As pundits and politicos do their post-mortem on the failure of the GOP to pass their American Health Care Act last week, attention will shift back to the Affordable Care Act and what it means for the industry and our country.
Last week’s intramural conflict among Republicans exposed the reality of healthcare politics. As the President observed, healthcare is complicated. Reducing costs, increasing coverage, improving quality and safety, insuring choice and access are easy to say but hard to legislate. That makes the passage of the Affordable Care Act, which aspired to all these, all the more significant in retrospect.
As we now pivot to Chapter Two for the Affordable Care Act, the realities are these:
• The healthcare system needs improvement. Affordability is the issue one. Two-thirds of U.S. households are being hurt. Deductibles for the 170 insured by their employers increased 12% last year alone to $1478/employee. Out of pocket costs for services not covered increased even higher, with medical debt piling up on credit cards. Access is an issue for those lacking insurance and quality is highly variable though often hidden from scrutiny. The triple aim—better quality, lower cost and increased access– is far from being achieved.
• The Affordable Care Act has flaws. It successfully increased coverage for 20 million who were uninsured via Medicaid expansion and subsidized coverage for individuals via the marketplaces, but at a hefty price– $1.1 trillion over 10 years—and the rules whereby insurers are required to structure and price their plans are problematic. Equally vexing are the mechanisms whereby the cost curve is to be bent: the transition from volume to value-based incentives for providers via accountable care value-based purchasing and bundled payment programs, et al are largely untested but promising. The ACA’s mandate to purchase coverage to normalize the health insurance market’s risks needs revisiting. The special enrollment provisions for marketplace enrollees need revision and the ways states are empowered to innovate in managing their Medicaid programs deserves fresh attention. It’s an imperfect law, with hundreds of hanging chads and a public still confused about what it achieves or intends.
• The strength of our economies—locally and nationally– is closely tied to the effectiveness of our health system. Our health system does not operate in a vacuum. With education, it is the cornerstone for economic development and global competition. For hospitals and physicians, Chapter Two is part of a brewing perfect storm unprecedented time: traditional reimbursement is being cut by Medicare, Medicaid and private insurers, drug costs are soaring, mandates to invest in information technologies are complicating operations and raising costs, lender disaffection, interest rate hikes, and physician discontent compound the reality of the ACA’s trajectory from volume to value. The 30 million who lack coverage get care from hospitals and local providers who receive no reimbursement for their care, and for those with coverage, including the newly insured, accessing the system is frustrating.
In the next few months, it’s not likely a new Repeal and Replace bill will find its way through Congress. Pundits are pondering whether moderates in both parties might find middle ground toward repairing the ACA, and a few outliers are betting a new bill might be in the works.
My hunch is changes to Chapter Two of the ACA and related regulatory activity will be the focus. These are a few areas where the GOP’s leaders might be active in coming days:
• Individual market stabilization: To fend off insurer threats they’ll exit the marketplaces next year, regulators will seek to loosen underwriting restrictions for insurers, strengthen requirements for continuous coverage in the individual market and shrink special enrollment period loopholes so premium increases will be less than the average 22% last year. Per the CBO (March 13, 2017) “Under current law, most subsidized enrollees purchasing health insurance coverage in the nongroup market are largely insulated from increases in premiums… “ so the attention will be on carrots for underwriters to keep them in the marketplaces, at least thru the 2018 Campaign season. Stabilizing the individual non-group market insurance market, including the 11 million who get subsidized coverage via the marketplaces, will be a platform for high profile compromise across the aisles with nudging from a deal-making White House.
• Medicaid innovation: Governors whose states expanded their Medicaid will get assurances from the new leaders in CMS their Section 1115 waiver requests and innovation proposals will get expedited reviews. Allowing work requirements for adult Medicaid enrollees, proposed by four states already, might get a go ahead, though 59% work already and the state’s costs for overseeing it are problematic.
• Physician autonomy: HHS Secretary Price, using his administrative authority, will seek to loosen requirements for physician quality reporting and suspend mandatory participation in Medicare’s bundled payment programs (which he’s already delayed). In the ACA, “the Secretary shall…” is mentioned 1442 times! It is anticipated medical malpractice reforms and Stark laws limiting physician inurement will be high on his list of pro-physician initiatives.
• Drug costs: The FDA will accelerate approval of its backlog of generic and new drug approvals while updating the Prescription Drug Users Fee Act (PDUFA) to leverage manufacturer support. Behind the scenes, the administration will negotiate with drug companies to slow price increases as a quid quo pro for backing-away from importation and direct purchasing by Medicare.
• Veterans Health: The Veterans Choice Care program will be updated, with new mechanisms whereby the 8 million vets will gain access to private providers more quickly and effectively. VA Secretary Shulkin, the lone Obama appointee in the cabinet, is likely to shift attention to primary care and preventive health, and suspend VA hospital operations where no longer viable.
• Executive actions: The White House will initiate high profile programs to reduce opioid abuse, expand provider fraud surveillance and use its bully pulpit to draw attention to the ACA repairs it initiates.
• 2018 Budget: And tax reformers, with an eye toward the 2018 budget due in May, will revisit tax exemptions of not for profit health systems and the employer tax credit as part of deficit reduction. They’ll look for cuts in Medicaid and Medicare and in key healthcare agencies to help lower the deficit.
Monday morning quarterbacks will pick winners and losers in the fight about the American Health Care Act. But, for the time being, the Affordable Care Act is the law of the land. That means insurers will be scrambling to get ready for their rate filings next month knowing their concessions will be limited. Hospitals and physicians will be looking for cost reductions to offset expected cuts from Medicaid and Medicare, higher drug prices and more pressure from private insurers. And regrettably, it means Americans will see healthcare reform as a partisan gambit rather than a vital component of our Republic.
It’s often said getting big things done in DC is hard. Chapter Two of the ACA begins today. It’s a big thing. The 56 signees of the Declaration of Independence affirmed that the powers of Congress are limited (Article I) in 1776. Fifteen years and a war later, they enumerated the subordinated powers of the federal government to states and to the people (10th Amendment to the Constitution, 1791).
It took 187 days to pass the Affordable Care Act; the American Health Care Act was presented and a vote scheduled in 17 days. The lesson is that healthcare is complicated, and fixing it is a big deal not easily done in DC. Let’s hope the states and our people play a larger role in Chapter Two as the ACA is fixed and healthcare is transformed.
Paul
P.S. While attention was given to the drama in DC last week, two notable healthcare stories grabbed attention in industry trade media: confirmation by Mayo Clinic it had advised its staff to be deferential to privately insured patients as the $11 billion system looked to its sustainability long-term, and the release of American Association of Medical Colleges’ annual report projecting the nation could be short between 40,800 and 104,900 physicians by 2030—which it carefully framed as an educated guess since the impact of new payment models, technologies and scope of practice changes is unknown.
