Special Edition - 2014: What to Expect in Health Care

These are the headlines you’re likely to see in 2014…

Costs spiral, employers respond…Total healthcare spending increased less than 4% for the past 3 years, but will increase 5-6% in 2014 as a result of new enrollees receiving care, pass-through costs of the ACA’s taxes on insurers, and medical inflation. Employers that provide insurance coverage feel the increases hardest and they’re not sitting idly. In 2014, they’ll promote high deductible plans through private exchanges to their employees along with narrow networks and reference pricing. Some will drop coverage altogether and pay the penalty, if they don’t put themselves at a talent disadvantage to a competitor. And administration officials will likely revisit the ACA’s definition of “fulltime” employment (currently 30 hours weekly for companies with 50+ employees) to discourage cuts to hours in sensitive industries i.e. restaurant, retail, hospitality and others. In 2014, most employers will continue to play the employee insurance game, but their game plan will be more aggressive.

Affordable Care Act major issue in Campaign 2014; ‘fix and repair’ new focus…ObamaCare will be the defining issue in the coming election cycle, but the political debate will not be Healthcare.gov glitches or enrollment. Rather, the issue will be sticker shock in insurance premiums and the complaints from doctors and hospitals that they’re being driven out of business. “Repeal and Replace” will not be heard; the new slogan will be ‘fix and repair’ for both friends and foes of the ACA.

Individual mandate delayed; insurers look for deals…Most of the 2.1 million who signed up for coverage by December 31 were those eligible for a subsidy or those needing a medical problem treated urgently. The young invincibles have been no shows to date. The penalty--$95/1% of AGI—is simply not punitive enough to persuade the young and healthy to enroll, and the math underlying the ACA assumes large numbers of them will buy.  So, the individual mandate will be delayed so it can be fixed. The announcement will come soon after the March 31enrollment deadline to neutralize it as an issue in Campaign 2014. And, behind the scenes, deals with the insurance industry will be negotiated to reduce the 2014 excise tax ($8 billion) proportionate to the shortfall in enrollment though predicated on cooperation going forward. Blue Cross Blue Shield Association affiliated plans will seek unique responsibilities and opportunities to boost coverage while also seeking special dispensation vis a vis the investor owned plans with whom they compete. The uneasy co-dependence between the private insurance industry and the administration will wear thin unless deals are cut, and the issue will be not how many enrolled but whom.

States recalibrate Medicaid expansion…In the 36 Governor’s races in Campaign 2014, Medicaid expansion will be a key issue. In the 25 states that expanded, costs for new enrollees, and access to doctors and hospitals will be the challenge. (one year increases for PCPs go away). For states that didn’t expand, pressure to develop a work-around so hospitals don’t go broke will be headlines. But “managed Medicaid” outside some Deep Red states will face hurdles—how private insurers deliver on their promises to manage costlier and complex Medicaid populations better. In 2014, state legislators and Governors will focus on Medicaid cost to the state, whether expanded or not.

Health insurers acquire health system… Health insurers, armed with capital, operational infrastructure and data, will acquire major health systems as incentives pivot from fee for service to value-based payments. Acute downsizing, population-health management, and cost reduction will be their immediate focus as local employers watch for cost reduction, regulators scrutinize anti-competitive impact, and physicians try to judge what their role will be. And while so doing, the ranks of the private insurance players will thin as the strongest national and regional plans take market share from their smaller and weaker counterparts.

 

Medicare ACOs savings less than costs… After accounting for consulting fees and costs for information systems and staffing, net savings in the Medicare Shared Saving Program (MSSP) will fall short of the costs for their set-up and operation. ACOs sponsored by hospitals will use a backdoor to mitigate physician disaffection; physician sponsored ACOs will struggle lacking a capital partner. Many of the Medicare ACOs will be suspended in 2014 while ACOs focused on commercial populations will gain momentum. As a result, ‘accountable care’ arrangements will expand to include episode-based payments and case management services to drive higher savings in higher cost populations for employers, as well in Medicare and Medicaid. 

 

Hospitals battle for survival…Faced with negative operating margins, sequester cuts and mounting bad debt, state and local officials and hospital boards will take dramatic steps to insure acute services survive. Some will merge local hospitals to be operated as a public utility. Some academic medical centers will spin off their research enterprises into commercial ventures with bio-pharma and device partnerships. Some will merge or sell out to larger systems with stronger balance sheets. And all will reduce operating costs and purge clinical programs no longer affordable. As patient demand and their severity increase, hospitals will operate their inpatient business as a cost center, and their enterprises as regional care management organizations assuming risk for costs, outcomes and safety. But none is delusional: hospitals face a battle for survival.

Physicians go it alone; holy war for future of the profession taking shape…Led by the American Medical Group Association and several specialty societies, large medical groups will join forces to advance a physician-centric platform for health reforms that protect physician-patient relationships, position primary care physicians as gatekeepers, and assume financial and clinical risk in contracts with insurers and employers via fully integrated health plans operated by the group. Physicians will step up their political activism in 2014, armed with data showing their net incomes have suffered and their clinical autonomy compromised since the onset of health reform. In 2014, they’ll wage unsuccessful battles for replacement of the SGR and liability reform again. And they’ll dust off advocacy advertising campaigns to drum up resentment of market pressures that threaten to deduce their profession to a guild employed by plans or hospitals. For doctors, 2014 will look like a last stand for the profession.

Value in health care questioned…The U.S. health system is notable in access to the latest technologies and drugs for treating disease, but at a cost exceeding every other developed system in the world. And the outcomes in many of these countries are equivalent or superior. Just as the value of higher education is under scrutiny, with notable disruptive innovators like Western Governors University taking aim at its value gap, so is health care vulnerable. The value gaps in the healthcare system are legion—made all the more traumatic since the U.S. industry feigns transparency about its costs, prices, outcomes and user experiences. Its value gap is just as noticeable to all--“have not’s” and “have’s”, young and old, sick and well. Why do pills cost so much? Why are insurance premiums so high? What are hospital prices so wildly different for the same procedure? And where does the money go? Employers and consumers will lead questioning of the system’s case for value: their scrutiny will impact every hospital, plan, physicians and supplier in the U.S. health system.

Occupy Health Care Breaks out; profits with purpose sought… Income inequality in the U.S. will spill over into health care in 2014. The social media fueled visibility of earnings and executive compensation in every sector of health care will spark local political activism. And interest in a single payer system will begin to build heading into the 2016 election cycle. Just as value will be challenged, so will the morality of the U.S. health system, and a populist campaign to align profit with purpose sought.

2014 will be a great year: health care is guaranteed to be in the headlines! Happy New Year!