Late last week, the Congressional Budget Office (CBO) released its analysis of the Center for Medicare and Medicaid Innovation (CMMI)’s spending outlays, revealing that in its first decade of operations it produced a $5.4B net increase in federal spending instead of a projected $2.8B reduction.
Moreover, CBO revised its CMMI projection for 2021-2030 from a $77.5B net spending reduction to a $1.3B increase, predicting CMMI may only begin to generate annual savings in 2031. CBO says its updated projections largely reflect revised expectations on CMMI’s ability to identify and scale models that actually reduce Medicare spending.
CMMI was created by the Affordable Care Act (ACA) in 2010 to test new payment models and other initiatives for reducing the federal government’s healthcare costs, but of the nearly 50 models it has run, only four have become permanent programs.
The Gist: This critical report confirms what many in the healthcare world already believed: the ACA’s value-based care initiatives have largely struggled to reduce Medicare spending.
There are plenty of policy factors to blame, including the lack of mandatory participation for providers and conflicting incentives across care models, but one factor left out of the CBO report is CMMI’s disproportionate emphasis on accountable care organizations (ACOs) to produce meaningful cost savings, even as years of data proved otherwise.
ACOs are designed to reduce spending primarily through utilization management, but research has shown that prices, not utilization, are responsible for the US’s high medical spend relative to other countries.
While CMMI’s mission is still laudable and important, the center must make good on its 2021 “strategic refresh” if it hopes to continue receiving Congressional support.
It feels as though November 5, 2024 is far away, but for both Democrats and Republicans, the election is now. On the issue of healthcare, the two parties’ approaches differ sharply.
Think back to the behemoth effort by Republicans to “repeal and replace” the Affordable Care Act six years ago, an effort that left them floundering for a replacement, basically empty-handed. Recall the 2022 midterms, when their candidates in 10 of the tightest House and Senate races uttered hardly a peep about healthcare.
That reticence stood in sharp contrast to Democrats who weren’t shy about reiterating their support for abortion rights, simultaneously trying hard to ensure that Americans understood and applauded healthcare tenets in the Inflation Reduction Act.
As The Hill noted in early August, sounds like the same thing is happening this time around as America barrels toward November 2024. The publication said it reached to 10 of the leading Republican candidates about their plans to reduce healthcare costs and make healthcare more affordable, and only one responded: Rep. Will Hurd (R-Texas).
Healthcare ‘A Very Big Problem’
Maybe the party thinks its supporters don’t care. But, a Pew Research poll from June showed 64% of us think healthcare affordability is a “very big problem,” superseded only by inflation. In that research, 73% of Democrats and 54% of Republicans thought so.
Chuck Coughlin, president and CEO of HighGround, an Arizona-based public affairs firm, told The Hill that the results aren’t surprising.
“If you’re a Republican, what are you going to talk about on healthcare?” he said.
Observers note that the party has homed in on COVID-lockdowns, transgender medical rights, and yes, abortion.
Plans won’t offer coverage for preexisting conditions, maternity care, or prescription drugs, and they can set limits on coverage. The plans will make it easier for small employers to self-insure, so they don’t have to adhere to ACA or state insurance rules.
CHOICE would let large groups come together to buy Association Health Plans, said NPR, which noted that in the past, there have been “issues” with these types of plans.
Insurance experts say that the act takes a swing at the very foundation of the ACA. As one analyst described it, the act intends to improve America’s healthcare “through increased reliance on the free market and decreased reliance on the federal government.”
Democrats Tout Reduce-Price Prescriptions
Meanwhile, on Aug. 29, President Joe Biden spoke proudly in The White House: “Folks, there’s a lot of really great Republicans out there. And I mean that sincerely…But we’ll stand up to the MAGA Republicans who have been trying for years to get rid of the Affordable Care Act and deny tens of millions of Americans access to quality, affordable healthcare.” Current ACA enrollment is higher than 16 million.
He said that Big Pharma charges Americans more than three times what other countries charge for medications. And on that date, he announced that “the (Inflation Reduction Act) law finally gave Medicare the power to negotiate lower prescription drug prices.” He wasn’t shy about saying that this happened without help from “the other team.”
