Affordable Care Act (ACA) enrollment appears poised to reach record levels once again as signups grew by more than a third of what they were this time last year, a fact the White House is using to continue to draw attention to former President Trump’s threats to try again to repeal the law.
More than 15 million people have signed up for plans in states that use HealthCare.gov, representing a 33 percent increase from last year. The Biden administration estimates 19 million will sign up for plans by the Jan. 16 deadline.
On Dec. 15, the deadline for coverage starting Jan. 1, more than 745,000 people selected a plan through HealthCare.gov — the most in a day in history, the Department of Health and Human Services said.
For 2023 plans, more than 16.3 million people signed up through HealthCare.gov last year, another record. Of those who enrolled for this year, 22 percent were new to the marketplace.
This year’s enrollment had some unusual factors that may have played a part in boosting enrollment. Those who were disenrolled from Medicaid this year during the “unwinding” period were allowed to sign up for ACA plans earlier than normal.
There was also stronger insurer participation in the program this year, providing significantly more options for customers to choose from.
“Thanks to policies I signed into law, millions of Americans are saving hundreds or thousands of dollars on health insurance premiums,” President Biden said on Wednesday.
“Extreme Republicans want to stop these efforts in their tracks,” he added. “At every turn, extreme Republicans continue to side with special interests to keep prescription drug prices high and to deny millions of people health coverage.”
After a presentation this week, a senior physician from the audience of our member health systems reached out to discuss a well-trod topic, the future of health reform legislation. But his question led to a more forward-looking concern:
“You talked very little about politics, even though we have an election coming up next year. Are you anticipating that Medicare for All will come up again? And what would the impact be on doctors?”
As we’ve discussed before, we think it’s unlikely that sweeping health reform legislation like Medicare for All (M4A) would make its way through Congress, even if Democrats sweep the 2024 elections—and it’s far too early for health systems to dedicate energy to a M4A strategy.
Healthcare is not shaping up to be a campaign priority for either party, and given the levels of partisan division and expectations that slim majorities will continue, passing significant reform would be highly unlikely.
Although there is bipartisan consensus around a limited set of issues like increasing transparency and limiting the power of PBMs, greater impact in the near term will come from regulatory, rather than legislative, action.
For instance, health systems are much more exposed by the push toward site-neutral payments. How large is the potential hit? One mid-sized regional health system we work with estimated they stand to lose nearly $80M of annual revenue if site-neutral payments are fully implemented—catastrophic to their already slim system margins.
Preparing for this inevitable payment change or the long-term possibility of M4A both require the same strategy: serious and relentless focus on cost reduction.
This still leaves a giant elephant in the room: the long-term impact on the physician enterprise.
As referral-based economics continue to erode, health systems will find it increasingly difficult to maintain current physician salaries, further driving the need to move beyond fee-for-service toward a health system economic model based on total cost of care and consumer value, while building physician compensation around those shared goals.
Ten states have uninsured rates below 5 percent. What are they doing right?
Universal health care remains an unrealized dream for the United States. But in some parts of the country, the dream has drawn closer to a reality in the 13 years since the Affordable Care Act passed.
Overall, the number of uninsured Americans has fallen from 46.5 million in 2010, the year President Barack Obama signed his signature health care law, to about 26 million today. The US health system still has plenty of flaws — beyond the 8 percent of the population who are uninsured, far higher than in peer countries, many of the people who technically have health insurance still find it difficult to cover their share of their medical bills. Nevertheless, more people enjoy some financial protection against health care expenses than in any previous period in US history.
The country is inching toward universal coverage. If everybody who qualified for either the ACA’s financial assistance or its Medicaid expansion were successfully enrolled in the program, we would get closer still: More than half of the uninsured are technically eligible for government health care aid.
Particularly in the last few years, it has been the states, using the tools made available by them by the ACA, that have been chipping away most aggressively at the number of uninsured.
