How The Health Reform Game Has Changed

By some accounts, the Republican takeover of the House is a game changer for health reform. Already, it has reinvigorated debate over the law, and the media have focused on what federal legislators can or will do to alter it. But more attention should be directed elsewhere. The future trajectory of health reform will be shaped far more by interest group agendas and state-level actions than by the new House leadership's stated plans. Not only has the game changed, but so have the most important players.

When the new Republican House majority gets to work next year, they will likely continue their rhetoric of repeal and, perhaps, even vote on it. The media attention they receive for these actions may satisfy the GOP base, but with Democratic control of the Senate and presidency, actual repeal is extremely unlikely. In addition, Americans like much of the law. More importantly, so do key interest groups.

It shouldn't be a surprise that hospitals, insurers, large employers, and the pharmaceutical industry do not favor repeal. The health law took the shape it did for a reason: interest groups were reasonably successful in achieving their goals with respect to the fundamental structure of the law. Insurers and hospitals like the mandate (even if Americans oppose it) because it promises greater revenue and a more attractive risk pool for the former and a reduction in uncompensated care for the latter. The pharmaceutical industry is pleased that the Medicare doughnut hole will be closing because it will lead to increased drug sales. Large employers also favor Medicare reforms that will reduce costs and increase quality, both for Medicare and for the supplements that large employers sponsor for their retirees.

If these interest groups opposed health reform, they would have killed it last winter, if not earlier. They didn't. It's unlikely the Republican House leadership will take tangible steps to cross them now, despite what they say.

However, just because health reform won't be repealed, that doesn't mean there might not be significant changes during implementation, or that Republicans won’t have influence over those changes. Many of the key implementation decisions won't be made at the federal level because insurance is regulated to a large extent by states. State insurance commissioners are not appointed by the president or by Congress; they are generally appointed by governors. In the November mid-term elections, Republicans picked up nine governorships, and will, as a result, control that office in 29 states. And, in the states where insurance commissioner is an elected position, the GOP also made gains.

The exchanges, which still have to be set up, are state based, as are Medicaid programs. State insurance commissioners will have a lot of power and control to set regulations on how the exchanges will work. That will make a big difference in how reform functions in the individual insurance market – where many of the uninsured are expected to get insurance.

While the overhaul sets national standards for minimum benefits that insurers must offer in the exchanges, states can augment them. States could demand that insurers meet certain criteria, such as benefits requirements, or decline to set any at all. Each state will also have to determine whether to administer the exchange itself, let a private entity do so, or decline entirely and submit to federal intervention. Additionally, the law provides states much leeway in determining what is an "unreasonable" premium increase. States could go as far as to refuse any increases without justification, or merely require justification only for severe increases, and then, perhaps, after the fact.  The medical loss ratio can be changed on a state-by-state basis with approval from the Department of Health and Human Services.

Finally, it's important to remember that Medicaid is a state-run program, and how changes are made to contain costs within it is entirely at the discretion of governors and their state legislatures. As we've already seen in the news, Republican governors of some states are seeking flexibility to significantly modify their states' Medicaid program.

No one should be under the illusion that health reform is complete just because a law was passed last March. The degree to which objectives of the law are realized continues to depend on implementation. In contrast to the rhetoric from newly elected or re-elected Republican members of the House, or the intense media attention they enjoy, legislative action and implementation will be constrained and shaped by interested groups and action by the states. That doesn't by any means guarantee success or imply certain failure; it means only that the game has changed. Congress may still be in it, but many other players, some at the state level, are now also on the field.

Austin Frakt is a health economist and an Assistant Professor of Health Policy and Management at Boston University’s School of Public Health. Aaron Carroll is associate professor of Pediatrics, the associate director of   Children’s Health Services Research , and the director of the Center for Health Policy and Professionalism Research at Indiana University School of Medicine. B oth blog at   The Incidental Economist .