10 key policy issues facing healthcare
The last few years have been nothing short of fascinating to watch in terms of healthcare policy change and implementation. The passing and now (somewhat troubled) implementation of the Patient Protection and Affordable Care Act is the most significant, but certainly not the only, policy issue to gain national attention, from the industry and public at large. Following is a list of, in our view, 10 of the top key policy issues facing the industry as well as some of the issues surrounding each.
1. Is the impact of the PPACA worth the cost? A July 2014 study from the Commonwealth Fund found 20 million people now have health insurance due to the PPACA.
Approximately 8 million people signed up for healthcare through federal or state healthcare exchanges between October 2013 and April 2014. Of these, 57 percent, or approximately 4 million to 5 million individuals, were previously uninsured (with the others previously having individual coverage). Another 12 million people gained coverage through other PPACA provisions, such as Medicaid expansion (in 27 states, including Washington, D.C.), allowance for young adults to remain on their parents’ health insurance until age 26 and bans on health insurers’ denial of coverage because of age or preexisting conditions, according to The Hill.
In contrast, the PPACA created literally billions of dollars in new taxes. These include a Medicare tax increase of .9 percent for individuals earning over $200,000 or married couples earning $250,000; a net investment income tax of 3.8 percent tax on individuals, estates, and trusts worth more $200,000 or $250,000 for joint filers; and an increase in the threshold for itemized deductions for medical expenses from 7.5 percent to 10 percent of gross income, not to mention the additional costs to providers and healthcare companies to comply with the law
In 2012, the Congressional Budget Office and Joint Committee on Taxation estimated that the insurance coverage provisions of the PPACA will have a net cost of just under $1.1 trillion over the 2012–2021 period. A great question remains: Is the cost worth the gain?
It will be interesting to see when or whether the societal benefits of having 20 million newly insured outweigh the billions spent for improvements in societal healthcare costs over time. Will the law’s unintended consequences lessen its ROI? Will the approximate $1.1 trillion curtail healthcare spending in the United States? National healthcare spending grew at an annual rate of 4 percent during the first 11 months of 2013, just above the revised all-time low rate of 3.6 percent for 2011, according to the Altarum Institute’s Center for Sustainable Health Spending and CMS. However, healthcare spending growth slowdown occurred in other industrialized countries as well, suggesting it is not solely attributable to the PPACA. The White House has said it anticipates an uptick in healthcare spending as newly insured utilize healthcare services, but it will be interesting to see whether or how long that persists, and if healthcare costs will start trending down for good.
2. Should federal or state governments control healthcare policy? A great question exists as to whether states should be able to be laboratories of democracy, or whether the federal government should develop top-down solutions for healthcare. Seventeen states (including Washington, D.C.) decided to build their own Obamacare exchanges, while the rest of states chose a partnership model with the government or the federally-facilitated marketplace. Of those 16 governed states, 12 are led by governors who are Democrats, while the remaining are led by Republicans and one Independent governor (Rhode Island).
Generally, state-based exchanges enrolled a higher percent of the eligible population than states using the federal marketplace, HealthCare.gov. But just as there were problems with HealthCare.gov, some states experienced setbacks of their own. In April, after undergoing months of technical problems and putting applications on hold due to processing difficulties, Oregon decided to shut down its troubled Cover Oregon marketplace and transition to the federal marketplace. In May, Nevada did the same, scrapping its state exchange to join the federal marketplace for at least one year. Massachusetts is still trying to save its exchange, but also laying the groundwork to join HealthCare.gov. Some states have seen success, however. Connecticut’s exchange portal has performed remarkably well — so well that Maryland wants to buy it and use it as a model for its own. Kentucky also hit its stride: more than 413,000 Kentuckians (or one in 10) signed up for coverage through the state’s kynect system.
A Politico report last month suggested the federal exchange option — which was supposed to be a temporary fallback for states — may become a longterm solution for the majority of states. This was not the intent of the healthcare law. ” But a shift to a bigger, more permanent Washington-controlled system is instead underway — without preparation, funding or even public discussion about what a national exchange covering millions of Americans means for the future of U.S. healthcare,” according to Politico. “It’s coming about because intransigent Republicans shunned state exchanges, and ambitious Democrats bungled them.”