The New York Times said it feels this push for lower healthcare costs will be the centerpiece of his re-election campaign. The announcement confirmed that his administration will negotiate to lower prices on 10 popular—and expensive drugs—that treat common chronic illnesses.
It said previous research shows that as many as 80% of Americans want the government to have the power to negotiate.
The president also said that “Next year, Medicare will select more drugs for negotiation.” He added that his administration “is cracking down on junk health insurance plans that look like they’re inexpensive but too often stick consumers with big hidden fees.” And it’s tackling the extensive problem of surprise medical bills.
Earlier, on August 11, Biden and fellow Democrats celebrated the first anniversary of the PACT Act, legislation that provides healthcare to veterans exposed to toxic burn pits while serving. He said more than 300,000 veterans and families have received these services, with more than 4 million screened for toxic exposure conditions.
Push for High-Deductible Plans
Republicans want to reduce risk of high-deductible plans and make them more desirable—that responsibility is on insurers. According to Politico, these plans count more than 60 million people as members, and feature low premiums and tax advantages. The party said plans will also help lower inflation when people think twice about seeking unneeded care.
The plans’ low monthly premiums offer comprehensive preventive care coverage: physicals, vaccinations, mammograms, and colonoscopies, and have no co-payments, Politico said. The “but” in all this is that members will pay their insurers’ negotiated rate when they’re sick, and for medicines and surgeries. Minimum deductible is $1,500 or $3,000 for families—and can be even higher.
Members can fund health savings accounts but can’t fund flexible spending accounts. Proponents cite more access to care, and reduced costs due to promotion of preventive care. Nay-sayers worry about lower-income members facing costly bills due to insufficient coverage.
Republican Candidates Diverge on Medicaid
The American Hospital Association (AHA) doesn’t love these high deductible plans. It explained that members “find they can’t manage the gap between what their insurance pays and what they themselves owe as a result,” and that, AHA said, contributes to medical debt—something the association wants to change.
An Aug. 3 Opinion in JAMA Health Forum pointed out other ways the two parties diverge on healthcare. For example, the piece cited Biden’s incentives for Medicaid expansion. In contrast, Florida Governor Ron DeSantis, a Republican presidential candidate, has not worked to offer Medicaid to all lower-income residents under the ACA. Former Governor Nikki Haley of South Carolina feels the same, doing nothing. However, former New Jersey Governor Chris Christie has expanded it, as did former Vice President Mike Pence, when he governed Indiana.
Undoubtedly, as in presidential elections past, healthcare will be at least a talking point, with Democrats likely continuing to make it a central focus, as before.
This week we showcase data from a recent American Antitrust Institute study on the growth of private equity (PE)-backed physician practices, and the impact of this growth on market competition and healthcare prices.
From 2012 to 2021, the annual number of practice acquisitions by private equity groups increased six-fold, especially in high-margin specialties. During this same time period, the number of metropolitan areas in which a single PE-backed practice held over 30 percent market share rose to cover over one quarter of the country.
These “hyper-concentrated” markets are especially prevalent in less-regulated states with fast-growing senior populations, like Arizona, Texas, and Florida.
The study also found an association between PE practice acquisitions and higher healthcare prices. In highly concentrated markets, certain specialties, like gastroenterology, were able to raise prices rise by as much as 18 percent.
While new Federal Trade Commission proposals demonstrate the government’s renewed interest in antitrust enforcement, it may be too little, too late to mitigate the impact of specialist concentration in many states.
A detailed report, published by a group of organizations including the American Antitrust Institute, provides one of the highest-quality examinations of the growth of private equity (PE)-backed physician practices, and the impact of this growth on market competition and healthcare prices.
From 2012 to 2021, the annual number of practice acquisitions by private equity groups increased six-fold, and the number of metropolitan areas in which a single PE-backed practice held over 30 percent market share rose to cover over one quarter of the country. (Check out figure 3B at the bottom of page 20 in the report to see if you live in one of those markets.)
The study also found an association between PE practice acquisitions and higher healthcare prices and per-patient expenditures. In highly concentrated markets, certain specialties, like gastroenterology, saw prices rise by as much as 18 percent.
