By Julie Steenhuysen

CHICAGO (Reuters) – Republicans may have failed to overthrow Obamacare this week, but there are plenty of ways they can chip away at it.

The Trump administration has already begun using its regulatory authority to water down less prominent aspects of the 2010 healthcare law.

Earlier this week, newly confirmed Health and Human Services Secretary Tom Price stalled the rollout of mandatory Medicare payment reform programs for heart attack treatment, bypass surgery and joint replacements finalized by the Obama administration in December.

The delays offer a glimpse at how President Donald Trump can use his administrative power to undercut aspects of the Affordable Care Act (ACA), including the insurance exchanges and Medicaid expansion that Republicans had sought to overturn.

The Republicans’ failure to repeal Obamacare, at least for now, means it remains federal law. Price’s power resides in how to interpret that law, and which programs to emphasize and fund.

Hospitals and physician groups have been counting on support from Medicare – the federal insurance program for the elderly and disabled – to continue driving payment reform policies built into Obamacare that reward doctors and hospitals for providing high quality care at a lower cost.

The Obama Administration had committed to shifting half of all Medicare payments to these alternative payment models by 2018. Although he has voiced general support for innovative payment programs, Price has been a loud critic of mandatory federal programs that dictate how doctors should deliver healthcare.

Providers such as Dr. Richard Gilfillan, chief executive of Trinity Healthcare, a $15.9 billion Catholic health system, say they will press on with these alternative payment plans with or without the government’s blessing. But they have been actively lobbying Trump officials for support, according to interviews with more than a dozen hospital executives, physicians and policy experts.

Without the backing of Medicare, the biggest payer in the U.S. healthcare system which Price now oversees, the nascent payment reform movement could lose momentum, sidelining a transformation many experts believe is vital to reining in runaway U.S. healthcare spending.

Price “can’t change the legislation, but of course he’s supposed to implement it. He could impact it,” said John Rother, chief executive of the National Coalition on Health Care, a broad alliance of healthcare stakeholders that has been lobbying the new administration for support of value-based care.

The move Friday to pull the Republican bill only reinforces the risk to the existing law, which Trump said on Friday “will soon explode.”

“It seems that the Trump Administration now faces a choice whether to actively undermine the ACA or reshape it administratively,” Larry Levitt, senior vice president at Kaiser Family Foundation, wrote on Twitter.

“The ACA marketplaces weren’t collapsing, but they could be made to collapse through administrative actions,” he added.

NEW PAYMENT PLANS AT RISK

The United States spends $3 trillion a year on healthcare – more by far than 10 other wealthy countries – yet has the lowest life expectancy and the highest infant mortality rate, according to a 2013 Commonwealth Fund report.

Health costs have soared thanks in part to the traditional way doctors and hospitals get paid, namely by receiving a fee for each service they provide. So the more advanced imaging tests a doctor orders or pricey procedures they perform, the more money he or she makes, regardless of whether the patient’s health improves.

“We have a completely broken economy in healthcare,” said Blair Childs, senior vice president at hospital purchasing group Premier Inc. “Literally, all of the incentives in fee-for-service are for higher cost.”

Alternative payment models are designed to remove incentives that reward overtreatment of patients. Private insurers are on board, with Aetna Inc, Anthem Inc, UnitedHealth Group and most Blue Cross insurers announcing plans to shift half of their reimbursement to alternative payment models to control costs.

To promote the shift to alternative payments, the ACA created an incubator program at the Centers for Medicare Medicaid Services (CMS). The CMS innovation center is funded by $10 billion over 10 years to test payment schemes aimed at improving quality and cutting the cost of care.

The Obama administration’s decision to make some of these payment programs mandatory has drawn the ire of Price, a former U.S. senator and orthopedic surgeon. In response to a mandatory payment program for joint replacements last September, for example, Price charged that the CMS innovation center was “experimenting with Americans’ health.”

In his January 17 confirmation, Price said he was a “strong supporter of innovation,” but said he believed the CMS innovation center “has gotten a bit off track.”

TRUMP SETS WHEELS IN MOTION ON DAY 1

President Trump has already signed an executive order directing the HHS to begin unraveling Obamacare. In the early hours of his presidency, Trump directed government agencies to freeze regulations and take steps to weaken the healthcare law.

The order directed departments to “waive, defer, grant exemptions from, or delay the implementation” of provisions that imposed fiscal burdens on states, companies or individuals. These moves were meant to minimize the costs and regulatory burdens imposed on states, private entities and individuals.

David Cutler, the Harvard health economist who helped the Obama Administration shape the ACA, said Price could do all sorts of things to undermine the law.

“If he wants to blow it up, he can,” Cutler said in an email. But if they do, he added, “they alone will own the failure.”

(Editing by Edward Tobin)