ACA Deathwatch; What to watch for when Congress convenes next week

News reports indicate Speaker Ryan will be moving quickly to pass ACA repeal legislation when Congress reconvenes next week.

While most elected Republicans are in agreement that ACA should be “repealed”, that’s about where the agreement ends.

And therein lies the problem.  Here’s a brief summary of where legislators stand.

First, the kill-it-dead camp.

Some budget hawks want a total repeal and defunding, much of which can be accomplished via reconciliation.  This prevents a possible Democratic filibuster in the Senate.

There are about 40 Representatives in the so-called Freedom Caucus that hew to this line with possibly a couple dozen more votes to repeal-and-be-done-with-it. Make no mistake, emboldened by the election results these people are in no mood to compromise. As these are the same people who refused to fund the government we should fully expect them to push very hard for total repeal and defunding.

Implications: do NOT assume these folks will compromise.  They will fight tooth-and-nail to kill ACA and damn the consequences.

Second, the fiscally prudent

Related to this group are the fiscally-focused.  These Senators and Congresspeople are quite concerned that a repeal will also do away with about a trillion dollars in revenue and taxes over the next decade which will result in:

  • budget shortfalls
  • bankruptcy of the Medicare Hospital Trust Fund
  • elimination of premium support for about 75% of those buying insurance via the Exchanges

Add to that the reductions in Medicare and Medicaid reimbursement embedded in ACA, and you have another $879 million in additional spending if ACA is repealed.

Implication these folks are going to be cautious, and they will likely end up in the “repeal and replace” camp.

Repeal and replace camp

There are two different groups here – one calling for a repeal then construction of a replacement over time, and one that wants both bills passed simultaneously.

In either case the far-righters are going to come up against more pragmatic Representatives and Senators, notably Lamar Alexander, Chair of the Health Education Labor and Pensions Committee, the Senate Committee that will have significant influence on any legislation going thru that chamber. Alexander’s been quoted saying a GOP bill must “do no harm.”

Alexander and his allies are pushing hard for a much more measured approach that couples repeal with a replacement bill, thereby giving insurers and other stakeholders some confidence and predictability.  Essentially their approach leaves much of today’s ACA in place while sunsetting the bill in 3 or perhaps as many as 4 years.

Alexander, Olympia Snowe et al are of the mind that this gives them enough time to work thru the calculations, political and financial, necessary to replace ACA without blowing up the insurance and healthcare industries in the process.  Among the provisions that have been mentioned favorably by this group are:

  • guaranteeing coverage for pre-ex conditions if individuals maintain insurance coverage
  • maintaining some form of government tax subsidies to help different groups of Americans cover their premium costs and
  • funding for expanded Medicaid coverage for low-income adults and children.

Notably, Alexander et al’s position has been challenged by House Majority Leader Kevin McCarthy, who wants to repeal THEN replace.  McCarthy’s colleague, Speaker Ryan has also outlined a replacement plan that keeps many of the popular provisions of ACA. Notice the word “outlined”; there is NO replacement legislation that is ready to be introduced anytime soon.

Implication – the House and Senate leadership have different views, and the House is going to be pretty internally-conflicted. This is a LONG way from being resolved.

Back to the good old days camp

Finally, HHS Secretary designate Tom Price has his own ideas, which include repealing cuts to Medicare and ending much of the financial and practice controls and oversight put in place by ACA.  Price’s bill, while it has not been scored by CBO, will almost certainly result in higher costs.

Implication – I don’t see Price’s proposal going very far.

The wild card – Senate Democrats.

There are 48 Democrats in the Senate, and some will have to be co-opted to get a non-reconciliation repeal-and-replace bill thru.  Leader Chuck Schumer is pragmatic, a bunch of Dems are up for re-election in two years and will likely work hard to keep key provisions in any new bill.  However, there are many of his fellow Democrats who are in no mood to compromise.  Hell, the take-no-prisoners approach worked for McConnell…

And this means…what?

Notably, NONE of the GOP bills presently under consideration will address the fundamental, underlying issue – cost.  US health care costs average almost $10,000 per person. In fact the Alexander-Snowe approach and Price’s bill would increase health spending. 