3. Are high-deductible plans and high out-of-pocket costs a necessary evil? High-deductible health plans and out-of-pocket plans have long been a Republican tenet of healthcare reform due to arguments around choice and free-market ideals. Interestingly, Democrats, who haven’t as closely supported these plans in the past, intentionally or unintentionally did so through the passing of the PPACA, which created marketplace plan structures that include high deductibles and up to 40 percent cost sharing.
Republicans oppose the law for a number of reasons, but some have pointed out that their recent attack on high-deductible plans departs from the party’s previously held views. Last winter, Ezra Klein wrote a column for the Washington Post‘s Wonkblog in which he noted his confusion about Republicans’ criticism of high-deductible plans. “What’s confusing about this line of attack is that high-deductible healthcare plans — more commonly known as ‘health savings accounts’ — were, before Obamacare, a core tenet of Republican healthcare policy thinking. In fact, one of the major criticisms of Obamacare was that it would somehow kill those plans off,” wrote Mr. Klein. In that column, Mr. Klein wondered if some of Republicans’ pushback stems from the healthcare law giving a bad name to a policy they like.
Some political debates around high-deductible plans and out-of-network payments remind one of President Bill Clinton’s passage of welfare reform in 1996. There, Bill Clinton broadly put into place a Republication tenet much to the chagrin of some Republicans.
4. What policies are generally supported by both parties? Notwithstanding the general concerns about healthcare reform, the ban on insurers’ discrimination against preexisting conditions, limits on age discrimination and the elimination of lifetime caps are popular concepts amongst constituents who are Republicans or Democrats. In a Gallup poll, those who approve of the PPACA said the top reasons they support the law is because it makes healthcare accessible to more people, they find it fair that everyone have health insurance, it provides more health insurance options and it covers people with preexisting conditions.
5. Who should be required, if anyone, to cover contraception? In Burwell v. Hobby Lobby, the Supreme Court ruled in a 5-4 decision that a health plan offered by a private employer that is a closely-held, for-profit corporation need not include contraception coverage. Here, it reasoned that the concept of being forced to offer contraception violates the freedom of religion of the owner of the company. Based on this ruling, a federal judge estimated that a third of Americans are not subject to the requirement that their employers provide coverage for contraceptives: Small employers are not required to offer health coverage at all, religious employers like churches are exempt, religiously affiliated groups may claim an exemption and some insurance plans that had not previously offered the coverage are grandfathered in, according to the New York Times.
6. Was the Obama administration really unable to predict that some insurers would be forced to drop catastrophic-only health plans, leading to public outcry? Or was the president dishonest when he promised Americans they could keep their current plans, if they liked them? Whether Republican or Democratic, we have largely learned that politicians are not particularly honest. In 2009, speaking out to promote his healthcare law, President Obama told Americans, “If you like your healthcare plan, you’ll be able to keep your healthcare plan. No one, will take it away no matter what.” We’ve now learned that wasn’t the case. There have been a string of presidencies lately with at least one infamous lie that lives well beyond the commander in chief’s term, such as those about weapons of mass destruction, extramarital affairs or wiretapping. It will be interesting to see what mistruths about the healthcare reform law, if any, persist over time.
7. Should individuals using the federal exchange receive subsidies? The government now subsidizes buying healthcare insurance on the federal and state exchanges. However, the original legislation did not specifically permit the subsidy of insurance bought on federal exchanges. The heart of the issue is whether subsidies may be awarded in the 36 states that chose not to set up their own insurance marketplaces and instead relied on the federal government’s exchange.
Most of the people who bought policies on the exchanges received some sort of subsidy, though these subsidies were not authorized by the PPACA. The PPACA encourages states to set up their own health insurance marketplaces, but it also created a federal marketplace as a fallback. But the law’s section on health insurance subsidies says they can be paid to anyone who signs up for coverage in “an exchange established by the State.” It doesn’t mention the federal exchange. This stems from a 2009 drafting error in the law, a basic mistake in the wording that was never reconciled, according to Politico.
The U.S. Court of Appeals for the D.C. Circuit recently ruled in Halbig v. Burwell that the federal government was not allowed to expand subsidies in this way. In contrast, earlier in July, the Fourth Circuit Court of Appeals ruled differently. The conflicting rulings show regulatory uncertainty about a decision that could affect more than 4.5 million people who were found eligible for subsidized insurance in the federal exchange.
