McDonald Hopkins Government Strategies Advisory: This Week in Washington -- June 26, 2015

Supreme Court upholds Affordable Care Act provision - What's next?

Despite a loss at the Supreme Court, congressional Republicans are quickly laying out next steps in their quest to repeal the Affordable Care Act.

For months, Republicans have been crafting a post-King v. Burwell strategy based on the assumption that the court would strike down the federal subsidies that underpin the healthcare law. If the court had struck down the subsidies congressional Republicans had hoped to extract major concessions from President Barack Obama, like repealing the individual mandate. Congressional Republicans thought a ruling in favor of the plaintiffs—which would have left 6 million people without the tax credits that many need to be able to afford their insurance plans—would force the president to the bargaining table in order to save his signature healthcare reform law.

The Supreme Court didn't give Republicans the decision they expected, but that doesn't mean they are packing in their opposition to Obamacare.

Some Republicans are once again looking to reconciliation as a way to take another shot at the healthcare law.

Republicans left the reconciliation language broad in the budget resolution that they passed earlier this year, which Budget Chairman Tom Price (R-Ga.) said should allow them to repeal major parts of the health care law.

The budget-reconciliation rule allows the Senate to bypass the procedural need for a 60-vote threshold, effectively neutering Democrats ability to stop such a move in the upper chamber.

If Republicans carry through with their threat, there is no doubt that President Obama would veto the legislation. Additionally, and problematically for Republicans, the budget-reconciliation process limits lawmakers' ability to add new policy, which means the technique can be used only to repeal the parts of the law that deal with revenue and spending. That technique wouldn't dismantle the entire law, but it could certainly do enough damage to it to make it unworkable.

House Speaker John Boehner (R-Ohio) would not commit to any specific future plan in his post-ruling remarks, admitting that most of the GOP's planning had been contingent on a victory at the Supreme Court.

Even as Republicans turn to next steps, they're lamenting the court's decision and the opportunity they lost. Chief Justice John Roberts and Justice Anthony Kennedy, both appointed by Republican presidents, sided with the court's liberal bloc to uphold the subsidies.

The party is also looking ahead to 2016, hoping the law's survival will pay political dividends in the presidential election. Ahead of the Supreme Court's decision, Democrats had promised that a GOP win in court would be a disaster at the polls, as voters turned out to punish the party that had pushed a decision costing them the insurance subsidies on which they depended.

Now that the GOP has lost in court, some Republicans are saying—or at least hoping—that the decision will ultimately help them win the White House.

Many in the party feared that, if the court had struck down Obamacare's subsidies, the GOP would have shouldered the blame for chaos in insurance markets—which would have fallen primarily in Republican-led states. Getting the party to coalesce around a fix—even temporarily restoring the biggest, most expensive piece of Obamacare—would have been difficult, to say the least.

The Supreme Court's decision in King v. Burwell was the last legal challenge on the horizon—at least for now—with the potential to tear apart a foundational piece of the Affordable Care Act.

There are still lawsuits challenging some of the law's cost-cutting measures, and challenges to its contraception mandate persist, but none of those is a real threat to the law's fundamental structure or its ability to work as intended.

Supreme Court legalizes same-sex marriage

In a 5-4 decision, the Supreme Court earlier today ruled that states cannot ban same-sex marriage because it is a violation of the 14th Amendment (the right of all citizens to equal protection). For more on this ruling, see our alert "US Supreme Court says yes to same-sex marriage."

Trade bill advances to president's desk

President Obama's trade agenda has taken a long and twisting road - going from once looking inevitable to then looking dead on arrival to once again back on track.

The Senate concluded its work on trade Wednesday afternoon, passing Trade Promotion Authority (TPA) legislation on to Obama's desk and returning a Trade Adjustment Assistance (TAA) bill promoted by Democrats in both chambers back to the House, where it passed on Thursday.

House Democrats had defeated the TAA bill last month in the hopes of killing the TPA, or "fast-track" bill that would set up an expedited and amendment-free approval process for an eventual trade deal with Asia-Pacific nations. But with fast-track now headed to Obama's desk, Democrats would like to see TAA, which would provide relief to U.S. workers hurt by the forthcoming trade deal, join it. Even House Minority Leader Nancy Pelosi (D-Calif.), who previously voted against both TPA and TAA, voted in favor of the worker-assistance measure.

