[CLIENT NOTE – WED.

, 3/24; 11AM]

FIRST TAKE – Reality testing on prospects for repeal of the recently enacted health reform legislation,
"Patient Protection and Affordable Care Act of 2010":

* REPUBLICANS TEST "REPEAL AND REPLACE" FOR NOVEMBER ELECTIONS. Republicans –

including Senate Republican leader Mitch McConnell (R-KY) and House Republican John Boehner (R-OH)
– have announced a national November mid-term election strategy based on slogan, "Repeal and
Replace", i.e., a campaign promise to repeal health reform and replace with other health reforms
(proposals to be named later?). In fact, yesterday (TUES., 03/23), Senator McConnell introduced S.
3152, a bill to repeal the Patient Protection and Affordable Care Act.

* DIAGNOSIS AND OUTLOOK – NEAR TERM "PSYCHOTIC OPTIMISM" (2010-2012). Dr. Vachon's
diagnosis – "psychotic optimism". President Obama is expected to be the sitting President until January
20, 2013 (and beyond if reelected in November 2012). As a general matter, expect Obama to veto any
health provisions that undermine the new health reform law. One could map out scenarios that if Rs –
in November 2010 – capture a majority in House (+41 seats) and Senate (+10), Rs could attach health
repeal provisions to "must do" legislation, with the threat an Obama veto would result in government
shut down (think back to 1995 clash between Gingrich and Clinton – Gingrich lost).

The above scenario is MOOT – unless Rs take both Houses – THAT'S THE BET.

* LONGER TERM SCENARIOS – 2013+. The key provisions of universal coverage – "individual
mandate" to purchase insurance (actually a cash penalty for failure to buy insurance), health insurance
exchanges, etc. – go effective 01/14/10. So if a new President were elected in November 2012, and Rs
had a simple majority in the Senate (for a reconciliation bill) and in the House, then perhaps the new
health insurance program could be eliminated before implementation. The real question is whether the
program will have developed strong public support by then.

* REMINDER – EXPECT FURTHER LEGISLATIVE CHANGES. All projects of this magnitude are always
unfinished – if only because facts change.