Tuesday Night's Primary Elections Were Huge. Here's What They Mean for Our Industry.
House Majority Leader, Eric Cantor (R-VA) is toast. Trounced in his Richmond district by a nobody Tea Bagger Tuesday night. Cantor gave up his leadership position yesterday. Depending on where you sit politically, either the unthinkable or the inevitable happened. In fact, a Majority Leader hasn't lost incumbency since the office was created in 1899. "The defeat of the second-ranking Republican in the House by an ill-funded, little-known tea party-backed candidate ranks as the biggest congressional upset in modern memory and will immediately generate a series of political and policy-related shock waves in Washington," wrote Chris Cilizza of WaPo.
What it means for our industry is that legislatively speaking, President Obama's second term is already over. The House will seize up like a bag of concrete in a toilet. The most unproductive Congress in history is about to continue and worsen that record as an epic Republican leadership battle ensues.
That means Obama is left chasing his agenda through administrative action, Executive Orders, regulations and enforcement. With brand-new and surprisingly popular HHS Secretary Sylvia Mathews Burwell on the job, expect her department to flex its muscles in ways we haven't seen, especially given the number of oversight hearings she's about to be subjected to:
- There will be tough new rules for all government-sponsored health programs: Medicare, Medicaid and implementation of the Affordable Care Act. The contentious new Part D rules are just the beginning.
- There will be increasing activism in network adequacy and rate reviews of insurers in Medicare Advantage, Part D and the exchanges;
- CMS will take a hard line on Medicare plans lagging in Star ratings and/or compliance records. The second term of a Democratic administration is always when scores are settled; the renewed Congressional scrutiny on our favorite agency will make the paper tiger grow some claws;
- CMS and the HHS Inspector General (IG) will finally put the pedal down on dreaded RADV audits with the promise of hundreds of millions in recoveries.
- With wingnuts like House Oversight Chairman Darryl Issa (R-CA) salivating for domestic Benghazis, the HHS IG will likely deliver a few surprises of its own.
Every time there's a major electoral event in Washington like this, elected and appointed officials alike will usually settle back on the motherhood and apple pie of health care politics: kicking the crap out of the insurance industry and other monied interests like pharmaceutical manufacturers and PBMs. If you're not wearing them already, it's time to pull on the kevlar boxers and the asbestos Spanx.
Follow the Leader: United Health Group's Outlook on Government Health Programs
Ralph Giacobbe at Credit Suisse is a leading health industry analyst and is doing the best work of his career. Today he produced a fantastic recap of his discussion with United Health Group CEO Steve Hemsley and several of his top executives. It included some fascinating insights into the market leader's strategy for government health programs:
â– 2015 Earnings Growth: Management reiterated its focus on growing operating earnings in 2015. While Medicare rate pressures remain (-3 to -3.5%), the company is optimistic of better MA enrollment in 2015 as it does not expect the same level of market disruptions with more limited network reconfigurations...Medicaid is expected to remain a positive contributor. Additionally, UNH has $90B in medical costs and $20B in administrative costs from which to drive savings, which was stressed by management during the meetings...cost creep has backfilled previous administrative cost savings. Management is now "acutely focused" on applying more rigorous standards to general reinvestments in the organization.
â– Medicare Star Ratings and Renewed Focus on Performance: While the management team noted that performance as a whole has been "good", there was clearly a sentiment that performance needs to improve. Hemsley noted that too many of UnitedHealthcare's recent issues have been "self-inflicted," especially Medicare Stars. As a result, UNH is in the process of narrowing its networks to steer patients to high performing providers in an effort to improve quality. Additionally, a greater focus will be placed on leveraging data to stratify members in order to quickly identify and place high acuity members in appropriate care management programs. As the largest player in the market, UNH has several metrics under its control and is expected to perform at high levels. According to management, it took UHC too long to figure out that STAR ratings place significant emphasis on serving both the healthcare and social needs of members. While corrective steps are encouraging the improvement in STAR rating won't be evident until 2017 at the earliest given the lag time in measuring criteria.
â– Network Reconfigurations Continue: As a result of MA rate pressures, UNH significantly adjusted its networks during the 2014 annual enrollment period for which it received scrutiny. Management reiterated that network reconfigurations will continue, but will be guided by insights gained during 2014. Last year UNH narrowed its Medicare networks by 10-15% and management expects some continuation into 2015, although changes will be made more on a continuous basis vs. occurring all at once and therefore should be less disruptive. Overall, network configuration remains a significant component of managing trend and should not be underestimated as narrowing networks to higher performing facilities/providers can save on medical costs. MA rate pressures for 2015 were evident when management reiterated that the final rate came in below their expectation of flat. UNH sizes the impact in the range of -3% to -3.5%. We would expect network reconfigurations to be an ongoing process, as management believes it is only in the 2nd or 3rd inning, but again, don't expect big disruption like 2014.
â– Reform Update: While UNH's exchange participation in 2014 was limited, it is inclined to increase its involvement in 2015. UNH is currently in the process of evaluating markets, products, regulations, and first year pricing. While it continues to appear that the company is likely to increase its exchange exposure in 2015, it has until September to finalize its decisions.
â– Medicaid: Expansion also appears to be tracking well, as management now expects Medicaid growth to exceed the high end of guidance (+350-450K lives). While the dust has yet to settle, expectations were to see 65% of expansion enrollment 1Q, followed by more moderate enrollment in the middle of the year and a reacceleration around year end. It is still early, but at this point UNH has not seen anything alarming in terms of utilization and feels comfortable about its ability to effectively manage new Medicaid members. Additionally, UNH is getting paid appropriately higher rates for Medicaid expansion members.
â– Optum: Management's new goals are "8 by '16" (8% operating margins, 10 new large relationships, double digit top and bottom line growth, and doubling 2013 op earnings of $2.3B). With a backlog of $7.2B, Optum has an abundance of opportunities at its fingertips...Optum's role as a system integrator for HealthCare.gov was an important building block in establishing its reputation. Management also conveyed a new level of confidence that scrutiny around Optum's association with UNH has subsided, as payors and healthcare systems appear to have gained comfort that the appropriate firewalls are in place for Optum to maintain its independence from UNH.
Resources
On May 7, Gorman Health Group Executive Vice President and former regulator Steve Balcerzak joined Vice President of Provider Network Management Craig Lyon for a deep dive into CMS expectations. Attendees got their their take on what to expect and how to prepare. Access the webinar recording here >>
From ACO-type incentives to bundled payments and contract capitation, to full professional and global capitation — where the potential is promising, we can help design and implement these arrangements. Contact us for more information >>
Lighting the Path in the Golden Age of Government-Sponsored Health Programs: Join Us for the GHG Client Forum
More than 300 guests will convene on May 1-2 at the Red Rock Casino in Las Vegas for the 2014 Gorman Health Group Forum, our annual strategic retreat for leaders in government-sponsored health programs. This year's gathering promises to be the most actionable, content-packed conference you could attend on how to succeed in this new Golden Age of government business. And when the learning and planning is done for the day, we will celebrate this unique moment in health care history as only GHG can in Vegas. Here's what's happening this year and why you've got to join us:
- The event features 27 content-charged sessions, including multiple presentations on Star Ratings tactics, quality improvement, risk adjustment, and compliance challenges unique to Medicare Advantage and Part D, Medicaid, and the ObamaCare exchanges
- A keynote presentation from CMS leadership
- An expert roster of presenters from Gorman Health Group and leading health plans in government-sponsored programs. No fluff, no sales pitches, no history lessons -- it's all about what to do NOW
- Approved for up to 12 continuing education credits from the Compliance Certification Board
- The perfect off-the-strip venue to minimize distractions during the day, but close enough to the action to make plenty of bad decisions in the evenings. ;)
Based on feedback from last year's Forum, I'm speaking in three separate sessions on overall strategy and implementation planning for government programs. If you've heard my "state of the industry" presentation before, you may think you know what to expect from me on stage. Think again. This is my favorite gathering of the year, and I'm building three brand-spankin' new presentations that are focused on specific steps and mileposts your organization needs to reach this year in care management innovation, risk adjustment, Star Ratings, and operational performance improvement. In each session I'll drill down to specific steps, and we'll leave you with a self-assessment tool in our closing session to help track your progress.
