The Midterm Elections’ Potential Impact on Healthcare

Manatt on Health

As Election Day approaches, the outcomes of many federal and state races remain unclear, with the future of health reform hanging in the balance. In this newsletter, we examine how the election—including 36 gubernatorial races, nearly a quarter of which are currently rated “toss-ups”1—could impact Medicaid, the individual market, broader health reform proposals and drug pricing. In both U.S. congressional chambers, whichever party wins the majority will lead with a slim margin. Coupled with looming budget pressures (caused by the 2019 expiration of budget caps that were first established in 2011 but have twice been modified by Congress),2 budget bills are the only major federal legislation likely to pass in the next year.

Against this backdrop, the following themes are likely to dominate state and federal healthcare debates post-midterms and leading up to the 2020 presidential election:

  • Tension over the role of Medicaid as either a welfare program or health insurance for low-income Americans
  • Diverse reactions among states about expanding and stabilizing the Affordable Care Act (ACA) Marketplace or promoting off-Marketplace coverage
  • Drugs as a major concern across party lines—for voters, the Trump administration, congressional Democrats, state governments and the industry

The other branches of the federal government will remain key players in healthcare; the Trump administration will continue to have significant discretion to shape healthcare policy and—with a growing number of health policy lawsuits pending before the courts—the judiciary will remain an important check on congressional, executive and state actions.

States Will Drive New Ideas

Healthcare policymaking will likely remain stalled at the federal level, with major new policy proposals largely focusing on 2020 and beyond. States will remain the drivers of new ideas, but the substance of those new ideas will vary dramatically depending on election outcomes. To appreciate how sharp those differences are, one needs only to look back to the 2010 election and how it impacted implementation of the ACA. Republicans replaced Democratic governors in 11 states, and all but 1 of those 11 states halted plans to establish a state-based marketplace (SBM). Conversely, Democrats replaced Republicans in 5 states, and all 5 of those states established SBMs. The 2010 midterms also ushered in the beginning of ACA repeal-and-replace efforts in Congress. The 2017 elections provide another example. New Jersey and Virginia both replaced Republican governors with Democrats and both enacted major health reforms in 2018—reinsurance and an individual mandate in New Jersey and Medicaid expansion in Virginia.

The current gubernatorial breakdown is 33 Republicans, 16 Democrats and 1 independent. Thirty-six governors are up for election this November, including 26 Republicans, 9 Democrats and the 1 independent. Current polling suggests the Democrats will pick up 4 states and could pick up another half dozen depending on how the toss-up states shake out, and the Republicans are likely to pick up Alaska (the 1 state currently governed by an independent).

Democratic and Republican gubernatorial candidates in these states remain far apart in their approaches to health reform, making the outlook for state reforms highly dependent on which gubernatorial candidates win the close races and whether state legislatures will mitigate or bolster the winning governors’ impact. A closer look at four states illustrates what is at stake, as outlined in the table below.

Federal Reform Likely to Be Limited

The election is likely to result in slim majorities in the House and the Senate, making significant health reform challenging—although, looking ahead to the presidential race in 2020, congressional leaders are likely to make the debate front and center. Congress must, however, address budget caps in 2019 to avoid automatic cuts, which will drive some legislation under any of the possible scenarios:

  • Republican Control. Retaining both chambers would embolden Republicans—and increase the pressure to advance the White House’s priorities, making possible the use of reconciliation as a vehicle to drive repeal-and-replace legislation similar to 2017 efforts, most recently through the Graham-Cassidy proposal.
  • Democratic Control of the House. A Democratic House will seek to overwhelm the administration with oversight hearings and investigations; administrative actions will be scrutinized through House-led and Government Accountability Office investigations, including Medicaid coverage waiver approvals (e.g., work requirements, lockouts and other provisions) and rule-making (e.g., “public charge” rule). There is a small chance that the House could reach common ground with a moderate Senate about drug pricing legislation or minor improvements to the ACA.
  • Democratic Control of the Senate. With senators vying for the presidential nomination and more right-leaning representatives in the House, government shutdowns are likely. Legislative gridlock will make enactment of major health policy unlikely.
  • Democratic Control of the House and Senate. Democrats will have some power to limit the administration’s effectiveness—but without 60 votes, passage of major reforms will be difficult and still subject to veto. Congress and the president might find common ground on drug pricing. Democrats will pass measures to bolster the Marketplace, limiting AHPs and short-term plans, increasing enrollment support, promoting 1332 waivers and reviving the federal reinsurance program—some of which could withstand the president’s veto.

Court Fights Could Be Game Changers

As federal and state elected officials pursue their health reform agendas, the courts will also play an important role. Issues to watch include:

  • Medicaid Work Requirements and Other Conditions of Eligibility. Legal challenges in several states, including Kentucky and Arkansas, test states’ implementation and the Trump administration’s promotion of Medicaid work requirements, premiums and other conditions of eligibility for Medicaid.
  • ACA Repeal. Twenty Republican-led states are challenging the constitutionality of the ACA in Texas v. U.S., a lawsuit that has increased attention to health reform as an issue in attorneys general races and could end up before the Supreme Court.
  • Ballot Initiatives. The fight over Maine’s Medicaid expansion ballot initiative may forecast litigation in other states.
  • AHPs and Short-Term Plans. Democratic state attorneys general filed a lawsuit against the administration’s rule promoting AHPs, and similar litigation has been filed to challenge the administration’s rule on short-term plans. In both cases, the argument is that the new rules conflict with the ACA’s protections for people with pre-existing conditions.
  • Hospitals Take on 340B. Hospital organizations are challenging the administration in multiple 340B lawsuits aimed at blocking 340B cuts and requiring that the Department of Health and Human Services issue ACA-required rule-making.

1“2018 Governor Races,” Real Clear Politics, accessed October 23, 2018, https://www.realclearpolitics.com/epolls/2018/governor/2018_elections_governor_map.html

2Grant A. Driessen, The Federal Budget: Overview and Issues for FY2019 and Beyond, R45202 (Washington, DC: Congressional Research Service, 2018), https://fas.org/sgp/crs/misc/R45202.pdf