Last week, we talked about the implications of the Supreme Court's decision for the states. Today, we'll look at the potential Congressional response.
Lynn began by suggesting the panelists speak about the federal level, as she's cynical about the 90% and 100% matching, when we're going into a period of austerity. She said she would like them to talk about entitlement reform and deficit reduction, and asked whether the decision to expand Medicaid has a lot to do with people's confidences that the 100% and 90% matching money will remain the law of the land at the federal level.
Bill said that he thinks the next big political battle is going to occur, or at least start, in the lame duck session and by some estimates, there's about an $8 trillion clip that occurs at the end of the year, which will force Congress to consider how it's going to deal with it. In this $8 trillion, there are the Bush tax cuts, what's called the "SGR," or the "doc increase in payments," the payroll tax and sequestration. Bill said that sequestration are the automatic cuts that go into effect at the year, which came out of the debt bill last year, which is about $1.5 trillion.
The Republicans do not want to see $750 billion cut from the defense department over ten years, so there will be a bipartisan effort to fix these things. There are differences between the parties, but ultimately, they're going to have to figure out a way to come up with a long-term debt reduction package and deal with the enormous burden on the economy. The belief is that if the $8 trillion were to be cut immediately out of the federal budget, that would probably lower growth by three to five percent almost immediately, which would put us back into a recession. This might become a spiralling recession. So Bill doesn't think that Congress can allow that to happen. How and when they deal with it is a different issue.
Bill thinks that they could postpone it - it costs $3-5 billion a month - probably a month if they wanted to delay it, and they could do that via legislation. But you have to find that money. If you look at Medicaid itself, the Republicans will be pushing to cut the new Medicaid money, which is a large pot of money. There will also be movements on the more conservative side to cut Medicare and the reimbursements there. Bill thinks that there will be some horse trading going on, everything will be in flux, and healthcare will be on the table across the board. He said that there are probably a few places where people might fix a problem they see, such as the device tax, which costs about $26 billion - these kinds of discussions are a fairly small number. So there's a chance that there could be some winners and losers in this.
Lynn asked Stuart to comment on the debt ceiling law and its constitutionality, and whether he sees lawsuits coming as a result of the 2% cut. Stuart said that there are always lawsuits, adding that the dynamic is really a very vital one. He said that there would be a deal, which will extend to taxes because restoring the tax cut has an effect on the economy. There will be a lot of bargaining. He said that one can envision lawsuits, but he doesn't envision any successful lawsuits to block any of this with respect to taxation. He thinks the Court has crossed that bridge - local courts may deal with some of the issues, but he said that the deed is done, and implementation is at the heart of it.
Bill added that if you assume that Governor Romney wins the election, and the Republicans in the Senate pick up half a dozen seats, you could have both houses of Congress controlled by the Republicans and a Republican President. If this happens, there is even more chance for change.
The real problem with change is, as Mitch McConnell said, they're going to repeal Obamacare in the beginning of the next Congress, the 113th Congress, and they're going to use reconciliation to do it. Bill said that it's interesting that it only take 51 votes in the Senate to do it. It's an interesting concept.
The problem is that the Affordable Care Act actually scores positively, and, if you were to repeal it, you'd have to figure out where you got that money from. He doesn't know that the ACA will save people money, but that's what the CBO says. So there's going to be a fight, it's going to continue, and Bill thinks that ultimately, it will force concessions from the Democrats on the programs themselves, both Medicare and Medicaid.
Stuart said that Bill had mentioned the next Congress, but that he had read where leader Cantor had already scheduled a hearing for July 13, 2012 - he asked Bill whether he thought that would go nowhere. Bill said that it will certainly pass in the house, but that the Senate will not take it out.
Moving on to the next slide, Lynn asked the panelists to talk about "when." She asked Bill to tell the audience about the lame duck session, what we have and what is likely to happen, and then how the new 113th Congress will affect health reform implementation. She hypothesized that she was a governor trying to decide right now whether to expand Medicaid in his or her state, and asked what she would have to look forward to.
Bill said that the election will have some input into what happens in the lame duck session. If it's status quo - Obama were to win, the Democrats hold on to the Senate, and the Republicans hold on to the House - there will be a push by Obama for a big deal, much like he talked about with Speaker Boehner, which would be on a Simpson-Bowles or the Domenici-Rivlin plan kind of a basis, which would be $4-5 trillion over ten years and Medicare and Medicaid would both be on the table. So that's one way of looking at it. He said that he thinks if other political outcomes happen, you may have the Democrats still control the Senate, and do nothing. If the Republicans are going to take over the Senate, Majority Leader Harry Reid has said, at least, that he will kick it all to the next administration, the next Congress. This would mean that there would be a lot of scrambling in January. Bill said it really depends on what happens in the next election.
Lynn said that sometime in the next month or so, we're perhaps going to see rebate checks coming from health plans under the medical loss ratio analysis. She asked whether anyone on the panel wanted to comment about how those rebate checks might influence this rush to perhaps repeal the law going forward. Do we wait for state exchanges to get up and running? Do we know whether the mandate is not that strong anyway? Were there any comments on what implementation things could change over the next few months that might change Congressional winds?
Bill answered, saying that any time constituents/voters, get money, they will have a more positive view of a law, where the impression was fairly muddled. He doesn't know how big the rebate checks will be, but he thinks that will affect voters to a certain extent, and their opinions abou tthe law. As we've seen even in the weeks since the decision, there is a slight move towards favorability about the law. There will be other things, but we'll have to wait and see.
Stuart commented about the rebates, saying that the audience needs to remember that there's a good deal of the ACA that's already in effect, and payments have gone out. So if the act were repealed, would they be recouped? He doubts it. Morever, even though many of Stuart's political compatriots are talking about repeal, he hasn't heard anybody suggest repealing the guaranteed issues - people with pre-existing conditions and children under the age of 26 on their parents' insurance policies. Again, this is another significant expense of the ACA. There is a lot that's in play already, it's hard to undo, and it leads to this deficit crunch that we're going to have at the end of the year.
Lynn said that she's started a little hobby, whereby she divided the states into different buckets - those that have already actively implemented the law, those who have done absolutely nothing, and those in the middle. She then crossed this database with those who challenged the statute within the Supreme Court case, and then looked at which of those states are also suing states. The bottom line is that there's no rhyme or reason across all of these indicia, because politics is local. So to answer those who were sending in questions about individual states, she wanted them to know that they'll have to look at the states specifically.
Tomorrow, we'll talk about the impact of the upcoming election on the PPACA.