Many of our clients use the Forum as an offsite retreat for their government programs executive teams, and so we offer huge group discounts to encourage it. It's a unique opportunity for team-building and action-oriented planning and budgeting.
If government-sponsored health programs are central to your company's future, do yourself a favor and join us in Vegas. You'll come back tired, happy, and ready to win in this crazy new environment of health reform.
Don't believe me? Hear what last year's attendees thought about the event, and why they keep coming back for more.
Resources
Register today for The Annual GHG Forum held May 1-2 at the Red Rock Casino and Resort in Las Vegas. This two day event is designed to provide best practices for the decision makers of organizations serving Medicare members, Exchange beneficiaries, and the Dual eligible population.
On April 11, Bill MacBain and Jean LeMasurier will be back, and this time joined by John Gorman, Executive Chairman of GHG, to offer insight on the Final Rate Announcement from CMS. You will walk away from this session with critical to-do items and issues to tackle in order to ensure your success in 2015 and beyond. Register now >>
Innovation and Quality must go hand-in-hand
Plan sponsors are waiting with anticipation for their 2014 Medicare Star Ratings to be released. Just yesterday, Tufts Health Plan in Watertown, Massachusetts released the news that their Medicare Preferred HMO plan was awarded 4.5 out of a possible five stars. It reminds me of the old Ford commercial jingle where they said "Quality is Job 1". No truer words apply when it comes to maintaining high quality plan options for our nation's Medicare beneficiaries.
Recently I accompanied our founder and executive chairman on a field trip, where he enthusiastically addressed a large group of health plan decision-makers as part of their series on innovation. Now, innovation and quality do not always go hand in hand. I have purchased my share of aftermarket tech products to know that while a company might have employed innovation to make something less expensive, often times, it comes at the expense of quality. It's deflating when you finally get on your train with your discounted charger, plug your phone in, and you see the magical words: "not charging". Add it to the list of our countless first world problems, but it illustrates the point.
With the bonus payment going away for any plans earning less than a 4-star rating in 2015, 3.5 stars will not cut it, especially if you are counting on those funds or have incorporated them into your future year's budget. During his presentation, he drew our attention to outcome measures, and how heavily weighted they are. There are so many opportunities for a plan to innovate, not only for purposes of increased quality rating, but also for the most important factor of a plan: its membership. Loyalty can no longer be bought with just the $0 premium plan anymore. The customer service has to be stellar; their enrollment experience must be error-proof; and in times of sickness, when their utilization has to increase, the care management has to be more than just a pre-auth and a smile (and sometimes you don't get the smile). It is time to have a discussion in every department:
- What are we doing to be innovative?
- What are the best in the nation doing?
- What's low-hanging fruit and what requires more significant investment?
Our health plan partners are becoming more and more engrained in government programs, including Medicare Advantage, Part D, Medicaid, Duals, and the Marketplace. He also reminded us that organizations should be prepared for constant regulatory oversight, which comes with government-sponsored programs. True, some of the regulations are a challenge to implement, but when you've gotten to the point where you have met your compliance requirements, think about ways your organization can supplement that success to exceed a member's expectations - within the rules of course. Who is the town crier at your plan for the beneficiary's experience? Why can't it be you?
Resources
Coming soon: GHG's updated star rating database. We'll send an alert when it's ready! Join our subscription list to be sure you know when this free download is available. In the meantime, take a peek at last year's database that combines the CMS-issued 2013 Star Ratings with those over the program's history from 2008 on.
Register to attend our October 29 presentation "Inside the 2014 Star ratings for MA and Part D: Trends and their implications."
GHG Pharmacist, Lynne Civin, outlines the benefits of daily dispensing requirements in a new article: Short-Cycle Dispensing for Long-Term Care. Lynne discusses key attributes in long-term care , and outlines critical items that warrant further discussion. Download the whitepaper today.
The percentage of plan with an average or below average star rating is staggering - and CMS has made it clear, average just isn't good enough. Learn how GHG can help your plan effect meaningful change in your Star Rating and beat the curve.
