Politics of Economy May Affect Health Care Policy

by Dan Diamond, California Healthline Contributing Editor

TOPIC ALERT:

California's efforts to implement health reform continue to speed ahead. The state is on track to be the first to set up a health insurance exchange since the overhaul's passage, and the Legislature has advanced other key bills regulating insurer behavior.

However, efforts to roll out new health care provisions -- both in the Golden State and across the nation -- are increasingly colored by economic woes.

Persistently bad unemployment figures have complicated Democrats' efforts to tout the overhaul and could expedite Republican midterm victories that might affect future implementation. Meanwhile, ongoing concerns about state and federal budgets have fueled resistance to government spending across the political spectrum, from consumer protests outside the Sacramento Capitol to lawmakers' protestations in the nation's capital.

Unemployment, Budget Delay Test State Safety Net

While California remains on track to expand access to health coverage in 2014, new data underscore that the state has a worsening problem right now.

About 8.4 million Californians were uninsured in 2009 -- up from 6.4 million in 2007, a 31% surge in just two years -- according to a new report from the UCLA Center for Health Policy Research. The sharp increase was driven by widespread job loss, as areas that reported higher unemployment figures corresponded to areas with the highest rate of uninsured residents, said Shana Alex Lavarreda, the center's director. The figures should remind lawmakers that "California's health system needs all the help it can get," according to Anthony Wright, director of Health Access.

Several provisions under the health reform law are intended to bolster the short-term safety net. California's high-risk pool --called the Pre-existing Condition Insurance Plan -- is slated to be the first major initiative from the federal health reform law to take effect in California. The pool is slated to cover up to 25,000 Californians; as of Aug. 6, about 4,000 state residents had requested applications for the pool. Under the law, more than 450,000 of the state's small businesses also are in line for tax credits intended to help finance health coverage for their employees.

However, state budget issues continue to raise red flags for health care stakeholders. The budget, which is now about two months late, currently threatens cuts to health and human services, which critics say would hamper access to Medi-Cal, reduce home health services and make other changes. The budget delay also means that community clinics are now going without Medi-Cal reimbursements, which represents 50% to 80% of their revenue, and could force clinics to scale back their hours and services.

National Economics Also Affect Politics of Reform

National budget issues present their own set of challenges. Critics continue to hammer the new law for costing too much at a time of high deficit spending. Republicans also have pointed to consistently high unemployment figures as evidence that reform isn't helping the economy, despite the White House and Democratic leaders initially positioning the overhaul as a necessary financial fix.

These economic woes matter as the midterm elections approach.  Rather than discuss the merits of the health care overhaul, candidates for higher office are focusing "all [their messages] about jobs and the economy," said Howard Dean, former chair of the Democratic National Committee. As a result, debate over the reform law has been continually reframed to focus on long-term costs and not issues like improved access to care.

The current climate and tone is thought to favor Republican challengers and hurt Democratic incumbents. However, even if Republicans make major gains in the House and Senate -- with many candidates campaigning on a promise to "repeal and replace" the federal overhaul -- their options to change the bill will be limited given President Obama's veto power, notes Grace-Marie Turner, president of the Galen Institute.

As a result, GOP repeal efforts will likely focus on the law's cost, as Republicans could convene congressional hearings to explore the overhaul's effect on the economy and the health sector. According to Turner, Republicans' "strongest cases" would address the law's effect on jobs and national deficit. A shift in Congress also could allow Republicans to roll back certain elements rather than the entire law. GOP lawmakers already have targeted a new reporting mandate, which will take effect in 2012 and require businesses, not-for-profit groups and government offices to file 1099 forms with the Internal Revenue Service when they purchase $600 or more in goods from another business in a given year. The provision is expected to generate $19 billion in revenue toward health reform over the next decade. However, small businesses have argued that the new requirements will impose "an enormous amount of red tape" for companies during bleak economic times, and GOP lawmakers have introduced legislation to repeal the reporting mandate.

While the debate on cost continues, here's what else is making news in health reform.

