The Medicare Payment Advisory Commission voted Jan. 14 to recommend a 2 percent raise in Medicare payments for hospitals next year.
The commission said it wants to give the payment boost to both acute-care and long-term care hospitals. The 2 percent payment increase will result in about a $750 million to $2 billion increase in acute-care hospital spending for Medicare and about $50 million for long-term care hospitals.
MedPAC also plans to recommend no change to the payment rate for physicians in 2022 and a 5 percent decrease for home health firms and inpatient rehabilitation centers.
Although MedPAC will recommend the payment boost, Congress is not required to implement the recommendation.
Consumers choosing insurance via the federal Affordable Care Act exchanges reached 8.25 million over the 2021 open enrollment period, about the same number as the year before, CMS said Wednesday.
Because two fewer states are participating in the federal marketplace this year, adjusted year-over-year growth in plan selections was 7%, the agency said.
Of the total, 23% of consumers were new, down by 3.6%. Renewing consumers who actively chose a new plan and those who were automatically re-enrolled both increased.
The figures are the last from the Trump administration, which has drastically reduced money toward navigators who help people use the Healthcare.gov website and find the best ACA plan for them. The administration has made no secret of its opposition to the law and after failing to overturn it in Congress has used executive actions to undermine it.
President-Elect Joe Biden and his pick for HHS chief, California Attorney General Xavier Becerra, however, are eager supporters and are likely to take a number of actions to restore and burnish it. That could be increasing tax credits and subsidies, increasing navigator funding and building on protections like essential health benefits.
The U.S. Supreme Court is expected to make its ruling on the ACA case later this spring or summer, but the Biden administration could essentially make it moot by walking back the zeroing out of the individual mandate penalty that is the linchpin of the lawsuit against it.
The relatively steady enrollment could be increased through those actions and the possibility of a special enrollment period to account for needs during the coronavirus pandemic. The COVID-19 crisis and the recession it has caused have kicked millions of people off their employer-sponsored insurance, and they could turn to the exchanges for coverage, especially with higher tax credits and subsidies.
Congress passed a bill that would end an antitrust exemption for health insurers, and the legislation is expected to be signed by President Donald Trump, according to The National Law Review.
On Sept. 21, 2020, the U.S. House of Representatives passed the Competitive Health Insurance Reform Act of 2020, with the Senate passing the Act on Dec. 22, 2020.
The bill would repeal parts of the McCarran-Ferguson Act that exempt insurance businesses from most federal regulation, including antitrust regulation. When the bill passed the House, Rep. Peter DeFazio, D-Ore., who introduced the bill, said, “As long as this exemption is still on the books, health insurance companies legally can, and do, collude to drive up prices, limit competition, conspire to underpay doctors and hospitals, and overcharge consumers.”
Proponents of the McCarran-Ferguson Act have said it sets up important state authorities. The National Association of Insurance Commissioners has said, “The McCarran-Ferguson Act is as relevant today as it was when it was adopted. It contains the basic delegation of authority from Congress to the states with respect to the regulation and taxation of the business of insurance. It has been affirmed as the law of the land in the Gramm-Leach-Bliley Act and in the Dodd-Frank Act.”
The Competitive Health Insurance Reform Act of 2020 was presented to President Trump for his signature on Jan. 1. He was expected to sign the legislation before pro-Trump rioters stormed the Capitol Jan. 6.
With just a dozen days left in power, the Trump administration on Friday approved a radically different Medicaid financing system in Tennessee that for the first time would give the state broader authority in running the health insurance program for the poor in exchange for capping its annual federal funding.
The approval is a 10-year “experiment.” Instead of the open-ended federal funding that rises with higher enrollment and health costs, Tennessee will instead get an annual block grant. The approach has been pushed for decades by conservatives who say states too often chafe under strict federal guidelines about enrollment and coverage and can find ways to provide care more efficiently.
But under the agreement, Tennessee’s annual funding cap will increase if enrollment grows. What’s different is that unlike other states, federal Medicaid funding in Tennessee won’t automatically keep up with rising per -person Medicaid expenses.
The approval, however, faces an uncertain future because the incoming Biden administration is likely to oppose such a move. But to unravel it, officials would need to set up a review that includes a public hearing.
