Given the election results and the incoming administration’s pledge to “repeal and replace”, the healthcare space understandably sees Obamacare squarely in the crosshairs. Obamacare, or the Affordable Care Act (ACA), was intended to be a massive shift in how healthcare is financed and managed. With approximately $3T in spending and a number of high profile challenges with the exchange business, the ACA was in need of some serious adjustments well before the 2016 election.

Bottom line, changing a public policy of this magnitude is going to take some time. Over 20 million insured could have their coverage impacted. The healthcare industry has spent the past 6 years implementing ACA’s many moving parts.

While there is uncertainty on how this will ultimately play out, there is opportunity for healthcare leaders. Here’s the primary advice we are offering for 2017…

Some modifications to individual insurance, but mostly status quo

What will stay: accepting members regardless of pre-existing conditions and the ability to keep adult children under 26 on their parent’s insurance. These have been very popular pieces of healthcare reform and the public is unlikely to support any change.

What will change: the health exchanges are the most visible sign of Obamacare, covering 12.7 million people this year, with a significant surge in enrollments occurring this week. Expect a “rebranding,” and if previous Republican thinking holds, a move towards allowing insurers to sell across state lines as a means to introduce competition in pricing. Most policy research suggests that this will not make a significant impact to pricing provided that the pre-existing conditions guarantee is maintained, but there is a strong will to remove government intervention in the model.  Expect this to be the initial strategy.

Medicare will be untouched; Medicare Advantage (MA) will remain strong and continue to grow

  • Tinkering with Medicare is incredibly dangerous politically.
  • MA was originally conceived of as a private-market alternative to traditional fee-for-service Medicare. Despite concerns about the overall cost of the program as compared to traditional FFS Medicare, expect MA plans to gain traction and continue to be a key driver of revenue for many health plans.

Value Based Contracts and ACOs will still be in play

While the concepts and programs of Accountable Care Organizations and Value Based Contracts are hallmarks of the ACA, they are largely hidden from public view, despite the fact that 23 million Americans are now being serviced in some type of ACO arrangement. This is more than CMS at work. As of 2015, over 132 private payers (health plans and employers) were engaged in some type of ACO activity. Even if CMS pulls back on aggressive plans to move all payments to some type of value basis, the horse is out of the barn. The effectiveness of these types of programs, while incremental, is meaningful at controlling costs. Expect commercial payers and providers to be actively engaged in ACOs and VBCs for the foreseeable future.

Hopefully, the incoming administration will accelerate the work that has already been done around bundled payments. While their initial setup and launch is complex, bundled payments hold tremendous promise in allowing consumers to have more visibility into healthcare pricing, a position the President-elect has espoused support for.

Wild Cards: Medicaid Expansion, Drug Costs, Medical Loss Ratio

Extremely hard to predict. This is where the alchemy of lobbying firms will come into play. Medicaid expansion not only helps millions gain coverage they wouldn’t otherwise have, the dollars that are flowing into hospitals in expansion states are shoring up billions in what would otherwise be uncompensated care and bad debt. If a block-grant program were to replace Medicaid expansion, many individuals would lose coverage but still be likely to use acute and emergency care service at hospitals acting as a de facto safety net. Expect hospital stakeholders to be highly vocal in the coming months as healthcare employers (especially rural) are a significant driver of good quality, well-paying jobs in many cities.

Drug costs are a rallying cry for payers and consumers

Expect the administration to be torn between heeding a populist call for relief and a pro-business mindset led by the pharmaceutical industry. Similarly, we could expect to hear calls to adjust the Medical Loss Ratio (MLR) for payers if the costs of covering the individual market are in any way capped to protect consumers or if additional benefits are added to individual plans to assuage consumers over prices increases. For example, Behavioral Health benefits may be mandated as a component of all coverage.

The Triple Aim remains a strategy to create value

The landscape is dynamic and will be for at least the next decade. However, the principles of improving population health, patient experience and reducing the overall cost of care must be addressed if we are going to meaningfully impact cost and outcomes.

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