The election of Mr. Trump portends the demise of ‘Obamacare’. The combination of legally contested legislation and executive orders supporting the program will likely be torn down over the next several months.
· I do not see a major impact on 2017 as Obamacare is unraveled but 2018 is likely to be the time of adaptation in the market.
· Hospitals benefited greatly from Obamacare and they will likely feel the brunt of the changes to come.
· Provider groups will see dramatic shifts in their insurance mix during 2017 due to cost escalation in premiums and increasing deductibles. Direct collection from patients will be more critical moving forward.
· Payers will continue to build their knowledgebase of cost factors in hopes of moving to a more bundled payment method. Bundled payment will not mean independent providers negotiate a split with hospitals and other facilities, the payers will split the bundle and each element of care will receive a single payment for the episode of care. I do not believe there will be significant penetration of bundled payments until 2020 or beyond.
· We urge our clients to stay the current course, don’t make dramatic changes in alliances or commit to major cost increases over the next 12-18 months. Repeal of law is messy and enacting new laws will be fraught with unintended consequences.
Mr. Trump will likely disable two Obamacare executive orders immediately upon inauguration:
· Cost Sharing Reductions – these are the bonus payments made to insurance companies that enroll individuals receiving subsidy under the ACA Silver plans.
· Reinsurance Payments – this is the hotly contested pool of funds paid to insurance companies to offset losses on ACA plans. The lack of available funds to meet the promises made to insurance companies has widely been the excuse for higher premiums and ending participation in certain markets.
In 2016, the House of Representatives and Senate passed a repeal of Obamacare that was vetoed by President Obama. It is reasonable to assume the coming repeal will be like that legislation which included:
· Eliminating Medicaid expansion
· Eliminating the individual subsidies paid by the government to low income enrollees.
· Eliminating the mandate to purchase insurance, including penalties that impact the 2016 tax year.
· Eliminating the “Obamacare Tax Surcharge” on capital gains and income of high earning taxpayers.
· Eliminating the tax on medical devices.
· Eliminating the penalties on providers not participating in Meaningful Use, MACRA, etc.
The matter of replacing the legislation and benefits to the impacted citizens will be the focus of our attention moving forward. Many strategies have been floated, including:
· Allowing insurance companies to combine covered lives and pools across state lines.
· Block grants to states helping the states expand health insurance coverage and possibly including pre-existing condition patients in Medicaid programs.
· Creating a new federal program to insure citizens with pre-existing conditions in a subcategory of Medicare or Medicaid.
It is my hope that Mr. Trump will focus on a few fundamentals to improve the healthcare payment industry:
· Elimination of excluding past medical history in setting insurance premiums. Insurance companies cannot reasonably price coverage without full actuarial freedom.
· Reduced regulation on all businesses, but especially small business. The cost of regulation and compliance is driving cost up in many industries and healthcare is severely impacted by regulation that does not relate to improving patient care.
· Aggressive means testing in Medicare and any future program to cover individuals with pre-existing conditions.
· More transparency in healthcare costs and individual responsibility for payment.
Long term, the pools of covered individuals that insurance companies assemble for covering health costs must increase in size. Sale of insurance across state lines is the easiest strategy for insurance companies to spread risk. Additionally, more financial responsibility needs to be shifted to individuals in two ways – means testing so government programs are used for lower income individuals and getting insurance back to covering unplanned events of healthcare.
This post was written by Brian White