Amid this uncertainty, the name Jonathan Gruber has appeared a lot in the news lately. He’s an economist from the Massachusetts Institute of Technology and an architect of the PPACA. In a video circulating the web, Mr. Gruber makes a presentation in January 2012 to a nonprofit group and says the following, which would support the latest legal challenge to the health law: “I think what’s important to remember politically about this, is if you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits.” He added, “I hope that that’s a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these exchanges.” Mr. Gruber made similar remarks to another group, as well.
8. Is the explosive increase and expansion in the False Claims Act warranted or overreaching? Previously, the False Claims Act only covered true false claims. Ten years ago, it was relatively easy to identify a bad intent or bad actor in an FCA case, many of which were egregious and severe. Now the FCA covers any claim that derives out of a violation of the Stark Law or Anti-Kickback Statute. This has led to a tremendous growth in healthcare FCA cases.
Under the False Claims Act, plaintiffs file civil actions on the government’s behalf called qui tam suits, from a Latin phrase loosely meaning “who brings the action for the king as well as himself.” The Justice Department can join a suit it deems worthy, taking over the case. It usually prevails: Among cases it joined from 1987 through 2010 that had outcomes, 95 percent produced settlements or judgments by 2010, according to a Wall Street Journal report.
Two-thirds of the 753 qui tam suits filed in fiscal 2013 were in healthcare. Such suits were behind 87 percent of the government’s $12.3 billion in civil recoveries from the industry over the five years through fiscal 2013. Some of the largest settlements involved allegations that drugmakers overcharged or illegally promoted medicines in ways that led to improper billings to government programs. But some say the FCA’s provisions have given rise to plaintiffs who, more interested in profits than fraud, often file cases with thin premises.
9. Has lack of antitrust enforcement led to too much hospital power? A growing body of literature demonstrates that providers with a higher market power can negotiate higher than competitive rates. For example, an ongoing project from Robert Wood Johnson Foundation, launched in 2006, is examining hospital consolidation and its effect on consumer prices and care quality. In 2012, the researchers found when hospitals merge in concentrated markets, healthcare costs increased sharply, often more than 20 percent. Further, those increases are passed on to consumers in the form of higher insurance premiums. (The research does not distinguish between for- and nonprofit hospital mergers.)
There has also been research on vertical consolidation, as hospitals acquire physician groups and practices. This spring, a study published in Health Affairs found prices were most likely to increase when hospitals bought physician groups rather than establishing a looser contractual relationship with practices.
When the FTC does choose to challenge a merger, it has proved successful: Since 2007, the FTC has successfully challenged three hospital mergers, and a number of transactions have been abandoned after the FTC threatened a challenge. But the aforementioned study findings raise questions about whether FTC challenges are too few and far between, and whether the commission only pursues case that are low-hanging fruit in an industry ripe with consolidation.
10. Should hospitals get paid more than physicians and surgery centers for providing the same services? On average, ASCs are paid about 50 percent of what hospitals are paid for the same procedure. Hospitals argue that this extra payment is in exchange for all the other things that hospitals do (e.g., trauma and specialized care, uncompensated care, etc.) and is necessary for hospital financial survival. Physicians and providers assert that these subsidies are unfairly beneficial to hospitals and subsidize hospitals’ ability to employ physicians and move business to hospitals.
This spring, The Office of Inspector General recommended CMS seek legislation to make it possible to reduce hospital outpatient department rates. CMS disagreed with the OIG recommendations, which may be in part due to the financial stress already facing hospitals. Also, CMS may be more subject to politics than the OIG.
In some ways the differences in rates for the same procedure in different settings reflect the bastardization of healthcare policy. For example, there seems to be the use of inexact subsidies without real clarity as to the final goal or aim, leading one to ask: Is the goal of higher rates for hospitals to support hospitals financially? Should this be a goal in and of itself? However, it is very unlikely (due to hospitals’ political clout and other reasons) of this payment change or any similar change occurring near term.
Some of these 10 policy issues were to be expected in the rollout of the PPACA, whereas others — not so much. We are keeping an eye on a broad mix of issues, including how the government handles growing reliance on the federal exchanges, whether the costs of the newly insured will reduce healthcare costs and spending in the longterm, whether antitrust enforcement will respond to studies linking consolidation and price increases, and get more aggressive in a more noticeable way, and whether high-deductible plans are a necessary evil to attain low healthcare costs. It will be most interesting to see how these, among many other issues, pan out. Regardless of the outcomes, we know this to be true: It’s a fascinating time to work in (and write about) the healthcare industry.