Health Reform Bracketology Oct 25

Health Reform Bracketology2010 Congressional Election Madness

Standings as of October 25, 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 25 2010

Democrats Republicans

Toss Up

Democrats Republicans

Toss Up

179 33 223 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 October 25, 2010

Republicans DemocratsRepublicansRepublicans Democrats Democrats

Election 2010 Scenarios

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

Likelihood85%78%63%53%78%85%

Likelihood73%50%43%38%63%68%

Likelihood28%30%33%20%33%53%



House Senate House Senate House Senate


Individual MandateStandings as of October 25, 2010


LP Coaches Poll Prediction

Democrats

Republicans

Republicans

Democrats

Republicans Democrats

HOUSE SENATE

73%(+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 58%

Stall 35%

Repeal 8%

85%Chance of Disruption

Republicans

House Senate

Alternative Scenario

Commentary: The Individual Mandate has become the leading symbol for conservatives and moderates in opposition of health reform.

As the election draws near look for heightened rhetoric around this provision as it is arguably on the top of the list for congressional disruption. The Judicial path can also still affect this provision with Attorneys General from 20 states challenging the constitutionality of this mandate. The slow court progression continues to make headlines and is staying top of mind for voters.

Republicans

Modify 78%

Stall 20%

Repeal 3%


Democrats

House Senate

Democrats


ModifyStall

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.


Employer PenaltyStandings as of October 25, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE



Stall 33%

Repeal 15%


Republicans

House Senate


Commentary: Our coaches have increased the chance of disruption slightly due to the appearance of a stronger than previously

expected Republican presence in the Senate. This issue will need to fit into an overall plan for getting the economy moving and restoring trust among employers. However, the penalty will be linked to other issues to maintain employer coverage. Our coaches also believe that Democrats are more likely to work with Republicans on modifications for the Employer Penalty than they would be on other PPACA issues.

Republicans

Modify 68%

Stall 30%

Repeal 3%


Democrats

House Senate

Democrats


ModifyStall

Repeal

Modify, 63%

Stall, 35%

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 SubsidiesStandings as of October 25, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE

43%(No Change Change From Last Week)


Stall 18%

Repeal 3%


Republicans

House Senate


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

Republicans

Modify 85%

Stall 13%

Repeal 3%


Democrats

House Senate

Democrats


ModifyStall

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 ExpansionStandings as of October 25, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE

38%(No Change From Last Week)


Stall 40%

Repeal 8%


Republicans

House Senate



Republicans

Modify 65%

Stall 10%

Repeal 0%


Democrats

House Senate

Democrats


ModifyStall

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.


Medical Loss RatioStandings as of October 25, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE



Stall 18%

Repeal 20%


Republicans

House Senate


Commentary: Our coaches increased this provision’s likelihood of disruption as tighter margins in managed care plans may warrant

additional compromise. As states and companies have come forward citing the need for waivers politicians are becoming increasingly sensitive that the MLR could reduce the quantity of health plans.

Republicans

Modify 78%

Stall 23%

Repeal 0%


Democrats

House Senate

Democrats


ModifyStall

Repeal

Modify, 78%

Stall, 18%

Repeal, 5%

, 0%


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 October 25, 2010



Democrats

Republicans

Republicans

Democrats


HOUSE SENATE

68%(No Change From Last Week)


Stall 28%

Repeal 10%


Republicans

House Senate



Republicans

Modify 70%

Stall 28%

Repeal 10%


Democrats

House Senate

Democrats


ModifyStall

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.


Republicans Take House,Democrats Retain Senate

Historical Coaches Polling

*Prediction based on analysis using data from www.RealClearPolitics.com, October 25 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

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Medicare Funding Cuts

Medical Loss Ratio

Medicaid Expansion

Premium Subsidies

Employer Penalty


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Health Reform Bracketology Oct 25

Education

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