Friday, November 11, 2016

What's in Store for Obamacare?

November 11, 2016

The election upset took most of us by surprise. Given the tenor of the lead up to the election and Republican control of Congress, the healthcare space sees Obamacare squarely in the crosshairs.

In the broader public’s mind, Obamacare or the Affordable Care Act is viewed mostly as the individual mandate, exchanges, and certain provisions that impact coverage like pre-existing conditions and adult children remaining covered through a parent’s insurance. The ACA is much more than just these items. It was intended to be a massive shift in how healthcare is financed and managed. And like any public policy, especially one that is trying to manage $3T or so in spending, the ACA was in need of serious adjustments. The high profile problems with the exchange business would have to be tackled regardless of who was elected. 

While it’s impossible to predict how it will ultimately play out, here’s my take.

Some modifications to individual insurance, but mostly status quo
What will stay: accepting members regardless of pre-existing conditions and the ability to keep adult children under 26 on their parent’s insurance. These have been very popular pieces of healthcare reform and the public is unlikely to support any change.

What will change: the health exchanges are the most visible sign of Obamacare, covering 12.7 million people this year, with a significant surge in enrollments occurring this week. Expect a “rebranding,” and if previous Republican thinking holds, a move towards allowing insurers to sell across state lines as a means to introduce competition in pricing. Most policy research suggests that this will not make a significant impact to pricing provided that the pre-existing conditions guarantee is maintained, but there is a strong will to remove government intervention in the model, so expect it to be the initial strategy.

Medicare will be untouched; Medicare Advantage will remain strong and continue to grow
MA will be strongly in play for two reasons: first, in general tinkering with Medicare, a popular program, is incredibly dangerous politically. Second, Medicare Advantage was originally conceived of as a private-market alternative to traditional fee for service Medicare. Despite concerns about the overall cost of the program as compared to traditional FFS Medicare, expect MA plans to gain traction and continue to be a key driver of revenue for many health plans.

Value Based Contracts and ACOs will still be in play
While the concepts and programs of Accountable Care Organizations and Value Based Contracts are hallmarks of the ACA, they are largely hidden from public view, despite the fact that 23 million Americans are now being serviced in some type of ACO arrangement. This is more than CMS at work. As of 2015, over 132 private payers (health plans and employers) are now engaged in some type of ACO activity. Even if CMS pulls back on its aggressive plans to move all of its payments to some type of value basis, the horse is out of the barn. The effectiveness of these types of programs, while incremental, is meaningful at controlling costs. Expect commercial payers and providers to be actively engaged in ACOs and VBCs for the foreseeable future.

Wild Cards: Medicaid Expansion, Drug Costs, Medical Loss Ratio
Extremely hard to predict. This is where the alchemy of lobbying will come into play. Medicaid expansion not only helps millions gain coverage they wouldn’t otherwise have, the dollars that are flowing into hospitals in expansion states are shoring up billions in what would otherwise be uncompensated care and bad debt. Expect these stakeholders to be highly vocal in the coming months as healthcare employers (especially rural) are a significant driver of good quality, well-paying jobs in many cities.

Drug costs are a rallying cry for payers and consumers. Expect the administration to be torn between heeding a populist call for relief and a pro-business mindset led by the pharmaceutical industry.

Similarly, we could expect to hear calls to adjust the Medical Loss Ratio (MLR) for payers if the costs of covering the individual market are in any way capped to protect consumers or if additional benefits are added to individual plans to assuage consumers over prices increases, for example by mandating Behavioral Health benefits as a component of all coverage.

Regardless of where one stands politically, it’s one thing to repeal a policy of this magnitude that impacts 20% of the US economy. It’s wholly another to replace it with another policy that will make an appreciable impact on those costs as the non-partisan Congressional Budget Office noted in June of last year. The landscape is dynamic and will be for at least the next decade. But it would be no matter who is elected.

However, the principles of improving population health, patient experience and reducing the overall cost of care will have to be addressed if we are going to meaningfully impact cost and outcomes. Among other tactical items, that will require continued focus on reducing variability in systems and the reliability of data to guide both systemic change and improved quality of care.