Notably, there is another option.  Republicans could come up with whatever changes they want, and not bother to fund them or do anything about the increased deficit.  While that may seem heretical, one must remember that a Republican House, Senate, and President gave us Medicare Part D, a totally unfunded benefit that the Medicare Actuary calculates has added $16 trillion to the federal deficit.

Note – Paul Ryan was one of the “Yes” votes on that bill.

 

ACA Deathwatch: The real reason the GOP can’t – and won’t – “Repeal” ACA

For the GOP, the problem with repealing ACA is not practical, legislative, or financial.

It’s psychological.

Humans are hard-wired to hate losing stuff, a principle known as loss aversion. We humans strongly prefer avoiding losses to acquiring gains: We get much more upset if we lose a five dollar bill than happy if we find $5.  

With over 20 million more Americans insured now due to ACA and record enrollment going on now, there are millions of voters who will be enormously upset if they lose their health insurance.

The five states with the most people enrolling for coverage on Healthcare.gov through Monday were ones Trump won: Florida – 1.3 million plan selections, Texas (776,000), North Carolina (369,000), Georgia (352,000) and Pennsylvania (291,000). (thanks to NYT).

The GOP has boxed itself in, and has an impossible task ahead – how to

Not surprisingly, many Trump backers who gained health insurance under ACA are now scared he’s going to deliver on his promise to kill ACA. And not nervous scared – really, really scared.

This adds a whole new dimension to loss aversion – this isn’t a five dollar bill, this is a new liver, diabetes medications, knee replacement surgery.

There’s no way any ACA “replacement” that doesn’t require coverage of pre-existing conditions, have significant subsidies for the poor and near-poor, and mandate insurance is going to prevent these people from losing coverage. Oh, and do that while reducing medical costs and not increasing the national debt.

That’s why the GOP isn’t going to repeal ACA.

For a very thorough discussion of just how many – and who – stand to lose coverage if the GOP does repeal ACA, there’s no better source than Charles Gaba.

ACA Deathwatch: Hospitals, bankruptcy, and chicken-killing dogs

For those wondering why the GOP appears to be walking back its promise to “rip out Obamacare root and branch”, here’s why this is a whole lot harder than one might think.

And why the political realities make this picture far too real for the incoming Congress.

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The GOP has long prided itself as the party of fiscal responsibility; Speaker Ryan and Majority Leader McConnell have assailed ACA as unaffordable and a budget-breaker. However, among the myriad issues inherent in healthcare reform is this – repealing ACA would bankrupt Medicare’s hospital insurance fund next year.

(It would also alienate many who voted for Trump...but that’s another story.)

When ACA was passed, there were financial trade-offs put in place to address winners and loses in an attempt to make the law as budget neutral as possible.

Insurance companies, drug companies, device manufacturers, and hospitals paid higher taxes or got lower reimbursement because they were going to get a whole lot more business as millions more people got insurance. Specifically, hospitals’ Medicare reimbursement has been changed – in part to eliminate payment for medical mistakes and re-admissions, and in part by altering reimbursement mechanisms and formulas.

ACA also included a 0.9 percent payroll tax on the wealthy individuals earning more than $200k or couples making more than $250k.  This raised $63 billion, which went to fund Medicare’s Hospital Trust Fund.

The combination of lower total reimbursement and more revenue extended Medicare’s solvency by 11 years. Without ACA, the Trust Fund is bankrupt next year.

If the GOP repeals the ACA or eliminates the 0.9 percent tax on the very wealthy, Medicare Part A is technically bankrupt.

The incoming President, Congress, and HHS Secretary are facing the very same tradeoffs and complexities their predecessors faced in 2010 – health care is horrendously complex and inter-related.  There are no simple, easy answers.

What does the GOP do?

From here, it looks like they have a couple options.

  1. Repeal it, pass their own health care reform legislation that makes major changes, and claim success.  
    As noted above, and as we’ve seen over the last five years, changing the US healthcare system is brutally hard, there are way more unintended consequences than anyone could predict, and there are no simple answers. There is just no way they can cobble together legislation anytime soon that will address ACA’s issues and not result in a gigantic clustermess.
  2. Repeal ACA in two or three years, with the promise they’ll come up with a replacement in a year or two.
    Without a credible replacement, insurers and healthcare providers are going to panic. Expect insurers to exit the individual and small group health insurance markets in droves. Democrats will use Medicare’s pending insolvency to bludgeon Republicans in the mid-term elections.
  3. Rebrand ACA as TrumpCare, make a couple tweaks around the edges, declare victory, and go home.
    This gets my vote as most likely, primarily for the reasons noted above. Now that the GOP owns health reform and Medicare solvency, Democrats are going to tie the issue around their necks like a dead chicken.