Meanwhile, the changes in Tennessee will take months to implement because they need final legislative approval, and state officials must negotiate quality of care targets with the administration.
TennCare, the state’s Medicaid program, said the block grant system would give it unprecedented flexibility to decide who is covered and what services it will pay for.
Under the agreement, TennCare will have a specified spending cap based on historical spending, inflation and predicted future enrollment changes. If the state can operate the program at a lower cost than the cap and maintain or improve quality, the state then shares in the savings.
Trump administration officials said the approach adds incentive for the state to save money, unlike the current system, in which increased state spending is matched with more federal dollars.If Medicaid enrollment grows, the state can secure additional federal funding. If enrollment drops, it will get less money.
“This groundbreaking waiver puts guardrails in place to ensure appropriate oversight and protections for beneficiaries, while also creating incentives for states to manage costs while holding them accountable for improving access, quality and health outcomes,” said Seema Verma, administrator of the Centers for Medicare & Medicaid Services. “It’s no exaggeration to say that this carefully crafted demonstration could be a national model moving forward.”
Opponents, including most advocates for low-income Americans, say the approach will threaten care for the 1.4 million people in TennCare, who include children, pregnant women and the disabled. Federal funding covers two-thirds of the cost of the program.
Michele Johnson, executive director of the Tennessee Justice Center, said the block grant approval is a step backward for the state’s Medicaid program.
“No other state has sought a block grant, and for good reason. It gives state officials a blank check and creates financial incentives to cut health care to vulnerable families,” she said.
The agreement is different from traditional block grants championed by conservatives since it allows Tennessee to get more federal funding to keep up with enrollment growth. In addition, while the state is given flexibility to increase benefits, it can’t cut them on its own.
Democrats have fought back block grant Medicaid proposals since the Reagan administration and most recently in 2018 as part of Republicans’ failed effort to repeal and replace major parts of the Affordable Care Act. Even some key Republicans opposed the idea because it would cut billions in funding to states, making it harder to help the poor.
Implementing block grants via an executive branch action rather than getting Congress to amend Medicaid law is also likely to be met with court challenges.
“This is an illegal move that could threaten access to health care for vulnerable people in the middle of a pandemic,” Rep. Frank Pallone (D-N.J.), chair of the House Energy and Commerce Committee, posted on his Twitter account. “I’m hopeful the Biden Administration will move quickly to rollback this harmful policy as soon as possible.”
The block grant approval comes as Medicaid enrollment is at its highest-ever level.
More than 76 million Americans are covered by the state-federal health program, a million more than when the Trump administration took charge in 2017. Enrollment has jumped by more than 5 million in the past year as the economy slumped with the pandemic.
Medicaid, part of President Lyndon B. Johnson’s “Great Society” initiative of the 1960s, is an entitlement program in which the government pays each state a certain percentage of the cost of care for anyone eligible for the health coverage. As a result, the more money states spend on Medicaid, the more they get from Washington.
Under the approved demonstration, CMS will work with Tennessee to set spending targets that will increase at a fixed amount each year.
The plan includes a “safety valve” to increase federal funding due to unexpected increases in enrollment.
“The safety valve will maintain Tennessee’s commitment to enroll all eligible Tennesseans with no reduction in today’s benefits for beneficiaries,” CMS said in a statement.
Tennessee has committed to maintaining coverage for eligible beneficiaries and existing services.
In exchange for taking on this financing approach, the state will receive a range of operating flexibilities from the federal government, as well as up to 55% of the savings generated on an annual basis when spending falls below the aggregate spending cap and the state meets certain quality targets, yet to be determined.
The state can spend that money on various health programs for residents, including areas that Medicaid funding typically doesn’t cover, such as improving transportation and education and employment services for enrollees.
The 10-year waiver is unusual, but the Trump administration has approved such long-term experiments in recent years to give states more flexibility.
Tennessee is one of 12 states that have not approved expanding Medicaid under the Affordable Care Act, leaving tens of thousands of working adults without health insurance.
“The block grant is just another example of putting politics ahead of health care during this pandemic,” said Johnson of the Tennessee Justice Center. “Now is absolutely not the time to waste our energy and resources limiting who can access health care.”
State officials applauded the approval.
“It’s a legacy accomplishment,” said Tennessee Gov. Bill Lee, a Republican. “This new flexibility means we can work toward improving maternal health coverage and clearing the waiting list for developmentally disabled.”
