In this episode, Mike Merola, Founding Partner of Winning Strategies Washington, discusses what healthcare policy might look like under the Trump administration
In this episode we look at:
- The potential for keeping or eliminating elements of the ACA including pre-existing conditions and allowing individuals under 26 to remain on their parents’ insurance policies
- The possible reintroduction of high risk pools as a way to offset the need for an individual healthcare mandate
- Specific measures that could be undertaken to continue modernizing Medicare
- The practicality of allowing insurance to be sold across state lines
- Healthcare premium deductions on tax returns and HSAs
- Drug reimportation measures
- How Congress could go about repealing the ACA
Michael Passanante: Hi, this is Mike Passanante and welcome back to the Hospital Finance Podcast. We’re glad you can be with us. Today, I’m joined by Mike Merola. Mike is a founding partner of Winning Strategies Washington, a leading government relations firm based in Washington DC that specializes in hospital issues.
And Mike is going to talk with us today about what healthcare policies might look like under a Trump administration. Welcome back to the show, Mike.
Mike Merola: Thanks, Mike. I appreciate you having me again.
Michael: So we spoke way back in April when the primaries were still under way and there was probably a little more speculation as to what might happen. But now we’re here in late November. We know the outcome of the election and we’re looking forward to what policies might actually come into play because there could be some changes on the way.
Mike: There’s going to be a lot of changes. I would encourage your audience to buckle up.
Michael: Well, with that, we’ll jump right in because I think we have a set of broad questions and things to work through here.
In recent interviews, President-elect Trump seemed in favor of keeping two provisions of the ACA. And of course, he’s spoken previously about repealing and replacing the ACA. And those two provisions were forbidding discrimination based on pre-existing conditions and allowing people up to age 26 to remain on their parents’ health plans essentially.
Do you think those items are likely to survive either changes to the ACA or potential legislation that might replace it?
Mike: Sure. Let me take a step back and first just set the table a little bit for the audience because I think what’s become clear from conversations we’ve had directly with folks on the transition team and talking to Republican members of Congress and seeing some of the formal communications that the Speaker, the Speaker Ryan has sent out to his caucus. I think what’s really clear is that the Republicans believe they have a mandate and that they’re going to be big, bold and expeditious in implementing their agenda and in their words, really changing the country.
And this is despite the fact that Secretary Clinton’s lead in the popular vote is now over a million votes and the margin of difference between the two candidates in the combined vote counts in Pennsylvania, Michigan and Wisconsin is only around a hundred thousand votes.
So I just wanted to provide that context. I think there is a real risk here that the Republicans may overreach and rather than work with moderate Democrats to find broader agreement on what is working and what isn’t on the ACA. There may be just a much more ideological approach that says, “Scrap all of it,” except for the two provisions that you just referenced on pre-existing conditions and allowing folks up to age 26 to stay in their parents’ healthcare.
That’s a really long way of giving you the affirmative answer there. Yes, I do believe those two provisions survive at least as of today, November 17th.
Michael: It’s great context, Mike. And it makes a lot of sense to me. I think certainly with all we’ve been through in the past few years with the introduction of Obamacare, you do have to step carefully as we move through some of the changes that are coming up.
So next question for you. According to Trump’s transition team website and I’ll read from it, “The administration also will work with both Congress and states to re-establish high risk pools, a proven approach to ensuring access to health insurance coverage for individual who have significant medical expenses and who have not maintained continuous coverage.”
So I like to just walk us through some of the potential positives and negatives of this. Obviously, this is I think in response to the individual mandate, which is under Obamacare and trying to come up with an alternative to that.
Mike: Sure, sure. And again just full disclosure to the audience, I am a Democrat, so I maybe a bit biased on this issue because this issue—as you know, this instrument, high risk pools were around for a long time before the ACA and in many cases were the only coverage available pre-2014 for people that had serious pre-existing conditions who didn’t have access to insurance either through their job or from the government. But they’re often under-funded, the coverage is very expensive and the plan choices were really limited.