For a more detailed discussion of the issue, here’s a good synopsis from Politico.

Later – Hospitals and Medicaid – it’s pretty scary. 

What does this mean for you?

Don’t be lazy. Healthcare reform is hugely complicated, and for those of us – that means you – invested in the industry, what’s about to happen is far too important for you to ignore it or pay it little heed.

Friday catch-up

Holy bejeezus this has been a crazy week.

Labor Secretary Nominee

First up, the nominee for Labor Secretary is fast food executive and avowed billionaire Adam Puzder. Puzder’s likely to face tough questioning from Democrats for his stance on the minimum wage, automation, mandatory sick leave, and ACA. He’s also been a vocal critic of the overtime rule.

His restaurants paid a $9 million fine re class action lawsuits involving overtime pay in 2004.

For those in the workers’ comp world concerned about a new Commission on work comp, your concerns are gone.

Puzder’s points on automation aren’t crazy – in point of fact there’s a lot of research on the impact of automation on jobs, with one very credible group estimating 47% of jobs will be automated within 25 years.

Drug prices

Adam Fein has an excellent post on drug pricing, diving into the list v actual price.  Adam uses the EpiPen and insulin products as examples.  For those involved in pharma, this is a must read.

Heroin deaths just surpassed deaths by gunshot.  Congratulations, opioid-shilling pharma companies! 

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Medicaid

For those looking for more insights into Medicaid, I highly recommend a few articles that provide perspective on post-election changes, hospital payments from Medicaid.

ACA repeal

Billy Wynne has a really thoughtful piece on why ACA will not be repealed.  Certainly made me think differently about a few issues. FWIW, I’ve heard from a colleague who is Chair of a large health plan that the repeal language is already written.

These perspectives may both be right; I expect a re-branding of ACA and not a total repeal. The impact on the health system, hospital finances, the individual insurance market, and the number of insureds of a complete and sudden repeal would be disastrous.

Rather, the GOP will pass a bill ostensibly “repealing” ACA while in fact keeping many of its changes in place for at least three years.

How will Democrats handle this?  Here’s one perspective.

Enjoy the weekend.  Gonna get a load of snow up here in upstate New York – can’t wait.

Healthcare in 2018

2017 will be a very misleading year.

There will be no changes to health reform, markets, Exchanges, Medicaid, or Medicare. More people will be insured, hospitals and health systems will enjoy financial stability, and while losses in the individual market for the big five insurers will increase somewhat, work comp will prosper.

This will lead some to think everything’s fine, there’s nothing to worry about, it’s all good, I and others worrying about health care’s future are hysterical Chicken Littles.

Let’s summarize.  There are two general scenarios; GOP repeals ACA’s main components without addressing system-wide fallout, or GOP essentially re-brands ACA (TrumpCare, anyone?) leaving much of the current ACA in place.

If the GOP repeals ACA via reconciliation and/or without:

  • replacing it with an enforceable mandate,
  • maintaining changes to Medicare fee schedules and reimbursement,
  • maintaining the Medicaid expansion,
  • maintaining cost-sharing subsidies for the near-poor, and
  • restoring DSH and other supplemental hospital/health system funding.

This is what we’ll get.

Implications are obvious;

  • cost-shifting to private insurance, workers’ comp, and other property and casualty insurance increases
  • claim shifting increases
  • job lock increases as people don’t leave their employer for fear they won’t be able to get or afford health insurance
  • individual bankruptcy rates increase

I must admit to a morbid fascination with the game that’s playing out.  I’m both embarrassed to admit that fascination and appalled by the damage that will be done to people, businesses, cities and states by the combined ideology and ignorance of our newly-elected House, Senate, and President.

As friends and colleagues keep telling me, we don’t KNOW what these worthies will do.