Sea Change at CMS
Administrator Marilyn Tavenner officially named Paul Spitalnic as the CMS chief actuary. I worked with Paul when he first came to CMS to implement the Part D program. He then served as the Director of the Part C and D actuarial group. Paul is very smart and will ably fill the shoes of other distinguished CMS chief actuaries that I have worked with including Guy King and Rick Foster. Both Guy and Rick were outstanding public officials who came to CMS from the Social Security Administration and from a tradition of government run social insurance programs. I guess experience with the managed care side of Medicare is no longer considered a handicap. To me this shows how much has changed at CMS. Part C is almost 30 percent of the Medicare program and Part D is administered through contracts with private plans. These programs are no longer step children. Congratulations Paul.
Health Insurance Premium Guessing Game
Health insurance issuers are generating enough fodder for a good guessing game. Will Obamacare increase rates for individual insurance or not? And if so, will the increase be modest or catastrophic. Writing in the April 25 edition of the Washington Post, Ezra Klein reports that the Blues plan that serves the national capital area is warning of big increases in individual premiums. The cause? More sick people are going to get health insurance, now that the pre-existing condition limitations have been removed by the Affordable Care Act. But is that the whole story? Klein also reports that insurance companies in Vermont and Rhode Island are projecting a more modest impact in announcing their proposed 2014 rates. But in Massachusetts, where "Obamneycare" has been in place since 2006, individual premiums are the highest in the nation.
The individual mandate, which gives people the choice of either getting insurance or paying a tax, is supposed to stimulate enrollment of healthy people who might otherwise go without coverage until they get sick. Why not, since they can't be denied due to preexisting conditions? But the tax is less than the premium, so its anybody's guess how effective the mandate will be in bringing low risk people into the insurance market.
Until we see how enrollment pans out this fall, and how many healthy people dive into the risk pool, there's no way to know how big an impact the sick will have on premiums.
One thing Klein overlooked is that individual insurance will be sold both in the new health insurance exchanges (which the Feds are now calling "marketplaces," a terminology change the rest of us are ignoring), and in the open market. Klein rightly points out that the impact of higher premiums will be ameliorated for many people by the subsidies that they get through the exchanges. But those who don't qualify for the subsidies, whether they buy through exchanges or in the marketplace outside, will bear the full brunt of any premium increase. These are the folks who, if they are healthy, may well prefer to pay the tax and go without.
The Administration is gearing up for a major public relations campaign to publicize how health insurance will work for individual purchasers in 2014. We hope they will include a strong message about the importance of buying health insurance, even if you are healthy. While you may not be denied due to a preexisting condition, lack of insurance still leaves you open to catastrophic costs due to accident or unforeseen acute illness.
Health insurance: It's not just a good idea, it's the law!
Resources
Gorman Health Group policy expert Jean LeMasurier provides a summary of proposed rules from the Department of Treasury, IRS and OPM regarding the implementation of health reform.
The Exchanges will create a large risk pool that will allow risk to be managed more effectively with reduced administrative costs, read this white paper for estimates from the Congressional Budget Office (CBO) and more.
To learn how Gorman Health Group can help your organization get involved in the Exchanges or other government programs, visit our website.
Attend the GHG Forum, June 13-14 in DC, and hear from the nation's recognized leaders in health reform implementation and ongoing development of exchanges about the challenges facing both the government and private partners pre-launch, plus what lies before us in 2014 and beyond.
The Path to a Deal on the Fiscal Cliff
Outside the Beltway Bubble it must look like we're about to go all Thelma & Louise off the fiscal cliff. In fact, each day the path to a deal becomes clearer, as brilliantly displayed by our friends at WaPo's WonkBlog. The one thing that is crystal-clear: the final deal will piss off everyone.
Of course they should! (But not for the reason you may think)
The New York Times reports that Hospitals fear they may bear the brunt of Medicare cuts. I should hope so! But not because they are wildly profitable at the expense of efficiency and innovation elsewhere.
To be wildly profitable itself is, in my book, no sin. But that's moot in this case: the average hospital in the US breaks even—barely—as Forbes recently noted. The fact that a small number put major dough on the bottom line only makes them like restaurants in the way that a few are able to monopolize a local market while most limp along. Just because Wolfgang Puck can buy an island doesn't mean your brother's pizzeria will thrive.