“This means we will be able to make additional investments in TennCare without reduction in services and provider cuts.”
With many deals delayed by the pandemic, 2020 turned out to be slower than anticipated for hospital mergers and acquisitions. But we’d expect the pace of mergers to quicken this year as health systems emerge from the winter COVID surge. The calculus centers on both strategy and security.
Having weathered the pandemic better than expected, many larger systems approach the market as opportunists, looking expand their reach and capabilities. And systems of all sizes are seeking scale to enable better access to capital and greater risk mitigation—now viewed as essential should they once again face a pandemic-sized shock.
As systems contemplate new combinations, they would be wise to learn from the high-profile combinations that fell apart last year. In our experience, many mergers are felled by the “social” issues: board seat allocation, leadership structures, or cultural mismatches. These types of challenges appeared to be behind the stalling of Advocate Aurora Health’s merger with Beaumont Health (which faced pushback from doctors and community stakeholders) and the demise of the combination of Intermountain Healthcare and Sanford Health (called off amid leadership turnover).
Any successful merger must not only present the financial rationale for partnership, but also make a clear case as to how a combined system will bring new capabilities that will improve care, access and experience for local consumers.
Expect scrutiny on deals to rise in the Biden administration with the likely confirmation of Department of Health and Human Services (HHS) Secretary nominee Xavier Becerra, who took a strict antitrust posture in reviewing hospital mergers and contracting during his tenure as California’s attorney general.
Their Senate majority will be slim as can be, and their margin for error in the House is also quite small. So it’s not going to be easy to get anything done. But it seems likely that the Biden White House and a Democratic Congress will try to pass legislation to expand health coverage.
Regarding what Democrats’ health care agenda would look like if the party enjoyed full control of Congress and the White House, a senior party official told reporters this fall: “If we don’t take full advantage of this moment, we’ll be making a huge mistake.”
The question is how big they will go. A lengthy health care section will likely be part of any new Covid-19 relief and recovery bill. But will that be the end of it, or do Democrats want to try to pass another health care plan through budget reconciliation? Given Senate rules, that process is probably their best chance of passing a major bill.
Taking a cue from my Future Perfect colleagues and their 21 predictions for 2021, I thought I would lay out some of my expectations for the coming two years of health policy. These projections are based on my own reporting, but they are not meant to be definitive — and nothing is 100 percent guaranteed. It’s more like a list of issues I’ll be watching.
Democrats will expand eligibility for Obamacare subsidies: 85 percent chance
Democrats could attempt to take two bites at the health care apple: first as part of a Covid-19 relief bill, and second in a budget reconciliation package that can pass with a bare majority. I think there is a very strong chance both attempts would end up with provisions expanding eligibility for insurance tax subsidies.
The $2.4 trillion HEROES Act passed by the House, a likely starting point for Covid-19 negotiations between the House and the Senate, would have made anybody currently on unemployment insurance eligible for premium tax credits. That would help people who have lost their employer-sponsored coverage afford a new health care plan. A provision like that is likely to become part of whatever Covid-19 bill Congress comes up with.
A reconciliation bill could make that change permanent and universal. Back in spring 2020, Senate Democrats released a list of their health care priorities in response in response to Covid-19. At the top was a plan to raise the current cutoff for Obamacare subsidies, which stands at 400 percent of the federal poverty level.
Under current law, anybody with an annual income above that threshold, which is about $51,000 for an individual or $87,000 for a family of three, is ineligible for any assistance. Democrats have introduced plans to expand eligibility, either by doubling the income cap to 800 percent of the federal poverty level (like in this bill from Sen. Jeanne Shaheen) or by eliminating it entirely so that nobody pays more than a fixed percentage of their income on health insurance (as President-elect Joe Biden proposed). Democrats could also try to make low-income people in states that have not expanded Medicaid eligible for tax credits to buy private coverage.
The people squeezed under Obamacare have been the ones ineligible for the law’s financial aid. Expanding eligibility could insure up to 4 million people, and it seems like the bare minimum Democrats would want to do on health care with their new power.
