The midterm elections of 2010 and the widely anticipated shift toward a more Republican Congress will bring major changes to domestic and foreign policy, which will have a major effect on our clients’ businesses; both here and abroad. Among the areas that will be a primary focus of the new Congress is health care policy. The Government Relations Practice Group of Arent Fox is pleased to provide the following initial analysis and commentary on yesterday’s election results.
One thing is very clear from yesterday’s elections: the 112th Congress will look and sound very different from the 111th Congress, and nowhere will that be felt greater than on health care issues. The election of numerous Republican candidates, including those affiliated with the Tea Party movement, means a more conservative outlook in the House of Representatives. The new candidates elected yesterday seek quick, discernable change, though it is not immediately clear how the newly configured Republican Conference (the party caucus) will handle the demands of new conservative candidates who will undoubtedly propose significant cuts to federal spending. It is expected that the vitriol of the elections will carry over to the 112th Congress – and will undoubtedly affect the potential for compromise between parties, between the House and Senate, and with the President.
From a snapshot perspective, in the wake of the election, certain parts of the Affordable Care Act (health care reform law) are likely to come under fire, especially since full repeal of the law is clearly unlikely in a Democratic Senate, and in the face of Obama Administration opposition. As noted below, we expect congressional opponents to settle on an incremental approach to challenging ACA, taking advantage of its cost and gradual phase-in. Although less controversial and more popular provisions (insurance reforms, wellness programs) are less likely to be challenged, opponents are expected to launch efforts to erode employer penalties, individual mandates, Medicare funding cuts, Medicaid expansion, and even some of the more intrusive program integrity provisions. The result will be a war of attrition in the health policy arena, heightened by looming financial pressure from entitlements and the demand for more effective cost controls. Medicaid program reductions could be front and center in proposals from the House side because the federal government can use levers like rolling back mandates and reducing incentives to States to increase the size of the program. There will also likely be a groundswell for federal reform of medical malpractice.
House of Representatives
Based on election results known today, there will be 84 new Republican Members in the House of Representatives, reflecting the net gain of 63 seats so far from the 111th Congress. There is much debate about whether new Republican Members of Congress and Senators will be appointed to plum committees. We believe GOP leaders will face some immediate challenges in organizing the House, specifically where to put the freshmen. As Minority Leader, Rep. John Boehner refused to assign new members to top committees such as Appropriations, Energy and Commerce, Financial Services, and Ways & Means. This policy is likely to be seriously tested by the addition of 84 new House Republicans, many of whom are political newcomers frustrated with traditional governance. By comparison, in 1994, Speaker Newt Gingrich allowed freshmen on key committees after a similar wave election. We expect chairmen to be selected by the House GOP within the next two weeks and it may well be that Members receive their tentative committee assignments by the end of this month or early December, leaving the matter to be formalized when the 112th Congress convenes on Monday, January 3, 2011.
Rep. Boehner is expected to govern by regular order, allowing bills to be drafted by committee chairmen and through the committee process. By contrast, at times House Speaker Pelosi and her leadership team worked on drafting legislation with varying input from committee chairmen. We expect the Republican-led House will push to repeal and replace all or parts of the Affordable Care Act (health care reform law) enacted in March, 2010. We expect the Republicans will set up at least one procedural vote to repeal the law, and likely make piecemeal attempts to delay and/or repeal the individual, employer, and state mandates enacted into law; roll back Medicaid eligibility levels; and delay funding for other provisions. Under House rules, the majority has far more ability than their Senate counterparts to decide what comes to the floor for votes, using the auspices of the House Rules Committee (where the majority often has a lopsided membership in its favor) to establish the structure for floor proceedings.
Very few new Members will be added to the House Energy and Commerce Committee roster though there will be some change as a result of retirements and to account for the shift in party leadership. Members, staff, and pundits have speculated that there are five Members of Congress that are potentially in the running to be Chairman of Energy and Commerce, including Joe Barton, R-Texas, – the current Ranking Energy and Commerce Member; Fred Upton, R-Mich.; John Shimkus, R-Ill.; Greg Walden, R-Ore., who temporarily gave up his seat on the Committee in 2010 to allow political newcomer Parker Griffith, R-Al., to join the committee; and Cliff Stearns, R-Fla. Each of these Members has served as full committee chair or subcommittee chair.
Due to term limits set by the Republicans in 1994, many of the current Ranking Members, such as Rep. Barton, will not be eligible under current rules and would have to be nominated by the Republican Steering Committee (a House GOP leadership apparatus) to take the gavel under a waiver scenario. Rep. Barton, who has already written to all state Medicaid agencies seeking input about their efforts implementing health care reform legislation, has indicated he would pass a health care repeal through the committee in the first 90 days, and pass legislation that would allow insurance companies to sell policies across state lines, tackle medical malpractice reform, and fix the doctor reimbursement system under Medicare. If the leadership prefers not to extend a waiver, the other four Members will have an opportunity to make their cases and since Rep. Ralph Hall of Texas has not been seen as actively pursuing the full Committee chairmanship, it is worth noting that Rep. Upton is the next senior Member on the panel. Either way, health care policy will also be shaped in part by the next Health Subcommittee chairman (Rep. Shimkus is the current Ranking Minority Member) and it is unclear how the Democrats will handle the position of Ranking Minority Member (current Chairman Frank Pallone, D-NJ, will be the most senior on the Subcommittee when the new Congress convenes).