Today, 10 states have an uninsured rate below 5 percent — not quite universal coverage, but getting close. Other states may be hovering around the national average, but that still represents a dramatic improvement from the pre-ACA reality: In New Mexico, for instance, 23 percent of its population was uninsured in 2010; now just 8 percent is.
Their success indicates that, even without another major federal health care reform effort, it is possible to reduce the number of uninsured in the United States. If states are more aggressive about using all of the tools available to them under the ACA, the country could continue to bring down the number of uninsured people within its borders.
The law gave states discretion to build upon its basic structure. Many received approval from the federal government to create programs that lower premiums; some also offer state subsidies in addition to the federal assistance to reduce the cost of coverage, including for people who are not eligible for federal aid, such as undocumented immigrants. A few states are even offering new state-run health plans that will compete with private offerings.
I asked several leading health care experts which states stood out to them as having fully weaponized the ACA to reduce the number of uninsured. There was not a single answer.
“I don’t think any state has taken advantage of everything,” said Larry Levitt, executive vice president at the KFF health policy think tank. “No state has put all the pieces together to the full extent available under the ACA.”
But a few stood out for the steps they have taken over the last decade to strive toward universal health care.
Massachusetts (and New Mexico): Streamlined enrollment and state subsidies
Massachusetts has the lowest uninsured rate of any state: Just 2.4 percent of the population lacks coverage. It had a head start: The law provided the model for the ACA itself, with its system of government subsidies for private plans sold on a public marketplace that existed prior to 2010.
But experts say it still deserves credit for the steps it has taken since the Massachusetts model was applied to the rest of the country. Matt Fiedler, a senior fellow with the Brookings Schaeffer Initiative on Health Policy, said two policies stood above any others in expanding coverage: integrating the enrollment process for both Medicaid and ACA marketplace plans and offering state-based assistance on top of the law’s federal subsidies.
Massachusetts was among the first states to do both.
“The former can do a lot to reduce the risk that people lose their coverage when incomes change,” Fiedler told me, “while the latter directly improves affordability and thereby promotes take-up.”
Integrated enrollment means that, for the consumer, they can be directed to either the ACA’s marketplace (where they can use government subsidies to buy private coverage) or to the state Medicaid program through one portal. They enter their information and the state tells them which program they should enroll in. Without that integration, people might have to first apply to Medicaid and then, if they don’t qualify, separately seek out marketplace coverage. The more steps that a person must take to successfully enroll in a health plan, the more likely it is people will fall through the cracks.
The state assistance, meanwhile, both reduces premiums for people and makes it easier for them to afford more generous coverage, with lower out-of-pocket costs when they actually use medical services. Nine states including Massachusetts now have state assistance, with interest picking up in the past few years.
New Mexico, for example, only recently converted to a state-based ACA marketplace and started offering additional aid in 2023. Having already seen some dramatic improvements, it remains to be seen how much more progress the state can make toward universal coverage with that policy in place.
Minnesota and New York: The Basic Health Plan states
The basic structure of the ACA was this: Medicaid expansion for people living in or near poverty and marketplace plans for people with incomes above that. But the law included an option for states to more seamlessly integrate those two populations — and so far, the two states that have taken advantage of it, Minnesota and New York, are also among those states with the lowest uninsured rates. Just 4.3 percent of Minnesotans and 4.9 percent of New Yorkers lack coverage today.
They have both created Basic Health Plans, the product of one of the more obscure provisions of the health care law. This is a state-regulated health insurance plan meant to cover people up to 200 percent of the federal poverty level (about $29,000 for an individual or $50,000 for a family of three). Those are people who may not technically qualify for Medicaid under the ACA but who can still struggle to afford their monthly premiums and out-of-pocket obligations with a marketplace plan.
In both states, the Basic Health Plans offered insurance options with lower premiums and reduced cost-sharing responsibilities than the marketplace coverage that they would otherwise have been left with. In New York, for example, people between 100 percent and 150 percent of the federal poverty level pay no premiums at all, while people between 150 percent and 200 percent pay just $20 per month.
