Axios Hill Leaders

December 14, 2024
Good morning! This is a special edition of Hill Leaders — brought to you by Axios Future of Health Care author Caitlin Owens — on next year's health care battles. If you want more health care news, sign up for Axios Pro Policy or Axios Vitals. 898 words, 3.5 minutes.
- 💣 GOP spending grenade
- 🍦 Thune and Johnson's tough menu
- 😩 Unavoidable choices
1 big thing: 💣 GOP spending grenade
Republicans may be stuck taking on major health care reform next year.
Why it matters: Health care isn't high on incoming GOP leaders' lists for what they expect to include next year, sources tell us.
- But the math makes it very hard to rule out ahead of time, and that could create big political problems for incoming Senate Majority Leader John Thune and House Speaker Mike Johnson.
The big picture: Extending the tax cuts Republicans passed during Trump's first term is expected to cost more than $4 trillion over 10 years, blowing a hole in the federal budget when national debt has hit record levels.
- One of the first huge decisions leadership will have to make about the tax cuts is how much of the package, if any, is paid for.
- "I think we're going to look for savings wherever we can, and that might include health issues," said Sen. Chuck Grassley.
- "[T]he fiscal situation of this country is very serious," he told us. "There's hardly anything except Social Security and Medicare that can't be on the table."
The biggest savers generally fall into three categories: 1. Health care reforms, 2. Social Security cuts, 3. Tax increases.
- "The second and the third are off-limits," one former GOP Senate staffer said.
- "We have two dozen or more health options for Congress to consider that would reduce overpayments to hospitals, reduce overpayments to insurers, reduce overpayments to states — there's so many inefficiencies in our health sector," said Brian Blase, a former Trump administration official who now leads Paragon Health.
- "If you want to reduce federal spending, the health care entitlement programs are where you have to go," he told us.
Yes, but: It's hard to overemphasize how much many Republicans would love to avoid doing health care reform again after the 2017 debacle. That version ended in failure when the late Sen. John McCain cast the deciding vote against GOP changes to the Affordable Care Act.
- "In the Senate, everybody still has scar tissue that's as fresh as if the vote was just held yesterday," the former staffer told us.
— Caitlin Owens
2. 🍦 Thune and Johnson's tough menu

Health reform is so politically brutal because it almost always creates losers.
- Why it matters: Throwing government money at the problem is one way to avoid creating losers, but that's the exact opposite of what Thune and Johnson would be looking to do through budget reconciliation.
The most ripe target on the table is federal Medicaid spending, whether that's through work requirements, caps on federal funding of the program or crackdowns on state financing schemes.
- "Before, we found ways to save money in Medicaid with per capita allotments," incoming House Energy and Commerce Chair Brett Guthrie (R-Ky.) told us.
- "I don't know if it'll be in reconciliation, but it's absolutely something we need to discuss over the next couple of years," he said.
Zoom in: Republicans are familiar with the politics of messing with Medicaid, as the Medicaid reforms included in their ACA repeal and replace effort created a lot of heartburn.
- Other big buckets of money would be even harder to touch, like those generated by changes to the employer insurance tax exclusion or Medicare Advantage.
- The big question for Republicans is whether they're trying to pay for new spending or deliver conservative wins, former GOP staffer Adam Buckalew told us. He's now a lobbyist and has outlined the universe of health policy options in a reconciliation presentation he's giving to clients.
The intrigue: Some health care measures, like those targeting hospital billing practices, have drawn bipartisan interest this past Congress.
- Those could theoretically get sucked into reconciliation as pay-fors — or the bipartisan process could continue.
— Caitlin Owens and Victoria Knight
3. 😩 Unavoidable choices

Republicans won't be able to avoid the ACA, even though they can take comfort in not having to reopen the debate over reforming the entire law.
Why it matters: You'd be hard-pressed to find a Republican who thinks that Democrats' enhanced subsidies for the ACA's health insurance marketplace plans should be extended on their merits.
- But you'd also struggle to find an observer who has completely ruled out the possibility of it happening anyway.
- The calculus would be entirely political: If Republicans take no action and let the subsidies expire, they'll face headlines about millions of people either losing their insurance or facing skyrocketing out-of-pocket health care costs.
- Red states like Florida and Texas would be disproportionately impacted by the subsidy expirations.
Where it stands: Senate Republicans didn't rule out an extension this week, Axios Pro's Victoria Knight reported.
- Incoming Senate Finance Chair Mike Crapo said that the subsidies could be included in reconciliation, adding that "what I can tell you is that everything is on the table" and "I don't know that that's been singled out yet."
- "Hell no," House Budget Chair Jodey Arrington said when asked if he could envision a subsidy extension.
Go deeper: Charted: Health coverage without ACA subsidies
— Caitlin Owens
This newsletter was edited by Justin Green and copy edited by Matt Piper.
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