In this episode, we are joined by Mike Merola, Managing Partner of Winning Strategies Washington, to discuss how healthcare could be affected at the federal level going forward.
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Highlights of this episode include:
- What can be expected from the new administration in their efforts to combat COVID-19?
- How President-elect Biden plans to expand government-subsidized insurance with premium tax credits and a new public option.
- What the new administration hopes to accomplish by bringing back the ACA tax penalty for failing to purchase health insurance.
- Why drug pricing could be a top healthcare-related priority for the new administration.
- And more…
Mike Passanante: Hi, this is Mike Passanante and welcome back to the award-winning Hospital Finance Podcast®. 2020 has been a year like no other and before we begin the show today, I want to acknowledge that, while we’ve just completed a difficult, very close, presidential election, our focus remains squarely on providing hospital executives with the insight and perspectives they need to run their organizations successfully. And while some legal challenges are still present, related to the vote, we will be talking today on the basis that Joe Biden has prevailed in the election. And to discuss how healthcare could be affected at the federal level in the coming months, I’m joined by Mike Merola, founding partner of Winning Strategies Washington, a leading government relations firm based in Washington, DC that specializes in hospital issues. Michael, welcome back to the show.
Mike Merola: Hi. Thanks, Michael. It’s great to be with you after last week’s historic vote.
Mike Passanante: Glad to have you back. You always provide great perspectives on these many issues, so I’m excited to talk with you today. I guess, first off, right now, healthcare, the discussion is dominated by COVID, right? I mean, that is, I guess, the number one healthcare issue at the moment. What can we expect once a transition has taken place?
Mike Merola: Sure. So I think it’s going to be at the top of the agenda for the foreseeable future. Congress just started a lame-duck session today. Both Nancy Pelosi and Mitch McConnell, in the House and the Senate respectively, different parties, have both said they want to have another COVID stimulus bill done before they all go home for the holidays. I think, in light of the mixed election results, you’re probably going to see something that’s on the skinnier side, closer to the senate’s $500 billion number than the House’s $2 trillion number, and then I think we’ll have to see how the economy and the markets react early in president Biden’s tenure to see if they revisit that. So I don’t know if it’s six months or another year at this point, but it’ll depend on whether or not the vaccine is working, how quickly can it be distributed. But I think hospitals are going to have to– in addition to making sure they have the resources to care for COVID patients, they’re going to have to be prepared to reengage on a whole slew of provider reimbursement cuts that are likely to continue at pace no matter who is controlling the administration.
Mike Passanante: Mike, President-Elect Biden has said he seeks to expand government-subsidized insurance coverage with a new public option like Medicare and add premium tax credits to make certain plans more affordable. Can you tell us about these priorities and how they might practically get done?
Mike Merola: Yeah, I mean, listen, you know I’m a Democrat, and I know that the party views its inability to get a public option done when they passed Obamacare as sort of one of their great regrets. I’m very skeptical at this point they’re going to be able to get that done with even more Republicans in the House and Republicans controlling the senate. I think we’ve got to sort of refocus our aspirations downward significantly, look for much more incremental change on that front. Maybe something on the tax side, though, on tax credits, that may be something that both sides can agree on. But I think it’s going to be at least two years until the midterms to see if we can do some of the more ambitious items.
Mike Passanante: So, speaking of taxes, President-Elect Biden wants to bring back the ACA’s tax penalty for failing to purchase health insurance that was taken away in 2017. What is he looking to accomplish by doing that?
Mike Merola: So I think two things. The first one is the most basic, right, just to have it as an incentive that folks will actually buy the exchange health insurance so that someone else doesn’t have to pay the fine. That’s tied to this whole issue of adverse selection, preventing the insurance companies from the old practice of rejecting older and sicker beneficiaries and only offering their products to healthier folks. Obamacare was trying to get more younger and healthier people into the insurance market to help spread the cost over more folks. And then, second, the tax is really the key reason that the Affordable Care Act was considered by the Supreme Court to be constitutional. Taxation is within the power of Congress and was a key component of the law. So when the Supreme Court first upheld it in 2012, the majority opinion written by Chief Justice John Roberts said that the individual mandate was a legitimate exercise of Congress’s taxing authority. And because the high court found that the penalty for not having coverage is a tax and not a fee, it ruled that Congress had the constitutional authority to impose such a levy. So that five-to-four decision basically concluded that Congress can tax you for failing to acquire insurance and, therefore, the mandate was constitutional. So I think that’s what he’s hoping to accomplish.
Mike Passanante: And that’s a good bridge to the next question I have for you because a case is heading to the Supreme Court on November 10th that could determine whether or not the ACA is struck down because the tax penalty was eliminated in 2017. The outcome of that case probably won’t happen until June, but what could happen if the ACA is struck down?
Mike Merola: Sure. So I think we’ll have a much clearer sense of the justices’ thinking next Tuesday, which will give us a better sense of what’s about to happen to 20 million people’s health insurance. So let me focus on that first and foremost because I think most folks think they will rule against the mandate, and then this whole issue of severability, right; does that mean that the entire rest of the law has to fall away as well? So, presuming it does, the impact on millions of American’s lives is going to be significant and adverse. So you’ll have 20 million people lose their insurance. You’ve got 133 million people with pre-existing conditions and then tens of millions more who were able to take advantage of the Medicaid expansion. So, really, really a terrible impact on folks all across the country, Democrats and Republicans. So some type of legislative solution is going to be required because, I think, the chaos in the market will be tremendous. You’re going to have both healthcare providers and health insurance have tremendous uncertainty in their payments. A lot of your clients have invested in accountable care organizations; what happens with them? You can go on down the list. I think it’s going to be a real nightmare across the board if that happens. And again, because, with divided government, I think there will be an opportunity for folks to come together sort of around the margins. You’ve heard a lot of Republicans talk about how we have to protect folks with pre-existing conditions. But what that really means in terms of if they’re willing to spend their money on policies is to be determined. So I’m really nervous about the decision.
Mike Passanante: Mike, there are several other healthcare-related priorities that Biden espouse during the campaign, anywhere from surprise billing, to drug pricing, and even market concentration across the healthcare system and wanting to look at that. Which ones do you think they might pursue, initially?
Mike Merola: Sure. Of the three that you referenced, I think drug pricing is probably the only one that there’s enough common ground, and that would be a– he’d have a pretty big win. I mean, that’s something that both the president and Biden campaigned on. And there are bills in both the House and Senate. And so there is a pathway to a compromise there. The Republican bill is a little bit more sort of market-oriented. And the Democratic bill, not surprising, is more government-oriented in terms of how you get the price of drugs down. But they were unable to pass surprise billing. This Congress, that has proven to be very controversial, the approach that they’re taking, and I think the market concentration issue just smacks of partisanship. And so I think they’d be wise to focus on something like drug pricing.
Mike Passanante: Yeah. Well, as usual, healthcare has no lack of issues to be tackled, and we’ll certainly see a different approach and some different priorities in the years to come. Mike, as always, you provided some great insights today. I know we’ve just touched the surface, but it’s always great having you back, and look forward to having you back again as there are more developments to discuss. Thanks so much.
Mike Merola: Thank you, Michael. Be well.
Mike Passanante: You too.