Legislative and Regulatory Update | Healthcare Reform

The Changing Health Policy Debate and the Unyielding Imperative of Value-Based Care

Legislative and Regulatory Update | Healthcare Reform

The Changing Health Policy Debate and the Unyielding Imperative of Value-Based Care

Republican efforts to repeal and replace the Affordable Care Act have been temporarily put on hold while the party focuses on tax reform.

As efforts to repeal the Affordable Care Act (ACA) have shifted from purely symbolic actions taken soon after the law was enacted to the more plausible campaign made possible by the election of Donald Trump and Republican majorities in Congress, the ACA’s coverage and access provisions have been repeatedly challenged, and the law’s long-term ability to withstand these challenges remains in doubt.

Repeal of the individual mandate, rollback of the Medicaid expansion, and cessation of federal government subsidies of the health insurance marketplaces have been common elements of ACA repeal-and-replace legislative proposals.

Because an estimated 20 million individuals gained health insurance coverage as a result of the ACA, either through the expansion of Medicaid
or through the health insurance marketplaces, concern about coverage and access, not the cost or quality of care, dominated the discussion, and the aforementioned repeal-and-replace attempts were objectionable not only to congressional Democrats, but also to a few Republicans on Capitol Hill as well, not to mention significant portions of the American populace.

When congressional Republicans were unable to pass any form of ACA repeal-and-replace legislation through the summer of 2017, they set their sights on tax reform and decided to take another swing at health care in the future, perhaps in 2018.

Tax Reform Shifts the Debate to Healthcare Cost

On Nov. 16, 2017, the House passed H.R. 1, The Tax Cuts and Jobs Act, a 448-page tax reform bill introduced by Rep. Kevin Brady (R-Texas). Excluding estimated effects of economic growth, the Congressional Budget Office (CBO) estimated that H.R. 1 could increase the deficit by $1.5 trillion to $1.7 trillion over 10 years.

On Nov. 20, 2017, Senate Republicans released a 515-page revision of The Tax Cuts and Jobs Act, which six days later the CBO estimated would add $1.4 trillion to the deficit over 10 years, excluding estimated effects of economic growth. On Nov. 30, 2017, the Joint Committee on Taxation’s macroeconomic analysis projected that the bill would add $1 trillion to the deficit from 2018 to 2027, after factoring in economic growth benefits of the proposed legislation. a  Then, in the early hours of Dec. 2, 2017, the Senate passed a significantly revised version of the bill by a 51-49 vote, almost entirely along party lines, the lone exception being Sen. Bob Corker (R-Tenn.). b

If a conference bill passed by both the House and Senate increases the deficit by more than $1.5 trillion over 10 years (without estimated effects of economic growth), per congressional “pay-as-you-go” (PAYGO) rules, mandatory spending cuts would be imposed, including a maximum 4 percent or about $25 billion cut to Medicare spending in 2018. c  The ensuing pressure to reduce federal spending would shift the focus of the health policy debate to slowing the growth of healthcare costs.

The Republican view is that economic growth stimulated by tax cuts will produce increased tax revenues, eliminating or reducing the need for spending cuts. That may transpire. Yet PAYGO rules require the White House Office of Management and Budget at the outset to automatically cut mandatory spending if legislation is projected to increase the deficit by more than $1.5 trillion in the next 10 years. Regardless of tax reform’s projected or actual impact, the recent debate on Capitol Hill again has highlighted the burgeoning federal deficit issue and reinforced the importance of slowing spending growth on entitlement programs, including Medicare and Medicaid.

Healthcare Cost: the Single-Payer System’s Achilles’ Heel

At the other end of the political spectrum sits Sen. Bernie Sanders (I-Vt.) and his “Medicare for All” proposal aimed at  creating a federally administered single-payer healthcare program, which the Urban Institute concluded would increase federal expenditures by approximately $32 trillion and national health expenditures by $6.6 trillion over a 10-year period. d  To put the $32 trillion in perspective, the entire federal budget for 2018 is about $4 trillion. Obviously, given such large projected increases in federal spending, even with numerous tax hikes proposed by Sanders, there would be enormous pressure to curb healthcare cost inflation.

The Bipartisan Appeal of Value-Based Care

With its roots predating the passage of the ACA, the value-focused care movement has been experimenting and progressing quietly under the radar of the acrimonious health policy debate in Washington, D.C. There have been many encouraging signs indicating the potential for value-based payment to reduce healthcare costs.

According to the Agency for Healthcare Research and Quality, from 2011 to 2015 there was a 21 percent decline in the rate of hospital-acquired conditions, preventing the deaths of 125,000 patients and avoiding $28 billion in healthcare costs. e

In September 2016, the Centers for Medicare & Medicaid Services reported that hospital readmission rates dropped by 8 percent nationally, on average, from 2010 to 2015. f

Perhaps most significantly, accountable care organizations (ACOs), which have been likened to the Rock of Gibraltar amidst rough seas of political change, reduced Medicare spending by almost $1 billion during 2013 to 2015 through the Medicare Shared Savings Program (MSSP), with 56 percent of MSSP ACOs achieving savings relative to their spending benchmark in 2016. g

In the final analysis, regardless of which healthcare system one espouses—more state-run, market-based, and multipayer or a federal single-payer—value-focused care constitutes what is arguably the only workable approach to restrain the growth of healthcare spending because it addresses many, although certainly not all, of the underlying drivers of cost. 

Footnotes

a. Joint Committee on Taxation, Macroeconomic Analysis of the “Tax Cut and Jobs Act” as Ordered Reported by the Senate Committee on Finance on November 16, 2017 , Nov. 30, 2017.

b. Tankersley, J., Kaplan, T., and Rappeport, A., “Senate Republicans Pass Sweeping Tax Bill,” The New York Times, Dec. 1, 2017.

c. Elis, N., “GOP Tax Bill Could Spur $25 Billion in Medicare Cuts: CBO,” The Hill, Nov. 14, 2017

d. Holahan, J., et al., “The Sanders Single-Payer Health Care Plan,” Urban Institute, May 2016. 

e. Agency for Healthcare Research and Quality, “National Patient Safety Efforts Save 125,000 Lives and Nearly $28 Billion in Costs,” Press Release, Dec. 12, 2016.

f. Terry, K., “Hospital Readmission Rates Drop Nationally,” Medscape, Sept. 15, 2016.

g. Calandra, R., “ACOs Sit Like Gibraltar In Rough Seas of Change,” Managed Care, August 2017; Office of the Inspector General, U.S. Department of Health and Human Services, Medicare Shared Savings Program Accountable Care Organizations Have Shown Potential for Reducing Spending and Improving Quality , August 2017;  Saunders, R., Muhlestein, D., and McClellan, M., “Medicare Accountable Care Organization Results for 2016: Seeing Improvement, Transformation Takes Time,” Health Affairs, Nov. 21, 2107.

About the Author

Ken Perez

is vice president of healthcare policy, Omnicell, Inc., Mountain View, Calif., and a member of HFMA’s Northern California Chapter.

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