Any time there’s a transition of power there are always questions on how the new administration’s policies will affect our daily lives. After a hard fought campaign, there are questions on what a Trump Administration and a Republican-held Congress will do with the Affordable Care Act, Medicare, Medicaid, and Social Security. How will any reform or amendments to these government programs affect our daily lives and impact our financial plans?
Both President-elect Trump and Republicans in Congress have said they would like to tackle the Affordable Care Act in the first 100 days. This could have an effect as well on Medicare, as they share some revenue and policy provisions. The likelihood of any changes to Medicaid or Social Security in the first 100 days is currently pretty low. But politics has been anything but predictable over the past year.
As mentioned above, Medicare and the Affordable Care Act (a.k.a. Obamacare) do share some revenue and policy provisions. For example, the prescription drug donut hole that is scheduled to be closed by 2020 is part of Affordable Care Act legislation. If the Affordable Care Act is to be repealed outright, this provision would be repealed as well.
Without seeing any proposal in detail, it’s hard to break down any pros and cons of what a “repeal and replace” strategy or an amendment would do to our individual financial plans. Republicans have, in the past, praised Medicare Part C (Medicare Advantage) and have expressed interest in strengthening it.
Medicare Part C (Medicare Advantage) is already a privatized version of Medicare. Medicare Advantage has to cover all the provisions of Original Medicare (Medicare Part A and Part B) and all federal standards, but it allows private insurance companies the flexibility to add additional benefits and package it together to sell to the general public. In order to control cost, generally, these Medicare Advantage plans will be in an HMO or PPO network similar to a typical employer-based plan.
Since being signed into law in 2003, Medicare Advantage has grown as a percentage of plans used in Medicare. Today, 35 percent of Medicare users are enrolled in these plans. Other strategies that Republican lawmakers have suggested include a Medicare Health Savings Account type plan (HSA). To what extent Medicare is tweaked or what provisions of the Affordable Care Act remain, only time will tell.
Before we get ahead on what policy will be proposed or enacted, most people should keep in mind that in order to pass legislation in the Senate you need 60 votes to avoid a filibuster. This means that Republicans and Democrats will have to compromise on any amendment or repeal or replace of the Affordable Care Act or changes to Medicare or Social Security.
The President can dismantle some of the law by executive order, and Republicans can use budget reconciliation to dismantle some of the law, but they’re limited in what they can and cannot do by these processes. Full scale or long-term changes to these laws would require legislation passed through the typical legislative route. Bottom line, any changes to Medicare or the Affordable Care Act will need at least eight Senate Democrats to vote for it in order for major overhauls to the law to be changed.
President-elect Trump has hinted at legislation on the Affordable Care Act in his first 100 days. What that finally looks like, we will likely know in the next six months.
Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc.