In addition to ushering in Republican control of the Senate, the November 4, 2014, election results bring about changes that could present challenges for the health industry in the coming year.

The November 4, 2014, elections recast the balance of power in Washington, D.C., restoring Republican control of the Senate, and thus both chambers of Congress, for the first time since 2006. While Democrats will continue to control the other end of Pennsylvania Avenue for at least two more years, the GOP takeover on Capitol Hill signals big changes in the legislative agenda, and big challenges for the health industry. In addition, the elections will change the face of Congress, bringing at least 12 new Senators and more than 50 new Representatives to Capitol Hill.

Balance of Power

Of the 36 Senate seats subject to election this cycle, Republicans took 22, picking up at least seven seats previously held by Democrats and increasing their Senate ranks to at least 52 (compared to the Democrats’ 43 seats). At the time of publication, two states were still too close to call: Virginia and Alaska. If Democratic incumbent Mark Warner holds on in Virginia and Republican challenger Dan Sullivan wins in Alaska, as expected, Republicans will have gained eight seats and advanced their majority to 53, compared to the Democrats’ 44.

The ultimate balance of party power of the 114th Congress may not yet be known for another month. Louisiana’s Senate contest between incumbent Democratic Senator Mary Landrieu and Republican challenger Bill Cassidy is headed to a run-off on December 6, 2014.

Moreover, at least one of the Senate’s two independents may yet switch party affiliation. Senators Bernie Sanders of Vermont and Angus King of Maine, who are unaffiliated independents, presently caucus with the Democrats, but Senator King made statements in the lead-up to the election that suggest he might switch affiliations and caucus with the Republicans.

If Republicans win in Louisiana, the Republican majority would be 54. If Senator King caucuses with Republicans, the Republican majority could swell to 55.

As expected, Republicans retained control of the House of Representatives; there too they increased their numbers, winning at least 244 of the 435 seats contested for a pick-up of at least eight seats (13 races were still undecided at the time of publication).

Leadership Changes

As a result of the Republican Senate takeover, Republican Senators will now assume the helm of the Senate’s leadership apparatus and committee structure. Senator Mitch McConnell (R-KY), who survived his own tough re-election battle, is expected to become Majority Leader, taking the gavel from Harry Reid (D-NV), who has run the Senate for the Democrats since 2007. With respect to the Senate committees of greatest interest to the health community, Senator Orrin Hatch (R-UT) is expected to lead the Finance Committee, while Senator Lamar Alexander (R-TN) likely will chair the Health, Education, Labor and Pensions (HELP) Committee.

While the leadership structure in the House is expected to remain the same—after a leadership shake-up following then-Majority Leader Eric Cantor’s (R-VA) unexpected primary loss in June 2014, and subsequent resignation in August 2014, brought Kevin McCarthy (R-CA) and Steve Scalise (R-LA) into the leadership ranks as Majority Leader and Majority Whip, respectively—several key committees with jurisdiction over health care programs are expected to change hands in 2015. The chairman’s seat on the House Committee on Ways and Means is up for grabs following the retirement of Dave Camp (R-MI). Congressmen Kevin Brady (R-TX) and Paul Ryan (R-WI) are the leading contenders for what is regarded as one of the most powerful chairmanships in the House. Meanwhile, Democrats will be battling for minority leadership on the comparably powerful House Energy and Commerce Committee, after Congressman Henry Waxman’s (D-CA) retirement opened the position. Congressman Frank Pallone (D-NJ) and Congresswoman Anna Eshoo (D-CA) are locked in heated combat to take over as leading Democrat on that panel. These and other committee leadership decisions likely won’t be resolved until the new Congress convenes in January 2015.

Agenda

In addition to new leaders, Republican control of Congress for the first time in eight years will mean a new agenda, and much of it will be focused on health care. Topping the priority list for congressional Republicans will be the Affordable Care Act (ACA). Many newly elected Republicans will feel obliged to make good on campaign promises to repeal the controversial law. But while the balance of power has shifted in Republican’s favor, thereby improving their chances, their ascendancy will not prove enough to enable repeal of the ACA. Their still-too-thin Senate majority and President Obama’s veto pen will make full repeal an unrealistic goal. Republican leaders may allow a symbolic full repeal vote, but they are not likely to wage all-out war on the ACA as they did in the budget battles of 2013, shutting down the government for 16 days in a failed quest to repeal the ACA.

Instead, Republicans may try to gain points through targeted attacks on the law. For example, the House Energy and Commerce Committee earlier in 2014 approved a bill that would allow those who purchase health care on the group market to keep the plans they previously had. Also on the table could be the twice-delayed employer mandate, which has been criticized by both parties; the medical device tax; and the Independent Payment Advisory Board, the much reviled and feared independent commission empowered to cut Medicare spending.