So the people who used to have this coverage are now eligible in the exchange or off the exchange without subsidies, with access to the same plans that healthy people can buy, which I think is a positive thing. But for the past years, the Republicans have been proposing to bring back high risk pools as a possible change to healthcare reform, and I think it’s very reasonable to assume that they are going to make a comeback under President Trump.
The good news is the Republican plan calls for $25 billion in federal funding for high risk pools, which if it materializes could actually make them effective. I think the negative here is that getting any kind of funding for any new initiative out of the Republican Congress for the past eight years, even those that they have historically supported has been almost impossible. So that’s the downside to it. It’s that they’ll pass legislation resurrecting them, but not supporting them sufficiently.
Mr. Trump on the campaign seemed to indicate that he was willing to spend a lot of money whether that was on entitlement programs or defense. So maybe this fever on the fiscal side will break a bit over the next year. But we’ll have to see. But on the upside, it’s structured correctly and funded sufficiently, they could act as either a temporary bridge to whatever the Republicans plan to replace Obamacare with or, in and of themselves, become a permanent fixture of the new health insurance landscape. I think we just have to wait and see what they do with them.
Michael: So Mike, the transition website also discusses modernizing Medicare. Do you know of any specific initiatives that have been proposed from the Trump camp?
Mike: Yeah. And for this, I would encourage your listeners to read Speaker Paul Ryan’s blueprint for governing that’s titled A Better Way. It’s on his website. And he has pages and pages of specific proposals for improving Medicare and Medicaid as well for that matter.
And just to highlight a few for your audience, he wants to significantly strengthen and expand Medicare advantage. He wants to repeal the ban on physician-owned hospitals and he wants to completely reform uncompensated care.
So some of these proposals, there’s at least a dozen more that have more details than others, but I think every hospital CEO and CFO in the country should check it out because they’re going to—whether or not, they get over the finish line, they’re going to get a day in court legislatively soon.
Michael: Mike, the sale of insurance across state lines has been a key part of the Trump healthcare platform with the idea that that would help to foster competition and ultimately reduce costs. Is this something that could easily be done or are there unforeseen obstacles that must be dealt with first?
Mike: Sure. Well, I’m not an expert on this issue per se. We had to deal with it a lot during healthcare reform. So I just dusted off a lot of my notes. And I think the answer is it cannot be done easily.
The proposal itself has been around for about 30 years and it’s been a part of every Republican platform going back to 2005, the idea being that by eliminating red tape associated with state insurance regulations, insurers will be able to offer national plans with lower administrative costs thereby giving consumers more choice and reducing the price of insurance.
And I think almost all of the Republican proposals assume that in place of expensive regulations in some state insurers would have the option to choose to base their plans in states with fewer rules. And I think both critics and supporters of the idea agree that you would likely have a lot more people coming into the market and then a national plan would be able to offer a lot of options to folks so they could choose the best plan for them.
I can remember using an example for customers in a state requiring insurance to pay for either chiropractic care or infertility treatments. They may prefer to buy a cheaper policy in a state that doesn’t require such benefits.
I think critics of cross-state line plans worry about the negative consequences of letting insurers shop for the state regulator of their choice. I know you’re based in New Jersey. You know that a lot of businesses tend to incorporate just south of you in Delaware or a lot of credit card companies have headquarters in South Dakota. Insurers may end up congregating in whatever state offer the most lenient regulations and this just could have adverse impacts for customers who get sick because there are fewer comprehensive policies available or maybe consumer protections are weak.
And from an advocacy perspective, I think what’s really interesting is that none of the insurance, none of the big players in town, none of the big companies themselves or their associations have gotten behind this idea. They’re just not pushing it. They’ve really been muted in their enthusiasm for it, I think which tells you a lot.
So it very well may get vetted and may get an airing in Congress, but I think this may not ultimately happen.
Michael: That’s a great perspective, Mike. I appreciate that. I want to delve into a couple of other elements of the platform, which I’m not sure if they survived or not to this point.
But one was the proposal to allow individuals to deduct their health insurance premium payments from their tax returns under the current tax system. The other is allowing contributions into health savings accounts that accumulate over time.