The public option won’t be part of a Democratic health care bill: 75 percent chance
Much like the 2009 debate over Obamacare, a new government insurance plan would probably be the most hotly debated proposal if Democrats try to approve a major health care bill. Biden embraced the public option in his campaign, but passing it won’t be easy — in fact, I think it’s more likely than not that it doesn’t happen.
One problem for a public option is budget reconciliation. Unless Democrats are willing to eliminate the 60-vote legislative filibuster, they’ll have to use this special procedural tool in order to pass a bill with just 51 votes.
But budget reconciliation comes with limits on what provisions can be included, narrowly targeted to federal spending, and creating this new program may not qualify. Capital Alpha, a health care policy analysis group, thinks there is “virtually zero chance” a public option like that proposed by Biden during his campaign would be enacted because it likely doesn’t satisfy the reconciliation rules.
Progressives will push Democratic leadership to be as aggressive in pursuing a public option as possible, including in how they handle those procedural limits. But the moderate Senate Democrats who will ultimately dictate what the final package will look like have sounded ambivalent about the public option, and Democrats are wary of the party getting dragged into a messy health care fight.
Support for a public option would be substantial — about 70 percent of Americans say they’re for it, polls show — but so would the opposition. The health care industry will surely mobilize against the plan if Democrats look serious about pursuing it.
I suspect that, either because the moderates rule it out from the start or Democratic leaders balk at a drawn-out health care debate, politics will take the policy off the table.
Democrats will approve Medicare negotiations for prescription drugs: 55 percent chance
Democrats have campaigned for several election cycles now on a promise to give Medicare more power to negotiate drug prices with pharma companies. This promise was a part of the drug pricing bill that House Democrats passed in the last Congress, a plan that was estimated to cut federal spending by $456 billion over 10 years.
Savings are the reason the policy could be handy for Democrats in crafting a budget reconciliation plan. Democrats will need to include provisions that save the government money to help pay for the new provisions that cost money, like expanding eligibility for tax subsidies.
“We have long believed that pharma faces the greatest risk of drug pricing reforms in conjunction with Democrats’ efforts to expand coverage,” Capital Alpha wrote in a recent analysis.
Those twin incentives — delivering on a campaign promise and finding offsets — could help overcome what would surely be fierce industry opposition.
But the politics of drug pricing have shifted during the Covid-19 pandemic, which is why I think there’s only a slightly better than even chance that Congress will approve Medicare negotiations. Pharma has delivered the Covid-19 vaccines in record time, improving the industry’s relationship with the public in the process. This, in turn, has lowered expectations among the experts for how aggressive Democrats will be on drug prices.
“I think now you don’t have all those stories about insulin and EpiPen, plus you have positive stories about vaccines and other drugs,” Walid Gellad, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh, told me in December. “You don’t have as fertile an environment for more extreme drug measures.”
Thus, my feeling that the odds for Medicare negotiations are closer to 50/50.
If Democratic candidates Raphael Warnock and Jon Ossoff both win Senate seats in Tuesday’s runoff election, and give the Democrats majority power in that chamber, it will change not only what type of healthcare policies are passed by the Senate but which healthcare bills get brought up in the first place.
“The big thing that it means is that [Senate Majority Leader] Mitch McConnell (R-Ky.) no longer controls what bills even get a vote” in the full chamber, said one policy advocate who asked to speak on background. “Last year, a bill on prescription drug pricing passed on a somewhat bipartisan basis out of the Senate Finance Committee,” with the blessing of committee chairman Chuck Grassley (R-Iowa), “and it never even got a vote. It certainly would have passed the House. So it’s not so much that you’re going to see a lot of partisan bills passed with [Vice President Kamala] Harris casting the tie-breaking vote … it’s that things will actually get voted on.”
Leadership of Senate committees also will change, noted Dan Mendelson, founder of Avalere Health, a consulting firm here. And because of that, “you’d see the Senate Finance Committee focused on coverage, and you’d see kind of an aggressive push to figure out how do we expand exchanges, expand Medicaid, and get more people covered in the U.S.”
One of the top priorities will be shoring up the Affordable Care Act (ACA), he continued. “There is no consensus on how to replace the law if it’s struck down by the Supreme Court. Legislation is necessary on an urgent basis.” Some other issues, such as drug costs, “are more likely to be addressed through regulatory approaches rather than legislative ones initially,” Mendelson said.