There is good evidence that the approach has increased coverage: In New York, for example, enrollment among people below 200 percent of the poverty level increased by 42 percent when the state adopted its BHP in 2016, compared to what it had been the year before when those people were relegated to conventional marketplace coverage.
State interest in Basic Health Plans has been limited so far, but Minnesota and New York provide a model others could follow. Fiedler said part of the basic plans’ success in those states has been using Medicaid managed-care companies to administer the plan: Those insurers already pay providers lower rates than marketplace plans do and the savings give the states money to reduce premiums and cost-sharing.
Colorado and Washington: Public options and assistance for the undocumented
These states have been inventive in myriad ways. They are both early adopters of a public option, a government health plan that competes with private plans on the marketplace, a policy also being tested in Nevada.
There is another policy that unites them, one that addresses a sizable part of the remaining uninsured nationwide: They both provide some state subsidies to undocumented immigrants.
Most uninsured Americans are already technically eligible for some kind of government assistance, whether Medicaid or marketplace subsidies. But there is a large chunk of people who are not: About 29 percent of the US’s uninsured are ineligible for government aid, among them the people who are in the country undocumented. Those people bear the full cost of their medical bills and may avoid care for that reason (among others, of course).
Starting this year, Washington is allowing undocumented people with incomes that would make them eligible for Medicaid expansion to enroll in that program, and making state subsidies available to people with higher incomes no matter their immigration status. Colorado has set aside a small pool of money annually to provide state aid to about 11,000 undocumented people. (After that threshold is hit, those folks can still enroll in a health plan but they must pay the full price.)
Interest has been robust: Last year, Colorado hit the enrollment limit after about a month. This year, enrollment capped out in just two days, suggesting the state may need to put more money behind the effort.
It is difficult to imagine insurance subsidies for undocumented people nationwide any time soon, given the fraught national politics of immigration. But states are finding ways to make inroads on their own: California has made undocumented people eligible for Medicaid.
Through these and other means, they are helping the US inch toward universal health care.
In the last 2 weeks, the Affordable Care Act (ACA) has been inserted itself in Campaign 2024 by Republican aspirants for the White House:
On Truth Social November 28, former President Trump promised to replace it with something better:“Getting much better Healthcare than Obamacare for the American people will be a priority of the Trump Administration. It is not a matter of cost; it is a matter of HEALTH. America will have one of the best Healthcare Plans anywhere in the world. Right now, it has one of the WORST! I don’t want to terminate Obamacare, I want to REPLACE IT with MUCH BETTER HEALTHCARE. Obamacare Sucks!!!!”
Then, on NBC’s Meet the Press December 3, Florida Governor Ron DeSantis offered “We need to have a healthcare plan that works,” Obamacare hasn’t worked. We are going to replace and supersede with a better plan….a totally different healthcare plan… big institutions that are causing prices to be high: big pharma, big insurance and big government.”
It’s no surprise. Health costs and affordability rank behind the economy as top issues for Republican voters per the latest Kaiser Tracking Poll. And distaste with the status quo is widespread and bipartisan: per the Keckley Poll (October 2023), 70% of Americans including majorities in both parties and age-cohorts under 65 think “the system is fundamentally flawed and needs major change.” To GOP voters, the ACA is to blame.
Background:
The Affordable Care Act (aka Obamacare aka the Patient Protection and Affordable Care Act) was passed into law March 23, 2013. It is the most sweeping and controversial health industry legislation passed by Congress since Lyndon Johnson’s Medicare and Medicaid Act (1965). Opinions about the law haven’t changed much in almost 14 years: when passed in 2010, 46% were favorable toward the law vs. 40% who were opposed. Today, those favorable has increased to 59% while opposition has stayed at 40% (Kaiser Tracking Poll).
Few elected officials and even fewer voters have actually read the law. It’s understandable: 955 pages, 10 major sections (Titles) and a plethora of administrative actions, executive orders, amendments and legal challenges that have followed. It continues to be under-reported in media and misrepresented in campaign rhetoric by both sides. Campaign 2024 seems likely to be more of the same.