On the surface, these seem like attractive proposals for individuals, relatively easy to implement. Why don’t we already have those mechanisms in place and do you think that the new Congress will support those proposals?
Mike: Sure. I think there are a couple of reasons. I think first and foremost, we haven’t comprehensively reformed our tax system in decades and Congress has been really reluctant to do it piecemeal.
So I think tax reform is coming. The President-elect has laid out healthcare, immigration and jobs or the economy as his top three priorities next year. Under that jobs and economy piece, I would put tax reform. I think they’re going to try to jumpstart job creation and economic growth through tax cuts. And I imagine this will be on the list of things that will get considered.
Also going back to my earlier reference about getting any new money out of this Congress, we still do have a significant budget deficit year over year. And both of these things cost money. I don’t have any idea of the scope of the cost, but I think it would be significant.
And so we have to see overall how they approach tax reform and how expensive these two provisions are that will ultimately determine I think if they get over the finish line.
Michael: Mike, last summer, rising drug prices were in the news quite a bit. In the past, Trump has proposed allowing consumer access to less expensive imported drugs. Do you think the time is right for Congress to take action on allowing drug re-importation?
Mike: When Mrs. Clinton lost, I think a lot people in town assumed that the pharmaceutical industry breathed a collective sigh of relief, but my sense is that would be premature if that is happening.
This issue, I think every American can identify, to one degree or another, with this issue. And I don’t think the issue is going away and I think that how the President-elect is going to handle it because he did win the biggest populace upset I think since 1828 when Andrew Jackson became President. This issue is tailor-made for his constituency.
I think there are also legitimate concerns about the safety of drugs that are brought in through the re-importation process. So, that one has always had bi-partisan opposition. And so I think there may be an array of other issues that folks like—I think Senator John McCain just this week put out a proposal to do more make the way that pharmaceutical companies derive their prices more transparent to consumers.
So I think there’s going to be a multi-faceted approach by Congress to the drug price issue. I’m not sure. I think re-importation again will be in the mix, but again because of the bipartisan opposition, it had—in the past, I think that will still be a problem for supporters of that issue.
Michael: Mike, my next couple of questions are I guess inside baseball for those of us who probably know less about how Washington works technically. So hopefully, you can shed some light on that.
We’re getting back to the notion of repealing and replacing the ACA. What would the legislative process look like to do that?
Mike: Sure. There is a vehicle. It’s a budget vehicle. Without getting too technical, it’s called reconciliation and it basically allows a piece of legislation to go through the Senate on a simple majority. It cannot be filibustered. So you don’t need the 60 votes to pass. You only need 51.
And so that’s the vehicle that Republicans are going to use. Their plan is to come in on January 1st. They’re calling it now repeal and replace. I understand that it it won’t go into effect until 2019. The replaced part is still to be determined, but the plan is the President-elect gets inaugurated on the 20th and on January 21st, he will have this bill on his desk for signature. So that’s how they’re planning to do it.
Michael: So given the makeup of the incoming Congress, do you think there are enough votes to make this happen? It sounds like it’s a simple majority in the Senate and I believe they have that. Will they have to pivot to a different strategy?
Mike: No. I think they absolutely have the votes for this. And what’s really interesting is that because Trump is—I think he’s pragmatic. I think he is a deal-maker. I think he’s open to compromise. In many ways, he may have more in common with some of the moderate Democrats in the Senate. And it’s more important in the Senate because the House’s majority rules and the Senate each because there are few of them and they all have more authority. Each member just is more important. He may have more in common with some of them than he does with the more hard right members of that body.
So there are some really interesting alliances and public policy implications that could come out of this, depending on how they work together. But obviously, they have to go through the actual head count and see what the specific package looks together that they’re going to propose. But the easy answer is yes, they have the votes and vote bodies to pass it.
Michael: Mike, as always great perspectives. I want to thank you for your time and enlightening us on some of the healthcare policy issues that we’re likely to face in the coming year under a brand new Presidential administration.
Mike: Thanks, Michael. It’s always a pleasure to spend time with you and your audience.