Obama's health-care law still faces challenges after president's re-election

Obama returns to the health-care law (Getty Images)

President Barack Obama's victory eliminated the last serious threat to the existence of his health-care law, but it didn't remove an array of challenges that will ultimately determine whether the 2010 statute is a policy triumph or a disappointing muddle.

Among the tasks Obama officials still face: protecting the law from budget cuts Republicans are sure to demand during upcoming negotiations, wrangling wary governors into going along with the law's expansion of Medicaid, and ensuring that the private insurance markets, or "exchanges," at the heart of the law can be rolled out by the law's 2014 deadline.

An early indicator of whether the implementation will be choppy could come Nov. 16, when states must declare whether they intend to manage their exchanges on their own, cede full control to the federal government or enter into some form of federal-state partnership.

The exchanges are supposed to make it easier and more transparent for small businesses and millions of individuals who are not covered through employers to shop for health insurance. Many of these individuals will be eligible for federal subsidies to buy private coverage.

So far, only 13 states have officially said they will set up exchanges. Republican governors in about a dozen states have held off giving their answer for months — first in anticipation of the Supreme Court's ruling, and then, after the court upheld the law, in the hope that Mitt Romney would win the presidential election and make good on his promise to repeal it.

Robert Laszewski, a health-care consultant and former insurance executive who opposes the law, predicts that most of these leaders will now choose to take command of their states' exchanges. But while some — including the governors of Virginia, Nebraska and New Mexico — hedged their bets by quietly laying the groundwork to run an exchange, those that have made virtually no preparations could find it hard to make up for lost time.

Meanwhile, many health-care experts predict that even states that have always planned to run their exchanges — for instance, New York and Kentucky — might not be ready by Oct. 1, 2013 — the date by which the exchanges must start enrolling people.

As a result, at least for the first year or two, the federal government could have full or partial charge of exchanges in as many as three dozen states.

"I think it's safe to say that we are likely to see quite a number of federal partnerships," said Jennifer Tolbert,who has been tracking state progress for the nonpartisan Kaiser Family Foundation.

Is the federal government up to the job?

"That's the $64,000 question," Laszewski said. "The Obama administration has said emphatically that they will be ready, but so far they've produced no information about how they're going to do it."

Also looming over the law are the negotiations Obama will soon undertake with Republicans over how to pull back from the "fiscal cliff" — nearly $500 billion in automatic tax hikes and spending cuts set to take effect next month.

In the quest to find alternate savings, Obama could be pushed to cut Medicaid in ways that make the program's expansion less attractive to states, or to reduce the health-care law's subsidies to help people buy insurance plans.

"One can't look at the upcoming debate around the debt and tax reform and be sanguine that the health-care system as currently structured is safe and sound," said Chris Jennings, a former health policy adviser to President Bill Clinton. "It is going to be, by definition, part of the discussion."

Timothy Jost, a law professor at Washington and Lee University and a supporter of the law, expects Obama officials to hold firm.

"They'll be under tremendous pressure . . . but I hope they withstand it," he said. "I just cannot imagine that President Obama, having fought this hard for the [health-care law], would put it on the table in exchange for some destroyers or tax cuts for billionaires."

Obama might stick to his guns on subsidies but be less adamant when it comes to defending Medicaid, the federal-state insurance program for the poor and disabled. After the Supreme Court ruled that states cannot be required to participate in the law's expansion of the program to cover a greater share of the poor, several governors announced their intention to opt out.

Obama officials have expressed confidence that these leaders will change their tune. They note that nearly the entire cost of covering the newly eligible will be paid for by the federal government. At the least, governors who leave so much federal aid on the table risk a backlash from voters.

Still, because the Medicaid expansion is so fundamental to achieving the health-care law's goal of extending coverage to the uninsured, Republican governors arguably have the administration over a barrel. They might try to use that leverage by pressing Obama to grant greater flexibility over how they spend their Medicaid dollars. Or they could ask for permission to expand Medicaid to a smaller share of people — those with incomes up to 100 percent of the federal poverty level, for instance, rather the 133 percent called for in the law.

That last option would be especially unpalatable to the administration because it would push people left out of Medicaid onto the exchanges, where they would presumably use federal subsidies to buy private plans. Because Medicaid is less expensive than private insurance, this would cost the federal government substantially more money. And the plans would probably be less favorable than Medicaid, charging higher deductibles, for example.

Still, Laszewski said, "the administration is really between a rock and a hard place on this."