Disagreements between the two parties over the bills, and the decreasing size of the pro-trade caucus within the Democratic conference in both chambers, forced a lot of legislative maneuvering in the House and Senate over the past several weeks. It also put Obama on the phone, and on a few occasions in the room, with his Democratic colleagues on the left urging them to lower their opposition to the trade deal.

In the end, most Senate Democrats bucked their president's wishes, but not enough to defeat the fast-track deal, as 13 Senate Democrats voted with their Republican colleagues.

This trade bill represents a major victory for President Obama, as well as for House Speaker John Boehner and Senate Majority Leader Mitch McConnell (R-Ky.), both of whom listed trade as one of the few issues they expected could get through the new Republican Congress and earn the president's signature.

It also represents a sizeable defeat for progressive Democrats, who fought against giving the president fast-track authority on trade.

Also this week, the Senate voted to go to conference with the House to sort out the two chambers' differences on a customs-enforcement bill that was originally part of the trade package. The measure includes several enforcement measures to prevent nations involved in the trade deal from unfairly disadvantaging U.S. companies, but it also includes a currency-manipulation-enforcement measure offered by Sen. Chuck Schumer (D-N.Y.) that has been criticized by the White House.

Senate unveils transportation bill – missing one big component

The clock has been ticking for Congress when it comes to a new transportation bill. With just over a month left before the last extension is set to expire, the Senate has dropped a bipartisan transportation bill that would extend the program all the way out to 2021.

Only one big problem: the bill doesn't say how it will pay for this - and that's a huge piece to be missing from the puzzle.

On the surface, this bill appears to grant states some certainty after having watched Washington plan highways through a string of last-minute, short-term extensions. But while the bill would direct states on how to spend their highway dollars and sets new policy on matters like environmental reviews and a backlog of funding for freight facilities, it does so without actually finding a way to pay for it.

The Environment and Public Works Committee released the bipartisan bill on Tuesday, called the Developing a Reliable and Innovative Vision for the Economy Act, or DRIVE Act. It is scheduled to be marked up next Wednesday and with support from chairman Sen. Jim Inhofe (R-Okla.) and ranking member Sen. Barbara Boxer (D-Calif.) is expected to pass easily.

Sponsors and supporters applauded the bill's introduction for finally offering the kind of stability states want after years of stopgap measures on highway funding. Congress passed a 27-month funding bill in 2012 and has since been keeping the spigot open through a series of short-term extensions. This week's bill would even give states some extra money, setting levels at about 3 percent more per year than previous levels for a total funding level of between $260 and $270 billion over six years.

But it's all rhetoric without a financing plan to pad the depleted Highway Trust Fund. That plan would have to come from the Finance Committee, and there, lawmakers are far apart.

Highway programs are currently funded through the 18.4-cent federal gas tax, but raising it is a political non-starter, and it hasn't been indexed to inflation. That's left the trust fund facing bankruptcy without an injection of cash or a permanent source of revenue, and there's no guarantee that anything the Finance Committee comes up with will match up with the desired policy.

The latest short-term extension extended funding out to July 31, giving Congress until the end of next month to pass some type of legislation lest they leave states without transportation dollars during peak construction season. Democrats have been hammering Republican leadership for weeks to do something, saying in a press conference last week that they want a long-term deal by mid-July.

The Banking Committee and Commerce Committee each contribute language to the Senate transportation bill, although the bulk of it comes from EPW. No other committee has come out with their own bills, which could collectively add as much as $90 billion to the final total.

The funding issue has loomed over transportation for years as the federal gas tax has brought in increasingly diminishing returns. The last long-term bill that passed in 2012 was funded with the dregs of the Highway Trust Fund and a series of funding gimmicks, punting a decision on how to finance programs long term.

Congress has transferred $62 billion in general revenue to supplement the gas tax, and the Congressional Budget Office has projected that it would take an $11 billion transfer next year to keep programs at current levels.

Boxer has put her clout behind a repatriation proposal that would bring in companies' overseas profits to pad the Highway Trust Fund, but Inhofe has dismissed the idea as a one-time fix for a long-term problem. Speaking Tuesday, Finance Committee Chair Orrin Hatch (R-Utah) said he was not behind that idea.

And while the Senate has tried to lean hard into a long-term solution, the House seems resigned to moving another short-term bill. Ways and Means chairman Rep. Paul Ryan (R-Wis.) has said he's against raising the gas tax, but at a hearing last week he offered no alternative solutions.

21st Century Cures pits Upton vs. Price

The 21st Century Cures Act has been a rare bright bipartisan light in the darkly partisan D.C. environment. The road forward for the medical-innovation bill, however, has hit a speed bump - and its intraparty politics, not partisanship, that stands in the way.