True, but we can read policy papers, previous proposed legislation, and statements of incoming officials, all of which point to dramatic changes to healthcare. This may well not happen, as those now in positions of power may decide ACA isn’t so bad after all. 

Their constituents have certainly changed their tune, with barely half of the Republicans surveyed looking to repeal “Obamacare”.  Then again, many didn’t know that “Obamacare” and ACA are one and the same.

I don’t think the “repeal and destroy” scenario indicated by those papers and statements will happen, because the real-world impacts would be so damaging.  It appears most on the Hill are leaning towards leaving much of ACA alone, tweaking around the edges, declaring victory and moving on.

Then again, I didn’t think Donald Trump would be President.

If the “tweak and rebrand” strategy wins out, there’s still an awful lot of uncertainty.  The healthcare “system” is a Rube Goldberg contraption like the one where you hit one button and out pops a dollar bill, but if you hit that button while holding down the shift key, you get punched in the face.

a-punch-in-the-face

What does this mean for you?

Yes, this is really complicated and sometimes hard to unpack.  Don’t fall into the trap of willfully ignoring what’s going on in healthcare, as the implications for you and your business are huge indeed.

Workers comp and Medicaid – Implications aplenty!

Workers comp and Medicaid are intertwined.

First, a few factoids about Medicaid.

  • Medicaid accounts for about 17% of US medical spend (work comp is about 1%)
  • It is very state-specific; states have a lot of control over who and what’s covered.
  • both federal and state funds pay for Medicaid, with the Feds covering about 62% of total costs
  • Most Medicaid recipients don’t pay deductibles, copays, or co-insurance. (Indiana is one exception)
  • Medicaid covers millions of people in working families.

Let’s dig into this last datapoint, as it has implications for workers’ comp.

63% of Medicaid recipients have at least one family member working full time. This varies among states, from 77% in Colorado to 51% in Rhode Island. 15% have a part time worker. Only 19% of recipients’ familes have no one working.

Many employers that don’t provide health insurance &/or aren’t required to provide health insurance under ACA recommend workers who qualify sign up for Medicaid.

Implications…

  • More workers are covered by Medicaid now than were pre-ACA
  • Medicaid’s health “benefits” are similar to work comp
  • Claiming behavior may well be influenced by coverage status

Next, employment.

Most credible studies indicate Medicaid expansion increased employment in states that expanded Medicaid.

Implications

More employment = more payroll = more workers’ comp premium and more claims (NOT higher frequency, which is a percentage and not a raw number)

There are a number of other benefits for states that expanded Medicaid – an excellent summary of all available research is here.

What does this mean for you?

Watch what happens with the GOP’s efforts to “repeal and replace” ACA.  Workers’ comp has done quite well since ACA’s full implementation; reductions in Medicaid will almost certainly have the opposite effect.

Note – if you want to argue or discuss, fine – cite sources and data to support your assertions.

Tuesday catch up

Or, what happened while I was/we were in New Orleans at NWCDC

First up, a most excellent report by WCRI’s Olesya Fomenko and Te-Chun Liu on provider fee schedules in workers’ compensation.  Must-reading for investors, bill review entities, networks, and users thereof, the report details:

  • which states use what methodologies,
  • what changes have occurred over the last few years, and
  • trends and developments.

As there is a lot going on with Medicare’s fee schedules, this report provides a sound basis of understanding.

For all those investors, private equity people, and researchers – you can now get – for FREE – what you often pay me for.  Information on fee schedules in workers’ comp and the effects thereof is available here. From WCRI, of course!

Wait…did I just post that? Sometimes I’m such a dumbass.

Fraud

The REAL fraud in work comp is not the odd worker cheating the system – it’s employers misclassifying workers, using labor brokers, under-reporting payroll – you name it.  Bruce Woods, formerly of AIA, brought this to the attention of AIA’s members about a year ago, and I thought of Bruce when I got this from Matt Capece about the millions in damages due to fraud in one state – New Jersey.

Health spending

US spending on health care is approaching 18% of GDP.  CMMS estimated 2015 spending hit $3.2 trillion, or $9,990 per person. The primary driver was “residual use and intensity”, geek-speak for what’s left after age, sex, population changes and inflation are accounted for. In other words, people are getting more services which, given over 40 million didn’t have health insurance until 1.1.2014, and just over half of those poor unfortunates now do, isn’t exactly shocking.

