health reform bracketology oct 18

Health Reform Bracketology 2010 Congressional Election Madness

Standings as of October 18, 2010

Overview

As the 2010 election approaches, Leavitt Partners has engaged a collection of our policy experts and senior advisors to identify provisions within the recently passed health reform legislation that are subject to potential disruption. Health reform continues to be an important topic with voters, and our firm believes that certain scenarios regarding the future congressional makeup could have a material impact on the timing and nature of the implementation of PPACA and related health care reform efforts.

HOUSE SENATE

Democrat

Republican

Democrat

Republican

Democrat

Republican

Democrat

Republican

Democrat

Republican

Democrat

Republican

Democrat

Republican

Democrat

Republican

? ?

Current Public Polls Suggest*

*Prediction based on analysis using data from www.RealClearPolitics.com, October 18 2010

Democrats Republicans

Toss Up

Democrats Republicans

Toss Up

179 43 213 48 6 46

Republicans

House

Democrats

Senate

© Leavitt Partners 2010

http://www.realclearpolitics.com/

Methodology and Focus Our analysis utilizes polling data from RealClearPolitics.com to project the likelihood of various election outcome scenarios in the House of Representatives and the Senate. Based upon these scenarios, publicly reported information, and other proprietary sources, Leavitt Partners has identified several PPACA provisions

that could be targets for disruption. We have queried several health care experts for their opinion on a)

the likelihood of disruption of these targets given certain election outcome scenarios, b) potential congressional tools/channels to facilitate the disruption, and c) potential outcomes. The data is aggregated and presented below.

Health Reform Bracketology 2010 Congressional Election Madness

Standings as of October 18, 2010

Republicans Democrats Republicans Republicans Democrats Democrats

Election 2010 Scenarios

Target • Individual Mandate • Employer Penalty: • Premium Subsidies: • Medicaid Expansion: • Medical Loss Ratio: • Medicare Funding Cuts:

Likelihood 85% 78% 63% 53% 75% 85%

Likelihood 68% 48% 43% 38% 58% 68%

Likelihood 28% 28% 33% 20% 30% 53%



House Senate House Senate House Senate


Individual Mandate Standings as of October 18, 2010


LP Coaches Poll Prediction

Democrats

Republicans

Republicans

Democrats

Republicans Democrats

HOUSE SENATE

68% (+8% Change From Last Week)

Chance of Disruption if Republicans take the House and Democrats retain the Senate. See below for type of disruption. Modify 55%

Stall 38%

Repeal 8%

85% Chance of Disruption

Republicans

House Senate

Alternative Scenario

Commentary: Our coaches have increased their projection of the likelihood of disruption for the Individual Mandate for the second

week in a row. The Individual Mandate is making its way through the court system and recent developments this week in Virginia indicate that judges are sensitive to the potential unconstitutionality of the provision (WSJ Article). Also, it is starting to appear that Tea Party candidates could make up a formidable voting bloc in the House and Senate. These candidates have been among the most outspoken critics of this provision in challenging its constitutionality and openly threatening disruption.

Republicans

Modify 78%

Stall 20%

Repeal 3%


Democrats

House Senate

Democrats


Modify Stall

Repeal

Modify, 53% Stall, 43%

Repeal, 5%


Disruption Analysis

Likely modifications include raising the income threshold of those exempt from the requirement, or denying funding to the IRS to hire new staff to enforce the provision. If repealed, one discussed substitute is an auto-enrollment process with an opt-out provision.

http://online.wsj.com/article/SB10001424052702304410504575560180377091118.html?mod=WSJ_hps_MIDDLESixthNews

http://online.wsj.com/article/SB10001424052702304410504575560180377091118.html?mod=WSJ_hps_MIDDLESixthNews


Employer Penalty Standings as of October 18, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE



Stall 33%

Repeal 15%


Republicans

House Senate


Commentary: Our coaches determined that an increase in this provision was warranted. Employers are beginning to push back on the

overall health reform bill citing cost concerns. HHS has demonstrated a willingness to adhere to business concerns by granting waivers and other concessions for other provisions. If trend follows suit, Republicans will look to defend businesses by focusing their efforts on mitigating or eliminating the potential penalties on employers. This type of rhetoric has been heightened as we come closer to the election and businesses continue to struggle in the anemic economy.

