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How the Republican Health Agenda Could Play Out

This was published as a Wall Street Journal Think Tank column on December 2, 2016.

The worm is about to turn in health policy and politics when Republicans shift from throwing stones to owning the problems of the health system and the Affordable Care Act or its replacement, as President Barack Obama and Democrats have for the past eight years. It’s hard to predict how events will play out, but it’s likely that grand plans to repeal and replace Obamacare, convert Medicaid to a “block grant” program, and transform Medicare into a premium support program could be whittled down or delayed as details of such sweeping changes, and their consequences, become part of the debate.

Republicans and the president-elect are on the hook for election promises to repeal the ACA or major parts of the law. If the GOP repeals the ACA but delays a replacement plan until after the 2018 midterms, the degree of political fallout is likely to depend a great deal on what happens in the non-group insurance market. (This includes people who buy their own coverage on the ACA exchanges and outside of them, all of whom are subject to the same premium increases.) If Republicans cannot make deals with insurers to keep the non-group market functioning for the roughly 19 million people who rely on it, and the market becomes unstable or collapses, public reaction could affect the entire GOP health-care agenda. The chances of this happening stand to grow if Republicans move quickly to eliminate major provisions of Obamacare that directly affect marketplace stability, such as the individual mandate. The budget reconciliation process–which can be used to address revenue and spending measures that have been scored by the Congressional Budget Office–is the fastest and most likely route to such changes.

The big Republican “reform” idea most likely to be delayed until after 2018 is fundamentally altering Medicare by converting it to a premium-support, voucher-like program. That could be delayed or tabled altogether; Medicare has long been the “third rail” of health-care issues and is the health issue with the greatest potential to influence elections. Advocates of premium support want savings from capping federal contributions to Medicare beneficiaries, but they are likely to be wary of the political fallout if it becomes clear that benefits for future beneficiaries will be eroded if fixed payments don’t keep up with the rising cost of medical care. Phasing in a plan so that it affects only future beneficiaries may soften the impact but is not likely to be enough to side step a political problem over Medicare in 2018, which might prompt some efforts to defer action.

Action on Medicaid is the toughest element of the Republican health-policy trifecta to predict. Republicans may face resistance from states over cuts in federal Medicaid funding that are integral to their block-grant plans, as well as resistance from Democrats in Congress. More red states (16) have expanded their Medicaid programs than have blue states (14) at this point, giving these Republican-led states a stake in what happens with the ACA and Medicaid. Many states might see incentives to make their own deals with the new administration through waivers. Republicans might back off broad legislation to convert Medicaid to some form of block-grant program and turn, instead, to a state-waiver program administered by the Department of Health and Human Services. A broader waiver initiative would allow the administration to achieve policy goals state by state but would not accomplish the permanent transformation of Medicaid or across-the-board federal savings a federal block grant could. A lot will depend on details of Medicaid proposals that are not yet known, particularly the details of how a per-capita cap on federal Medicaid spending might work and how many states find it attractive.

It’s not clear how much political strife Republicans will be willing to accept in a health-care debate. One factor that could embolden them: The number of GOP Senate seats at risk in 2018 is not significant. Already, however, there is talk of Senate Republicans signaling reluctance.

Another unknown is how President-elect Donald Trump will react when debate is joined over detailed legislative proposals and the politics of fundamentally changing the ACA, Medicaid, and Medicare become more real. Will he want to invest a large share of his early political capital in a series of divisive national debates on health care, as President Obama did? Or will he prioritize other issues? The merits of Republican health-care plans aside–they obviously have detractors on the left and advocates on the right–history shows that the burden is always on those who want to make big changes in the health system and its major programs, and that doing so often carries a political price.

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Filling the need for trusted information on national health issues, the Kaiser Family Foundation is a nonprofit organization based in Menlo Park, California.