You can expect the folks most likely to lose their health insurance under Trump/Price will get every test, procedure, therapy, script, surgery, and treatment they can now, before the ACA is repealed.

Deflation in work comp medical spend

Workers comp medical expense is now just over 1 percent of total US medical spend. While non-work comp costs were up 5.8 percent last year, NCCI reported work comp medical DECREASED 1 percent last year.

Holy flipping unicorn, Batman. Until someone offers a better explanation, I’ll credit ACA’s reduction in the number of uninsured as the major driver.

Good people sometimes win

Congratulations to friend and colleague Danielle Lisenbey, CEO of Broadspire. Danielle was just named Claim Exec of the Year by the New York Claims Association.

Bravo!

 

Getting serious about health reform, part two – Medicare

As the GOP goes about repealing and replacing ACA, they’ll have to carefully consider how  Medicare will be affected, because it absolutely will be.

Briefly, reimbursement, senior drug benefits, hospital funding, and private Medicare Advantage programs were all altered by passage of ACA. Outright repeal of ACA will, according to most experts, result in higher Medicare costs in the future.

The GOP will have to walk a very narrow and tortuous path between increasing the deficit, something unacceptable to many legislators, and reducing benefits thereby angering its key constituency – seniors.

Not only did ACA make substantive and far-reaching changes to Medicare, but Medicare, Medicaid, group health and individual coverage are all inextricably linked. Reimbursement mechanisms and drivers, systems connectivity and protocols, coverage determinations and benefit design are related to, and influenced by, other payment sources.

Among the changes ACA made to Medicare are:

  • transition from strict fee for service to value-based purchasing
  • close the drug benefit’s “donut hole” (big out of pocket costs for recipients)
  • restrain increases in Medicare Advantage premium increases until the MA programs’ performance is on par with Medicare
  • fund ongoing and much-needed research

There’s been little detail from the incoming administration about future plans, however Speaker Paul Ryan’s “A Better Way” has a plan to address Medicare. It relies on privatization.  While Ryan’s website is outdated (still referring to the SGR), the “A Better Way” Plan, and recent press statements, provide some details on Ryan’s thinking about “repeal and replace”.

Before we jump into that, a word about ACA’s impact on Medicare. If ACA is repealed, there will be financial fallout for Medicare. In fact, as currently implemented, ACA’s passage has helped Medicare‘s viability.

Per Fact Check;

The law [ACA] both expanded Medicare fundingadding a 0.9 percent tax on earnings above $200,000 for single taxpayers or $250,000 for married couples — and cut the growth of future spending…The trustees’ 2010 report estimated that the ACA had added 12 years to the life of the Part A trust fund.” [emphasis added]

ACA also reduced some reimbursement (payments for imaging is one example), which many Republicans defined as “cutting” Medicare. That played well with seniors then, as most were highly protective of the system they’d been paying into for decades.

So, if ACA is repealed in its entirety, Medicare’s costs are going up.

Ryan’s solution

While there’s little in Pres. Elect Trump’s platform addressing Medicare, other GOP stalwarts have weighed To his credit, Speaker Ryan wants to improve Medicare’s future financial position; he proposes to do so by:

  1. Raising the eligibility age to 67 by 2020, and
  2. Dumping the current CMS-run system in favor of giving seniors vouchers they will use to buy coverage from private insurers. (currently private insurers administer the Medicare program under contract from CMS)

Financially, baby boomers MAY come out OK on the second point (except for those of us who are going to have to rely on the post-ACA private insurance market for two more years). But the Millennials and Gen Exers may well be looking at higher out-of-pocket costs if elected officials decide Medicare vouchers are just too expensive.

However, all seniors would be affected by a privatization of Medicare, and therein lies (one of) the issues.  Medicare is almost universally well-regarded and jealously guarded by seniors

  • 77% of seniors say Medicare is “very important” (that’s higher than the military)
  • more than 2/3rds say Medicare needs to make some changes to remain viable – but the overwhelming favorite “change” (87%) is for the Feds to negotiate drug prices
  • 75% of Medicare recipients believe it is working well

Most telling for Speaker Ryan, only a quarter of respondents thought Medicare should switch to the key plank of the Ryan plan – premium supports.

