Health Reform Bracketology

Health Reform Bracketology 2010 Congressional Election Madness

Standings as of October 11, 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 11 2010

Democrats Republicans

Toss Up

Democrats Republicans

Toss Up

186 39 210 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 11, 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 83% 78% 63% 50% 78% 83%

Likelihood 60% 40% 40% 28% 60% 68%

Likelihood 20% 23% 25% 10% 30% 53%



House Senate House Senate House Senate


Individual Mandate Standings as of October 11, 2010


LP Coach’s Poll Prediction

Democrats

Republicans

Republicans

Democrats

Republicans Democrats

HOUSE SENATE

60% (+10% Change From Last Week)

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

Modify 54%

Stall 28%

Repeal 18%

83% Chance of Disruption

Republicans

House Senate

Alternative Scenario

Commentary: Leavitt Partners has increased our projection of the likelihood of disruption for the Individual Mandate due to the increasingly

toxic political environment. Voter disapproval of PPACA stays strong and it appears that Democrats may be open to some modification to mitigate public outcry. If Republicans gain control of both chambers, repeal remains unlikely due to filibuster power. If repealed, one discussed substitute is an auto-enrollment process with an opt-out provision. 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.

Republicans

Modify 70%

Stall 28%

Repeal 3%


Democrats

House Senate


Democrats


Modify, 51%

Stall, 44%

Repeal, 5%



Employer Penalty Standings as of October 11, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE

40% (No Change From Last Week)


Modify 53%

Stall 30%

Repeal 18%


Republicans

House Senate


Commentary: Leavitt Partners does not see any reason to alter our projections for this provision. We believe that any potential modifications

will be focused on additional exceptions for businesses or a reduction in the penalties. With the campaign season in full sway, look for Republican candidates to speak out against penalties and fines levied against employers not offering sufficient insurance, citing the detrimental impact on employment.

Republicans

Modify 60%

Stall 38%

Repeal 3%


Democrats

House Senate


Democrats


Modify Stall

Repeal

Modify, 50% Stall, 45%

Repeal, 5%

, 0%



Premium Subsidies Standings as of October 11, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE



Modify 73%

Stall 23%

Repeal 5%


Republicans

House Senate


Commentary: The probability of disruption has been slightly increased for this provision. We 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. 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.

Republicans

Modify 75%

Stall 20%

Repeal 5%


Democrats

House Senate


Democrats


Modify Stall

Repeal

Modify, 70%

Stall, 28%

Repeal, 3%

, 0%



Medicaid Expansion Standings as of October 11, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE



Modify 54%

Stall 39%

Repeal 7%


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

Republicans

Modify 80%

Stall 20%

Repeal 0%


Democrats

House Senate


Democrats


Modify Stall

Repeal

Modify, 51%

Stall, 49%



Medical Loss Ratio Standings as of October 11, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE

60% (No Change From Last Week)


Disruption Type

Modify 63%

Stall 20%

Repeal 18%


Republicans

House Senate


Commentary: This week HHS responded to the mini-med issue by granting several waivers to different companies that have cited major

issues in compliance with annual caps. The granting of these waivers may indicate lenience in MLR where employers’ health plans would have to drop coverage. Although this does not change our prediction we expect the MLR to remain a hot political issue for the remainder of the election and the year.

Republicans

Modify 75%

Stall 25%

Repeal 0%


Democrats

House Senate


Democrats


Modify Stall

Repeal

Modify, 73%

Stall, 23%

Repeal, 5%

, 0%



Medicare Funding Cuts Standings as of October 11, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE

68% (-2% Change From Last Week)


Modify 65%

Stall 18%

Repeal 18%


Republicans

House Senate


Commentary: Medicare funding , including the IPAB (Independent Payment Advisory Board), Medicare Advantage program, and market

basket updates, represent an extremely large portion of funding and contentious area of debate. The current lagging economic indicators and the likelihood that the Debt commission will call for substantial changes in entitlement spending caused us to increase the likelihood for disruption. There has also been recent news that additional MA plans will be dropping out of the market which will continue to act as a catalyst for Senior voters’ unrest.

Republicans

Modify 73%

Stall 22%

Repeal 5%


Democrats

House Senate


Democrats


Modify Stall

Repeal

Modify, 65%

Stall, 20%

Repeal, 15%

, 0%



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Health Reform Bracketology

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