Marie Fishpaw, director of domestic policy studies at the Heritage Foundation, a right-leaning think tank here, suggested that expanded federal control of healthcare would be under consideration. “Last Congress, a majority of Democrats in the House of Representatives and 15 Democratic senators have already signaled their support for Medicare for All, so we can expect the left will push for more government control of healthcare should they get more power in Congress,” she said in an email. “Whether that happens by expanding Obamacare with a public option or setting up Medicare for All, it all leads to the same outcome in which government officials in Washington have more decision-making power over the kind of healthcare that Americans receive.”
Joe Antos, PhD, scholar in healthcare and retirement policy at the American Enterprise Institute, another right-leaning think tank, said in an email that “with Harris as the tie breaker, Biden will need to avoid issues where Democrats are not solidly behind him (at least Democratic senators). Drug pricing limits and another COVID spending bill are the most likely to be enacted, perhaps fairly quickly.”
The COVID bill will include “another trillion or two,” Antos said, because “despite all the moaning on TV about lack of state funding, the problem isn’t money — it’s organization and the skilled people to wield the needle. I think there would be more money for states and public health.”
As for the ACA, Biden “might try to reinstate the individual mandate with a penalty/tax, but that would only be a political show since the mandate really hasn’t mattered much in increasing number with insurance (after the first 2 years of ACA enrollment),” said Antos. “Increasing access to the premium subsidy is a possibility, but the true left won’t like it.” On the regulatory side, Antos predicted that Biden will “rewrite Medicaid guidance and reject waiver projects that tighten Medicaid rules,” such as waivers seeking to add work requirements for Medicaid.
Like Mendelson, Antos expects to see Biden push for action to lower prescription drug prices — possibly legislatively. “He would even get some Republican votes for limiting what Medicare will pay for Part B drugs and maybe even Part D drugs,” he said. “This isn’t Medicare ‘negotiating’ drug prices — it’s just old-fashioned price setting, which Medicare has done for decades.” Such a thing would be easier to implement in Part B “since we are already in a price-setting regime.” And, because the price controls would only be in effect for Medicare, “prices paid by everyone else will likely rise,” Antos added.
Less likely to succeed is Biden’s proposal for an advisory board that would consider drugs’ therapeutic value in its recommendations on prices. That is “a complex version of the Independent Payment Advisory Board, which never got off the ground,” Antos said.
Biden also may try to ease rules related to funding of reproductive healthcare organizations like Planned Parenthood that provide abortions, but legislative action in that regard would be a tough slog, Antos said, even with a nominally Democrat-controlled Senate. But Biden “could do something administratively” as the Trump administration has done in the other direction.
Senate confirmations of Cabinet members, such as California Attorney General Xavier Becerra as Secretary of Health and Human Services, would also be smoother under a majority-Democratic Senate, said Mendelson.
And what if the Republicans retain the Georgia Senate seats — and their majority? “The primary strategy the Republican leadership has pushed is to slow things down and to kill major legislation, and that goal gets facilitated if there’s a Republican majority,” he added. With McConnell keeping control of the Senate’s agenda, “things will run much more slowly and there will be a mentality of not doing things.”
But it could go the other way as well, Mendelson noted. “The optimistic scenario is that Senate Republicans feel like they have something lose in the midterms in 2022, and they need to build some sort of record of legislative accomplishments.” In that case, premium support for ACA marketplace enrollees and bringing down costs in the small-group insurance market might be in play, he said.
Top executives at some of the biggest commercial insurers outlined their shifting strategies and what markets are growth opportunities in light of the recession at Morgan Stanley’s annual conference.
Top executives at some of the biggest commercial insurers provided a peak behind their curtains at Morgan Stanley’s annual investor conference this week, discussing the pace of utilization recovery and how they’re approaching rate setting and risk going into next year
Though there’s significant uncertainty around the future of the insurance industry, many remarks can be summed up in a line from Cigna CEO David Cordani: “We feel bullish on 2021.”
And despite the major role of government in regulating healthcare, most officials seemed agnostic on the presidential election looming in less than two months.
Payers are reporting skyrocketing profits amid the COVID-19 pandemic as patients deferred care in droves in the second quarter, sparking a congressional investigation into business practices. Use of healthcare services continues to recover from a nadir in March and April, and that recovery has continued into the third quarter, payer executives said. But the pace has differed by segment.