Reports indicate the GOP is going to move aggressively on repealing ACA and replacing it with something else.  Given the demographics of Trump/GOP voters (mostly older), their favorable views of today’s Medicare, and their lack of enthusiasm for higher premiums or cost share, this is going to be quite the challenge.

It will also be a clear indicator of how serious the GOP is about “reform”.

What does this mean for you?

The first 100 days are going to be quite interesting- watch for the battle between those focused on their core constituency and those seeking to fundamentally change health care.

 

 

Getting serious about health reform, part one

Selling health insurance across state lines is one of the central planks of the GOP’s plan to replace ACA.  Intended to foster competition and reduce costs, the idea is the more insurers competing for customers, the lower the price and better the product. And by eliminating the requirement that insurers comply with state mandates, costs would be lower because some services, conditions, and treatments would not be covered

In addition to these issues there is one real example that should sharpen our thinking.

Today three states allow citizens to buy insurance offered by out-of-state insurers. Maine, Wyoming, and Georgia have all allowed this for over a year, yet no out-of-state insurers are offering plans in those states.

the question is why?

Folks advocating this idea base their view that selling coverage across state lines will reduce costs by eliminating mandated benefits, which some think would reduce costs 30-50 percent.

That view reflects a lack of understanding of the cost drivers in health insurance, the primary driver being – you guessed it – the cost of medical care.  While mandates do influence costs, the underlying cost of insurance is the cost of care. And health care just costs more in Portland Maine than it does in Boise Idaho

There’s another concern that hasn’t been broached, perhaps because it is politically charged. States have significany regulatory authority over benefit design and mandates. Allowing the sale of non-compliant insurance in a state may well be anathema to those strongly supporting state sovereignty.

 

 

Telerehab’s coming fast

Regardless of what happens to health reform on the national level, the healthcare industry is relentlessly and rapidly adopting technology that will revolutionize patient care.  Big players are seeking out new tech devices, platforms, and applications, buying start-ups and rapidly pushing their products and services into their distribution pipeline.

One example is Zimmer’s recent acquisition of RespondWell, a start-up delivering comprehensive at-home telerehab intended to improve patient compliance with PT and deliver better outcomes. I recently interviewed RespondWell CEO Ted Spooner.  Spooner has a long history in developing tech that delivers services faster/better/cheaper with far less human intervention.  He and his team have taken that experience and used it to build a home-based rehab solution.

The quick backstory – Medicare and other payers are bundling payments for surgical procedures, forcing providers to assume responsibility for any procedure-related care for 90 days post-surgery. In this model, a health care system might get $37,000 to do a total knee replacement; out of that fee, around $5,000 would go to physical therapy.

But there’s a problem – in some places, there’s more demand for PT than there is supply of PTs.  As a result, some patients are on a waiting list – and as a result of that, surgeons, operating rooms, and related staff are not working to full efficiency.

There’s another issue here, one that gets at an uncomfortable reality – many services can be delivered in ways that don’t require nearly as much human intervention.

Telerehab provider RespondWell has come up with a solution, one that uses existing technology, platforms, and communications to “create accessibility and convenience for therapy to patients and give providers visibility to patients to adherence to therapy. Kaiser is one of the early adopters of the Therapy@Home solution.  To date almost all customers are healthcare providers, but Spooner expects payers to be in the mix quickly.

Briefly, Therapy@Home is set up for each patient recovering from surgery; the provider prescribes a therapy plan which is “loaded” into the App. The patient sees a web-based on-screen virtual therapist that helps them perform exercises correctly, while allowing the care team to monitor patient performance and compliance via the internet-connected device’s web camera.

Sessions and communications are recorded and stored for provider access if and when needed.

Here’s one key takeaway; about 60% of in-person PT visits can be eliminated using Therapy@Home.

Considering most total knee patients are older folks, I challenged Spooner on adoption and usage by senior citizens.  He noted that the over 55 population is adopting technology very quickly, driven by easy-to-use smartphones and apps that allow them to connect easily with friends and family.

While RespondWell is focusing on bundled payment-driven care today, this technology/service model (I’m not sure exactly how to describe it) is absolutely transferrable to other types of care – both within PT and in other service areas.

What does this mean for you?

Be a disruptor. Or be disrupted.