As the insanely smart Clay Christensen has postulated in The Innovator's Dilemma, hospitals are expensive because they are conflations of three highly contradictory business models: the first of these is the "Solution Shop," as typified by a consulting or law firm. These business are well-matched for the Fee-for-Service payment model. Where hospitals are concerned, this is the realm of their diagnostic and intuitive medicine activities. The value they create here is inherently open-ended. The reimbursement structure should be as well. The NYT's own "Diagnosis" Series is a brilliant example of this.
The second of these is the "Value Adding Process" business, as seen elsewhere in manufacturing, restaurants and education. Take something and do stuff to make it better. Like a pizza. Or a knee. This is best financed through a fee-for-outcome model. "I will pay you $12 for that lunch." When Atul Gawande wrote recently about what the Cheesecake Factory can teach hospitals, it was no doubt these types of medical procedures that he had in mind. Lasik surgery or knee replacements are a good match for his famous "Checklist Manifesto." One need only to look at medical tourism to see how the market has responded as hospital execs lumber along under the weight of overhead which does not drop as the price of a new hip does.
The last of these three models is the "Facilitated Network." Think of your own insurance company. You pay to get access to a risk pool. Another example from healthcare that is slowly taking off is the communities of patients (cancer suvivors, people living with diabetes) who add value with each other through social networks. One can certainly imagine many ways a thriving network of 5 million diabetics could make its sponsor a little cash.
In that hospitals are inefficiently organized, they are expensive. In that they are expensive, they have sown the seeds of their own destruction. As the market and policymakers alike look for oxen to gore, there are few better options. Time will tell if the hospital business model can disentangle itself and reorganize before the entities holding these companies crash and burn.
An Old Friend's Newest Challenge: Rein in Massachusetts' Health Costs
An old, dear friend of mine and fellow XLHealth Board member, Stuart Altman, was just appointed chief of healthcare cost containment for Massachusetts' ground-breaking reform effort -- a harbinger of things to come nationally as the Affordable Care Act now hurtles toward implementation. The local NPR affiliate did a great interview with Stu that I wanted to share here. As always, Stu brings tremendous insight and a sense of history and trends to his work, and as goes Massachusetts, so will go the rest of the country in 2014 and beyond.
"Massachusetts is the first state to say that health care costs must stop increasing faster than that of most other goods and services. Prof. Stuart Altman, a Brandeis economist who advised President Richard Nixon on health policy and President Bill Clinton on Medicare, has responsibility for helping the state achieve that goal.
Gov. Deval Patrick recently named Altman to chair the Health Policy Commission, the new board overseeing the sweeping cost-control law. The board, whose other members were announced last week, will monitor progress toward keeping health care spending in line with state economic growth overall. While he's "hopeful" the state can meet this goal, Altman notes that many attempts have failed over the years. WBUR's Martha Bebinger spoke with Altman about the challenge. Here is an edited transcript of that interview:
How do you see this new role?
Massachusetts has put together the best kind of balanced program that I could think of in the country, where it is relying at one level on the many changes that are going on in the private sector. But it also has put together an overarching public assessment of what's going on to make sure that it works, and it actually brings cost down without hurting quality.
If the changes that are currently in place don't do that, this commission is responsible for giving an early warning sign. So we don't have direct regulatory power to force the system to change, but we do have a monitoring role to make sure that it is working. If it's not, [we would] first direct the delivery system and the payers to change, and if that doesn't work, we could also recommend back to the legislature that the state needs more authority.
On one level I'm pretty optimistic. The level of changes that are occurring in the state are really very substantial. And I would say that the delivery systems, including our very big delivery systems, they really are seriously trying to restructure to live within a tighter budget than they had in the past. And the payers too -- Blue Cross, Tufts and Harvard also -- are tightening up the reins and not giving big increases.
But I've been around a long time and I've seen other years and other decades when after a while the cost-containment mechanisms in place began to fall apart, and did fall apart. So while I'm going into this quite optimistic, I also have a degree of skepticism so I'm going to be watching it pretty closely.
You have seen interest in reining in costs wax and wane. How do you rank this period?
If we look back in history we had very strong government regulation environment in the early and middle 1970s, actually put forward by a Republican administration. It looked like the government was going to be a very strong regulator of growing health care spending. We had wage and price controls from '71 to '74. We created health planning agencies all over the country. We had tough certificate-of-need laws.
