The Legislative Calendar

As of October 3rd, Congress has, by the most generous estimate, 43 legislative days remaining in 2017. While President Truman famously branded the 80th Congress as the "Do Nothing Congress", the current 115th Congress continues to lower the bar for historic inaction to a level unseen since the 1920s. 
 
In the remaining 43 (or less) days of the 2017 legislative calendar, Congress must pass legislation to: 1) reauthorize the Children's Health Insurance Program (CHIP), and reauthorize a key grant fund for community health centers (more on these subjects later in this newsletter); 2) reauthorize the Department of Defense via the annual National Defense Authorization Act; 3) provide funding for all or part of FY18 (you will recall that last month, Congress passed a short-term Continuing Resolution that will expire in December) or face a government shutdown; and 4) (likely) raise the debt ceiling, if not by the end of 2017, then very early in 2018, or face unprecedented default on our national debt. In addition, President Trump's executive action to terminate the Deferred Action for Childhood Arrivals (DACA) program expires on March 6th, 2018. At that time approximately 800,000 young Americans, who came as children, will be subject to deportation as their DACA expiration dates arrive. The necessary legislative fix is supported by a strong majority of Americans but lacks sufficient votes, so in our opinion, will only pass this year if included as an add-on to one of the above pieces of "must-pass" legislation. Finally, Congress still has not passed any highly-politicized measures to stabilize the health insurance market, risking the stability of already fragile individual insurance markets.
 
On top of all of this must-pass legislation, Speaker Ryan and Majority Leader McConnell have pledged to act on tax reform legislation which, based on the Treasury Department's summary of the proposal, would be the largest tax cut and the most ambitious rewrite of the tax code since President Reagan's 1981 and 1986 tax reforms, respectively.
 
In order to get all this done, there needs to be an ability and a willingness to seek bipartisanship, a term that has simultaneously become a shibboleth for some who seek the long-sought return to "regular order," and a four-letter word for others who loathe the idea of compromise. The divisions within the Republican party - particularly in the wake of the nomination of Judge Roy Moore for Senate in Alabama- are raw and getting worse. They will not be solved within the remaining 43 days of the legislative calendar. These continuing divisions and lack of consensus, not only between the parties, but within the Republican party, in particular, makes it highly unlikely that Congress will be able to achieve much of anything through the end of the year, in our opinion. Our most optimistic estimate is that Congress will continue to kick the can down the road on the must-pass bills listed above - leaving tax reform and other priorities largely unaddressed this year.
 
1)      Obamacare - With the third failure of efforts to repeal and replace the Affordable Care Act (ACA), Obamacare is now our "national health-care system." Voters have expressed concerns about premium increases, fragile markets, and the high cost of prescription drugs. Seventy-four percent of the electorate says "Congress should do what they can to make the law work." Fifty-nine percent of the public says "President Trump and the Congressional Republicans are now in control of government and they're responsible for making the ACA work." Senator Lamar Alexander, R-TN, and Senator Patty Murray, D-WA, have established a general framework to address the most glaring problems with the ACA, and their efforts are supported by the bipartisan House Problem Solvers Caucus.
 
Throughout American history, political parties, upon coming to power, have been challenged to implement programs and enforce laws that were passed by the opposition party in a previous administration. And throughout our history, Congress and the President, sometimes from differing parties, have always found ways to honor their responsibilities to make government work for the American people. An essential principle of our Democracy is respect for established law and the willingness of both our political parties to enforce and implement laws that are on the books even when they may differ from the party in power's ideology. While Obamacare is unlikely to earn this degree of acceptance from Congressional Republicans, there does seem to be a general agreement that modest, short-term ACA fixes should and will be advanced this fall.
 