The Gist: As the report highlights, one of the greatest barriers to assessing PE’s impact on physician practices is the lack of transparency around acquisitions and ownership structures. This analysis brings us closer to understanding the scope of the issue, and makes a strong case for regulatory and legislative intervention.
Recent proposed changes to federal premerger disclosure requirements offer a good start, but many practice acquisitions are still too small to flag review, and slowing future acquisitions will do little to unwind the market concentration already emerging.
PE is also not the sole actor contributing to healthcare consolidation, and proposed remedies may target the activities of payers and health systems considered anti-competitive as well.
With the latest Bureau of Labor Statistics’ Consumer Price Index (CPI) report revealing the 12-month inflation rate in April 2023 rose again after hitting a recent low in March, we’re using this week’s graphic to show the cumulative picture on price and consumer sentiment changes across the last five years.
Since 2018, the CPI for all goods has risen 21 percent, while medical services have become 15 percent more expensive, in terms of consumer out-of-pocket spending. Leading into COVID, medical service prices were rising faster than general inflation, but the cumulative rise in the price of all goods caught up to medical services in early 2022.
Since December of last year, the price of medical services has actually experienced some deflation, partly due to a lagging decline in insurer profits. Reports of easing inflation had elicited a slight rebound in consumer sentiment, but last month’s 9 percent drop, the largest since June 2022, suggests this confidence is easily shaken.
Unfortunately for healthcare providers, according to a recent poll, fewer consumers worrying about elevated grocery and gas prices means that healthcare has reclaimed the top spot for household financial concerns.
The film “American Hospitals: Healing a Broken System” premiered in Washington, D.C., on March 29. This documentary exposes the inconvenient truths embedded within the U.S. healthcare system. Here is a dirty dozen of them:
Hospitals are largely unaccountable for poor clinical outcomes.
The cost of commercially insured care is multiples higher than the cost of government-insured care for identical procedures.
Customer service at hospitals is dreadful.
Frontline clinicians are overburdened and leaving the profession in droves.
Healthcare still operates the same way it has for the last one hundred years — delivering hierarchical, fragmented, hospital-centric, disease-centric, physician-centric “sick” care. Accordingly, healthcare business models optimize revenue generation and profitability rather than health outcomes. These factors explain, in part, why U.S. life expectancy has declined four of the five years and maternal deaths are higher today than a generation ago.
It’s hard to imagine that the devil itself could create a more inhumane, ineffective, costly and change-resistant system. Hospitals consume more and more societal resources to maintain an inadequate status quo. They’re a major part of America’s healthcare problem, certainly not its solution. Even so, hospitals have largely avoided scrutiny and the public’s wrath. Until now.
“American Hospitals” is now playing in theaters throughout the nation. It chronicles the pervasive and chronic dysfunction plaguing America’s hospitals. It portrays the devastating emotional, financial and physical toll that hospitals impose on both consumers and caregivers.
Despite its critical lens, “American Hospitals” is not a diatribe against hospitals. Its contributors include some of healthcare’s most prominent and respected industry leaders, including Donald Berwick, Elizabeth Rosenthal, Shannon Brownlee and Stephen Klasko. The film explores payment and regulatory reforms that would deliver higher-value care. It profiles Maryland’s all-payer system as an example of how constructive reforms can constrain healthcare spending and direct resources into more effective, community-based care.
The United States already spends more than enough on healthcare. It doesn’t need to spend more. It needs to spend more wisely. The system must downsize its acute and specialty care footprint and invest more in primary care, behavioral health, chronic disease management and health promotion. It’s really that simple.
My only critique of “American Hospitals” is many of its contributors expect too much from hospitals. They want them to simultaneously improve their care delivery and advance the health of their communities. This is wishful thinking. Health and healthcare are fundamentally different businesses. Rather than pivoting to population health, hospitals must focus all their efforts on delivering the right care at the right time, place and price.
If hospitals can deliver appropriate care more affordably, this will free up enormous resources for society to invest in health promotion and aligned social-care services. In this brave new world, right-sized hospitals deliver only necessary care within healthier, happier and more productive communities.
