Key Factors in the Development of the

Affordable Care Act

Keith Fontenot Managing Director, Hooper, Lundy and Bookman, PC Visiting Scholar, The Brookings Institution

Outline

• Institutional and Strategic Factors • Legislative Adjustments and Implications

• Status/Coming Issues

Institutional Preparation Outside Executive

• Broad awareness that election of a Democratic President presented a rare opportunity for health reform.

• Preparation centered outside government and in Legislative Branch.

• Broad awareness of mistakes made in 1993 and determination not to repeat them -- preparation.

Senate Finance Committee Leadership

• Extraordinary level of activity starting in 2007.

• Nov. 12, 2008, SFC releases “A Call To Action”. A comprehensive blueprint for health reform

“Striking in both its timing and scope…Rarely, if ever, has a lawmaker with his clout moved so early – eight days after the election of a new president – to press for such an enormous undertaking.” The Washington Post, 11/12/2008. House similarly active and engaged.

5

Budget Options Volume 1: Health Care; published late in 2008

• Option 31: Reduce Medicare Payments to Hospitals with High Readmission Rates

• Option 32. Expand the Hospital Quality Incentive Demonstration to All Hospitals

• Option 33. Deny Payment Under Medicaid for Certain Hospital-Acquired Conditions

• Option 37: Allow Physicians to Form Bonus Eligible Organizations and Receive Payments (Aka, ACOS.)

• Option 46: Create Incentives in Medicare for the Adoption of Health Information Technology

• Option 54: Reduce Annual Updates in Medicare Fee-for-service to Reflect Expected Productivity Gains

• Option 65: Establish Benchmarks for the Medicare Advantage Program Through Competitive Bidding

Category 2015 2016 2017

Without ACA

Medicaid/CHIP 35 34 33

Employment based 158 160 163

Nongroup/other 24 25 25

Uninsured 55 55 55

Total 272 274 277

Changes from ACA

Exchanges 12 21 25

Medicaid/CHIP 11 13 13

Employment based -2 -7 -8

Nongroup/other -3 -4 -4

Uninsured -19 -24 -26

CBO Estimates of ACA Effects – Non-Elderly Population

Incremental

THE WHITE HOUSE

Office of the Press Secretary ------------------------------------------------

For Immediate Release April 8, 2009

EXECUTIVE ORDER ESTABLISHMENT OF THE WHITE HOUSE OFFICE OF HEALTH REFORM By the authority vested in me as President by the Constitution and the laws of the United States of America, and in the interest of providing all Americans access to affordable and

high-quality health care, it is hereby ordered as follows: Section 1. Policy. Reforming the health care system is a key goal of my Administration. The health care system suffers from serious and pervasive problems; access to health care is

constrained by high and rising costs; and the quality of care is not consistent and must be improved, in order to improve the health of our citizens and our economic security.

Sec.2. Establishment. (a) There is established a White House Office of Health Reform (Health Reform Office) within the Executive Office of the President that will provide leadership to the

executive branch in establishing policies, priorities, and objectives for the Federal Government's comprehensive effort to improve access to health care, the quality of such

care, and the sustainability of the health care system. (b) The Secretary of Health and Human Services, to the extent permitted by law, shall

establish within the Department of Health and Human Services (HHS) an Office of Health Reform, which shall coordinate closely with the White House Office of Health Reform.

Presidential Commitment, Alignment, Focus

9

Close Attention to Timing of Provisions

Comparison of 2009 Senate Bill to Sen. Chaffee 1993 Legislation

Provision Senate 2009 Sen. Chaffee 1993 Rep. Boehner 2009

Require HI purchase Yes Yes No; tax applied if not.

Standard Benefits Yes Yes No

Bans Pre X Denial Yes Yes No (high risk pool)

State based purchasing groups

Yes Yes No

Medicaid Expansion Yes No No

Reduces Growth In Medicare Spending

Yes Yes No

Offers Subsidies For Low-Income People To Buy Insurance

Yes Yes No

Percentage Of Americans Covered

94% by 2019 92-94% by 2005 82% by 2019

Approach Embraced Many Prior Proposals

Massachusetts Example

• State based Marketplace, or “exchange” where insurance is offered and competition fostered. Underlying insurance market reforms and benefit standards.

• Subsidies for lower-income – ensure the affordability of insurance purchased in the exchange. MA up to 300% of poverty, ACA 400%.

• Requirements on to Purchase/Offer Insurance– Individuals purchase insurance or pay penalty; business in Massachusetts (over ten employees) were required to provide health benefits to their workers or pay $295 per employee. ACA required business with 50 or more full-time employees to pay a $2,000 per employee.

A Successful State Example As a Model

Summary • Incremental vs. comprehensive – If you like what you have you can keep it…

• Presidential Leadership – structural and reforms.

• More institutional preparation outside Executive Branch. SFC/CBO

• Timing of legislative elements – immediate deliverables and election cycles. • Embrace of prior market oriented ideas/demonstrated success of Massachusetts provides foundation.

OTHER KEY ELEMENTS Other Key Elements

• Approach – admin does bill, send to Congress vs. work it out with Congress. • Inclusive – providers/insurers as partners, not adversaries.

• Created a greater good (coverage) so we could all win.