Implementing the Overhaul

  • As Obama administration officials work to implement the federal health reform law, HHS Secretary Kathleen Sebelius is in the difficult position of reconciling the differences between what lawmakers intended for key provisions and the guidelines established by the National Association of Insurance Commissioners. The law requires NAIC to draft recommendations or consult on 10 reforms or programs included in reform standard insurance benefits and enrollment forms and regulations for state insurance exchanges. Although Sebelius has final say over the regulations, HHS thus far has not signaled how it will handle the proposed guidelines (Haberkorn, Politico, 8/23).
  • Physicians who embrace the federal health reform law will prosper, according to an article written by Nancy-Ann DeParle, director of the White House Office of Health Reform, and colleagues published on Monday in the Annals of Internal Medicine. DeParle and colleagues wrote that the overhaul offers financial support for physicians, such as incentives to improve the care they deliver, purchase and implement electronic health records, and encourage preventive care. They added, "The most successful physicians will be those who most effectively collaborate with other providers to improve outcomes, care productivity and patient experience" (Steenhuysen, Reuters, 8/23).
  • Twenty-seven states hope to use a provision in the health reform law to expand programs that provide low-income people with no-cost contraception through Medicaid. Contraception and other reproductive health services -- including sexually transmitted infection testing, Pap tests and, in some state programs, infertility treatments -- already are offered in the states through a Medicaid pilot project for low-income women who do not qualify for Medicaid. Prior to the health reform law's passage, funding for the programs was conditional, and states had to regularly reapply. The health reform law makes the program permanent and expedites federal funding distribution, offering states a chance to expand their programs (Adamy, Wall Street Journal, 8/18).
  • Last week, CMS officials announced that beneficiaries of the Medicare Part D prescription drug benefit program will pay an average monthly premium of $30 in 2011, up from $29 in 2010 (Alonzo-Zaldivar, AP/Boston Globe, 8/19). Officials said larger cost increases were offset by more frequent use of generic medications (Reichard, CQ HealthBeat, 8/18). CMS officials also touted cost-reducing benefits for Part D beneficiaries contained in the federal health reform law. For example, one provision aims to close the so-called "doughnut hole," or gap in coverage, by distributing $250 rebate checks to nearly 750,000 beneficiaries. Another provision will reduce the cost of brand-name drugs by 50% for beneficiaries in the coverage gap (Lillis, "Healthwatch," The Hill, 8/18).
  • Last week, President Obama updated his pending fiscal year 2011 budget request to include $400 million more for health worker training, HIV/AIDS programs and high-risk insurance pools. Obama is seeking an additional $55 million to help states establish high-risk insurance pools called for by the health reform law. In addition, the president is seeking $30 million more for consumer information about health insurance and $250 million for programs to train primary care physicians and health care workers who focus on treatment of seniors. White House officials said the additional spending will be offset through several avenues (Young, CQ Today, 8/20).

Calling for Changes

  • Several groups and coalitions -- including America's Health Insurance Plans, the American Chiropractic Association, the Coalition for Affordable Coverage and the National Community Pharmacists Association -- requested changes to federal regulations of "grandfathered" health plans before the comment period ended last week (Pecquet, "Healthwatch," The Hill, 8/17). Grandfathered plans are those that were offered before March 23, 2010, the day the federal health reform law was signed. They are exempt from some of the requirements of the law, provided they do not make major changes, such as increasing cost-sharing requirements beyond certain levels (Reichard, CQ HealthBeat, 8/17).
  • Last week, business lobbyists sent members of Congress a letter bearing more than 1,099 signatures in opposition to a provision in the health reform law that requires businesses of all sizes to send 1099 tax forms to the Internal Revenue Service when paying corporate vendors more than $600 within a year's time. Members of local Chambers of Commerce believe that the reporting burden will be too great for businesses. According to the letter, organizations will have to "institute new complex record-keeping data collection and reporting requirements that track every purchase by vendor and payment method," adding, "This provision will also serve to dramatically increase accounting costs, expose businesses to costly and unjustified audits by the IRS, and subject more small businesses to the challenges of electronic filing" (Reichard, CQ HealthBeat, 8/17).

Public Perception of Reform

  • Health reform has not helped improve residents' confidence in their own medical care, according to the Robert Wood Johnson Foundation's health care consumer confidence index. The foundation said that confidence increased in April after Obama signed the overhaul legislation, but then declined to where it was in 2009 at the beginning of the congressional health reform debate. RWJF officials said the lack of change in attitude among most U.S. residents could be because many provisions in the overhaul do not take effect until 2014 (Alonso-Zaldivar/Tompson, AP/Boston Globe, 8/18).
  • Democrats and Republicans have begun reworking their messages on the federal health reform law to highlight characteristics that could benefit their efforts in the upcoming midterm elections. Proponents of the overhaul have proposed deserting claims that the reform law will curb costs and reduce the deficit, opting instead to focus on how the law benefits individuals while reiterating that it can be improved. The messaging shift -- which was presented last week during a conference call organized by Families USA -- was based on survey data collected by pollsters John Anzalone, Celinda Lake and Stan Greenberg. The presentation suggested that Democrats have acknowledged that the health reform law failed to win over more U.S. residents after passage, contrary to the party's original predictions (Smith, Politico, 8/19).
  • Meanwhile, Republicans are attempting to leverage new unemployment and deficit statistics as proof that the health reform law is negatively affecting the economy. GOP Lawmakers pointed to the newly released Congressional Budget Office mid-year budget outlook, which forecast a $1.3 trillion deficit in fiscal year 2010 and a $1.1 trillion deficit in FY 2011. Sen. Judd Gregg (R-N.H.) said that the CBO outlook "underscores [that] ... the current pace of U.S. spending is unaffordable and unsustainable," adding, "Democrats argued that their massive health care plan would get the deficit under control, but we can see now that was simply smoke and mirrors." Sen. Mike Enzi (R-Wyo.) said, "The CBO report confirms that the health care law will increase labor costs, and will discourage employers from expanding their businesses and investing in their workers" (Pecquet, "Healthwatch," The Hill, 8/19).

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