Sources say House Budget Committee Chairman Rep. Tom Price (R-Ga.) is pushing back against the 21st Century Cures Act, which is championed by House Energy and Commerce Chairman Rep. Fred Upton (R-Mich.). The problem for Price? The price-tag.

Price raised objections at a stakeholders meeting last week and again at a closed-door meeting of the House Republican Conference on Wednesday morning. But Rep. Hal Rogers (R-Ky.), who also had problems with the bill before the decision was made to allow his committee to appropriate the mandatory savings, said he supports it.

The dilemma is not a new one for the GOP. Voices in the party have for a few years been pushing to shed the draconian image of a party so preoccupied with budget cuts that they will not spend money on medical research or other worthy pursuits. But the party's push for austerity has been a strong countervailing voice.

That is no different in the case of this bill: The legislation aims to bring drugs to market faster, in part by upping funding to the National Institutes of Health (NIH). But small-government conservatives object to authorizing a new government program.

So Upton has been working overtime to get this bill through. He has more than 200 bipartisan cosponsors and on Wednesday was working the House floor to beat back any dissent. He said he hopes that by the July 8 target date for a floor vote, he can wrangle 300 to 350 supporters.

The innovation fund, which would draw $2 billion a year for five years and be offset with spending cuts elsewhere, would be overseen by the Appropriations Committees. But sources said those conditions have done little to allay Price's concerns.

The measure's fate was complicated further this week with the Congressional Budget Office handing down a $106 billion price tag between 2016 and 2020. Upton's committee had worked to offset part of the bill's cost with cuts elsewhere, and in part with savings from Medicare Part D. But several members objected, sending a letter to Speaker John Boehner and Minority Leader Nancy Pelosi last week asking that the Medicare program remain untouched. Upton said Wednesday that he is optimistic that the additional NIH funding will be offset.

While CBO scored the NIH Innovation Fund spending as discretionary, it was intended to be mandatory funding. The rest of the money will go toward the reauthorization of NIH programs and is discretionary.

Some of the bill's other cosponsors, however, still are concerned about the $106 billion price tag. Rep. Gene Green (D-Texas), a key Democratic supporter, said it would be difficult to offset the cost, especially because the bill includes the reauthorization of programs at NIH, which itself has been operating without a reauthorization since 2009.

The bill's detractors are concerned that the offsets will never materialize, and that the innovation program spends money over five years, whereas offsets are found over a 10-year timespan.

The House is not alone in its support for medical innovation and precision drugs. President Obama singled the issue out in his State of the Union address, after which the White House unveiled its Precision Medicine Initiative. And Sens. Lamar Alexander (R-Tenn.) and Richard Burr (R-N.C.) released a white paper in January espousing many of the same programs.

But while Upton has said he wants a bill on Obama's desk by the end of the year, the Senate appears to be in no hurry to follow suit.

Transportation in Focus

House T&I Prepares to Drop FAA Bill

While most of the focus on the transportation front is on the surface transportation front, it appears House Transportation and Infrastructure leadership is preparing to introduce a new Federal Aviation Administration bill by the middle of next week. After introduction, the House T&I committee is hoping to move quickly to a hearing on July 8 and a mark-up as early as July 9.

There appears to be bipartisan agreement on the committee when it comes to the timing of dropping the bill, a hearing and a mark-up, but significant policy differences remain.

Rep. Peter DeFazio (D-Ore.), the ranking member on the House T&I committee, made it clear that he - and other Democrats on the committee - remain concerned about provisions that would privatize the air traffic control system - provisions that are expected to be in the initial draft that is dropped next week. Indeed, DeFazio said that the inclusion of air traffic control privatization could jeopardize his ability to support the bill in general. While DeFazio expressed concern, he still spoke highly of the process that has been driven by T&I Chairman Rep. Bill Shuster (R-Pa.).

While the committee is adopting an aggressive timeline, serious hurdles remain. While some of the bill has been leaked, stakeholders have yet to see a full draft of the legislation, which means the T&I committee will need to circle back to stakeholders for input once they release the full text.

Additionally, a "transformational" FAA re-authorization bill - something Chairman Shuster has said he is hoping for - may be difficult regardless of the timeline given the disparate positions of stakeholders and the political realities of a gridlocked Washington, D.C. 

  

 Steven C. LaTourette, President | 202.559.2600

McDonald Hopkins Government Strategies LLC
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