And then as we move through the '70s we gradually dismantled it all and by the end of the '70s, it was all gone. Then we had a very brief period when the providers had what we called a "voluntary effort" to control their spending. All that fell apart and we had the biggest growth in our history in the 1980s.
Then we introduced managed care, which was extremely effective in slowing the growth in spending, but it was perceived by the patients — and the beneficiaries and the press — as a system that was holding back access and quality. We had this strong backlash and we essentially destroyed managed care by the end of the ‘90s. So I've seen both the private sector fall apart and the government sector fall apart.
Now, I think what's being done is smarter, and not quite as aggressive as the ‘90s, which I think is a good thing. If you're too aggressive you're going to get a lot of backlash too quickly. So I give it a higher probability of success than either the ‘90s or the ‘70s, and I am hopeful.
What's your main worry?
There are two:
Ultimately the constraints begin to hurt certain segments of the provider community, [and they] begin to put out statements to the patients that they're being denied needed care and we begin to develop a new backlash. So I think patients need to be part of this equation and we need to be balancing their needs with the people that pay the bills, so that's one side.
Massachusetts can only be so far ahead of the rest of the country. If inflation really begins to rear its head again in the rest of the country, the likelihood that Massachusetts would be able to really have a significantly lower level of spending growth is hard to hold on to. I'm going to be very conscious of trying to minimize any backlash and I'll also be watching what's going on in the rest of the country.
For patients, are things moving along now in terms of communicating clearly with patients as you think they should?
No. I don't think patients really understand these limited networks and tiered networks and ACOs and the like. I think there needs to be an expanded consumer education program. Also I think we need to do it smarter. You don't force a patient into any one delivery system, you just make it more expensive if they jump out of one to the other, which continues to gives them the choice. What happened in the ‘90s is that often they had no choice, they had to be at a particular network and they couldn't jump out.
So I think we've learned something in the last 20 years. If we're going to ask organizations to have responsibility for total spending of a particular patient population, [the patients] need to know they're in a particular group, but they also need to have the flexibility if for some reason they want to get out. I think we need to better educate our consumers and patients, but I think we've also learned from the ‘90s, so I'm hopeful.
This story is part of a reporting partnership that includes WBUR, NPR and Kaiser Health News.
Election Gives Health Reform the Kiss of Life
It's hard to argue this wasn't a decisive victory for the President and Democrats in the Senate. What remains to be seen is whether intractable Congressional Republicans will come to the table to get stuff done.
While it was a distant #2 issue in exit polls, this election was a de facto referendum on health reform. The ACA will not be repealed and is now assured to be Obama's lasting legacy. The "repeal and replace" campaign -- over three dozen repeal attempts in Obama's first term at taxpayer expense of more than $50 million -- is over. The GOP fought the ACA fiercely but I expect it will be hugely popular by 2016. Our hope is that Congressional Republicans will lay down their arms and help shape the ACA's implementation so they can share the credit when it's as successful as Medicare Part D has been. House Speaker John Boehner made some welcome gestures this week, asserting that "ObamaCare is the law of the land" and that the repeal agenda is over. We'll see.
Here are some thoughts on what happens in government health programs now that the election is over:
Sequestration and Fiscal Cliff: the 2% across-the-board sequester will not happen and the two parties will make a deal on the fiscal cliff that leaves everyone pissed — like compromise is supposed to. The political dynamics strongly favor the President, as his ideal scenario — raising taxes on the wealthy to accompany budget cuts -- occurs without any legislative action, and nothing happening in Congress is always a safe bet these days. Any deal reached will now involve both entitlement cuts and tax increases, we'd guess in the neighborhood of $2T or roughly half that recommended by the Simpson-Bowles Commission, and it will have bipartisan support.
"Doc Fix": The Sustainable Growth Rate (SGR) or the "doc cut" will be fixed, but it has to be paid for — and that's the obstacle both parties struggle with. MA rates are profoundly impacted by this issue, and Congress's inclination to deal with it through annual increments rather than the 10-year price tag in CBO estimates means that MA plans must wait until the next year's rates are announced. The discrepancy between how and when MA rates are set vs. FFS means that MA plans are never really made whole. It's a tremendous challenge for our industry — and an enormous windfall for MA in 2014 and beyond if Congress solves the problem.