In 2009, I facilitated discussions about health reform between the White House Office of Health Reform and the leading private sector players in the system (the American Medical Association, the American Hospital Association, America’s Health Insurance Plans, AdvaMed, PhRMA, and BIO). The impetus for these deliberations was the Obama administration’s directive that systemic reform was necessary with three-aims: reduce cost, increase access via insurance coverage and improve the quality of care provided by a private system. In parallel, key Committees in the House and Senate held hearings ultimately resulting in passage of separate House and Senate versions with the Senate’s becoming the substance of the final legislation. Think tanks on the left (I.e. the Center for American Progress et al.) and on the right (i.e. the Heritage Foundation) weighed in with members of Congress and DC influencers as the legislation morphed. And new ‘coalitions, centers and institutes’ formed to advocate for and against certain ACA provisions on behalf of their members while maintaining a degree of anonymity.
So, as the ACA resurfaces in political discourse in coming months, it’s important it be framed objectively. To that end, 3 major considerations are necessary to have a ‘fair and balanced’ view of the ACA:
1-The ACA was intended as a comprehensive health reform legislative platform. It was designed to be implemented between 2010 and 2019 in a private system prompted by new federal and state policies to address cost, access and quality. It allowed states latitude in implementing certain elements (like Medicaid expansion, healthcare marketplaces) but few exceptions in other areas (i.e.individual and employer mandates to purchase insurance, minimum requirements for qualified health plans, et al). The CBO estimated it would add $1.1 trillion to overall healthcare spending over the decade but pay for itself by reducing demand, administrative red-tape and leveraging better data for decision-making. The law included provisions to…
To improve quality by modernizing of the workforce, creating an Annual Quality Report obligation by HHS, creating the Patient Centered Outcome Research Institute and expanding the the National Quality Forum, adding requirements that approved preventive care be accessible at no cost, expanding community health centers, increasing residency programs in primary care and general surgery, implementing comparative effectiveness assessments to enable clinical transparency and more.
To increase access to health insurance by subsidizing coverage for small businesses and low income individuals (up to 400% of the Federal poverty level), funding 90% of the added costs in states choosing to expand their Medicaid enrollments for households earning up to 138% of the poverty level, extending household coverage so ‘young invincibles’ under 26 years of age could stay on their parent’s insurance plan, requiring insurers to provide “essential benefits” in their offerings, imposing medical loss ratio (MLR) mandates (80% individual, 85% group) and more.
To lower costs by creating the CMS Center for Medicare and Medicaid Innovation to construct 5-year demonstration pilots and value-based purchasing programs that shift provider incentives from volume to value, imposing price and quality reporting and transparency requirements and more.
The ACA was ambitious: it was modeled after Romneycare in MA and premised on the presumption that meaningful results could be achieved in a decade. But Romneycare (2006) was about near-universal insurance coverage for all in the Commonwealth, not the triple aim, and the resistance calcified quickly among special interests threatened by its potential.
2-The ACA passed at a time of economic insecurity and hyper-partisan rancor and before many of the industry’s most significant innovations had taken hold. The ACA was the second major legislation passed in the first term of the Obama administration (2009-2012); the first was the $831 billion American Recovery and Reconstruction Act (ARRA) stimulus package that targeted “shovel ready jobs” as a means of economic recovery from the 2008-2010 Great Recession. But notably, it included $138 billion for healthcare including requirements for hospitals and physicians to computerize their medical records, extension of medical insurance to laid off workers and additional funding for states to offset their Medicaid program expenses. The Obama-Biden team came to power with populist momentum behind their promises to lower health costs while keeping the doctors and insurance plans they had. Its rollout was plagued by miscues and the administration’s most popular assurances (‘keep your doctor and hospitals’) were not kept. The Republican Majority in the 111th Congress’ (247-193)) seized on the administration’s miss fueling anti-ACA rhetoric among critics and misinformation.