Medicare also will be on the agenda. Most immediately, Congress must decide what to do about physician payments under Medicare. The Medicare statute requires that the Medicare physician fee schedule be revised upward or downward every year depending on the results of a complex formula known as the sustainable growth rate (SGR). Since 2003, Congress has intervened 18 times with legislation overriding reductions required by the SGR, including most recently in the Protecting Access to Medicare Act of 2014. Amidst considerable fanfare and optimism, House and Senate Medicare committee leaders devised a bipartisan replacement compromise earlier in 2014 and advanced legislation through the committees of jurisdiction, but that legislation stalled after congressional leaders opted for another one-year patch in the only major Medicare bill to advance so far in 2014.

A new batch of congressional leaders will confront the same choice when the current patch expires March 31, 2015. Tied up in that decision are a variety of other expiring Medicare payment provisions, including provisions affecting hospitals, ambulances and therapy providers. Congressional Republicans are likely to require that any solution, whether permanent or one-year extensions, be paid for with commensurate reductions elsewhere within Medicare, and those payment reductions could affect a wide array of health care stakeholders.

Payment cuts to pay for SGR fixes may be only the tip of the iceberg. Major deficit reduction and comprehensive Medicare reform also may be on the table. The United States continues to face a daunting and growing long-term federal debt problem. According to the Congressional Budget Office’s 2014 Long-Term Budget Outlook, between 2009 and 2012, the federal government recorded the largest budget deficits relative to the size of the economy since 1946, causing federal debt held by the public to rise to about 74 percent of the economy’s annual output, or gross domestic product, “a higher percentage than at any point in U.S. history except a brief period around World War II and almost twice the percentage at the end of 2008.”

In previous budget battles, the President was willing to support $4 trillion in deficit reduction over 10 years, including $321 billion in Medicare and Medicaid spending reductions. Newly emboldened congressional Republicans may demand more progress on the deficit and more cuts coming from entitlement programs than the President previously has been willing to concede. Progress on the deficit may be the price Republicans demand to further extend the President’s borrowing authority, commonly known as the “debt ceiling,” which is expected to require legislation in March or April 2015. Alternatively, Republicans could look to push deficit reduction later in 2015, when the two-year budget deal reallocating the impact of sequestration expires on September 30, 2015.

Supporters of more flexibility under the “Meaningful Use” program requiring hospitals and physicians to adopt electronic health records could find a more favorable audience in a Republican-controlled Congress. Republicans may be more willing to press for changes to a program widely associated with the President and Democrats.

Congressional Republicans also are expected to make attempts to pass legislation to energize and facilitate the discovery, development and delivery of new medical treatments. Throughout 2014, House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Member Diana DeGette (D-CO) have pursued the “21st Century Cures” initiative, a comprehensive examination of, and response to, perceived roadblocks to medical innovation and development of new disease therapies and treatments. Since then, the two leaders and other committee members have conducted numerous hearings and roundtables, and now are preparing legislation to advance in the next Congress.

Lame Duck

While progress on these and other issues is not expected until 2015, the health industry may yet see some legislative action in 2014. Congress is scheduled to return to Washington, D.C., on November 12, 2014, for a lame duck session that could run deep into December following a break the week of November 24 for the Thanksgiving holiday. There are a few pressing items that Congress must resolve before year-end. Perhaps most urgent is fiscal year (FY) 2015 appropriations. Congress approved a continuing resolution in September 2014 that will keep the government running through December 11. Congress must pass another funding measure to keep the government operational beyond that date. Congress could move an omnibus appropriations bill for the balance of FY 2015, but might opt for another short-term continuing resolution that keeps the federal lights on until Republicans take over in January.

Congress also must decide what to do about approximately 60 federal tax provisions that expire on December 31, 2014.

Outlook

The legislative agenda in 2015 will be as much about the next election in 2016 as it is about this most recent 2014 election. In 2016, the shoe will be on the other foot, as Republicans will be defending 24 of the 34 Senate seats expected to be subject to election in the next cycle. Seven of those Republicans will defend seats in states won by President Obama in 2012. As a result, Senate Republicans may try to shape the 2015 agenda to establish favorable positions on which to run in the 2016 election. Moreover, both parties will be positioning for the 2016 presidential election. A number of sitting Members are considered serious presidential contenders, including Congressman Paul Ryan (R-WI) and Senators Ted Cruz (R-TX), Rand Paul (R-KY), Marco Rubio (R-FL) and Elizabeth Warren (D-MA). Republicans and Democrats alike may seek to advance party-defining measures, such as immigration reform and tax reform, not to mention ACA repeal and replacement alternatives, all of which could have implications for the health industry.

The power shift in Congress notwithstanding, congressional Republicans will not have complete control over the agenda. In light of the uncooperative Congress and ticking clock on the remainder of his administration, President Obama will undoubtedly seek to use the levers of power still available to him. The health industry should keep one eye on executive branch agencies as the now-lame-duck president seeks to make his mark on history through rulemaking and executive orders.