02/21/2013 11:53 am ET Updated Apr 23, 2013

Health Care: Now What?

Although the State of the Union Address (SOTU) often marks the beginning of the legislative season in Congress, it seems health care is not following the usual pattern. Due to the vast nature of the Affordable Care Act (ACA) and the strong and continuing political feelings it created, the debate has never subsided. It has just gone on, but the SOTU does provide an appropriate moment to assess where the country is on the issue of health care.

First, regardless of where you come down on the ACA, it is important to understand that there are trends in the health care marketplace that are underway that were not created by the ACA. If anything, the ACA capitalized on these trends, trying to encourage and/or accelerate them, and most importantly, they will continue regardless of any modification to the law.

• A drive for a new reimbursement model: There is true bi-partisan agreement that the fee-for-service (FFS) model -- the backbone of how we have paid for health care in the U.S. -- has reached its natural end. We can no longer afford to pay for primarily quantity, which the FFS model incentivizes. We must now begin to pay for value. What replaces it is still being debated, but ideas include a global payment system, a capitated payment system, the Accountable Care Organization model (ACO) (and its commercial version) or some modified version of any of these. In addition, FFS will not likely be replaced by any one single model, at least not for a while. Regardless, what is most important is that the day is coming when FFS is no longer the model for how we pay for health care in the U.S. Another key component to understand about the coming change is that nearly everything will be captured, including pharmacy benefits and wellness programs. The only question is how and when.

• Paying for quality: This is what is driving the debate over replacing the FFS model. FFS incentivizes and drives quantity of care. Nearly everyone understands that this model is not delivering the desired quality or outcomes of care, thus the drive to shift how we pay from quantity to quality to deliver more value.

• A greater emphasis on team-based care: Team-based models include ACOs, medical homes and community health networks. Another idea that has widespread agreement is to focus on chronic diseases. With 75 percent of our health care costs driven by chronic disease (and many people have multiple chronic diseases), health care providers need to do a better job of managing care. If it is done well, the potential savings are great and the potential improvement in outcomes is even greater.

• An increasing focus on wellness, prevention and quality of life as the measure of health: As we all know well, for decades our health care system really has been a sick care system, meaning people reluctantly see the doctor only when they are sick. In recent years there has been a drive to focus on being well (or as well as you can be whatever your condition). This trend will continue, particularly with the increase in workplace wellness programs.

Although the ACA did not create these trends, it is designed to encourage them and propel them forward.

• CMS Innovation Center which is testing ideas such as Bundled Payments, ACOs and Value-Based Purchasing;

• The private sector seeing the emphasis on innovation is also moving ahead with its version of ACO-like models of care, as well as experiments in new methods of reimbursement;

• Expansion of prevention benefits under the ACA;

• Codifies existing law that allows employers/worksite wellness programs to differentiate premiums based on certain health status factors (BMI, tobacco cessation, cholesterol, blood pressure).

So what about the politics of health care?

With President Obama's reelection, repeal of the ACA is not an option. However, this does not mean there will not be continued talk of repeal, especially from the most conservative elements of the Republican Party (Rep. Michelle Bachman, R-MN; Sen. Ted Cruz, R-TX).

One of the most important political issues regarding the implementation of the ACA is the ongoing fiscal/budget fight. Right now, Congress is lurching from one fiscal deadline to the next with no end in sight. The potential impact for the ACA is whether any changes or reductions in funding will be made as part of any long- or short-term deal.

In addition to possible changes based on a fiscal deal, expect a continued small-steps strategy to dismantle parts of the law. For instance, as part of the "Fiscal Cliff" deal Part 1, the CLASS Act was repealed. The CLASS Act was a long-term care program that suffered from a budget problem -- while projected to produce a surplus in the first 10 years, after 10 years the program plummeted into deficit for as far as the eye could see. In addition, a growing bi-partisan and credible effort is emerging to repeal the device tax, which was included in the law to help pay for it.

