Healthcare Business Trends

Navigating Uncertainty in Health Care in 2017

January 17, 2017 1:15 pm

In a year that promises to bring significant change to health care, leaders should keep their focus on delivering better-quality care at a lower cost.

As 2017 ushers in a drastically different political environment, it also brings uncertainty on a variety of issues.

Not least of those issues is the fate of the Affordable Care Act (ACA). Mark McClellan, MD, PhD, director of the Duke-Margolis Center for Health Policy, Durham, N.C., expects Republicans to work quickly to repeal the ACA now that they have assumed control of the White House through the election of Donald Trump while maintaining a majority in Congress. But exactly what would replace the ACA is unclear. 

“There is still a lot of work to be done to develop the policies and the politics that would make a replacement alternative work well, so we are going to be living for a while with some uncertainty about what exactly an ACA replacement would look like,” he says.

Other issues concern the timing and logistics of a repeal. One tactic might involve an immediate vote to repeal that would take effect in a few years, with efforts to develop a replacement plan in the meantime. Another tactic might delay the repeal decision as Republicans unify around a replacement strategy. Whichever timeline Republicans choose, McClellan (pictured below) anticipates their efforts will significantly alter several components of the ACA.

The leading Republican alternatives to replace the coverage components of the ACA include a fixed tax credit to help individuals purchase insurance, with additional assistance available through states for lower-income and higher-risk patients. In lieu of an individual mandate to purchase insurance, Republicans could propose a continuous-coverage requirement, similar to current portability requirements under HIPAA, that would allow individuals to avoid underwriting and have access to coverage at the median level or population rate, McClellan says.

McClellan believes language in the repeal itself could provide some hints as to what coverage under the ACA replacement would look like. For example, Republicans may decide to preserve some sources of ACA financing to fund tax credits in a new law. More will likely become clear in early 2017.

Based on policymakers’ discussions, Francois de Brantes, MS, MBA, vice president and director of the Center for Payment Innovation at the Altarum Institute, Ann Arbor, Mich., speculates that the replacement plan could create a national set of exchanges to encourage cross-border competition among health plans. That could create new dynamics among insurance carriers, including those that have enjoyed market dominance because of a lack of regional competition, he says.

“If there truly were more competition across borders through the exchanges, it would create a far greater dynamic in getting the plans to take payment reform more seriously,” he says. “They would lose a tremendous amount of business in the exchanges if they didn’t figure out how to be more innovative and how to reduce premium costs or at least reduce the rate of increase in premium costs so they could beat out their competitors.”

The nomination of Rep. Tom Price (R-Ga.) as secretary of the Department of Health and Human Services (HHS) reinforces the Trump administration’s interest in reforming health care, McClellan says.

“Dr. Price has a fairly unique combination of being a practicing surgeon with a lot of experience in direct clinical practice, and also a practicing congressional leader with a lot of experience in budgeting, budget legislation, and getting major legislation through Congress,” McClellan says. He believes Price will be engaged in upcoming legislation for the long haul. “It will be a longer process that will require working with Republicans with a range of views as well as moderate Democrats on how to transition from the current ACA to a new approach to coverage,” he says.

Transitioning to Value-Based Payment

McClellan predicts Price will take further action on payment reform in a way that supports smaller and medium-sized physician practices. Specifically, he expects to see more of a push by HHS to encourage practices to join alternative payment models (APMs) like the Oncology Care Model, which has enrolled a quarter of the nation’s oncologists.

“One thing to watch in 2017 is how much the new administration will put weight on creating a broader range of payment reform models that are focused on a broader range of areas of care,” McClellan says. Such an expansion could cover specialties like emergency medicine and cardiology. “Given Dr. Price’s interest in helping physician practices—especially smaller practices—thrive, the kinds of payment reforms like the Oncology Care Model that are not quite as comprehensive as an ACO [accountable care organization] but might complement a primary care ACO will get some attention,” he says.

McClellan also is eager to see how the Merit-based Incentive Payment System (MIPS) is implemented under the Medicare Access and CHIP Reauthorization Act (MACRA) starting in 2017. In October, the Centers for Medicare & Medicaid Services (CMS) proposed several MIPS participation options for physicians, including allowing them to report limited data in 2017 to avoid penalties in 2019.