3-Support for the ACA has grown but its results are mixed. It has survived 7 Supreme Court challenges and more than 70 failed repeal votes in Congress. It enjoys vigorous support in the Biden administration and among the industry’s major trade groups but remains problematic to outsiders who believe it harmful to their interests. For example, under the framework of the ACA, the administration is pushing for larger provider networks in the 18 states and DC that run their own marketplaces, expanded dental and mental health coverage, extended open enrollment for Marketplace coverage and restoration of restrictions on “junk insurance’ but its results to date are mixed: access to insurance coverage has increased. Improvements in quality have been significant as a result of innovations in care coordination and technology-enabled diagnostic accuracy. But costs have soared: between 2010 and 2021, total health spending increased 64% while the U.S. population increased only 7%.
So, as the ACA takes center stage in Campaign 2024, here are 4 things to watch:
1-Media attention to elements of the ACA other than health insurance coverage. My bet: attention from critics will be its unanticipated costs in addition to its federal abortion protections now in the hands of states. The ACA’s embrace of price and quality transparency is of particular interest to media and speculation that industry consolidation was an unintended negative result of the law will energize calls for its replacement. Thus, the law will get more attention. Misinformation and disinformation by special interests about its original intent as a “government takeover of the health system” will be low hanging fruit for antagonists.
2- Changes to the law necessary intended to correct/mitigate its unintended consequences, modernize it to industry best practice standards and responses to court challenges will lend to the law’s complex compliance challenges for each player in the system. New ways of prompting Medicaid expansion, integration of mental health and social determinants with traditional care, the impact of tools like ChatGPT, quantum computing, generative AI not imagined as the law was built, the consequences of private equity investments on prices and spending, and much more.
3-Public confusion. The ACA is a massive law in a massive industry. Cliff’s Notes are accessible but opinions about it are rarely based on a studied view of its intent and structure. It lends itself to soundbites intended to obscure, generalize or misdirect the public’s attention.
4-The ACA price tag. In 2010, the CBO estimated its added cost to health spending at $1.1 trillion (2010-2019) but its latest estimate is at least $3 trillion for its added insurance subsidies alone. The fact is no one knows for sure what its costs are nor the value of the changes it has induced into the health system. The ranks of those with insurance coverage has been cut in half. Hospitals, physicians, post-acute providers, drug manufacturers and insurers are implementing value-based care strategies and price transparency (though reluctantly) but annual health cost increases have consistently exceeded 4% annually as the cumulative impact of medical inflation, utilization, consolidation and price increases are felt.
Final thought:
I have studied the ACA, and the enabling laws, executive orders, administrative and regulatory actions, court rulings and state referenda that have followed its passage. Despite promises to ‘repeal and replace’ by some, it is more likely foundational to bipartisan “fix and repair’ regulatory reforms that focus more attention to systemness, technology-enabled self-care, health and wellbeing and more.
It will be interesting to see how the ACA plays in Campaign 2024 and how moderators for the CNN-hosted debates January 10 in Des Moines and January 21 in New Hampshire address it. In the 2-hour Tuscaloosa debate last Wednesday, it was referenced in response to a question directed to Gov. DeSantis about ‘reforming the system’ 101 minutes into the News Nation broadcast. It’s certain to get more attention going forward and it’s certain to play a more prominent role in the future of the system.
The ACA is back on the radar in U.S. healthcare. Stay tuned.
PS The resignations under pressure of Penn President Elizabeth Magill and Board Chair Scott Bok over inappropriate characterization of Hamas’ genocidal actions toward Jews are not surprising. Her response to Congressional questioning was unfortunate. The eventuality turned in 4 days, sparked by student outrage and adverse media attention that tarnished the reputations of otherwise venerable institutions like Penn, MIT and Harvard.
The lessons for every organization, including the big names in healthcare, are not to be dismissed: Beyond the issues of genocide, our industry is home to a widening number of incendiary issues like Hamas.
