Swamp Creature

Many people forget that before Washington DC was our nation’s capital, it was a pestilential swamp, whose few hardy residents regularly succumbed to tropical diseases like malaria. It was virtually uninhabitable in the summer (some say it still is), and like Houston and New Orleans, really began to boom only after the advent of affordable air conditioning. It is also a political swamp, infested with lobbyists and special interests, and Washington “lifers” – commentators, political operatives, consultants, intellectuals and bureaucrats who outlive increasingly fragile Presidential administrations. The electorate despises Washington, and sends waves of “outsiders” (e.g. ordinary Americans) to drain the swamp.

Though President Obama signed it into law in March, the new Affordable Care Act of 2010 is a swamp creature. Written by an exhausted Congress, half beast, half plant, the ACA is a seething, octopus-like tangle of well meaning but opaque government projects intended to expand health coverage and fix the health system’s numerous problems. Far more than “insurance reform”, it sprawls over and touches virtually every corner of our $2.5 trillion health system, bringing change, uncertainty and a ton of taxpayer dollars. It also has sunk its taproots deep into the national treasury and extends its feeding tentacles to an obese and hungry industry that already claims 17% of the national wealth.

A new wave of Republicans are about to hit town, fired up by their stunning mid-term election victory and control over the House of Representatives. One of their campaign pledges is to kill the swamp creature. They will shortly charge off into the swamp to try and kill it, like the British army tried to kill Francis Marion. In doing so, they expose themselves to a whole bunch of hidden hazards, including the beast itself. Handled thoughtlessly, the Republican campaign against health reform could damage the party’s prospects in 2012, even if the economy continues to sputter.

The Republicans ran on a disingenuous health platform of “repeal and replace”, knowing full well that they would not only not have the votes to “repeal” but also that they lacked a “replacement”. Beyond rolling back the controversial individual and corporate mandates, the Republican campaign agenda was basically the same thin gruel they’ve been peddling for years (malpractice reform, selling insurance across state lines, high deductible health plans, etc.), It is not a coherent response to the 2900 page Affordable Care Act, nor does it solve the core problem of a gaping hole in our health insurance safety net. The Republicans were ominously silent on the big issue: whether or not to preserve the 30 million person coverage expansion that was the main event in ACA- the swamp creature’s beating heart.

The fate of the Republicans’ effort to reshape health reform is inextricably tied to their plans for balancing the federal budget, which is also remarkably detail-free. Keeping the coverage expansion –the expensive part of health reform- will make it very difficult to balance the budget. However, there is huge political risk to killing the expansion, because it hands President Obama and his beleaguered troops the priceless political opportunity to mobilize a huge population of uninsured people expecting coverage against the heartless Republicans in 2012. There are 50 million uninsured people in the US- one sixth of the US population- a number likely to go higher while the two parties fight over the fate of health reform. And it gives Obama two years to figure out how to wake them up and get them to the polls.

Another particularly sticky part of the ACA swamp creature is the hated individual and corporate mandates and the regulatory expansion required to implement them. The mandates were a key negotiating point with insurers and employers and were what made the more popular health insurance reforms, such as restricting health insurers’ use of medical underwriting, possible. Many Republicans would like to keep the underwriting restrictions, but do not yet fully grasp the linkage to broadening coverage. The fate of a $1 trillion private insurance risk pool hangs in the balance.

Absent the requirement that everyone be insured, the opportunities for adverse selection, a deterioration of the risk pool and sharply rising premiums for businesses and individuals increase apace. Knock out the mandates but keep the subsidies, and you’ve markedly destabilized the risk pool, particularly the individual and small group markets. Knock out the mandates and cut back the subsidies and you’ve killed the coverage expansion. Killing the mandates and scaling back the coverage expansions but keeping the underwriting restrictions would punish the very businesses whose owners have been railing about the huge wave of new regulations in ACA with sharply higher health premiums. In other words, if you saw off a couple of the creature’s tentacles, there are more than a few left to drag you under and drown you.