The transition to APMs is unlikely to slow if the ACA is repealed, says de Brantes (pictured below).

“Most of the activity around the push toward alternative payment models is being influenced a lot more at this point by MACRA than by the pilots that have been implemented by the Center for Medicare and Medicaid Innovation [CMMI],” he says. “The reality is that with MACRA, there is a very strong incentive for physicians to try to institute alternative payment models.” The incentives include an opportunity to earn a 5 percent bonus annually and to avoid potentially onerous data-reporting requirements under MIPS. In fact, many specialty societies are starting advanced APMs for members as an alternative to participating in MIPS.

Repealing the ACA could create uncertainty for ACOs and other providers if funding for CMMI is cut in the process, although the experts say it is too early to speculate on the likelihood of such a fate for CMMI. “The push by CMMI and this administration has really been around ACOs, and if something happens to CMMI, then the Medicare Shared Savings Program and all the other ACO demonstrations would stop because funding would dry up,” de Brantes says. “Although MACRA doesn’t designate specific APMs in its rule-making process, CMS has designated some of the ACO programs run by CMMI as being advanced APMs. That creates a legal limbo.”

McClellan believes Republicans do not want to stop MACRA, although the emphasis might change. “In general, Republicans are for more flexibility for providers,” McClellan says. “On the other hand, the fee-for-service payment model that we have in place right now doesn’t really do a good job of supporting some of these more efficient models.”

Sarah Thomas, managing director for the Center for Health Solutions, Deloitte, LLP, Washington, D.C., thinks major changes to MACRA are unlikely. “Clearly, the MACRA law was bipartisan and bicameral, and I do not anticipate that the Congress would want to relitigate that whole piece of legislation that was in general very positive,” Thomas says. Still, changes could be in store as providers offer more input during the implementation. “If aspects of MACRA look like they are going to be burdensome, there may be even more sensitivity to those kinds of concerns,” she says. Even if some MACRA policies get tweaked, many industry stakeholders want to see it work.

On the commercial side, Suzanne Delbanco, PhD, executive director, Catalyst for Payment Reform, Berkeley, Calif., does not foresee a slowdown in the transition to value-based payment in 2017. “My perception is that the health insurance plans and purchasers have taken this on as a business imperative—that changing how we pay doctors and hospitals is key not only to improving value in the long run but also will be critical to stay competitive,” she says. 

She also anticipates that significant value-based payment efforts at the state level will continue because “there is a financial imperative to do so,” she says. “State Medicaid agencies and employee and retirement agencies have real fiscal constraints, and they are trying to find ways to improve the value of their healthcare spending—and they see payment reform as one of the strategies that they can utilize.”

Delbanco (pictured at right) also expects the push for greater price transparency to continue. “This is an area where there is movement in the private sector and at the state level,” she says. “There are likely to be continued increases in the use of benefit designs that urge consumers to do more shopping before they purchase healthcare services, and because of that, there will be a need for transparency in both quality and price.”

Privatizing Medicare

Another issue creating uncertainty is the possibility that Medicare could be privatized down the road, as key Republican leaders such as House Speaker Paul Ryan (R-Wis.) have proposed.

“Paul Ryan has supported premium support in Medicare for years, and I’d expect some discussion around this idea,” Thomas says. “It wouldn’t be a full-on privatization of Medicare, but it might make staying in the traditional program more costly in some parts of the country.”

The Medicare Payment Advisory Commission and the Congressional Budget Office already have begun looking at policy options for Medicare premium support that might result in budget savings. However, making major changes to Medicare could be politically challenging, Thomas says.

Reforming Medicaid

The appointment of healthcare policy consultant Seema Verma to lead CMS signals that Medicaid reform also will be a top priority of the Trump administration, McClellan says. “There is a lot more that could be done to let states try out new approaches to financing and support new models of care delivery for lower-income populations,” he says. 

Unless the ACA is repealed immediately, some of the reform could be carried out under provisions in the ACA, specifically Section 1332, which allows states to apply for innovation waivers funded through CMMI. One such waiver, the Healthy Indiana Plan developed by Verma, might be a template for Medicaid reform. This program requires unemployed or underemployed Medicaid beneficiaries to join work-search programs and share some of the cost of their coverage.

