Two Scenarios for Healthcare Reform: President Obama vs. President Romney
OCTOBER 12, 2012:
This post is authored by Allan Baumgarten, an independent research consultant working with BlueSpire Strategic Marketing. Baumgarten’s work focuses on healthcare policy, finance and local market strategies. He works with a variety of organizations to help them analyze the market competition and policy issues they face and to develop business strategies to meet the challenges of dynamic markets and health reform.
With the Presidential election around the corner and the country just over a year away from full implementation of the healthcare reform law in January 2014, what will happen to the law if President Obama is not re-elected?
The short answer is: in spite of current campaign rhetoric, much of the Patient Protection and Affordable Care Act (PPACA) will continue to be implemented under either President Obama or President Romney.
Health Care Reform Under President Obama
The only way to stop implementation if Obama is re-elected would be for both the House and Senate to go Republican, to the extent that they could override a presidential veto. As of this writing, that is not likely to happen.
So, under a re-elected President Obama, healthcare reform will be full steam ahead. Here’s what will happen in 2013:
REFINEMENTS. President Obama has signaled openness to endorsing non-partisan improvements in the law. There will be minor fixes, assuming that Congressional leaders can rise to the occasion.
EXCHANGES BUILT. States will continue to study and build health insurance exchanges. While only 13 and the District of Columbia have made firm commitments to establish exchanges, almost all have accepted federal grants to plan for them. Although about 30 governors have said they will forgo the state version and accept a federal exchange, many of them are moving ahead with the planning activities and consulting contracts for insurance exchanges. If Obama is re-elected, look to more states to jump onboard the state exchange wagon. Why? They’ll want local control.
PLANS FINALIZED. Local and national health plan companies are designing plans and provider networks to offer in the exchanges and will refine and price them.
MEDICAID CHANGES. States will have to make a decision on whether to accept federal funds for Medicaid expansion. This is a no-brainer. The federal government will pay 100% of the cost for newly eligible recipients in the first five years, and 90% after that. The billions of dollars coming to the states will take huge burdens off of those hospitals that provide care to large numbers of currently uninsured patients. Hospitals are pressuring their states to take the money, and most will.
PUBLIC NOTIFICATION. Huge amounts of money will be spent by both the government and the private health plans to promote their brands so buyers on the exchanges will purchase their products. The exchanges will be looking for millions of customers, effective Jan. 1, 2014.
FLEXIBILITY FOR STATES. Federal agencies have sent clear signals that they will allow states great flexibility in their implementation of exchanges and of the Medicaid expansion. For example, states will be allowed to pare back the eligibility expansion after federal funding begins to decrease.
Meanwhile, payers and providers will continue to make significant changes in how care is packaged and delivered. This has already begun in earnest and surely these large-scale investments are not made based on politics alone. There is no going back.
For example, more than 150 provider systems have been offered contracts to become Accountable Care Organizations for Medicare shared savings programs, representing more than 2.4 million Medicare beneficiaries receiving care from those systems. Many more are negotiating new payment arrangements with local payers to reward value instead of volume. Seed capital to establish more than 20 Co-op plans has been awarded to nonprofit organizations. Recent acquisitions by WellPoint and Aetna of Medicaid niche health plans represent billion dollar bets that President Obama will win re-election and that implementation of the Medicaid expansion will move ahead. Health plans have spent huge amounts on preparing to sell on exchanges … and paring their costs to be more competitive. None of this will change if the presidency changes.
Health Care Reform Under President Romney
Candidate Romney promises his first order of business will be to repeal PPACA. After all, he needs the votes of the Tea Party and that is their wish this election season.
But now let’s look at the dilemma facing President Romney in January 2013:
HEALTH PLANS. The health plans will come knocking at his door, pleading for him not to mess with the individual mandate. The individual mandate is a necessary condition for health plans to comply with the ban on pre-existing condition exclusions, which Governor Romney has said that he wants to continue in some form. Without the mandate, people can wait until they become ill to buy guaranteed issue coverage.
PROVIDERS. Hospitals will plead with President Romney to support the individual mandate and Medicaid expansion. They can’t continue to pay for uncompensated care of the poor, one of the factors driving many local hospitals in smaller communities to shut their doors or consolidate with larger systems. And larger systems can’t continue to pass on the costs of uncompensated care to health plans and employers because of price pressure on premiums.
STATES. If elected, President Romney and Republicans in Congress may seek to de-fund key elements of the reform. But the states are not going to want to have to shoulder the burden of caring for the poor. They need significant federal financial support. After all, states must balance their budgets and many are cutting key public services. They can’t take on more healthcare expenses.
EMPLOYERS. They can’t continue to sustain annual increases in their health benefit costs that exceed inflation and revenue growth. This burden means that U.S. companies can’t build products that can compete internationally … or often here at home. They want employees to take more responsibility for financing their use of healthcare, just as they did with their retirement plans.
So, what will President Romney do? He’ll have a hard time repealing the law by working with what likely will be a divided Congress. And he’ll have the constituencies listed above wanting him to leave the key components of the law intact.
In short, a Romney presidency will likely make very little changes to the law.
What This Means for Healthcare Marketers
The election results are unlikely to halt implementation of the law. So marketers will have their plate full in 2013 and beyond.
Marketers will be expected to help reposition the hospitals, payers, clinics and exchanges they work with in a way that relates to the consumer. Under the law, the consumer is empowered to make choices, and those choices will depend on information and a positive brand.
Marketers and communicators will see their budgets go up and their responsibilities increase. But they will be on the hot seat to keep their organizations relevant and successful in this new world of healthcare.
Hospitals will need marketing help to position for more patients coming to them with public coverage or with high deductible health plans, while maintaining a healthy mix of patients with richer benefits. Providers will want marketers to promote their efforts to improve quality and outcomes, and improve the patient experience while cutting costs.
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This blog was written by Allan Baumgarten. BlueSpire does not endorse the content in this post.