Legislative Adjustments and Implications

• Strong culture of bipartisanship in Senate lead to slower progress. House moved first with more centralized system, more polarization.

• Once SFC reported, razor thin margin meant any change deadly. Limited time for language vetting hence, “fix it in conference.”

• Senator Kennedy’s passing changed calculus. Resort to a budgetary procedure known as “reconciliation.” Allows 51% margin to pass, but limits content to financial items.

Polarization -- Impact

• Normal practice in 80s/90s with large bills was to “clean up” issues with technical amendments. Not possible.

• Polarization means little outlet for constructive change, and more recourse to other processes. – Administration relies more on administrative actions, using

whatever flexibility available. – More lawsuits.

Supreme Court Decision on Medicaid Changes Dynamics on Key Element

• Court upholds mandate/penalty but finds key element, Medicaid, invalid.

• Dynamics change immediately: States that do not want coverage no longer have to. Those that want flexibility in how they cover have leverage in negotiations with Federal government. Arkansas example.

Expansion States

• Medicaid Coverage – At least all adults below 138% FPL

eligible for Medicaid, along with traditional Medicaid categories of pregnant women, disabled, seniors, and children

• Marketplace Coverage – Mix of state-run, federally-facilitated, and

partnership exchanges, with people from 100-400% FPL eligible for subsidies

• Medicare Coverage – All adults over 65, disabled under 65, and

those with end-stage renal disease

• Uninsured Rate – Fell by 38% between September 2013

and June 2014

Non-Expansion States

• Medicaid Coverage – Traditional categories of low-income

pregnant women, disabled, seniors, and children covered

– Parents of eligible children are themselves eligible at an average of 46% FPL, and only one state (WI) covers childless adults

• Marketplace Coverage – All states except Idaho have federally-

facilitated marketplaces, with people from 100-400% FPL eligible for subsidies

– No access to marketplace tax credits for adults with incomes above Medicaid eligibility limits but below 100% FPL

• Medicare Coverage – All adults over 65, disabled under 65, and

those with end-stage renal disease • Uninsured Rate

– Fell by 9% between September 2013 and June 2014

• ©2014 The Brookings Institution

• Sources: Kaiser Family Foundation and Robert Wood Johnson Foundation

NM

IN

OH

SC

WV

WI

CO

AZ

AK

PA

MO

I

ID

OR

CA

IL

IA

KS

MI

MN

NE

NV

ND

MT

WA

TX

OK

UT

AL

ME

NY

NC

VA

SD

WY

TN

AR

KY

LA

FL

GA

MS

New Medicaid/CHIP Enrollment by State as

Percent of Eligible, through November 2014

VT

HI

NH

MA

RI

CT

NJ

DE

MD

DC

Sources: HHS, Kaiser Family Foundation, Urban Institute

Note: States in grey have missing data or data that is not

comparable to that of other states.

>86%

32-86%

13-32%

<13%

Non-Medicaid Expansion State ©2014 The Brookings Institution

Supreme Court Case Pending – King v. Burwell • ACA authorizes federal tax-credit subsidies for health insurance coverage

that is purchased through an “Exchange established by the State under section 1311” of the ACA.

• The question presented is whether the IRS may permissibly promulgate regulations to extend tax-credit subsidies to coverage purchased through Exchanges established by the federal government under section 1321 of the ACA.

• Subsidies make premiums on Exchange plans affordable for millions. In 2014, 8 million individuals selected Exchange plans.

• Enrollment represents about 28 percent of eligible individuals – CBO estimates 22 million enrollees in 2016

• Only 16 states operate State-Based Exchanges

NM

IN

OH

SC

WV

WI

CO

AZ

AK

PA

MO

I

ID

OR

CA

IL

IA

KS

MI

MN

NE

NV

ND

MT

WA

TX

OK

UT

AL

ME

NY

NC

VA

SD

WY

TN

AR

KY

LA

FL

GA

MS

Private Insurance Enrollment by State

as Percent of Eligible, through the end

of the Open Enrollment Period in 2014

VT

HI

NH

MA

RI

CT

NJ

DE

MD

DC

Sources: HHS, Kaiser Family Foundation >31.5%

24- 31.5%

18- 24%

<18%

©2014 The Brookings Institution

NM

IN

OH

SC

WV

WI

CO

AZ

AK

PA

MO

I

ID

OR

CA

IL

IA

KS

MI

MN

NE

NV

ND

MT

WA

TX

OK

UT

AL

ME

NY

NC

VA

SD

WY

TN

AR

KY

LA

FL

GA

MS

Total Enrollment by State as Percent of

Eligible, through November 2014

VT

HI

NH

MA

RI

CT

NJ

DE

MD

DC

Sources: HHS, Kaiser Family Foundation, Urban Institute

>52%

28.5-52%

18-28.5%

<18%

©2014 The Brookings Institution

Lessons Learned?

• Long range view and growing ideas for the future.

• Large expenditure of political capital required early on.

• Win-win; greater good from broader coverage. Easier in our system, but potential for “gainsharing” ideas? Future Generations?

• In Federalist system, value of successful State model is high.

• Learn lessons from the past failures.

• Co-opt traditional adversaries.

• Ensure institutional alignment, single focus, and top level access.