ANALYSIS: Implementing the ACA post-election: Let the wild rumpus begin

While the Patient Protection and Affordable Care Act (ACA) and Medicare and Medicaid may have been spared a complete topsy-turvy set of events with President Barack Obama's 332-206 electoral vote win over former Massachusetts Governor Mitt Romney, there's no doubt knotty challenges – financial and otherwise – lie ahead, not only for all agencies within the Department of Health and Human Services (HHS), but for the 50 US states and industry as the law is further implemented.

Just about everyone in Washington has acknowledged the reality that some spending cuts or changes in beneficiary criteria would need to be made to Medicare and Medicaid to sustain the programs, with all HHS agencies expected to take a significant haircut in their budgets, including the National Institutes of Health and the US FDA – all outcomes that will affect the biopharmaceutical industry in one way or the other.

Two days after the 6 November US 2012 elections, President Obama vowed he would work with both parties to find more ways to cut spending, which he said "includes making reforms that will bring down the cost of health care so we can strengthen programs like Medicaid and Medicare for the long haul."

Pharmaceutical Research and Manufacturers of America (PhRMA) senior vice-president Matthew Bennett urged Congress and the Obama administration to "preserve and sustain continued medical progress," which he argued "improves lives and is an engine of economic development."

"Maintaining leadership in R&D-intensive sectors like the biopharmaceutical sector is critical to winning the fight against the human and economic costs of disease and growing the US economy over the long term," Bennett said.

Solving the dilemmas of ensuring a sustainable US health care system is an "engineering problem" of the "highest complexity," Dr Donald Berwick, the former head of the Centers for Medicare & Medicaid Services and the co-founder of the nonprofit Institute for Healthcare Improvement, said during an 8 November forum in Washington.

At that same gathering, former US Senate Majority Leader Bill Frist (Republican-Tennessee), a physician, contended much of the "disruptive innovation" that will address those problems will come from the private sector and states, not the federal government.

"Very little in terms of innovation comes out of Washington," said Dr Frist, who is now part of a think tank of former lawmakers, known as the Bipartisan Policy Center (BPC). "All the private sector wants is certainty," he said. "Ideas have been locked up for fear of change. But much of that has been removed."

But BPC co-founder former Senator Tom Daschle (Democrat-South Dakota), who also previously reigned as Senate chief, argued the federal government would still be the best option for creating the "innovative new infrastructure" necessary for the US health care market to work as intended under the ACA.

"I don't know that the private sector has the capacity to create an innovative new infrastructure, a new paradigm, for health in this country," he said. "There's a tremendous amount of inefficiency in the private sector," which Senator Daschle said has not yet found the right balance between pursing innovation and being risk averse.

Nonetheless, Daschle said he expects to see an "extraordinary explosion of innovation" coming from the private sector and states with new models in services and delivery as the ACA moves forward.

Both former Senate leaders conceded the focus of the ACA has shifted to the states as they move forward with implementing the law's insurance exchanges, which were mandated to serve as a marketplace for reasonably priced health plans for individuals and small businesses.

The exchanges will be run as government agencies or nonprofits, with the federal government stepping in to set them up if a state fails to do so (scripintelligence.com, 10 October 2011, 27 August 2012).

For drug makers, the exchanges mean potentially millions of new customers whose prescriptions for medicines might otherwise go unfilled due to lack of insurance coverage.

But Dr Mark McClellan, director of the Engelberg Center for Health Care Reform at the Washington think tank Brookings Institute, and a former head of the FDA and the Center for Medicare & Medicaid Services, warned not to expect all to go smoothly with the exchanges – especially in the first year (scripintelligence.com, 14 November 2012).

"There will be bumps," Dr McClellan declared during a 13 November forum in Washington.

Nonetheless, said Chris Jennings, president of Washington-based consulting firm Jennings Policy Strategies and a former senior health care adviser to President Bill Clinton, the Obama win was a "relief" for the future of health care, "in the sense that there was not a desire to reopen every single element of the health care discussion again, in what would have inevitably been a very polarizing debate with a very destructive outcome."