2)      Tax Reform - If you talk to any of the Democratic members of the House Ways and Means Committee or the Senate Finance Committee, they will quickly tell you that there is "a deal to be had" on tax reform. While specifics and numbers may vary among the Democrats regarding jurisdiction over tax issues, there is general agreement on the following:
 
  1. The corporate tax rate needs to be lowered to both discourage companies from parking profits overseas and to make American companies and products more competitive in global markets.
  2. A one-time provision to allow U.S. corporations to repatriate offshore earnings that are estimated at $2.5 trillion makes sense, coupled with a lower long-term corporate tax rates and a commitment to use those funds on a one-time infrastructure program.
  3. Given the fact that the national debt has grown from 31% of GDP in 1981 to a projected 106% of GDP by 2019, debt and deficits do matter, both for economic growth and for the sustainability of Medicare and Social Security. While tax cuts will aide the economy, wild growth projections (unsupported by any mainstream economists), such as were made with the tax cut in 2001 and the Governor Brownback tax cuts in Kansas, are irresponsible. Projections of increased revenue from tax cuts need to be supported by sound economic analysis and past experience.
  4. The Earned Income Tax Credit (EITC) is an effective and simple tool to increase work force participation, promote economic upward mobility and address economic inequality. The EITC was enacted under President Ford in 1975 and has enjoyed strong bipartisan support from every Republican President since then. An increase in the EITC needs to be a part of any fair and efficient tax plan.
  5. Increasing the exemption for low income tax payers as the President's tax outline proposes should be a priority. By contrast, increasing the lowest tax bracket from 10% to 12%, as also advocated by the Administration, is terrible policy.
  6. Middle income tax payers need simplified tax forms and tax relief - Speaker Ryan's "post card" proposal.
  7. The top 1% of income earners do not need tax relief and should pay more, given the extraordinary tax and economic benefits that have been available to them for the last decade and a half.
 
Senator McConnell and Speaker Ryan have a choice: they can ram through a tax bill using the reconciliation process and try to pass something with only Republican votes, or they can seek common ground with Democrats and pass bipartisan tax legislation. Using a party line vote will almost certainly guarantee that the tax code will become a "political football," and that tax payers will live with constant uncertainty for the next decade as to what the rules and the rates are for individual and corporate taxes. Moderates on both sides of the aisle will be key to how - and when - tax reform plays out, as the Freedom Caucus is highly unlikely to (threaten to) vote against any tax reform, the way they did with health care.
 
3)      Immigration - President Trump used his executive authority to terminate the DACA program, putting the 800,000 young people who have signed up and qualified for the program under President Obama into a state of limbo. If this issue is not resolved by Congress, close to a million young people who have lived almost their entire lives in the United States and identify as Americans, many having served in the military and participated fully in their communities, will be subject to deportation, expelled from the military, unable to complete college, and forced into the underground economy. These young people provided data to the United States. government which will make them highly vulnerable to enforcement actions by ICE. They acted in good faith with the expectation that their government would act in good faith as well. Several Republican members (including Senators Lindsay Graham, R-SC, Jeff Flake, R-AZ, Lisa Murkowski, R-AK, and Cory Gardner, R-CO) have endorsed a resolution for DACA recipients which will allow them to remain in the U.S., serve in the military, finish school, and work in the legal economy. The House Freedom Caucus and other immigration hard liners are threatening to derail legislation to fix the DACA problem and to depose Speaker Paul Ryan (who has also endorsed some sort of fix for DACA recipients) if he does not commit to passing DACA legislation with a majority of the Republican majority. This demand will ensure that DACA legislation cannot pass the House and will inevitably lead to an immigration crisis of epic proportions, forcing ICE to lose focus and capacity on the single consensus area of their work (i.e. apprehending and deporting serious/violent criminals).
 
While comprehensive immigration reform is certainly not on the horizon, in 2013, the Senate passed a bipartisan immigration bill. The outlines of a narrow bipartisan immigration solution consist of a relatively obvious and already negotiated mix of protection for the Dreamers, increases in border security, and better enforcement of penalties on employers who knowingly employ undocumented workers. But it will require Republican leadership to work with Democrats, at the risk of angering some of the farthest-right members of their caucus.
 
