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November 8, 2018

Bottom line: The election results will not have a significant impact on fundamental healthcare issues such as rising costs and care delivery inefficiency and ineffectiveness. Healthcare remains a “top-of-mind” issue for many Americans, including government officials. The Affordable Care Act (ACA) successfully increased coverage, but it did not adequately consider rising costs. Care delivery evolution will continue at the local market level on an incremental basis driven by payment reform.

Election Results Overview:

  • Divided Congress: Republican Senate, Democratic House of Representatives. Increase in number of Democratic Governors from 16 to 23, +7 seats, if not more.
  • Medicaid expansion: Approved in Utah (150,000 low income beneficiaries), Nebraska (90,000) and Idaho (62,000). New Democratic Governor in Maine replacing Paul LePage to support Medicaid expansion (70,000). Republication Ron DeSantis elected as Governor in Florida unlikely to support Medicaid expansion. ACA now adopted in 36 states.
  • Mandated hospital nurse-to-patient ratio measure rejected in Massachusetts: Would have required one ER nurse to five patients; one medical/surgical nurse to four patients; and one psychiatric nurse to five patients. California is now the only state with mandated ratios (since 2004).
  • Free universal home healthcare, funded by a 3.8 percent tax on residents with gross wages over $128,400, rejected in Maine.
  • Cap on dialysis revenues to 115 percent of costs defeated in California (Proposition 8).

Potential Healthcare Implications

  • The president will likely continue to use executive orders, waivers and other regulations to alter the healthcare system and Medicaid. Recent examples include expanded access to association health plans (AHPs), short-term limited-duration insurance (STLDI) and “grand-mothered” transitional policies. Democratic House oversight of CMS may slow the rate of change.
  • A federal judge in Texas, Judge Reed O’Connor expected to rule on whether the entire ACA is unconstitutional. The challenge, filed in February 2018, is focused on the coverage of those with pre-existing conditions Republicans in 20 states filed the lawsuit, including a number of newly elected officials in Missouri (Josh Hawley, Senator), Florida (Brian Kemp, Governor) and elsewhere. During the recent election run-up Mr. Hawley and Mr. Kemp touted the importance of pre-existing condition coverage. Eliminating the pre-existing condition mandate would be “hugely” unpopular.
  • Federal funding of Medicaid based on matching (variable) state funds is not sustainable. Nevertheless, a transition to federal block grants or per capita allotment is less likely given Democratic control of the House.
  • The elimination of cost sharing reduction (CSR) payments from the Federal government after its expiration in 2016 contributed to the rapid rise in health exchange premiums. A few states have implemented their own re-insurance programs (using waiver 1332). Given the increase in the number of Democratic governors, we expect additional states to implement their own reinsurance programs to further stabilize health exchange premiums.
  • Payment reform initiatives, from fee-for-service to value-based contracting, will continue and possibly, increase, given rapidly aging demographics and rising costs.
  • President Trump aligned with Democratic House regarding the unsustainable rise in pharmaceutical prices; Medicare price negotiation and/or re-importation possible, though the drug industry spends more on lobbying (>$200 million) than other industries.
  •  “Medicare for All” not happening; entrenched stakeholders, combined with complexity of transformation serve as barriers to implementation.