All Americans deserve access to affordable health insurance that covers necessary healthcare services without bankrupting them and/or the country. Let me restate the obvious. This requires less healthcare spending and more investments in health-creating activities. Less healthcare and more health is the type of transformative reform that the country could rally behind.
At issue is whether America’s hospitals will constructively participate in downsizing and reconfiguring the nation’s healthcare system. If they do so, they can reinvent themselves from the inside out and control their destinies.
Historically, hospitals have preferred to use their political and financial leverage to protect their privileged position rather than advance the nation’s well-being. Like Satan in Milton’s “Paradise Lost,” they have preferred to reign in hell rather than serve in heaven.
Pride comes before the fall. Woe to those hospitals that fight the nation’s natural evolution toward value-based care and healthier communities. They will experience a customer-led revolution from outside in and lose market relevance. Only by admitting and addressing their structural flaws can hospitals truly serve the American people.
After COVID fears and shutdowns led consumers to delay care early in the pandemic, persistently high inflation over the past year has further suppressed volumes.
As the graphic above illustrates, the average deductible for individual coverage has grown by over 140 percent since 2010, exposing consumers to an increasing portion of healthcare costs, and prompting economists to reevaluate the adage that healthcare is “recession-proof”.
This year, that trend collided with an inflation spike that outpaced wage gains by two percent. Faced with diminished purchasing power, households are making budget tradeoffs which explicitly pit healthcare against other essential household needs.
For some, this cost-cutting impulse even extends to preventative screenings—required to be covered without cost-sharing—when consumers’ financial concerns drive them to avoid healthcare altogether.
While the latest inflation report suggests price increases are moderating, fears of a broader recession persist, making it critical for health systems and physicians to communicate with patients, encouraging them to continue to access preventive care, educating them about lower cost care options, and helping them prioritize treatment that should not be put off.
All signs point to a crushing surge in health care costs for patients and employers next year — and that means health care industry groups are about to brawl over who pays the price.
Why it matters: The surge could build pressure on Congress to stop ignoring the underlying costs that make care increasingly unaffordable for everyday Americans — and make billions for health care companies.
[This special report kicks off a series to introduce our new, Congress-focused Axios Pro: Health Care, coming Nov. 14.]
This year’s Democratic legislation allowing Medicare to negotiate drug prices was a rare case of addressing costs amid intense drug industry lobbying against it. Even so, it was a watered down version of the original proposal.
But the drug industry isn’t alone in its willingness to fight to maintain the status quo, and that fight frequently pits one industry group against another.
Where it stands: Even insured Americans are struggling to afford their care, the inevitable result of years of cost-shifting by employers and insurers onto patients through higher premiums, deductibles and other out-of-pocket costs.
But employers are now struggling to attract and retain workers, and forcing their employees to shoulder even more costs seems like a less viable option.
Tougher economic times make patients more cost-sensitive, putting families in a bind if they get sick.
Rising medical debt, increased price transparency and questionable debt collection practices have rubbed some of the good-guy sheen off of hospitals and providers.
All of this is coming to a boiling point. The question isn’t whether, but when.
Yes, but: Don’t underestimate Washington’s ability to have a completely underwhelming response to the problem, or one that just kicks the can down the road — or to just not respond at all.
Between the lines: If you look closely, the usual partisan battle lines are changing.
The GOP’s criticism of Democrats’ drug pricing law is nothing like the party’s outcry over the Affordable Care Act, and no one seriously thinks the party will make a real attempt to repeal it.
One of the most meaningful health reforms passed in recent years was a bipartisan ban on surprise billing, which may provide a more modern template for health care policy fights.
Surprise medical bills divided lawmakers into two teams, but it wasn’t Democrats vs. Republicans; it was those who supported the insurer-backed reform plan vs. the hospital and provider-backed one. This fight continues today — in court.
The bottom line: Someone is going to have to pay for the coming cost surge, whether that’s patients, taxpayers, employers or the health care companies profiting off of the system. Each industry group is fighting like hell to make sure it isn’t them.
HENRY KOTULA 