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The fight over ‘Obamacare’ goes on

Published on 26/07/12 at 10:49am
Mitt Romney image
Mitt Romney is campaigning for repeal of the legislation - despite introducing a very similar system to his state Massachussetts in 2006

The recent ruling by the US Supreme Court which upheld President Obama’s healthcare reforms could save the country around $84 billion over 11 years, according to a new study.

The non-partisan Congressional Budget Office has examined the cost implications of the reforms and the ruling of the Supreme Court judges, who narrowly voted 5-4 in favour of keeping the Act in June.

The Affordable Care Act was passed in 2010 with the full measures set to come into place in 2014, and requires all Americans to obtain health insurance, or face a penalty fine.

But opponents of President Obama - made up mainly of Republicans - had claimed that this amounts to a mandate, which is illegal under the terms of the US constitution.

But the Supreme Court judges decided to uphold the law, interpreting it as a tax, and therefore in accordance with the constitution.

In addition to the mandate, the Supreme Court was asked to consider another part of the law that deals with the expansion of Medicaid, a programme for poor citizens. The court ruled to limit that provision, but did not strike it down altogether.

The Court said in its ruling: “What Congress is not free to do is to penalise States that choose not to participate in that new program by taking away their existing Medicaid funding.”

The court decision is highly significant for the President, as the health reforms have been the biggest domestic success of his first term in office. It will also give him greater confidence ahead of the US presidential elections in November, as a defeat in the Supreme Court would have weakened him politically.

Lower costs

The court’s ruling means that states will now be able to opt out of providing Medicare for their citizens, meaning the costs to the federal government will be lower. The CBO forecasts that about six million fewer people than expected will be covered by Medicaid as a result of states opting out.

Analysts at the CBO estimate therefore that the net cost of expanding medical coverage under the law will total $1.168 trillion in the 2012-2022 period, compared to an earlier estimate of $1.252 trillion.

The Act will extend insurance to 32 million Americans who currently have no coverage and seeks to address the fast-increasing costs of healthcare to the nation.

Implications for pharma

Analysts say the Supreme Court ruling is unlikely to have a major impact on pharma - but that doesn’t mean to say further amendments to the law are now ruled out. While the industry was very publicly in favour of the reforms, there are some aspects which it opposes.

Among the Affordable Care Act’s measures is a reform which closes the ‘doughnut hole’ where patients have to pay their own prescription drug costs, caught between a lower and a higher level of costs which is covered by insurance.

The pharma industry agreed in 2009 that it would contribute to cost reductions by guaranteeing savings of $80 billion over the next decade, in part by offering rebates and making brand name drugs more affordable for senior citizens affected by the doughnut hole problem.

The pharma industry supported the Act when it passed, and the US lobby group PhRMA spent $100 million on advertising for the reforms. In return, President Obama agreed to drop two policies vehemently opposed by industry - the parallel importation of drugs from Canada and giving the federal government the power to negotiate Medicare prices directly with pharma companies.

Commenting on the Supreme Court ruling in June, pharma association PhRMA said: “We respect the Court’s decision and recognise that there will be ongoing policy discussions about the future of healthcare in America, and about the impact of today’s decision on the healthcare law.

“We will work with Congress and the Administration on a bipartisan basis to address these important issues and will continue to advocate for an environment that fosters medical innovation and access to new medicines.”

However, for pharma there are a few further changes it wants to see to the reforms. Most notable among these is the creation of the Independent Payment Advisory Board (IPAB), a part of the legislation it wants to see repealed.

The Whitehouse says the 15-strong committee will recommend policies to Congress to help Medicare provide better care at lower costs, including ways to co-ordinate care, getting rid of waste in the system, incentivising best practices, and prioritising primary care.

But pharma and other lobby groups fear IPAB’s power will be too broad when it comes into being in 2015, and believe it could eventually become a healthcare rationing body. President Obama’s adversary in the presidential elections will be Republican Mitt Romney, who has denounced IPAB as “an unaccountable board to ration care for today’s seniors”, - despite the fact that the health legislation specifically prohibits IPAB from making any recommendation ‘to ration healthcare’.

Public opinion on the value of the wider healthcare reforms remains divided on the reforms, with many worried about its high cost and impact on the economy.

Repeal would cost more

But this will not be the end of the debate as the Democrats may have won the battle, but the war is still ongoing.

Mitt Romney has already vowed to repeal the Act if he wins the US election in November, despite the fact that he introduced a very similar system to the state of Massachussetts, which aimed to provide universal health insurance coverage based on mandatory participation.

Romney has tried to distance himself from the Massachussetts reforms, saying there is much he would change about them, even though the system is popular with citizens of the state.

Republican calls for a repeal has been further undermined by the CBO report which calculated that repealing the healthcare law would increase the deficit over the next decade by $109 billion.

This is because it forecasts that the increased revenues plus cuts in spending will be greater than the cost of extending insurance coverage, the CBO said.

Andrew McConaghie

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