In an improbable, almost impossible, upset, Scott Brown won the Massachusetts Special Election for the Senate Seat of the late Ted Kennedy. Brown ran as a candidate who would become the 41st Senator to block the current health care reform bill. So what’s next for Health Care reform (HCR) and how will this impact Medicare and Medicare Advantage?
First of all, the Democrats still have a number of options left to pass HCR. Controlling 59 Senate Seats and with a large majority in the House, they wield considerable power. Here are some of their options and how I personally handicap their potential outcomes:
- Reconcile the Bill and Vote prior to Brown being seated. As Brown may not be seated for 15 days, there is a possibility that the bill could be reconciled and passed prior to Brown taking his seat. Probability – Almost 0%, I don’t see this as a politically viable option.
- House Passes the Senate Bill “As Is”. If the House passes the Senate Bill without amendments, it would go directly to the President’s desk. Probability – less than 10%, I don’t see this happening since the House bill passed narrowly (220-215, including one Republican vote which will disappear) and the Senate Bill is not attractive to many House Democrats who voted for the House Bill. Assuming the Republican who voted for the bill switches (highly likely), then only 2 more Democrats would need to vote “No”. I don’t see Democrats who voted “No” on the House Bill changing their vote because they look like geniuses right now!
- House Passes Senate Bill “as is” and Passes a Second Bill to make some modifications and the Senate Passes Second Bill via Reconciliation (the so called “Nuclear Option”) which would only require 51 votes. Probability – about 40%, this is a much more likely outcome in my opinion since House Democrats don’t like the impact of the 40% Excise Tax on “Cadillac Plans” which would hurt the Unions. I think they would prefer the stigma of using the “Nuclear Option” to the wrath of the Unions.
- Try to Pass Health Care Reform “Piece Meal”. Since the Democrats only need to pick off one Republican Senator, they could craft multiple Healthcare Bills with some Republican buy in to get some more moderate reforms passed and signed into law. Probability – about 10%, although I think this is a pretty reasonable way to go, I don’t see this happening. First of all, this will take too much time and I think the Democrats would like to put this issue to bed quickly. Also, I don’t think Leadership is as interested in tweaking Healthcare around the edges as they are looking to more radically change it.
- HCR Dies. No law is enacted this year. Probability – about 40%. Some pundits believe that the Democratic Leadership has way too much “Political Capital” invested in HCR to come away with nothing. I, on the other hand, see this as a significant possibility and possibly not a bad political outcome for the Democrats. Since the “General Idea” of HCR is politically popular, the Democrats could blame Republicans for “Killing Health Care Reform” and make a populist appeal to the voters in November.
So what happens to Medicare and Medicare Advantage?
- Since I’ve handicapped HCR passing as 60-40, it sort of depends on what happens. Let’s look at HCR passing first. If HCR passes, there will be about $130 Billion in cuts to MA plans over the next 10 years. This make it particularly hard for MA plans to thrive (and possibly survive) in rural areas. MA plans would continue to exist in more urban areas with higher premiums and lesser benefits. I’d guess that MA enrollment would drop from its current level of 11 million to about 8 to 9 million over the next 4 years.
- Assuming HCR does not pass in 2010, I don’t think that MA plans would be “out of the woods” by any means. CMS still has REGULATORY controls that they can and will impose to reduce reimbursement rates (an example is decreasing reimbursements with Coding Intensity Adjustments like they did in February of 2009). Based on the REGULATORY pressure I see MA plans overall as unchanged to slightly dropping in enrollment from the current 11 million even if no HRC bill passes. Further, there’s a pretty good likelihood that MA reductions could be tied to a Doc Fix bill (see below).
- Doc Fix. Under either scenario, I can’t imagine it will take long to see a doc fix, with a likely funding mechanism (like MIPPA in 2008) which takes the money out of MA reimbursement and gives it to the docs. The approximate cost to fix the Doc’s fee schedule over 10 years is $200 Billion and there is about a maximum of $170 Billion which could be stripped from MA (according to the CBO).
Without a doubt, things have gotten quite interesting.
LET ME KNOW YOUR THOUGHTS AND COMMENT BELOW!!
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I disagree that Obama will use any MA money for the Doc fix. He needs every penny of the $500 billion in cuts to Medicare to have any chance of ever funding a new entitlement program. I’m sure he thinks the the greedy docs will do just fine with a 21% cut.
I think Medicare Advantage is a free market scam that needs to be cut. It’s simply not sustainable. However, the insurance companies support it and Republicans like Brown. Hence, I think this government bloat will continue, but only because Obama’s wishes were not granted. The Republicans take the blame for this piece of waste.
Craig,
I think you are right on. My belief is that within the next week or so they will pass the Senate version and add ammedments like you stated through the nuclear option. If I were a democrat (which I’m not) after I invested this much time and energy and compound that with as many entities as I have alienated. I can’t see as that they have any other options but, to pass it. If not it would be political suicide.
I do feel that fortunately this bill wouldn’t radically start to effect us until 2013. By then people will become more disgusted by the way the democrats are playing with every level our lives and will become further educated to the pay-off’s that are done in order to pass a bill. The bill through ammendments will get so watered-down it will not be what we thought it would be.
My question to you Craig is when do you feel this Doc fix will take place? If I understand it correctly these cuts to the Doc’s will start soon. Seems to me if the mayo clinc is backing out now; others will follow suit. Pretty soon we will be selling Med supp’s or MA’s that may pay for doc’s that don’t participate.
Chad:
I’m shocked that the doc fix isn’t in yet. Clearly, this could be tied to other cuts in Medicare (the Senate bill had $500 billion in cuts). The problem is that money was to be used to provide insurance to people who didn’t have it. The $200 Billion to fix the doc’s fee schedule would have eaten away at that money. Being realistic, it makes sense to use Medicare money to fix Medicare’s problems. Sucking money out of Medicare to pay for other people’s insurance and then using other money to put back into Medicare to fix the Doc’s problem doesn’t make logical sense.
Also, the support of the AMA for any bill is closely linked to the Doc fix. If Congress just fixes this, they don’t have the chance to leverage the AMA for support of other legislation.