In one of the most stunning political upsets in a generation, Donald Trump was elected to the Presidency. One of Trump’s favorite targets on the campaign trail was Obamacare (the Affordable Care Act [ACA]), which he promised to repeal. Although his rhetoric has softened somewhat after the election, opening the door for portions of the ACA to remain in place, Trump’s win combined with Republican control of both the House and Senate likely mean a number of significant changes in the months and years to come. Healthcare executives across the country are in a difficult position as they attempt to plan for the changes ahead and control risk in an environment of ambiguity. One impact of this uncertainty can be seen in stock prices: shares of HCA fell 11%, Tenet fell 25% and Community Health Systems fell 22% the day after the election and have not returned to their pre-election levels.
Last week brought some new signals of what might happen in 2017 and beyond after Mr. Trump announced he was nominating House lawmaker and former orthopedic surgeon Tom Price (R-Ga.) to lead the Department of Health & Human Services (HHS) and Seema Verma, a healthcare consultant, to serve as Administrator for the Centers for Medicare and Medicaid Services (CMS). Both appointments communicate a clear signal of Trump’s intention to reshape the ACA and Medicare/Medicaid in this country with potentially far reaching impacts on health reform, access and payment.
In evolving and uncertain times, it can be helpful to return to three principles and chart a course from there. First, we know healthcare is too expensive in the US—one of the only policy items where Republicans and Democrats both agree. Second, the focus of repealing Obamacare will be on access to care and less so on the delivery of care, where cost and quality will remain ascendant challenges. Third, patients and payers want high-quality care and sophisticated tools to demonstrate their quality. Anchoring on these three truths supports QURE’s fundamental premise that providers and health systems that want to succeed in this uncertain environment must remain focused on delivering value – the highest-quality care at the most efficient price.
Below we outline a few insights on what these developments likely mean for healthcare reform, payment and innovation.
What Do Trump’s Appointments Tell Us about the Future?
Representative Price currently serves as chair of the House Budget Committee and sits on the Health Subcommittee of the House Ways and Means Committee. Like Mr. Trump, Dr. Price has expressed his opposition to the ACA, but unlike the President-elect, he has proposed specific policy changes through bills sponsored in Congress. One such bill, HR2300, would repeal the ACA, eliminate the individual mandate and provide tax credits based on age to purchase health coverage. Price’s proposed bill would also set limits on tax exclusions for employer-sponsored plans and allow insurers to sell coverage across state lines—a provision that Trump has also endorsed on the campaign trail. Price is also in favor of giving states increased control over Medicaid funding through federal block grants based on a per capita funding formula.
Price was a supporter of the Medicare Access and CHIP Reauthorization Act (MACRA), which provides a strong impetus for providers to move towards value-based care. He has, however, criticized the mandatory programs and reporting requirements that came out of the Centers for Medicare and Medicaid Innovation (CMMI). In September 2016, Price was the primary signatory on a letter from a group of 178 House Republicans and one Democrat asking CMS Administrators to “cease all current and future planned mandates” under CMMI.
Seema Verma, who was running a health policy consulting firm, made a national name for herself in Vice President-elect Mike Pence’s home state of Indiana where she helped broker a deal for Medicaid expansion. Like Price, Verma is a strong proponent of giving states expanded flexibility with Medicaid and supports expanded use of personal Health Savings Accounts (HSAs) to give consumers more control and responsibility for healthcare spending.
Factors Keeping the Focus on Value
While many questions remain, last week provided some important insights into Trump’s potential path forward. Here we highlight four trends, not meant to be exhaustive, indicating that high-value care will remain the important differentiator for successful health systems and providers:
- Greater consumer responsibility for health spending: The existing trend of shifting costs to consumers and patients is unlikely to be slowed by any of the proposals set forth by Trump or his team. In fact, greater use of tax credits and HSAs is only likely to accelerate this shift. An increasing array of online tools is making it easier for consumers to identify lower cost providers and differentiate based on quality. As more of the cost of care comes out directly out consumers’ accounts, expect continued shifts away from high cost providers, such as the shifts we are seeing in elective outpatient imaging.
- Sustained pressure on Medicare spending: Medicare makes up 15% of the federal budget today and is unlikely to see support for large spending increases from Dr Price or Mrs. Verma. Even as specific programs change and evolve within CMS, controlling costs will continue to be a priority for the new administration, especially with Representative Ryan leading the House.
- Continued demand for high-value, low-cost healthcare from employers: Over half of all Americans get health insurance through their employers, and these employers are feeling crushed by rising costs. Regardless of what occurs in Washington, employer focus on controlling costs, such as high deductible plans, will remain a key component in healthcare selection.
- More competition among payers: Changes such as allowing interstate sales of health insurance products is likely to drive competition among payers for increasingly price-sensitive consumers and cost-conscious employers. This competitive environment will drive continued growth of emerging plan structures, such as tiered-benefits and narrow networks that seek to reward high value providers and punish high-cost, highly variable ones.
- Increased experimentation at the state level: One of the mantras of those advocating repeal of the ACA has been for increased control at the state-level, especially for Medicaid. Paying attention to your local state environment is likely to be even more important in the coming months and years. We will likely see strong success stories, and some failures, that will hopefully provide lessons for the whole nation.
With these changes there will be winners and losers; not even the Trump administration knows the exact details of how this will unfold. We do know, however, that pressure to control costs will continue to come from inside and outside of Washington. We also know that variability in quality and cost is becoming a large influencer of both payment decisions and patient choice. Legislation and existing regulation, like MACRA, already create the impetus for moving away from a fee-for-service world, and Republican legislatures will need to figure out how to either refocus or build on existing successes in transitioning to a value-based environment. One of the most important parts of any plan to improve quality and reduce costs is engaging physicians in the process of standardizing care. If you are interested in how QURE’s proven CPV engagement approach can help you work with your physicians to improve value in an uncertain environment, give us a call today.