At the start of the pandemic, Humana saw beneficiary use drop to about 30% of pre-COVID-19 levels until mid-May, when it slowly started to tick back up. The Louisville, Kentucky-based insurer’s utilization is now still “a little below par,” but well above that depression and meeting internal expectations, CEO Bruce Broussard said.
CVS Health-owned Aetna has seen its commercial business come back faster than Medicare, CFO Eva Boratto said. Primary care and labs have seen a quicker rebound, but it’s been slower in inpatient and ambulatory.
Centene CEO Michael Neidorff predicts utilization will be between 65% to 80% of normal by the end of the year, but remains cautious due to the shifting nature of the pandemic, and how it could coincide with a potentially nasty flu season.
“We don’t know what other peaks we’re going to see,” Neidorff said.
2021 rate setting, strategic pivots
Unsurprisingly, COVID-19 is also shaping major payer’s go-to-market approaches and how they’re thinking about 2021 bids.
Humana, for example, studied both historical data prior to COVID-19 and did scenario planning around what the pandemic could do to factors like utilization, testing and treatment if it continued throughout the year. Eventually, the payer decided to base bid assumptions off trending historical information forward, according to Broussard.
“We were very oriented to pricing that was more conservative as we thought about the approach,” he said.
It appears Centene, contrastingly, is using 2020 data to risk score. When asked how the payer is approaching rate setting, Neidorff said: “We’re dealing with this year. And we’re saying that any concessions this year should not necessarily carry into next year, which is an entirely different year.”
Employers and plans nationwide are struggling with this issue. Only about 60% of employers are using 2020 claims to set rates for next year, while another 26% are calculating expected medical costs based on data from 2019, and 9% are using data from the first two months of 2020 alone, according to Credit Suisse.
The pandemic has also shifted insurers’ broader strategic priorities in 2021 and beyond, especially by hammering home the need for diversified revenue streams to keep afloat, top execs said.
“We’re in 37 states. If you have a stock that’s not performing well in your portfolio, you probably have some that are offsetting it,” Centene’s Neidorff said.
Humana has been investing in telesales, at-home and in-community offerings and digital capabilities, with an eye for growth. Broussard said Humana’s customers have been mostreactive to an omnichannel approach to care delivery.
For example, the payer is seeing home as an increasingly valid path for care a little more acute in service than in the past. As a result, Humana plans to continue investing in areas that dovetail with that trend, and those with biggest impact on downstream healthcare costs, including primary care, social determinants of health, behavioral health and pharmacy.
CVS has also accelerated development of its virtual care offering, eClinic, as a result of the pandemic and relaxed federal regulations. Visits are up 40% since the end of June, CEO Larry Merlo said, noting he believes the future of healthcare delivery is at the intersection between digital and physical.
Because of the pandemic, “we are seeing an accelerated shift to this multichannel, integrated approach,” Merlo said. “We did change some of our priorities, and accelerate some things that may have been further down the road.”
CVS is continuing to convert existing stores to health- and wellness-focused locations, called HealthHUBs, which devote a fifth of floor space to healthcare products and services. Currently, the Rhode Island-based giant has 275 HUBs up and running, despite pausing conversions for a time in March.
Cigna is also looking to drive revenue by moving beyond a payer’s traditional wheelhouse. On Wednesday, the insurer announced it was rebranding its health services division as Evernorth, in a next step for the Cigna-Express Scripts megamerger completed almost two years ago.
For its part, Centene is introducing more value-based contracts in 2021, after seeing providers it contracts with in alternative payment models are reporting stronger cash flow and patient relationships amid COVID-19 than those in fee-for-service relationships.
Going into next year, the payer is also focused on margin expansion, working with states to set rates and federal lobbying for friendly policies like an increased Medicaid match rate, Neidorff said.
The COVID-19 recession booted millions of Americans off employer-sponsored insurance, though the full scope of the insurance crisis isn’t yet clear. Cigna’s Cordani noted the disenrollment in the first half of the year in its commercial population was lower than expected, helped by the fact the payer is less active in sectors hit hardest by the pandemic like travel and leisure.
But disenrollment could still snowball in the second half of 2020. As a result, a number of major commercial payers are building out offerings in two coverage backstops in the market: Medicaid and the Affordable Care Act exchanges.
