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Navigating Uncertainty: Post Election Insights for Healthcare Payers and Providers

The election of Donald Trump and his promises to roll-back the Affordable Care Act adds to the uncertainty faced by healthcare leaders. Our analysis of the various proposals and the feasibility of implementing them underpins our perspective.

In summary, we think:

  • Many of the proposals are unlikely to be fully implemented within the next year. The CBO scoring for rolling back many ACA provisions will be especially challenging
  • MACRA and the shift to value-based care is likely to continue
  • Payers could be significantly impacted if some provisions of the ACA including the individual mandate are rolled back or competition across state lines is allowed
  • A proposal to increase price transparency will be disruptive for the provider industry
  • Providers with significant Medicaid exposure, especially in post-acute settings, will be most impacted.

As you plan ahead for next year, it is important to keep in mind that the broader transformation trends including digital health, data driven analytics, consumer driven health and ageing populations will continue to drive the strategic healthcare agenda.

While there is uncertainty on the policy front, the impact will not be felt immediately. The broader trends are likely to continue and drive the strategic agenda for the healthcare industry.

Item on platform Likelihood of implementation in 12 months Impact on payers Impact on providers Our perspective
Completely repeal Obamacare Low Medium Low Payer: The individual mandate can be repealed impacting risk pools
Provider: The Individual mandate can be repealed
Health insurance across state lines Low High Medium Payer: Increased competition
Provider: Opportunities for additional provider contracts
Fully deduct the cost of premiums High Low Low Payer & Provider: Unlikely to significantly alter the number with coverage
Allow use of HSAs N/A - already permitted Low Low Payer & Provider: HSAs are currently an available option
Require price transparency Medium Low High Payer: Accelerates existing trends
Provider: Accelerates existing trends, but requires significant operational change
Block grant Medicaid to states Medium High High Payer: Many members might lose coverage
Provider: Removes federally funded programs
Pharmaceutical pricing reform Medium Low Low Payer: Any impact will be a positive, by driving down costs for prescription drug coverage
Provider: Low impact to providers as PBMs and pharma bear the changes

We believe:

  • Complete rollback of ACA is unlikely
  • Some ACA provisions, such as the individual mandate will probably change
  • The health insurance exchanges are dead
  • Significant impact to healthcare payers as risk pools could change
  • Funding for Medicaid could decline impacting Payers and Providers, especially in home health and post-acute settings
  • MACRA and the shift towards value based care will continue unchanged
  • The shift towards consumer driven healthcare will accelerate
  • Many of the broader macro-trends driving innovation – Digital technology, Analytics, Aging population – will persist
  • Cost pressures will continue to persist and cost optimization efforts will yield significant ROI 

Over the last eight years, the healthcare industry has faced a significant transformation. The recent results of the US election have put some reform efforts into question and brought about significant uncertainty, which may hamper decision making and slow down some of the progress on some initiatives currently underway.

Given this is the time for many organizations to conduct their annual strategic planning and budgeting, this uncertainty poses significant risks for paralysis in decision making. With that context, it is important to step back and reflect on the broader trajectory of the healthcare industry to better understand the areas where change is unlikely to have a major impact.

  • MACRA is here to stay – MACRA was passed as a bipartisan legislation and is unlikely to have significant revisions in the near future. Given that MACRA is the single largest regulation driving business models for Providers, this means that a significant amount of uncertainty surrounding reimbursements and revenues is simply out of the equation.
  • Technology led disruption, the consumerization of healthcare, greater use of data analytics and business model innovation are likely to continue – These secular trends are enabled by advances in technology and changing consumer preferences, and not regulation. As a result, we still see these trends continuing into the future and business model innovation is likely to continue to drive the agenda for senior leadership as they look to offset revenues impacted by the shift to pay for performance.
  • Maintaining a focus on cost optimization is always good business practice – Over the last few years, cost optimization has received a lot of attention and driven the executive agenda. As an industry, there are still opportunities to realize cost savings, whether in IT or in the supply chain. In planning ahead for uncertainty, now is a good time to revisit the cost base and redesign operating models to squeeze out additional efficiencies.
  • The Exchanges are dead – Given the potential legislative barriers surrounding a potential repeal, a funding approach is most likely. Revisiting the vetoed 2015 reconciliation bill is the most likely approach, effectively eliminating the individual and employer mandates along with Medicaid expansion. The timeline for removing funding is likely to be short (at the end of 2017 or 2018), to provide an incentive for Congress to respond quickly to replacement legislation. Risk-pools will become unsustainable and the concept of subsidized qualified health plans sold on state-run exchanges dies. In the replacement consumer driven marketplace it is possible that a few of these exchanges will find a new lease on life as market portals.
  • New market potential exists for those health plans that can move quickly – With the potential for lighter regulatory oversight, there’s likely an early mover benefit for those payers that are able to make rapid decisions and decisive moves. This is especially true for market consolidation M&A activity, designed to take advantage of the opportunity to sell policies across state borders.
  • Whether individual or employer-sponsored, the future of health plans is Consumer Driven – President-elect Trump’s policy agenda is heavily dependent on an open market approach built around Consumer Driven Health Plans (CDHPs) and greater use of Health Savings Accounts (HSAs).
  • Changes are in store for both Medicare and Medicaid– It is notable that Medicare was not mentioned in any of the President-elect’s policy statements. However in the recently published transition agenda ( www.greatagain.gov/healthcare) contains a promise to “Modernize Medicare”. We assume that this would be achieved through an expansion of the very successful Medicare Advantage Program. The Block Grant approach to Medicaid funding at the state-level is likely to result in reductions in coverage especially in states with significant existing Medicaid programs, like New York.

As the industry grapples with post-election uncertainty, it is important to remember that many of the broader population, demographic and cost trends that have driven recent industry transformation are likely to persist, irrespective of any short-term change in regulations. Uncertainty does not have to lead to a paralysis in decision making.

On the contrary, building capabilities around market understanding and innovation will help payers become nimbler in an uncertain future, and move as soon as there is regulatory clarity. A focus on these broader trends can drive the healthcare agenda and help industry leaders navigate the uncertainty that lies ahead.

We hope you found this PA Perspective useful. Please share your thoughts and feedback with us by following the conversation on Twitter at @PA_healthcare, or contact us directly.

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