As talk of “repeal and replace” shifts from campaign slogan to serious policy debate, New Jersey has a great deal at stake. Over 670,000 New Jersey residents gained Medicaid or nongroup private health insurance since the implementation of the main coverage provisions of the Affordable Care Act (ACA) in 2014. Most of these people, nearly a half million, gained coverage through the Medicaid expansion. By the second quarter of this year, about 190,000 state residents were benefiting from premium subsidies offered through the health insurance marketplace, a number that will almost certainly grow during the open enrollment period that ends in January.
According to the latest federal data, over the first two years of ACA implementation, the share of nonelderly adults in New Jersey without coverage dropped nearly 40 percent (from 17.5 percent to 10.8 percent). Over the same period (2013 to 2015), the share of New Jersey’s nonelderly adults with private health insurance, mostly through employers, grew modestly from 72.3 percent to 78.2 percent.
The ACA certainly has flaws, but hundreds of thousands of New Jerseyans now depend on it for their health insurance coverage. Through myriad provisions, the ACA is also shoring up the financing and delivery of healthcare in ways that increase value and improve quality.
With the rhetoric of the blistering campaign in the rearview mirror, President-elect Trump and congressional Republicans are now accountable for the success of health reform. Simply opposing Obamacare will no longer suffice. Predictions in the run-up to the election were almost universally wrong, but current procedural, political, and practical realities will frame the future of health reform, at least in the near term.
Repeal of the ACA in the first 100 days of the new administration is exceedingly unlikely. A super-majority of the U.S. Senate would be required to repeal the law, enabling Democrats to block repeal. Defunding the ACA is possible without a super-majority, but doing so without the ability to change nonbudget-related provisions of the law would trigger utter chaos in insurance markets. Such a move would make public dissatisfaction with Obamacare appear quaint in contrast.
The White House could unilaterally and immediately trigger a similar defunding scenario by simply withdrawing its appeal of House v. Burwell, a court ruling that would block federal funding of some ACA subsidies. The administration could also decide not to enforce selected provisions of the law. But these actions would also deeply undermine insurance markets, imperiling health coverage for millions. Ensuing harm would not be limited to blue states. In fact, people living in solidly Republican counties have disproportionately benefited from ACA coverage subsidies.
If insurance regulations continue to require guaranteed issue but without subsidies or mandates, the nongroup market would simply collapse. Healthy people would drop coverage until they need it, and insurance carriers would withdraw from the market as they faced unsustainable costs. Not everyone understands the interdependence of guaranteed issue with mandates and subsidies; apparently including the president-elect, who has said that he would keep preexisting condition rules. Guaranteed issue rules also enjoy broad public support.
Another, more likely, path would enable the congressional majority and new administration to keep their repeal-and-replace promise without triggering immediate market failure. Congress could enact a budget resolution that ends marketplace subsidies and the tax penalty for being uninsured, but delay the effective dates of the cuts; for example, to the end of the two-year congressional session. That strategy, using the budget reconciliation process, would create a self-imposed ultimatum for Congress to act to prevent market failure.
Starting the clock to defund Obamacare down the road if Congress does not act to replace the rest of the ACA would be very risky, not just for insurance markets. Perhaps this scenario could lead to a true bipartisan compromise, but history suggests otherwise. By winning the White House and retaining majorities in Congress, Republicans will be held accountable for health reform. There is no incentive for Democrats to help them out by voting for reforms that they have long opposed.
The conundrum that Republicans face would be easier if their policy proposals for replacing Obamacare could resolve flaws in the ACA, but nonpartisan analyses demonstrate that they cannot. Some of the reform ideas advanced by the Trump campaign and congressional Republicans are moot. For instance, health insurance can already be sold across state lines and health savings accounts are already available, although the reach of these ideas could potentially be expanded. Other policy proposals would face significant opposition. For example, changing Medicaid from an entitlement to a capped block grant has historically been opposed even by Republican governors.
Public acceptance of replacement policy ideas is also in doubt. In public opinion polls, majorities, including about half of self-identified Republicans, favor expanding Medicaid and subsidizing private health insurance for those who cannot afford it, two of the major underpinnings of health reform.
It is not entirely clear what opponents of the ACA mean when they refer to “Obamacare.” They seem to be referring to unpopular parts of the law such as the enrollment mandate and high-cost sharing and narrow networks of plans available on the ACA marketplaces. But the ACA has hundreds of other provisions, including closing the Medicare Part D “doughnut hole” and numerous quality improvement and cost-containment initiatives that have taken firm root in our evolving healthcare system. Repealing many of these provisions would be extremely disruptive and unpopular among health system stakeholders. They would also shorten the life of the Medicare trust fund and add to the federal deficit.
Given these circumstances, “repeal and replace” would have to proceed more like precision surgery than the swing of an ax. Still, Republicans face a political imperative to act swiftly. In addition to trying to advance their priorities through the legislative process, they can undermine many ACA provisions by simply changing implementation plans, working through the courts, and issuing executive orders, none of which require congressional action. We are likely to see swift action, for example, widening religious exemptions for employers that object to covering contraception. But changing the health insurance provisions of the law will likely take many months or even years.
While we wait for Congress, we are likely to see action at the state level. States can apply for waivers of many federal Medicaid rules, subject only the approval of the Trump administration. Earlier administrations have used this authority to advance their policy agendas. Obama, for example, sought to entice ideologically resistant states to adopt the ACA Medicaid expansion by allowing them to impose “personal responsibility” requirements on enrollees such as cost sharing and behavior changes or to move some enrollees into the private health insurance markets. But Obama drew the line at imposing high levels of cost sharing or work requirements for new Medicaid beneficiaries. The Trump administration is not likely to draw such lines, and red-leaning states that already expanded Medicaid are likely to pursue many such restrictions.
Historically, Medicaid waivers were required to be federally budget-neutral and have a prospect of improving the quality and efficiency of the Medicaid program. But determinations of whether a state proposal meets these standards is an administrative decision, and prior administrations have exercised a good deal of flexibility in review of waiver proposals that advance their policy agendas.
Next year the ACA offers even wider waiver authority. ACA Section 1332 waivers will permit states to reshape not just Medicaid, but many other ACA provisions including the mandate, penalties, and some insurance rules. Section 1332 waivers can only be approved if they are budget-neutral and do not reduce the number of people with comprehensive coverage. But like Medicaid waivers, it will be up to the Trump administration to determine when these criteria are met. Once thought of as an opportunity for states to experiment with ideas like a single payer, it is likely that conservative-leaning states will bring forward ideas that dismantle parts of Obamacare.
Of course, policymakers in New Jersey are not likely to try to turn back the coverage gains of the ACA. The Christie administration expanded Medicaid, publically embracing this decision as recently as August. It also developed, was approved for, and is seeking to renew and enhance, a Medicaid waiver that includes a list of reforms to improve care and efficiency of the program. These positive changes are now at risk.
The outcome of the 2016 election adds great uncertainty to the future of coverage gains and delivery system improvements under the ACA. Much depends on the path that Congress and the Trump administration take. If “repeal and replace” can evolve to “modify and fix,” there is hope for progress.