In addition, the legal challenges that began with the individual mandate, and thus the overall standing of the law, will continue. These challenges have the same goal as the small step legislative strategy -- dismantle the law provision by provision. The current challenges fall into a couple areas:

• Challenge the constitutionality of the contraception mandate: So far the results have been mixed. Several injunctions have been granted while several have been disallowed. The president recently clarified the regulations granting exemptions for more institutions, which may help in the legal challenges, but will not slow down the number or ferocity of the opposition.

• Challenge the legality of exchange subsidy for federal exchanges: Conservatives believe because the law does not explicitly spell out that subsidies can be offered in federal exchanges as it does for state exchanges, they have an opening to topple the law. The IRS has already issued rules covering the state and federal health exchanges. Oklahoma has sued, but it is unclear who has standing (i.e. what is harm?).

• Challenge the employer mandate: Several lawsuits have been filed, with no results to date.

Health Exchanges

The last and most important issue in the ongoing debate is over the health exchanges, or marketplaces, as the Department of Health and Human Services (HHS) has rebranded them. The success of the ACA rides on their success. If they work well, the ACA will be nearly impossible to topple. If they do not work well, and conservatives are doing everything they can think of to stand in the way of their success, then an opening will be provided to make significant changes or even repeal the law.

With the focus on health exchanges the debate has shifted to the states where Republican governors have overwhelmingly rejected the idea of running the exchanges themselves, instead leaving the task to the federal government. Democratic governors have generally taken on the job, but in the end it looks like approximately 30 states will leave the job up to HHS. And while HHS/the federal government has the experience and expertise (they already run the federal employee program, which is an exchange, and more importantly the Medicare Part C and D exchanges), the sheer number may overwhelm them.

Given the short time frame that both the states and federal government have to get the health exchanges up and running, a question is lingering on everyone's mind: Is there enough time? And if not, given all that is riding on their success, does the president move to delay the implementation of the health exchanges? To note, the key date is not January 1, 2014, but October 1, 2013 when the exchanges are supposed to be open for enrollment. Republicans would love nothing more than a delay as they see it playing right into their hands. Democrats are wary of delay for this reason, but also must weigh that against not delaying and risking poorly performing exchanges that could sour the public on the law.

Regardless of your opinion on the law and exchanges; they are not a radical idea, as noted, two major exchanges already operate; the federal health care program and the Medicare Part C and D programs.

While fairly simple, they work, and they work well. The problem for the ACA exchanges is their complexity, they are new to the states and they are a much larger enterprise than the federal government anticipated.

Interestingly, Republicans are not unanimous on the question of who should run the health exchanges. In a piece for the National Review Online, Doug Holtz-Eakin, president of the American Action Forum argued that "In fact, federal 'fallback' exchanges are the single-payer Trojan horse hidden in ObamaCare. Conservatives must not allow themselves to be outfoxed and overrun." In addition, Tevi Troy, a senior fellow at Hudson Institute and former deputy secretary of Health and Human Services, writes that "Republicans cannot afford to sit back and assume -- or hope -- that the exchanges will fail ... In addition, ignoring the exchanges will not be without cost for the governors." He goes on to argue that GOP governors should ban together and create leverage to try and force the Obama administration to provide them the "... flexibility to create workable non-ObamaCare exchanges."

Congressional Oversight

Although President Obama was reelected, and the Senate remains under Democratic control, the GOP still controls the House and, beyond rhetorical opposition, it can be expected they will hold oversight and investigative hearings including looking at:

• How was/is the taxpayer money being spent;
• The overall cost of the law (the GOP believes, despite OMB and CBO projections, the law will add to the U.S. deficit);
• The effectiveness of the various programs within the law. Is the law working as intended?

The bottom line, the election did not end the health care debate -- it just moved it to a new phase.

In the words of Sir Winston Churchill: "This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning."