1 1 Center for Children and Families October 19, 2011 Chris Jennings, President Jennings Policy Strategies, Inc. Political and Policy Environment Framing Children’s Health Care: Diagnosis and Prognosis

2 Today’s Health Reform Debate is Primarily Driven by Deficit/Debt... Deficit, Dollars in Billions, FY 2001 vs $127 B Source: Congressional Budget Office, September 2011 ($1.3 trillion) 2

3 Here’s Why: Program Priorities/Costs Exceed Available Revenues (CBO’s Most Realistic Long Term Budget Scenario) Source: Congressional Budget Office Percentage of GDP

4 Debt Limit Deal 2.0 Will Require Another FEDERAL Health Care Contribution   Bipartisan debt agreement requires $1.2 trillion in cuts   Automatic sequester cuts for defense and Medicare are intended to be incentive for a broader bipartisan budget deal   Medicare is slated for approximately $130 billion dollars in cuts unless Congress finds alternative ways to achieve the $1.2 trillion target without it   BUT, in reality, the defense sequester represents an unacceptable ceiling for the “Super Committee” and the 2 percent Medicare health sequester represents an unacceptable floor

5 Most* Health Stakeholders Do Better with Automatic Cut than Broader Deal   By a factor of 2 or 3, any Super Committee deal will likely produce more cuts than the automatic sequester  Consumer groups  Consumer groups (and most Dems) fear painful cuts to low income, and “bad” Obama trade providing cover from Ryan Medicare Rx, limited revenue and ineffective jobs policy   Businesses and states fear cost-shifting/bad policy   Hospitals and home health care providers fear higher aggregate cuts and new Medicaid cuts   PhRMA fears Medicaid rebates being expanded   * Exceptions: Docs and some plans/discretionary interests

6 Debt Deal 2.0 Scenarios in One Slide 1) 1) Super Committee fails/sequester is assumed (although there will be time to fix most painful 2013 cuts next year) – 25-30% 2) 2) Super Committee hybrid scenario – 60%   Achieves less than $1.2 trillion in savings, but reduces across the board sequester cut through increased health care savings deal   Medicaid is major new target along with low-hanging Medicare fruit   Defense cuts are moderated   Health care constituencies targeted complain about being singled out   Could include bucking important decisions on revenue and other “hard” issues to 2012 process 3) 3) Super Committee produces major debt/deficit deal, including tax reform – 5-10%   Response to gloomy economy, stock market, disgust with Congress and public pressure to act   Looks increasingly like Bowles-Simpson, including larger health care savings and tax reforms that produce deficit reduction revenue   Elite media embrace, but unclear whether voters will 6

7 And If That’s Not Enough, the Supremes Likely Weigh in on ACA Constitutionality   This Fall, Supreme Court decides whether to grant cert to competing parties challenging Florida v. HHS 11 th Circuit case   Assuming cert granted, Supreme Court will hear case by late Spring 2012   Final ruling should emerge by end of June   Current status of likelihood of the court hearing the case is over 90 percent – (only takes four to grant certiorari) – and both opposing parties have requested it 7

8 Supreme Court Split Decision Ruling Scenarios (Assuming Justices Grant Cert) Outlook: While many predict, no one has a clue. Most believe it will be either scenario 1 or 2. 8 Scenario 1Sustain law as is -- with a great deal of negative commentary about the law emerging from most conservative justices Scenario 2Overturn individual requirement (mandate) to purchase insurance, but leave most everything else in place Scenario 3Overturn individual mandate and many other provisions of the law

9 But Most Are Missing Simple Truths   There will be vehement reaction to any ruling by respective bases, but independent voters are key   If Court ruling effectively upholds constitutionality of “mandate,” independents will likely view it as affirmation of the law -- urging politicians to move on to public’s priorities   If Court rules “mandate” as unconstitutional, what to do next becomes a major election issue, perhaps even challenging Medicare/Medicaid/entitlement reform as #1 health issue 9

So Where Does That Leave Advocates of Children? Viewed as better positioned than most stakeholders Popular provisions and perceptions in place:   Popular parents policy buy-in up to age 26   MoE protections from cuts   CHIP is still expanding coverage for children   Polling looking strong for kids and kids’ interests   States or Feds are not comfortable with policies that openly screw kids

Advocates of Children’s Health (continued) Don’t get cocky; plenty of problems, including:   Momentum declining for simplified enrollment and openness to expanding kids coverage; (as well as overall state based budget/policy threats)   Affordability test for tax credit eligibility   Exchange development   Benefit design   Overall implementation challenges   Supreme Court and “mandate” – impact on insurance protections – no one knows this issue better than you   And, of course, Medicaid cut threats are quite real

Big Message Your future – for good or bad – tied to overall big wave threats that are not directly under your control. To extent your popularity can help undermine, go for it…