The skinny on Obamacare repeal – it's not happening

The bid to reshape US health insurance coverage is over for now. Senators could not agree on a stripped-down bill in a last-ditch attempt to gain passage, leaving in place the Affordable Care Act’s health insurance subsidies and Medicaid expansion as well as the medical device tax used to fund coverage.

Failure on healthcare could cast some doubt on the scope of tax reform legislation, a priority for big pharma executives as they look for ways to use overseas profits without paying a hefty US levy. Some changes are likely in the offing, but biopharmas might need to rein in expectations as legislators hoped to pay for tax cuts from savings resulting from an Affordable Care Act (ACA) repeal.

Nothing tastes as good as skinny feels

Because there was not a majority in favour of House-passed legislation, Senate leaders sought support for what became known as “skinny repeal”.

This legislation removed the legal requirement for people to obtain health insurance coverage, and withdrew the mandate on some employers to cover workers, as well as allowing states more flexibility in setting insurance regulation and repealing the 2.3% tax on medical devices for three more years. It would not have touched Medicaid, the fastest growing US spender on prescription drugs (Spotlight – Fastest-growing US drug spender Medicaid in danger of cuts, July 14, 2017).

Despite its reduced scope, a Congressional Budget Office analysis estimated that it would lead to 15 million people dropping out of health insurance pools next year, increasing the share of uninsured people from 10% to 15%. 

While it was less damaging to insurance coverage than House-passed legislation, it would still have substantially reduced the number of people with sufficient coverage to pay for expensive drugs (Path to tax reform emerges from Obamacare repeal, May 25, 2017). 

As a tactic, President Donald Trump’s allies in the Senate Republican leadership offered this bill with the intent of delivering something to a House-Senate conference that would resolve differences between their versions of the legislation. This, too, has failed, with three Republicans joining Democrats in voting against it.

“This is clearly a disappointing moment,” Majority Leader Mitch McConnell said. “It’s time to move on.”

Berenberg analysts wrote today that the vote could help stabilise the healthcare investment picture: "Obamacare has its faults, but retaining the status quo is in many ways good for companies and providers that have invested a great deal of time and money in negotiating the current system, labyrinthine though it is."

On to taxes

The vote came hours after the White House, Mr McConnell and House Speaker Paul Ryan issued a six-paragraph statement committing to comprehensive tax reform. 

But because Congress has spent six months on attempts to repeal the ACA, it has left precious little time to work on tax reform – significantly, the tax-writing committees in the House and Senate also have jurisdiction over healthcare.

With few details on what tax reform would look like and a shortening calendar before midterm election campaigns kick off, biopharma executives could find themseves wishing that Congress had spent less time on healthcare.

To contact the writer of this story email Jonathan Gardner in Virginia at [email protected] or follow @ByJonGardner on Twitter