Republicans

Modify 60%

Stall 38%

Repeal 3%


Democrats

House Senate

Democrats


Modify Stall

Repeal

Modify, 58%

Stall, 40%

Repeal, 3%

, 0%


Disruption Analysis

We believe that any potential modifications will be focused on additional exceptions for businesses or a reduction in the penalties.


Premium Subsidies Standings as of October 18, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE



Stall 18%

Repeal 3%


Republicans

House Senate


Commentary: The probability of disruption has been slightly increased for this provision. Our coaches believe that the debt

commission will provide political cover for Democrats or Republicans if they advocate for a decrease in entitlement spending. The debt commission will finalize their report to the President by the end of December and is expected to include a myriad of entitlement reform suggestions.

Republicans

Modify 88%

Stall 10%

Repeal 2%


Democrats

House Senate

Democrats


Modify Stall

Repeal

Modify, 78%

Stall, 23%

, 0%


Disruption Analysis

Potential compromises could involve lowering the amount of subsidy to the target population (below 400% of the Federal Poverty Level), or changing the eligibility criteria to reduce the number of eligible individuals who qualify based upon household income.


Medicaid Expansion Standings as of October 18, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE



Stall 40%

Repeal 8%


Republicans

House Senate


Commentary: State budgets continue to be impacted by the slow economic recovery. Republicans in Congress have requested that

states send them information on the fiscal impact of PPACA’s mandatory Medicaid expansion. State budget solvency and the ensuing state lobbying could have an impact on expanding Medicaid. In addition to State fears regarding the expansion, providers are slowly conceding that the increase in patient volume may strain resources and capacity. One example of this was covered by the Washington Post last week.

Republicans

Modify 65%

Stall 10%

Repeal 0%


Democrats

House Senate

Democrats


Modify Stall

Repeal

Modify, 50%

Stall, 48%


Disruption Analysis

Possible modifications could include offering Medicaid eligible populations the option of receiving a voucher for use in purchasing insurance through state exchanges.

http://www.washingtonpost.com/wp-dyn/content/article/2010/10/12/AR2010101202647.html?hpid=topnews


Medical Loss Ratio Standings as of October 18, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE

58% (-2% Change From Last Week)


Stall 18%

Repeal 20%


Republicans

House Senate


Commentary: The Medical Loss Ratio continues to be front and center as we come closer to its effective date of January 1, 2011. Last

week the NAIC sent a letter to Secretary Sebelius suggesting a phase-in of the MLR limits to prevent market destabilization. Maine, Iowa, and South Carolina have requested waivers, and it is expected that larger businesses, expatriate plans, and additional states will seek some redress from the forthcoming requirements.

Republicans

Modify 75%

Stall 25%

Repeal 0%


Democrats

House Senate

Democrats


Modify Stall

Repeal

Modify, 73%

Stall, 23%

Repeal, 5%

, 0%


Disruption Analysis

Possible modifications could include the granting of waivers to carriers, businesses, or states that show evidence of market destabilization.

http://naic.org/documents/committees_ex_grlc_mlr_sebelius_letter_101013.pdf

../../../../NAIC Letter.pdf


Medicare Funding Cuts Standings as of October 18, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE

68% (No Change From Last Week)


Stall 28%

Repeal 10%


Republicans

House Senate


Commentary: No significant market developments have transpired in the last week causing our coaches to change their predictions.

Republicans

Modify 70%

Stall 28%

Repeal 10%


Democrats

House Senate

Democrats


Modify Stall

Repeal

Modify, 63%

Stall, 28%

Repeal, 10%


Disruption Analysis

Early legislative action in the 112th congress could result in an executive branch invitation to a ‘Budget Summit’, a forum for negotiating a budget that both Congress and the President can tolerate. Such a summit would be high stakes political theater that could create “winners” or “losers” out of the new congress.


Medicare Funding Cuts Standings as of October 18, 2010

*Prediction based on analysis using data from www.RealClearPolitics.com, October 18 2010 © Leavitt Partners 2010

0%

10%

20%

30%

40%

50%

60%

70%

80%

10/4/2010 10/11/2010 10/18/2010

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Medicare Funding Cuts

Medical Loss Ratio

Medicaid Expansion

Premium Subsidies

Employer Penalty


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health reform bracketology oct 18

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