Broussard said Humana sees ample opportunity in Medicaid — including the dually eligible — but wants to be more surgical in expansion moving forward, especially as states look for a more contemporary delivery of services and engagement with clinical programs. Humana is going to look for tuck-in acquisitions.
“Is there a way to enter the market in a small way, and leverage our capabilities and grow from that?,” Broussard said.
Cordani agreed that budget-strapped states are looking for new ways to lower costs, but said “Medicaid has always been a lower priority growth platform” for Cigna. Instead, the insurer sees the safety net program as an opportunity for Evernorth in the near term, more than its government business.
Of the 1.1 million new members Centene added from March through August, the majority were in Medicaid, but a significant portion were in the ACA exchanges, Neidorff said. Capitalizing on that momentum, Centene — already the largest payer in the exchanges — is adding 2 new states to its footprint for 2021. “I think we’ll grow in marketplace, given the level of people and the subsidies they get,” Neidorff said. “I see it as a positive going forward.”
Humana, however, is leery on entering the exchange market, given political uncertainty around the upcoming 2020 presidential election, according to its top exec.
“The exchange market has stabilized in a lot of different ways, but still has elements where it tends to be a sicker, more transient population,” Broussard said. “We’d rather not be in the situation where we go in and have to pull out because of the political realm.”
Payers also continue to forecast strong growth in Medicare Advantage. Currently, about 34% of Medicare beneficiaries are in the privately run Medicare plans. It’s a popular program: The Congressional Budget Office predicts MA’s share of the overall Medicare population will swell to 47% by 2029.
CVS is currently on track for mid-single-digit growth next year, and sees Aetna’s continued growth in MA as one of the building blocks to continued earnings power, Boratto said.
Similarly, Cigna is well on track to meeting its goal of 10% to 15% annual organic growth in MA, Cordani said. Historically, Cigna has only been present in about 18% to 19% of the addressable government market, but is trying to eventually expand to 50%.
Shrugging off election
Unlike years past when some payers worried of Democratic plans for Medicare and other aspects of insurance, most executives seemed to shrugged off the coming presidential election.
President Donald Trump has made undermining the ACA one of the chief goals of his first term, while Democrat nominee former Vice President Joe Biden’s healthcare plan revolves around shoring up the decade-old law, enacting a public option and lowering Medicare’s age of eligibility.
But executives noted Trump’s tenure hasn’t necessarily been bad for them, and having Biden at the helm could provide some opportunity for savvy operators.
Humana could be particularly at risk going into a period of political uncertainty. The payer has a smaller portfolio and fewer assets than some of its bigger peers, Ricky Goldwasser, managing director at Morgan Stanley, said.
But Broussard said regardless of whether the inhabitant of the White House is blue or red, they’ll likely support value-based payment models — a key tenet of its strategy. Additionally, the seemingly-threatening Medicare buy-in option is “very similar to MA,” Broussard said. “We’d see that as the opportunity to expand our ability to bring our capabilities to maybe a younger population, but with a lot of the same elements.”
Some industry experts see the public option, which has bipartisan support among voters, as a potential benefit for companies with leading market share in MA, like UnitedHealth, Humana and Aetna.
“We’ve had public options and done well in public options. So history says that’s fine,” Centene’s Neidorff said. “I think Biden would not be a threat, but an opportunity. I think a Trump re-election would just be more of what we’ve seen. And we’ve done OK with that.”
As the coronavirus sickens tens of thousands of Americans while pressuring the bottom lines of medical providers, analysts worry the pandemic could also hit pause on the decades-long march toward value-based care, as hospitals and doctors look to recoup revenue in the short-term instead of putting more dollars at risk.
Massive health systems and independent physician offices alike are diverting funds to shore up resources like personal protective equipment, ventilators and staff to prepare for an expected influx of COVID-19 patients or to cope with those already there. Expenses are skyrocketing as providers halt non-essential visits including lucrative elective procedures like joint replacements, winnowing down a major source of revenue.
Clinicians in value-based payment arrangements face higher levels of financial risk than their fee-for-service counterparts. Money spent preparing for the coronavirus and treating COVID-19 patients will be a sunk cost and they could be dinged financially again at the end of the year when their spending and performance is evaluated.
