Health Reform Bracketology

Health Reform Bracketology2010 Congressional Election Madness

Standings as of November 2, 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, November 2 2010

Democrats Republicans

Toss Up

Democrats Republicans

Toss Up

167 44 224 48 7 45

Republicans

House

Democrats

Senate

© Leavitt Partners 2010

http://www.realclearpolitics.com/

Methodology and FocusOur 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 Bracketology2010 Congressional Election Madness

Standings as of November 2, 2010

Republicans DemocratsRepublicansRepublicans Democrats Democrats

Election 2010 Scenarios

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

Likelihood80%73%58%58%70%83%

Likelihood68%45%40%43%53%68%

Likelihood28%30%25%25%23%53%



House Senate House Senate House Senate


Individual MandateStandings as of November 2, 2010


LP Coaches Poll Prediction

Democrats

Republicans

Republicans

Democrats

Republicans Democrats

HOUSE SENATE

68%(-5% 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%

80%Chance of Disruption

Republicans

House Senate

Alternative Scenario

Commentary: Our coaches slightly reduced the likelihood of disruption back to earlier levels as Democrat retention of the Senate

appears more probable. Also, recent comments from the President have made it clear that even if Republicans were to sweep the Congress, it won’t necessarily translate to any type of compromise. There has been increased chatter that appropriations and reconciliation would be vehicles for disruption.

Republicans

Modify 78%

Stall 20%

Repeal 3%


Democrats

House Senate

Democrats


ModifyStall

Repeal

Modify, 50%

Stall, 45%

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.


Employer PenaltyStandings as of November 2, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE



Stall 33%

Repeal 10%


Republicans

House Senate


Commentary: Sen. Hatch, who will be the next ranking member of the Senate Finance Committee, has said he is looking for bipartisan

support to introduce a bill to change this and the individual mandate.

Republicans

Modify 65%

Stall 33%

Repeal 3%


Democrats

House Senate

Democrats


ModifyStall

Repeal

Modify, 60%

Stall, 38%

Repeal, 20%


Disruption Analysis

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


Premium SubsidiesStandings as of November 2, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE



Stall 20%

Repeal 3%


Republicans

House Senate


Commentary: Our coaches feel that the President will fight any disruption on this every step of the way. This provision is not likely to face

immediate congressional intervention as it is not slated for implementation until 2014. Nevertheless, look for it to be a component of future fiscal dialogue, and possibly be addressed in the Debt Commission’s report to the President in December.

Republicans

Modify 78%

Stall 20%

Repeal 3%


Democrats

House Senate

Democrats


ModifyStall

Repeal

Modify, 75%

Stall, 25%


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 ExpansionStandings as of November 2, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE

43%(+5% Change From Last Week)


Stall 33%

Repeal 5%


Republicans

House Senate


Commentary: Our Coaches have increased the probability of disruption due to the likelihood of a higher mix of elected Republican governors and

a Republican majority in the House. Also, recent court decisions will make it harder for states to generate non-eligibility savings. Governors, including some Democrats, may press the new Congress to deal with Medicaid sooner rather than later. This type of increasing pressure from governors is likely to result in modifications of these reforms, not a full repeal.

Republicans

Modify 60%

Stall 15%

Repeal 0%


Democrats

House Senate

Democrats


ModifyStall

Repeal

Modify, 55%

Stall, 45%


Disruption Analysis

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


Medical Loss RatioStandings as of November 2, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE



Stall 18%

Repeal 218%


Republicans

House Senate


Commentary: Our coaches feel that carriers will feel more free to express their deep dissatisfaction with how this issue is being

handled if there is a Republican sweep. An increasing alignment of the administration and NAIC positions will make intervention in this policy less likely.

Republicans

Modify 75%

Stall 25%

Repeal 0%


Democrats

House Senate

Democrats


ModifyStall

Repeal

Modify, 75%

Stall, 20%

Repeal, 5%


Disruption Analysis

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


Medicare Funding CutsStandings as of November 2, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE

68%(No Change From Last Week)


Stall 30%

Repeal 7%


Republicans

House Senate


Commentary: This is the area of the bill that the Democrats will find most difficult to protect if there is a Republican sweep of

Congress.. Even Democratic control does not guarantee that the Medicare cuts will survive.

Republicans

Modify 63%

Stall 30%

Repeal 3%


Democrats

House Senate

Democrats


ModifyStall

Repeal

Modify, 63%

Stall, 30%

Repeal, 7%


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.


Republicans Take House,Democrats Retain Senate

Historical Coaches Polling

*Prediction based on analysis using data from www.RealClearPolitics.com, November 2 2010 © Leavitt Partners 2010

0%

10%

20%

30%

40%

50%

60%

70%

80%

10/4/2010 10/11/2010 10/18/2010 10/25/2010 11/1/2010

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Dis

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Individual Mandate

Medicare Funding Cuts

Medical Loss Ratio

Medicaid Expansion

Premium Subsidies

Employer Penalty


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Health Reform Bracketology

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