Presidential Election 2016: Healthcare as a Defining Issue

The first GOP debate: Rhetoric aside, would (could) a future Republican President repeal the ACA?

Last Thursday night’s first GOP debate was watched by approximately 24 million viewers (a ratings high); and one of the most compelling and oft-discussed issues for the 2016 Presidential election is the future of healthcare and the fate of the Affordable Cara Act (ACA).

Although many Republican candidates discuss the full repeal of the ACA, what is more likely to happen should a Republican take office is that parts of the Act would be replaced or scaled back (providing more power to the individual States). There are several reasons that the ACA in itself is unlikely to be fully repealed. The late June Supreme Court ruling in King v. Burwell upholds federal subsidies for 6.4 million middle and low-income Americans who purchase individual health insurance through Healthcare.gov rather than through state exchanges.

In addition, the Congressional Budget Office (CBO) estimated in June that a full repeal of the ACA could increase the federal deficit by up to $353 billion (without considering the effect of macroeconomic growth) over the next 10 years. The CBO report also estimated that the number of non-elderly uninsured people could increase by 19 million by 2016. Medicare costs are estimated to increase as well with a repeal.

The bottom line is that 25 million formerly uninsured Americans now have insurance, which will be an even higher number by 2017. The ground-breaking shifts in American healthcare are moving, and moving rapidly. All of the various healthcare players from providers to payers to life science companies to patients, and everything in between are well on their way toward a new healthcare environment one of value-based, coordinated care, insurance industry consolidation, employer accountability for employee wellness programs, and ultimate individual responsibility for health.

You’ve got a lot of people who have coverage that they’re growing used to,” said Michael Sparer, a professor of health policy and management at the Mailman School of Public Health at Columbia University in New York. “It doesn’t mean they’re happy with their coverage … but they’ve got coverage.” Insurance companies, employers, hospitals and doctors have all begun adapting to the Affordable Care Act, and “to simply pull the plug on that, I think there’s going to be a lot of resistance,” Sparer added.

Legislation to watch with a new Administration

It is unlikely that the vast transformational changes will be interrupted, but there are several areas of upcoming legislation implementation for consultants to watch and to assist their clients with.

These include the 40% excise tax on high-cost employer-sponsored coverage (the “Cadillac” tax) which is scheduled to take effect in 2018. The idea behind the tax was that employees will use unnecessary services that are offered just because they can. The logic was also that individuals should not be tied to their employer’s health plans (and have to change every time they change employment). Ultimately, employees may have the right to have employers pay for their insurance but they can opt to purchase insurance through an exchange (not the employer-sponsored plan). The imposition of the excise tax could create a situation in which companies offer less generous plans to employees. This could lead to payers revaluating their product mix and services.

In addition, on April 16th, President Obama signed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). MACRA replaces the Sustainable Growth Rate (SGR) payment formula and will align Medicare reimbursements with health care quality and outcomes (providing incentives for value-based care thus moving from a fee-for-service to a pay-for-performance architecture). The next Administration will have additional responsibility for the roll-out of this Act as well, as most changes are slated for 2019.

The new healthcare paradigm

The bottom line is that consultants are working with payers, providers and drug and medical device manufacturers to evolve toward the new world order of healthcare, and any result in the next Presidential election may alter the legislation and regulations to a degree, but a full upheaval of the current direction is unlikely. This likely reality will not reduce the amount of debate on these issues in the coming months before the election, however. Stay tuned for lots of fireworks and discussion.

Laura Becker is an Industry Analyst, Healthcare Consulting Research