They’re increasingly exposed to public smell tests that often lead to more: Workforce strikes. CEO compensation. Fraud and abuse. Tax exemptions and community benefits. Prior authorization and coverage denial. Corporate profit. Patient collection and benevolent use policies. Board independence and competence and many more are ripe for detractors and activist seeking attention.
Public opinion matters. Reputations matter. Boards of Directors are directly accountable for both.
On November 2-3 in Austin, I moderated the 4th Annual CSO Roundtable* in which Chief Strategy/Growth Officers from 12 mid-size and large multi-hospital systems participated. The discussion centered on the future: the issues and challenges they facing their organizations TODAY and their plans for their NEAR TERM (3-5 years) and LONG-TERM (8-10 years) future. Augmenting the discussion, participants rated the likelihood and level of disruptive impact for 50 future state scenarios using the Future State Diagnostic Survey. *
Five themes emerged from this discussion:
1-Major change in the structure and financing of U.S. health system is unlikely.
CSOs do not believe Medicare for All will replace the current system. They anticipate the existing public-private delivery system will continue with expanded government influence likely.
Public funding for the system remains problematic: private capital will play a larger role.
CSOs think it is unlikely the public health system will be fully integrated into the traditional delivery system (aka health + social services). Most hospital systems are expanding their outreach to public health programs in local markets as an element of their community benefits strategy.
CSOs recognize that states will play a bigger role in regulating the system vis a vis executive orders and referenda on popular issues. Price controls for hospitals and prescription drugs, restraints on hospital consolidation are strong possibilities.
Consensus: conditions for hospitals will not improve in the immediate and near-term. Strategies for growth must include all options.
2-Health costs, affordability and equitable access are major issues facing the health industry overall and hospitals particularly.
CSOs see equitable access as a compliance issue applicable to their workforce procurement and performance efforts and to their service delivery strategy i.e., locations, patient experiences, care planning.
CSOs see reputation risk in both areas if not appropriately addressed in their organizations.
CSOs do not share a consensus view of how affordability should be defined or measured.
There is consensus among CSOs that hospitals have suffered reputation damage as a result of inadequate price transparency and activist disinformation campaigns. Executive compensation, non-operating income, discrepancies in charity care and community benefits calculations and patient “sticker shock” are popular targets of criticism.
CSO think increased operating costs due to medical inflation, supply chain costs including prescription drugs, and labor have offset their efforts in cost reduction and utilization gains.
CSO’s are focusing more of their resources and time in support of acute clinical programs where streamlining clinical processes and utilization increases are achievable near-term.
Consensus: the current financing of the system, particularly hospitals, is a zero-sum game. A fundamental re-set is necessary.
3-The regulatory environment for all hospitals will be more challenging, especially for not-for-profit health systems.
Most CSOs think the federal regulatory environment is hostile toward hospitals. They expect 340B funding to be cut, a site neutral payment policy in some form implemented, price controls for hospital services in certain states, increased federal and state constraints on horizontal consolidation vis a vis the FTC and State Attorneys General, and unreasonable reimbursement from Medicare and other government program payers.
CSOs believe the challenges for large not-for-profit hospital systems are unique: most CSOs think not-for-profit hospitals will face tighter restrictions on their qualification for tax-exempt status and tighter accountability of their community benefits attestation. Most expect Congress and state officials to increase investigations about for-profit activities, partnerships with private equity, executive compensation and other issues brought to public attention.
CSOs think rural hospital closures will increase without significant federal action.
Consensus: the environment for all hospitals is problematic, especially large, not-for-profit multi-hospitals systems and independent rural facilities.
4-By contrast, the environment for large, national health insurers, major (publicly traded) private equity sponsors and national retailers is significantly more positive.
CSOs recognize that current monetary policy by the Fed coupled with tightening regulatory restraints for hospitals is advantageous for national disruptors. Scale and access to capital are strategic advantages enjoyed disproportionately by large for-profit operators in healthcare, especially health insurers and retail health.