With only one House under their control and with insufficient votes to override a Presidential veto, the Republicans cannot repeal the mandates. Once the testosterone surge of the 2010 electoral rout fades a bit, expect “deconstruct and delay” to follow “repeal and replace” in the Republican healthcare agenda. After the obligatory House vote to repeal the legislation and subsequent stall in the Senate will follow a deadlock, where Republicans continue fanning the flames of anger at a government takeover of healthcare and use the power of one House to deny appropriations to implement health reform (while praying that the Roberts Supreme Court will take down the mandates).

Republican appropriators in the House will probably work to deny a grievously understaffed Centers for Medicare and Medicaid Services and the new Office of Consumer Information and Insurance Oversight the funding to draft the implementing regulations for the Affordable Care Act. They will probably also zero out the funding for states to strengthen insurance regulation and could restrict the funding for setting up the insurance exchanges.

If they are not careful, however, the Republicans budget hawks could also kill off the CMS Innovation Center, and thus prevent future administrations from altering the course of Medicare and Medicaid spending through payment reforms, saddling the program with an obsolete fee-for-service payment model for the next ten years. The House Republicans will also deny the IRS the funds to hire new staff to enforce the mandates (but also kill off the short term program of small business subsidies built into the bill). They will try to kill many of the new taxes that fund the coverage expansion, particularly the taxes on insurers, pharmaceutical companies and device manufacturers. Killing the taxes will, of course, increase the deficit, unless matched by a scaling back of the coverage expansion or other spending reductions.

All this House appropriations activism will force a giant FY 2012 reconciliation pileup sometime next year that could compel the Obama administration to declare what pieces of reform they are willing to postpone or abandon in order to save the rest of their health reform agenda. It’s sadly in the interests of both parties to keep fighting, hoping for increased political leverage in 2012, rather than to come to the table and “fix” the Affordable Care Act. The 2012 campaign, featuring 21 returning Democratic Senate seats and the Presidency itself, began on Wednesday morning.

The result is massive uncertainty for a $2.5 trillion health system that was reluctantly gearing up to respond to reform. Providers and health insurers will be caught in the middle of a messy, ugly partisan squabble. Health industry leaders will be pressed by both sides to support them- Democrats to save health reform and Republicans to kill it. Physicians might find that the rising Republicans are no better capable of coping with the Medicare fee reduction nightmare (the so-called SGR problem) , because of their commitment to deficit reduction, than the Democrats were because they wanted health reform to be “deficit neutral”.

Hospitals are angry about ACA but could be angrier if Republican efforts denied them 30 million new customers, and locked them in to rising uncompensated care expense and rising cost shifting onto business. If they are not careful, and Republicans succeed in killing a coverage expansion, providers could also see the relatively modest Medicare payment reductions they contributed to helping finance the coverage expansion confiscated in the name of deficit reduction.

Health insurers face an even tougher challenge. They will be forced to operate for the next two years in the equivalent of a “room full of gasoline fumes”- each rate or coverage decision potential fodder for a cornered and angry Secretary Kathleen Sebelius, who will be anxious to preserve her regulatory brief and point to industry “abuses” as a reason to preserve or even broaden her authority. Expect to see cartoon images of Secretary Sebelius in Valkyrie garb and two years of orchestrated outrage over health insurers’ “abuses” of the consumer.

Lukewarm political support for reform, and inspired focused opposition, do not bode well for accomplishing the core objective of reducing the more than 50 million people presently without health coverage. Those 50 million people and the providers who care for them are hostages to a political struggle quite unlike anything we’ve seen in a long time. Iraq and Afghanistan were child’s play compared to health reform. The health reform swamp creature will prove to be a formidable and wily foe. The Republican invasion party may be full of fight now, but nine months from now, they could be feverish, covered by mosquito bites, leeches, festering sores and lots of mud.

Originally published on The Health Care Blog.