Already, the coronavirus is leading providers to think about exiting the models.
A survey published this week of more than 220 accountable care organizations nationwide found almost 60% are likely to drop out of their risk-based model to avoid financial losses. Some 77% are “very concerned” about the coronavirus’ impact on their 2020 performance.
“The value-based movement is at a critical juncture,” wrote National Association of ACOs CEO Clif Gaus in a letter to CMS Administrator Seema Verma last month.
Fee-for-service still dominates — roughly 40% of healthcare payments made in 2018 were under fee-for-service, according to the Health Care Payment Learning & Action Network (LAN) — but it’s been on the downswing. One in three healthcare payments currently flows through some sort of alternative payment model, and that has been projected to grow.
Among the four main types of value-based arrangements — shared risk, global capitation, bundled care and shared savings — most require an upfront financial commitment. And providers are unlikely to put more capital at risk given the current economic situation, analysts told Healthcare Dive, instead focusing on making up the losses they sustained during the outbreak by ramping up capacity.
Doctor’s offices and hospitals will reschedule delayed procedures and even operate on weekends to recapture as much revenue as possible before they’re likely to consider taking on more risk.
“Even if you’re not in the hotspots, you are preparing right now. This puts on hold a lot of the initiatives that have been on the value-based side of things,” Jefferies senior healthcare analyst Brian Tanquilut told Healthcare Dive. “I don’t think the value-based discussion goes away, but I think it will take a recovery of the hospital system before it can go there.”
Pleas for loss waivers
The National Association of ACOs told CMS in mid-March that ACOs in Medicare’s flagship ACO program the Shared Savings Program, along with other shared risk models like the Next Generation ACO model and the upcoming Direct Contracting initiative, could face losses beyond their control because of the pandemic.
CMS did pause some reporting requirements for value-based initiatives late last month. The agency pushed back the deadline for groups participating in the Medicare ACO program, Merit-based Incentive Payment System and the Hospital Readmissions Reduction Program to report quality data, or waived reporting entirely for the fourth quarter of 2019. The relaxation was framed as a way to help value-based organizations free up time and resources amid the pandemic.
But provider groups including NAACOS and the American Hospital Association have lobbied aggressively for the Trump administration to forgive all ACO losses for 2020. CMS is reviewing their request.
But all normal rules have gone out the window, experts say, and it’s almost impossible to move the needle toward value in the future when providers are facing a tsunami of patients now.
“This is not about managing a population. This is about doing everything you can to keep these people alive,” Dean Ungar, vice president of Moody’s Investors Service, told Healthcare Dive. “Coronavirus is really a five-alarm fire. But if your building’s on fire, that doesn’t really tell you how to maintain your business in normal circumstances.”
Some, however, are more optimistic that the unique financial challenges brought on by the pandemic highlight the problems with the traditional fee-for-service model and could even nudge providers toward value-based arrangements down the line.
“If all of your revenue is based on patients walking in the door, when they can’t walk in the door anymore, you’re kind of up the creek without a paddle,” Dan Bowles, SVP of growth and network operations at accountable care organization Aledade told Healthcare Dive. “You need to find a way to create non-visit-based revenue.”
Some hope the pandemic could help the value-based movement in the long term as practices look for ways to uncouple revenue from patient volume. And, as medical costs continue to rise, accounting for 19% of the country’s GDP, any pause in the shift to value-based care due to the coronavirus is likely to be a short detour, not a complete derailment.
“Maybe some providers are going to see it in a different light when their business kind of dries up — see that there’s a benefit to it,” Ungar said. “Ultimately, it’s a trend of where things are going, but it’s a big ship and it’s moving slowly.”
And value-based care arrangements were built predominantly for the populations being hit hardest by the coronavirus: those with serious underlying medical conditions like chronic lung disease or severe obesity.
If those vulnerable patients were being treated in value-based arrangements, it’s possible more COVID-19 cases could have been caught earlier before they became life-threatening, Moody’s analyst Stefan Kahandaliyanage told Healthcare Dive. That could renew industry’s focus on managing the health of those most at-risk from novel infectious diseases in the future.
“Costs are very high and there’s been a pandemic,” Kahandaliyanage said. “Let’s get more healthy before the next pandemic comes.”