The Ways and Means Committee will be chaired by veteran conservative Dave Camp, R-Mich., a seasoned Hill insider with long involvement in tax, trade, and health policy. Camp will be assisted by fellow Committee Member and Budget Chairman, Paul Ryan, of Wisconsin, a young conservative leader who will be very influential in the coming session on issues relating to health care. Although there may well be other budget reduction initiatives developed in this post-election timeframe, Rep. Ryan’s Roadmap for America’s Future legislation is likely to be featured prominently in the Republican agenda. The legislation features a flat, refundable income tax credit of $2,300 for individual tax filers and $5,700 for joint filers and families who purchase health insurance. It would provide debit cards to Medicaid recipients for purchasing health care services and supplies and would cap benefits for individuals and families to 200 percent of the federal poverty level. The Medicare benefit under the “Roadmap” would change for beneficiaries who become eligible in/after 2021, creating a standard Medicare payment to be used for the purchase of private-sector health coverage. Medicare payments would vary based on income and beneficiaries with incomes over $200,000 would face significant reductions in the federal contribution toward their care. It should be noted that this proposal was introduced in the House of Representatives this year and has 13 cosponsors, but in his likely new role, Rep. Ryan will have a greater chance to try to implement his vision.
Also, with the Republican ascension in the House, we expect that they will use the committee process as a platform to seek testimony from health policy-oriented Administration officials like Donald Berwick, Administrator of the Centers for Medicare and Medicaid Services, who was a recess appointment strongly opposed by Senate Republicans, to question health care reform implementation, and to attempt to affect the implementation of regulations pertaining to the health care reform law.
The bottom line is that efforts to curtail automatic funding of the health care reform law are likely, though there is little chance that the Senate Democrats would willingly accept any changes. It is also less likely that there will be political will to provide new funding for demonstration and grant programs that were authorized but not funded in the Affordable Care Act.
Although the Senate race in Alaska is yet to be finalized, the new balance appears to be 53-47 with Harry Reid, D-Nev., remaining as Majority Leader and signaling a return to the close division that was the hallmark of the Senate prior to the 2008 election, and a movement away from 2009, when Sen. Reid had as many as 58-60 Senators and could count on a few moderate Republicans (Sens. Olympia Snowe, Susan Collins, Arlen Specter) to provide the 60 votes needed to curtail a filibuster.
By maintaining their majority, albeit narrowly, Senate Democrats can partner with the Administration to block House Republican policy initiatives while still controlling the floor enough to have the chance to build coalitions to secure passage of Democratic priorities. An added bonus is that by denying the Republicans the majority, Senate Democrats managed to reduce the number of problematic oversight investigations that would be possible if Senate Republicans held the gavels.
What this means for health care policymaking is unclear, but we do not expect Republican gains in the House to translate into identical Senate policy shifts. While it is true that there is increasingly a need to get 60 Senators to agree to move much legislation given the filibuster rules of that body, not just Majority Leader Reid’s job got tougher overnight with the drop in Democratic members. Republican Minority Leader Mitch McConnell, R-Ky., will have an emboldened caucus replete with new Tea Party Senators (Rand Paul from Kentucky, Marco Rubio from Florida, and Mike Lee from Utah to name a few) and some who have been there for a while, like South Carolina’s Jim DeMint, who has emerged as a conservative hero for his procedural obstructions and demands for fiscal discipline. Some new GOP Senators can be expected to criticize the party “establishment” and if Sen. McConnell wants to engage in bipartisan negotiations on various issues, he may find himself taking arrows from some of his newly minted colleagues.
The Senate will continue to be controlled by Democrats, despite the election of 16 new Senators. The Finance Committee will continue to be chaired by Senator Max Baucus, D-Mont., but there is speculation that Senator Chuck Grassley, R-Iowa, will be forced by internal party term limits to shift from his position as Ranking Member and would be replaced by Sen. Orrin Hatch of Utah, who has a long history of bipartisan legislating on health and other issues, particularly with former committee chairman, the late Sen. Ted Kennedy. While Finance Committee member Senator Blanche Lincoln, D-Ark., lost her seat to Rep. John Boozman, R-Ark., her Democratic seat will likely be lost due to attrition, leaving the Committee with likely two openings for Republicans due to the retirement of Sen. Jim Bunning of Kentucky and a shift in Senate-wide party ratios.
Much more change will be felt on the Health, Education, Labor, and Pensions Committee, chaired by Senator Tom Harkin, D-Iowa. Assuming that Ranking Minority Member Mike Enzi of Wyoming will continue in that role, he should have at least two new Members to assist with health policy, education reform, and oversight on labor and OSHA issues. Meanwhile, on the Democratic side, the total number of Democrats was 13 and could go down to 12, reflecting the narrower party ratio. If that happens, the retirement of Connecticut Senator Chris Dodd and the vacancy created by the end of the term for appointed Senator Carte Goodwin, D-W. Va. would mean that there might be one vacancy. We expect Chairman Tom Harkin to have a comparable agenda in the next Congress and that he will push back on efforts to repeal or substantially overhaul the Affordable Care Act.
One of the first tests of the new conservative power shift will be felt during an upcoming lameduck session in which Democrats will undoubtedly try and pass a FY 2011 appropriations package and stave off potential Medicare payment reductions for physicians known as the SGR fix.
The Arent Fox Government Relations Department will continue to monitor the latest political developments to determine the impact upon our clients and friends. Major changes are ahead and we look forward to working with you over the next two years.