Each of these three issues need to be addressed by Congress before the end of the year. We will know soon whether there is a willingness on the part of the Republican leadership and the President to seek common ground and promote the public good, or whether the fear of the Freedom Caucus and the Bannon insurgency will force an epic end-of-year meltdown and massive disruption, both to the economy and to our national sense of civic purpose.

Health Care: What's Next?

This past weekend, the 2017 federal fiscal year came to a close, and with it came the expiration of the Senate's ability to use budget reconciliation to repeal the ACA. As we all now know, budget reconciliation is a parliamentary procedural mechanism that eliminates the ability to filibuster a bill in the Senate, as long as that bill reduces the deficit. With the 2018 fiscal year upon us, most Republicans seem to have moved on to tax reform, the designated topic of the FY2018 budget resolution that enables reconciliation. Although some ACA repeal "diehards" have expressed a hope that both tax reform and ACA repeal might be possible using the same FY2018 budget reconciliation process, most attention has shifted to a bipartisan compromise being negotiated by the leadership of the Health, Education, Labor and Pensions (HELP) Committee.
 
In the weeks prior to the Graham-Cassidy last-ditch effort to repeal the ACA, Senators Lamar Alexander and Patty Murray had been working towards a bipartisan effort to fix significant issues with the ACA and the resulting instability of the insurance market. After nearly two weeks straight of hearings on the issue (what Senator McCain, R-AZ, famously cherished as "regular order"), the leaders of the HELP Committee were within days of unveiling their bipartisan deal, which seemed all but sure to pass the Senate.
 
However, as the repeal and block granting legislation drafted by Senators Graham and Cassidy, R-LA, gained momentum, Majority Leader McConnell instructed Chairman Alexander to cease negotiations with Ranking Member Murray, and to issue a public statement that there was no deal. Senator Alexander did so, and negotiations and final touches to the legislation came to a screeching halt nearly overnight.
 
Now that Graham-Cassidy has failed, however, the Alexander-Murray negotiations have resumed, and we believe it is highly likely they will lead to the introduction of an insurance market stabilization bill that fixes several issues with ACA. While this would not be a true ACA "repair" bill, it would set a precedent for bipartisan cooperation to fix the system we have. Accordingly, there are three or four areas we expect to see addressed in the legislation. These are:
  • certainty for Cost Sharing Reduction funding (a key need for insurance companies serving fragile markets) - likely a 2-3 year guarantee;
  • flexibility in section 1332 waivers (allowing states flexibility in the implementation of ACA mandates and regulations), including allowing shared waivers across both section 1332 and section 1115 (Medicaid);
  • streamlined and fast-tracked waiver authority;
  • and potentially state-level reinsurance schemes - with ongoing debate over whether the seed funding should come from the federal government, and if so, for how long.
One additional area that is likely to enter the discussion - if not in the Senate bill then in the House as they debate the legislation - is the potential elimination of the individual mandate and/or loosening the employer mandate, changing the minimum employee threshold from 50 to 500 employees. Both of these proposals are likely to be fought strenuously be Democrats, who believe (not without some merit) that the mandates for participation in the insurance markets are the key to the entire ACA structure.
 
As we have detailed above, the Congressional calendar is tight and there are many must-pass items on the agenda. However, we are optimistic that this fix has a chance to pass by the end of this year. If it did, it would be a victory not only for ACA advocates who have feared the imminent collapse of the programs, but also health stakeholders, including many governors, who have long sought flexibility to try out some of their own solutions to the unique health problems their states face.
Another Casualty of Congressional Gridlock

Much has been written regarding the most recent failed effort by Congressional Republicans to repeal the Affordable Care Act (ACA). Graham - Cassidy may have ended in embarrassment for GOP leadership, but it also had knock-on effects on other Congressional priorities. Thankfully, both a looming government shutdown and a catastrophic debt ceiling breach and default were avoided thanks to President Trump's unconventional deal with "Chuck and Nancy" (the Democratic Congressional leadership in the House and Senate). However, as discussed above, other legislative necessities have been delayed, including the expired authorizations for CHIP, a state-administered program which provides health insurance to nearly nine million low-income children, as well as the Community Health Centers Fund, which provides approximately 70 percent of federal grant funding to Federally Qualified Health Centers (FQHCs). The September 30th expiration, and subsequent lack of legislative action to reauthorize both programs, means a (likely temporary) halt of federal funding for health coverage and services for millions of predominantly lower-income Americans.