CSOs believe publicly traded private equity sponsors will play a bigger role in healthcare delivery since they enjoy comparably fewer regulatory constraints/limitations, relative secrecy in their day-to-day operations and significant cash on hand from LPs.
CSOs think national health insurer vertical consolidation strategies will increase noting that all operate integrated medical groups, pharmacy benefits management companies, closed networks of non-traditional service providers (i.e. supplemental services like dentistry, home care, et al) and robust data management capabilities.
CSOs think national retailers will expand their primary care capabilities beyond traditional “office-based services” to capture market share and widen demand for health-related products and services
Consensus: national insurers, PE and national retailers will leverage their scale and the friendly regulatory environment they enjoy to advantage their shareholders and compete directly against hospital and medical groups.
5-The system-wide shift from volume to value will accelerate as employers and insurers drive lower reimbursement and increased risk sharing with hospitals and medical groups.
CSOs think the pursuit of value by payers is here to stay. However, they acknowledge the concept of value is unclear but they expect HHS to advance standards for defining and measuring value more consistently across provider and payer sectors.
CSOs think risk-sharing with payers is likely to increase as employers and commercial insurers align payment models with CMS’ alternative payment models: the use of bundled payments, accountable care organizations and capitation is expected to increase.
CSOs expect network performance and data management to be essential capabilities necessary to an organization’s navigation of the volume to value transition. CSOs want to rationalize their current acute capabilities by expanding their addressable market vis a vis referral management, diversification, centralization of core services, primary and preventive health expansion and aggressive cost management.
Consensus: successful participation in payer-sponsored value-based care initiatives will play a bigger role in health system strategy.
My take:
The role of Chief Strategy Officer in a multi-hospital system setting is multi-functional and unique to each organization. Some have responsibilities for M&A activity; some don’t. Some manage marketing, public relations and advocacy activity; others don’t. All depend heavily on market data for market surveillance and opportunity assessments. And all have frequent interaction with the CEO and Board, and all depend on data management capabilities to advance their recommendations about risk, growth and the future. That’s the job.
CSOs know that hospitals are at a crossroad, particularly not-for-profit system operators accountable to the communities they serve. In the 4Q Keckley Poll, 55% agreed that “the tax exemption given not-for-profit hospitals is justified by the community benefits they provide” but 45% thought otherwise. They concede their competitive landscape is more complicated as core demand shifts to non-hospital settings and alternative treatments and self-care become obviate traditional claims-based forecasting. They see the bigger players getting bigger: last week’s announcements of the Cigna-Humana deal and expansion of the Ascension-LifePoint relationship cases in point. And they recognize that their reputations are under assault: the rift between Modern Healthcare and the AHA over the Merritt Research ’s charity care study (see Hospital section below) is the latest stimulant for not-for-profit detractors.
In 1937, prominent literary figures Laura Riding and Robert Graves penned a famous statement in an Epilogue Essay that’s especially applicable to hospitals today: “the future is not what it used to be.”
For CSO’s, figuring that out is both worrisome and energizing.
This week, Express Scripts, the nation’s second-largest pharmacy benefit manager (PBM), which is owned by health insurer Cigna, announced a new pricing model.
It is giving employers and health plans the option to pay pharmacies up to 15 percent over acquisition costs, plus a dispensing fee, for covered drugs. This payment structure was popularized by the Mark Cuban Cost Plus Drugs Company, founded by the billionaire businessman in reaction to the opaque pricing and complicated discounts and rebates common among PBMs.
While Cigna is not promising that this new pricing model will result in lower prices, it says it will improve transparency and should benefit retail pharmacies, who will split the markup with Express Scripts.
Cigna projects that only some employers will lower their healthcare spending through the cost-plus model, and that patient cost-sharing should be similar under both approaches.
The Gist:Between disruptive competitors like Cuban’s venture and increasing scrutiny from Congress, PBMs are facing new pressures to improve transparency and account for their role in rising drug costs.
This move by Cigna is an attempt to address at least one of those concerns, possibly intended to preempt regulatory and legislative action.
