Post King politics
Now that the Supreme Court has removed the (next to last) existential threat to the ACA, how is the health care world reacting? We turn first to politics where we find the appetite for using reconciliation for ACA repeal is waning.
Republicans have always been united in their opposition to the ACA but divided over what, if anything, should replace it. With the prospect of millions losing their tax credits and insurance premiums spiking in the wake of a decision in favor of King, House and Senate leaders were under substantial pressure to figure out a way to bridge those divisions. While prospects of actually enacting something in the wake of a King decision were never good, failure to come up with at least a plausible alternative would have been a political disaster.
In that context, the ability to move legislation through the Senate with only a simple majority would have been a big asset. With King decided in favor of keeping tax credits for all, the cost-benefit of using budget reconciliation looks different. With the tax credits upheld, there is no pressure on the White House to compromise. Republican Congressional leaders would have to do a lot of persuading to unite their caucus behind a replacement bill, and simple repeal could run into procedural difficulties since it would be scored as increasing the budget deficit. In addition to being hard to write and even harder to build consensus around, a replacement bill would itself become a political target. And since it would certainly be vetoed (and sustained) there would be nothing to show at the end of the day for all of the work and the opportunity to use reconciliation to actually make policy would be gone for the year. Small wonder then, that the leadership's enthusiasm for using reconciliation on ACA repeal has diminished.
Meanwhile back on Wall Street…
If the King decision left Congressional leaders feeling somewhat depressed, it has certainly energized insurance markets as the nation’s big insurance companies seek to adjust to a changing health care landscape by acquiring each other. Two factors are driving merger mania. First, companies are looking to strengthen their position in the growth markets in insurance. As a result of the ACA, enrollment in non-group insurance and Medicaid Managed Care is expanding and companies are looking to expand their footprint there. Growth in a third market segment—Medicare Advantage—is spurred less by the ACA and more by demographics, but in both cases the imperative is the same for insurers—to get in better position to take advantage of enrollment growth. The second factor is that the push to create integrated delivery systems is enhancing the market clout of providers relative to insurers and insurers are trying to respond by getting bigger themselves.
What does this mean for consumers? Typically, market consolidation leads to higher prices and there is some evidence that Exchanges with less competition among carriers have higher premiums. However, too many insurers can also be a problem for consumers. There are certain overhead costs in running an insurance company and increasing the number of carriers increases those costs—there are economies of scale in insurance. The other factor is that when provider markets are concentrated, if each insurer only has a small market share, their ability to negotiate favorable prices is diminished. Strong providers and (relatively) weak insurers are a recipe for higher prices. The question is really whether the regulatory mechanisms in the ACA—mainly the medical loss ratio requirements and rate review provisions—are strong enough to keep a monopolistic insurance industry from price gouging. There is a risk that where both provider and insurance markets are concentrated, insurers will find it easier to simply agree to pass higher rates on to rate payers than to negotiate for lower prices.
One curious feature of merger mania is that the political world seems almost entirely resistant to the obvious conclusion that the growing market concentration of both providers and insurers is going to require a stronger regulatory role. The explanation for that obliviousness can probably be found in the words of Upton Sinclair.
Zombie death panels
Horror film sequels are a summer movie staple and it seems that the same is true in health policy. The spectacle of ACA opponents who should have (and did) know better, feeding the public frenzy on “death panels” in the ACA, was perhaps the nadir of the political debate over ACA passage (and that’s going pretty low). Five years and a couple of false starts later, the idea that your doctor can get reimbursed by Medicare for the time spent discussing your end-of-life wishes is making a quiet comeback in a proposed Medicare rule, but this time with very little fanfare. Just goes to show you that sequels seldom draw as well as the original.
Do the right thing
It’s good to see South Carolina moving forward with removing the Confederate battle flag from the State House grounds, but, as South Carolina Congressman Jim Clyburn said (and we blogged last week), a more meaningful tribute to the memory of Senator Pinckney would be to close the Medicaid coverage gap in his state. Senator Pinckney was a fighter for health care justice. His Senate district included parts of six counties in which more than 100,000 uninsured people live. There could be no better way to honor his memory that to extend health coverage to the thousands of people in his district and in his state who lack it today.
Final word: A shout out to CVS
The pharmacy chain took an industry leading position in withdrawing tobacco products from their shelves. Now, in light of recent revelations that the U.S. Chamber of Commerce played a leading role in promoting tobacco use in other countries, CVS has maintained the coverage of their convictions by resigning from the Chamber. We can only hope that other health care companies will follow suit.