From health care stakeholders' political, policy and positioning perspective, "it's far less challenging than it otherwise would have been" with a Romney win, Jennings said during the 8 November Washington gathering of health care stakeholders.

"I personally think that underneath all the politics and the polarization around health care, people fundamentally understand that the policy that emerged is a uniquely American, centrist-approach," Jennings said, adding that he is optimistic about the ACA's future.

While health care really wasn't the driving issue for the 2012 elections, "there was no issue that was impacted more by it," he said. Indeed, Senator Daschle declared that after withstanding the Supreme Court and the presidential challenges, the ACA is "now in the books permanently."

Both Senators Frist and Daschle agreed that repeal of the ACA is likely a dead effort following Obama's second-term decisive victory. But, Senator Daschle added, "that doesn't mean it is not subject to amendment, subject to change or subject of a lot of evolution over the course of next couple of years."

One target under fire by many Republicans and some Democrats is the ACA's 15-member independent commission charged with analyzing the drivers of excessive and unnecessary Medicare cost growth and making recommendations to Congress on policies to curb spending – the Independent Payment Advisory Board (IPAB), a measure which already has had votes in the House for repeal (scripintelligence.com, 26 March 2012).

Critics have asserted that IPAB is an unelected board of bureaucrats empowered to make budgetary and reimbursement decisions for Medicare without congressional oversight.

While there's been bipartisan agreement by some members of Congress from both sides of the aisle that IPAB is "not a good way to proceed," Representative Donna Christensen (Democrat- US Virgin Islands) acknowledged "that's where a lot of savings are" that were included in the ACA.

No matter what legislators may do in the future to amend the ACA, industry already has been "consolidating, squeezing the inefficiencies out and becoming leaner and better" former Representative Bart Stupak (Democrat-Michigan), a partner in the legislative and government affairs group at the Washington law firm Venable, told Scrip.

For the hospital and health system community, the lead up to the 2012 elections meant some "cautious fence-sitting," Chas Roades, chief research officer at the Advisory Board Company, a Washington-based global research, technology and consulting firm, said at the 8 November forum. But as with others, Roades said he expected the election outcome to have an "unlocking effect" on that industry, too.

But as the ACA is further implemented, Houston lawyer Susan Feigin Harris, a partner at BakerHostetler, warned that one issue confronting the health system community is the potential negative impact on the so-called disproportionate share hospitals (DSHs) – facilities whose patients disproportionately are poor or uninsured – of the Supreme Court's 28 June ruling, which, although upholding the individual mandate, made the law's expansion of the Medicaid program optional for states (scripintelligence.com, 2 July 2012, 29 June 2012, 28 June 2012).

During the negotiations the White House and lawmakers held in 2009 with various health care stakeholders, one of the concessions the hospital industry was made to give in to the idea that, as more and more individuals are insured under the health reform law through the exchanges, subsidies provided to help individuals buy insurance coverage or the Medicaid expansion, the enhanced government reimbursements DSHs receive under Medicaid would be eliminated over time, Feigin Harris told Scrip.

But if that foundational basis for the hospital agreement is chipped away by not having fully operational exchanges, smaller individual subsidies or states that opt out of the Medicaid expansion – leaving DSHs less compensated for the care they provide – the "fundamental bargain, in some ways, has been undermined," she said, noting that such an outcome wasn't foreseen.

"So have we so fundamentally undercut, in essence, the financial underpinnings of some of these safety net institutions that we are jeopardizing those institutions?" Ms Feigin Harris asked.

She pointed out that the DSH safety net hospitals include many of the top "most prestigious" large academic medical centers in the US, such as Johns Hopkins in Baltimore and Texas Children's Hospital in Houston, which Feigin Harris noted are involved in "groundbreaking" research.

But Chris Coburn, executive director of Cleveland Clinic Innovations (CCI), the health system's corporate venture arm, expressed hopefulness over the changes coming due to the ACA.

While the election may have looked like a status quo outcome – with Democrats retaining control of the White House and the Senate and Republicans keeping the House – "from our perspective, change and restructuring is underway in almost every conceivable fashion" in health care, Coburn said during the 13 November forum.

Nonetheless, he acknowledged that the broad change underway is "going to be messy."