Exchanges: Many Red State governors held out hope the election would settle whether they must prepare for health reform. The 11th hour means most have been caught flat-footed and the Federal Exchange will operate in over 30 states and will be the defining marketplace for health insurance starting in 2014. Far-right governors in Kansas and Virginia will eat the Federal fallback; Wisconsin Governor Scott Walker is now scrambling to get his own exchange together, and a handful of others may follow. It's one of the supreme ironies of Obama's reelection: the governors who screamed loudest of a "government takeover of health care" are about to get just that for their inaction, when the Federal Exchange comes to town in 2014.
Medicaid: most, if not all, of the 7-8 Red States who opposed expansion following the Supreme Court ruling will fold and take the expansion funds in the next 90 days — it's just too good a deal to pass up. Most of the 16 Million new Medicaid beneficiaries envisioned by the ACA — many childless uninsured adults -- will be assured of coverage in a second Obama term.
Dual Eligibles: The migration of dual eligibles to health plans will now move forward in more than two dozen of states in the next two years. The state fiscal crisis will overwhelm concerns about the speed of the migration, and it will result in over $200 Billion in new annualized premiums for plans in the next 3 years. The duals are now affirmed as the biggest opportunity for health insurers in a generation — bigger than the exchanges. They're also the most vulnerable, complex and expensive patients in the entire US health system and will challenge health plans like never before.
Medicare Advantage and Part D will continue on the course set by the ACA, and we expect the consolidations within the industry to accelerate with the election's uncertainty resolved. Look for a much tougher CMS in a second Obama term, with a continued increase in oversight, bolder regulations raising the bar, and a tougher compliance posture from CMS for Medicare Advantage and Part D plans.
- The Stars program's current trends will continue: Standards will change every year and underperforming plans will be hunted down and eliminated. CMS may get moving on SNP-specific rating standards, as SNP plans will be in trouble soon without them. Plans with 4+ Stars will continue to get bonuses and rebates under the ACA, but 2013 will usher in a new era of sub-3 Star plans being shut down by a much tougher CMS.
- CMS will keep trying to find a better way to risk adjust. We expect an attempt to recalibrate the HCC coefficients based on encounter data, which will change the dynamic: Plans will have to find missing codes to avoid being cut, rather than getting paid more. How CMS adjusts for the FFS error rate will be crucial.
- SNP and 1876 reauthorizations will both get paid for, but we need a vehicle to get the 1876 extension quickly, since it expires the end of December 2012. SNPs expire at the end of 2013, and so have more time for reauthorization.
Medicare: We expect Medicare will serve as a piggy bank for deficit-reduction proposals, given its size and fiscal situation.
- The Ryan/Wyden Medicare reform proposal will be debated as a gesture of "cross the aisle" goodwill from the President, but won't come close to enactment. But "premium support" will go mainstream in the debate and become more palatable over time — it reeks of inevitability and Democrats must come to the table to save the program we all hold so dear. The discussion begun by Ryan and Wyden must have its day.
- We expect the cuts that have been considered in prior budget proposals will be back on the table, including: fraud detection, reforming Medicare cost sharing rules, restricting first dollar coverage in Medigap, extending Medicaid drug rebates to duals and LIS, and more means testing. Provider cuts will also be on the table, especially for hospitals.
- An increase in the eligibility age to 67 is a possibility. But unlike with Social Security, deferring the eligibility age merely cuts off the lowest-cost tail of the distribution. The cost reduction would be disproportionately small compared to the number of people politicians would upset.
ACOs: with the ACA intact, the truly astounding surge in ACOs participating in Medicare, Medicaid and the commercial market will continue. Over 100 ACOs are already operating in Medicare. Over 500 applications were received by CMS for the September filing deadline for the Medicare Shared Savings Program, and over 300 ACOs are active in the commercial market and Medicaid reforms. With the election ACOs are here to stay as the bedrock contracting vehicle for the evolution and enrichment of forward-looking providers.
While it ended up a "status quo election" it gave the Affordable Care Act an indelible kiss of life and ushers in one of the biggest changes in our domestic policy in a generation. Now it's time to get down to the real work of implementing it.