Operated as a federal-state partnership similar to Medicaid, CHIP is an often-overlooked program that provides health insurance for children whose families do not qualify for Medicaid but do not have private insurance. Due to the federalized nature of the program, a temporary lack of federal funding impacts each state differently. For example, Massachusetts and 21 other states, currently estimate that a lack of additional federal funding will cause their CHIP programs to run out of money sometime in Q1 2018, giving federal lawmakers something of a "cushion" to reauthorize. However, ten states, including California, which enrolls almost one quarter of all CHIP recipients, anticipate exhausting funding by the end of 2017. These states are confronted with difficult choices. Nevada, for instance, may be forced to close enrollment for the program as early as November 1st, while West Virginia is busy interpreting a state statute that may force the termination of its CHIP program even sooner than that. Other states, which receive enhanced federal funding for CHIP in conjunction with Medicaid expansion under ACA, are facing increased state expenditures as part of a "maintenance of effort" requirement, potentially straining state budgets and forcing state policymakers to make difficult choices about the future of the program.

Meanwhile, community health centers, which have grown in stature and importance in recent years, in part because of increased funding included in the ACA, could have their operations impacted with the expiration of federal funding. The nation's roughly 1400 community health centers provide health services to roughly 27 million Americans annually, or over eight percent of the US population. In many areas, community health centers are the only source of primary care services. Health centers report that the disruption in federal funding is likely to delay hiring decisions at some centers, and others fear an inability to borrow money from banks due to the instability of the federal funding line. While virtually nobody expects the permanent expiration of the Community Health Centers Fund, if the funding were cut permanently, the federal government estimates a loss of 51,000 jobs nationwide, resulting in a loss of health capacity that would impact 9 million Americans.

The good news is that for both programs, pending legislation appears likely to pass in the next few weeks to restore federal funding. Lawmakers in both parties appreciate the importance of CHIP and largely support the reauthorization of the program. Senate Finance Committee Chairman Orrin Hatch, R-UT, was one of the original authors of the program in the 1990s (legislative longevity is an amazing thing; at the time Hatch helped to create the program, he had already been serving in the Senate for 20 years). Senator Hatch remains firmly committed to the program, and has released a draft for a five-year reauthorization of the program with Ron Wyden, D-OR, the Ranking Member on the Finance Committee. The Senate Finance Committee will markup the legislation this week. In the House, the Energy and Commerce Committee, which has jurisdiction over healthcare, will markup similar legislation this week. For the community health centers, a similar bipartisan agreement means that a legislative breakthrough is also likely imminent, and, in fact, many observers hope that both CHIP and the community health centers will ultimately be reauthorized in the same package.

The bad news, of course, is that we have come to this point. The September 30th expiration date for both programs has long been known, and a more proactive legislature would have addressed both issues long ago. Of course, "proactive" and "United States Congress" rarely, if ever, appeared in the same sentence these days. Instead, in the last few weeks, observers were treated to (another) quixotic Obamacare repeal effort, this one at the eleventh hour, while other vital healthcare programs expired without a second thought. Congress will likely finish its work on the reauthorization within the month, and a complete crisis will have been averted for another day. However, the implications of Congress' chronic inability to meet deadlines, even in areas of general bipartisan agreement, is an indictment of the institution, and seems likely to eventually result in serious impacts on the welfare and wellbeing of the very constituents these Members of Congress represent.
Commonwealth Corner - More Medicaid Waivers?