Republican leaders also are considering changing how the federal government funds Medicaid. One method would involve block grants. Under this approach, the federal government would issue lump-sum payments to the states, which would have greater freedom to run their own programs. At the same time, they would be on the hook for any budgetary shortfalls. 

“Republican and conservative policy has definitely been in favor of block grants for Medicaid programs and additional state flexibility, which are part of the conversation right now,” says Thomas (pictured at right). “However, that could become potentially challenging for states to implement if there is limited federal funding, which would have a direct effect on state budgets.”

Advice for 2017

The healthcare industry experts offer the following advice for organizations looking to prepare for uncertainty in 2017. 

Engage in scenario planning. “My advice to all stakeholders is to understand the set of policy ideas that are being discussed and then do some scenario planning around different options,” Thomas says. This includes the potential impact if fewer individuals have insurance coverage or if the same number have coverage but the benefit design changes. Possible changes to the large-group market, including repealing the so-called “Cadillac tax” that imposes a 40 percent excise tax on high-cost employer plans, also should be investigated, she says.

Choose the right partners. Thomas believes that merger-and-acquisition (M&A) activity among health plans and health systems is not likely to change in 2017. “We will continue to see organizations look for M&A opportunities but also look for partnerships and other types of collaborations that may not be formal M&A,” she says.

Continue to refine tools to track quality and financial performance. “Regardless of what form reform takes, providers will need to have their finger on the pulse of how they are doing along a variety of quality dimensions as well as efficiency and cost dimensions,” Delbanco says.

In such an environment, it will be important for providers to “analyze their own practice and performance, understand where potentially avoidable complications occur, and understand where they are adhering and where they are not adhering to guidelines,” she says. “It also means figuring out who their most efficient and high-value collaborators could be in an episode of care.”

Take the reins. “If you feel any type of social responsibility to reduce the costs of health care in the United States and to improve the quality, you shouldn’t be waiting for legislation to do that—you should do it on your own,” de Brantes says.

In particular, he urges payers to jump on board new payment models and think outside the box of global capitation. “There has to be a lot more flexibility, nimbleness, and willingness to experiment around alternative payment models,” he says. “Physicians and hospitals certainly are interested in doing that and are pursuing it, and payers need to be a bit more aggressive in getting it done.” 

McClellan agrees. “The best thing that finance leaders can do now to help address the high cost of care is to move ahead with the efforts they are taking to support new models of care and use new financing systems, such as episode payment models or Next Generation ACOs,” he says.

McClellan also believes stakeholders should aim to get beneficiaries more actively engaged in their care by developing models that allow them to share some of the savings. “That is clearly where the new administration is headed, even if the approach they take has a different flavor,” he says.

Being Proactive

As reform efforts unfold under the Trump administration, healthcare leaders should provide continuous input to policymakers while focusing on delivering value to payers and patients.

“The more that the private sector can have a position of clarity on where they would like to go with care delivery reform and healthcare-financing reform—and the models they are implementing that are working—the more support they are going to get from the new administration,” McClellan says. 

“That is not to say that there won’t be big questions about what is going to replace the ACA or how Medicaid will be reformed. Regardless of how those steps progress, we have got to continue this urgent work on identifying ways to get costs down while delivering as good or better care. Private-sector leadership on healthcare-financing reform will be really important for that.”

Laura Ramos Hegwer is a freelance writer and editor based in Lake Bluff, Ill.

Interviewed for this article: Mark McClellan, MD, PhD, director of the Margolis Center for Health Policy at Duke University, Durham, N.C.

Francois de Brantes, MS, MBA, vice president and director of the Center for Payment Innovation at the Altarum Institute, Ann Arbor, Mich.

Sarah Thomas, managing director for the Center for Health Solutions, Deloitte, LLP, Washington, D.C.

Suzanne Delbanco, PhD, executive director, Catalyst for Payment Reform, Berkeley, Calif.

Photo credits:

McClellan: Duke-Margolis Center for Health Policy

de Brantes: HCI3

Delbanco: Catalyst for Payment Reform


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