After years of complaints surrounding their business practices, it appears that the Congressional tide may be turning toward PBM industry reform. However,patients—who by and large are unaware of what PBMs are or do—won’t be satisfied till they see their out-of-pocket prescription drug costs go down.
Next up on this front: seeing which provisions targeting PBMs, many which have bipartisan support, make it into the Senate’s broad healthcare legislation planned for the end of this year, and in what form that bill ultimately passes.
Last week was notable for healthcare because current events thrust it into the limelight…
Hospitals and emergency responders in Maine: Media attention to Gaza and the Speaker-less U.S. House of Representatives was temporarily suspended as the deaths of 18 in the U.S.’ 36h mass shooting in Lewiston, Maine took center stage. The immediate overload on Lewiston’s Central Maine Medical Center and Mass General where the 13 injured were treated (including 4 still hospitalized) drew media attention—largely gone by Friday when the shooter’s death by suicide was confirmed.
The New Speaker of the House: The GOP House of Representatives elected Mike Johnson, the 4-term Representative from Shreveport to the post vacant since October 3.
Johnson is no stranger to partisan positions on healthcare issues. As Chairman of the conservative-leaning Republican Steering Committee from 2019-2021, he led the group’s platform to dismantle the Affordable Care Act and supports a national restriction on abortions despite Senate GOP Leader McConnell’s preference it be left to states to decide.
With the prospect of a government shutdown November 17 due to inaction on the FY2024 federal budget, the 52-year-old lawyer faces delicate maneuvering around $106 billion proposed for Israel, the Ukraine, Taiwan and border security alongside appropriations for the health system that consumes 28% of entire federal outlays.
Health organizational business strategy announcements: Friction between physicians and hospital officials in Asheville (Mission) and Minnesota (Allina) attracted national coverage and brought attention to staffing, cultural and financial circumstances in these prominent organizations. —and on the heels of the Kaiser Permanente strike settlement. The divorce from Mass General by Dana Farber in Boston and announcements by GNC, Best Buy, Optum (re-branding NaviHealth) and Sanofi hit last week’s news cycle.
And indirectly, the 3Q 2023 GDP report by the Department of Commerce raised eyebrows: it was up 4.9%–far higher than expected prompting speculation that the Federal Open Market Committee (FOMC) will raise interest rates (again) at its meeting this week or next month. That means borrowing costs for struggling hospitals, nursing homes and consumers needing loans will go up along with household medical debt.
As news cycles go, this one was standard fare for healthcare: with the exception of business plan announcements by organizations or as elements of tragedies like Lewiston, Gaza or a pandemic,
the business of the health system—how it operates is largely uncovered and often subject to misinformation or disinformation.
That’s the problem: it’s background noise to most voters who can be stoked to action over a single issue when prompted by special interests (i.e., Abortion rights, surprise billing, price transparency et al) but remain inattentive and marginally informed about the bigger role it plays in our communities and country and where it’s heading long-term.
The narrative common to most boils down to these:
The U.S. health system is good, but it’s complicated. ‘How good’ depends on your insurance and your health—both are key.
The U.S. health system is expensive and profitable. It pays its executives well and its frontline workers unfairly.
The delivery system focuses on the sick and injured; prevention and public health matter less.
Hospitals and physicians are vital to the system; health insurers keep their costs down.
The U.S. system pays lip service to “customer service” and ‘engaged consumers.” It is spin not supported by actions.
The U.S. system needs to change dramatically.
In the next 3 weeks, attention will be on the federal budget: healthcare will be in the background unless temporarily an element of a mass tragedy. Each trade group will tout its accomplishments to regulators and pimp their advocacy punch list. Each company will gin-out news releases and commentary about the future of the system will default to think tanks and focused on a single issue of interest.
That’s the problem. In this era of social media, polarization, and mass transparency, these old ways of communicating no longer work. Left unattended, they undermine the value proposition on which the U.S. system is based.
HENRY KOTULA 