Fresh on the heels of the Commonwealth's massive Section 1115 waiver, a five year, $52.5 billion deal approved in the dying days of the Obama Administration, the Baker Administration has advanced a series of new proposals in recent months aimed at curbing the growth of Massachusetts' Medicaid program, known as MassHealth. The proposals, detailed below, would cut benefits for some, transition other recipients off of traditional Medicaid and into subsidized private insurance, and impact the availability of some experimental and high-cost drugs for Medicaid recipients. The plans, depending on one's political bent, are either "bold" or "cruel," "transformative" or "unacceptable."
 
Since expanding MassHealth under the auspices of the Affordable Care Act in 2014, MassHealth's enrollment has surged by over 30 percent, today covering roughly one in three residents of the Commonwealth. With this increase in enrollment has come added cost, much of it reimbursed by the federal government. However, as the ongoing Republican efforts to repeal Obamacare have proven, federal health care funding cannot necessarily be counted on in the long term, a fact of which the Baker Administration is acutely aware. Even absent any significant changes to federal policy, Massachusetts has seen its share of MassHealth costs significantly increase in recent years, from $6.4 billion in FY2013 to $7.7 billion in FY2016. MassHealth spending today accounts for roughly 40 percent of the Commonwealth's budget, threatening to crowd out other state priorities, such as education and transportation.
 
The Baker Administration has moved aggressively this year to curb costs in MassHealth and increase revenue for the program. Among the more controversial proposals was the Baker Administration's request for a new $300 million employer health care assessment, an attempt to recoup the costs incurred by businesses that do not provide robust health care coverage to their employees. That proposal was panned by the business community, rejected by the Legislature, and replaced with a more modest assessment on employers who have employees covered by MassHealth, rather than private insurance. Meanwhile, on the reform side, the Administration has made a number of proposals in recent waiver applications submitted to the Trump Administration:

  • A request to reduce MassHealth benefits to "more closely align Medicaid coverage with commercial health plans." Separately, the Administration has asked the Legislature for the authority to provide subsidies to transition Medicaid recipients covered by the ACA expansion from traditional MassHealth to commercial insurance on the health care exchange;
  • A request to scale back various MassHealth benefits, including non-emergency medical transportation (NEMT), and a request to end 90-day provisional MassHealth eligibility for individuals who are unable to immediately provide evidence of their Medicaid eligibility;
  • Last week, a new request to limit the medicines that would be covered by MassHealth, by adopting a "closed formulary," allowing the Commonwealth to provide coverage only for certain drugs. By using this strategy, the Commonwealth argues it would be able to extract more favorable pricing from drug manufacturers. The Commonwealth also requested the authority (in conjunction with the University of Massachusetts Medical School) to independently evaluate the clinical efficacy of new drugs that have received accelerated FDA approval.
 
The Baker Administration has submitted its various requests to a Trump Administration that is quite willing to entertain proposals to scale back or otherwise modify benefits in order to cut costs. From the Governor's perspective, despite certain blowback from various stakeholders as a response to each request, his sky-high public approval ratings have not taken a hit as a result of his proposals. And for an Administration that prides itself on fiscal responsibility, every dollar saved on health care is another dollar available for the various other priorities competing for tax dollars. Public health advocates, however, will surely be scrutinizing the proposals for any negative impacts on vulnerable populations, and there is certainly a political risk to the Governor's actions.
 
The Commonwealth rightly prides itself on leading the nation in healthcare reform and boasting the lowest uninsured rate of any state. However, with ever-present financial pressures at the state level and federal funding anything but certain, the Baker Administration clearly feels it is necessary to take aggressive steps to address the cost of MassHealth, the program that in many ways enables that national leadership. Time will tell whether the Governor, and more importantly, MassHealth recipients, face any negative outcomes from these controversial decisions.
ADS Ventures |  info@adsventures.net | (617) 236.5830 | adsventures.net