By Dan Wilson, Founder & CEO of Moxe Health
January 2017 – With Congress moving to repeal the ACA, reinforced by President Trump’s executive order for a “prompt repeal,” there’s significant speculation surrounding how our insurance market will look post-2017. The ACA introduced changes resulting in an estimated 20 million people gaining coverage since the law’s introduction, mostly through Medicaid expansion, subsidies for commercial coverage, and changes to how young adults can leverage their parents’ health insurance.
While repeal of the ACA raises many questions around how these people will be covered, it’s some of the lesser-discussed implications of the repeal explored here.
The balance of power between health insurers and health systems is a delicate one. With different forces at play in each market, it’s hard to make sweeping claims. However, what’s clear is that as each side of the market consolidates, the other responds (or tries to). Rather than lowering costs through more efficient operations, consolidation often increases costs through lack of competition. With a philosophy of using market forces to drive down cost and improve quality, the new administration seems intent on increasing competition among providers. If this trend plays out, we will see the balance of power shift towards the insurer – and to risk-bearing providers, who share control of the premium dollar.
What evidence is there that an ACA repeal will shift power to insurers?
1. The ACA includes rules around how much of the collected premium must be spent on paying claims and activities tied to improving quality. This Medical Loss Ratio (MLR) means insurer profits are capped, and there is less incentive to raise premiums and more incentive to invest in quality initiatives. With an ACA repeal, MLR requirements are removed from commercial plans, and insurers are free to spend more on administrative and marketing expenses relative to medical expenses. Unsurprisingly, Section 2718 of the ACA, which laid out MLR requirements, was met with resistance from the payers.
2. Most replacement plans focus on driving growth in Medicare Advantage (MA) with the notion the free market will operate more efficiently than the federal government. While there’s contention around whether MA plans operate more efficiently than Traditional Medicare (TM), a study found that a 10% increase in MA penetration resulted in a 7.3% decrease in the average number of days a TM patient spent in the hospital while also increasing the average number of outpatient visits for the same TM patients. As MA continues to grow, will it continue to change how practices manage TM and MA patients, while decreasing other inefficiencies created by TM?
3. Reversing the ACA ban on creating or expanding provider-owned hospitals will likely influence the expansion of independent health systems. The current penalty for systems that violate this ban is steep – a prohibition from participating in Medicare and Medicaid. This moratorium halted 40 major projects, and a repeal of the ACA could unleash a flood of new investment in provider-owned systems. Additionally, Tom Price, President Trump’s nominee for Secretary of Health and Human Services (HHS) has been vocal in his call for addressing our “provider shortage”. More providers means more options for contracting, and given the ongoing narrowing of networks, more contracting options is a good thing for insurers.
4. Since the implementation of ACA, Medicaid expansion has increased the number of people covered by 15 million Americans. These newly insured resulted in a substantial decrease in the uncompensated care provided by hospitals located in states which elected Medicaid expansion. In fact, research released in 2015 shows a 21% decrease in uncompensated care for hospitals in expansion states – an expense that will return to health systems if a repeal plan does not include an alternative solution. By default, hospitals will suffer negative economic impacts if Medicaid expansion is eliminated.
Regardless of how power may shift, we are in a period where health plans and providers must continue to find new ways to work together. With the ACA repeal also eliminating the Center for Medicare & Medicaid Innovation – drivers of accountable care models, episode-based payments and other care delivery and payment initiatives – it is critical that all parties continue to find ways to collaborate and positively transform the industry. Driving change only becomes harder if health plans and providers are fighting to maintain their stake in a shrinking, zero sum game.
About the Author
Dan Wilson founded Moxe Health with an eye on making healthcare data do what data does best: inform, enlighten, and make a difference. As CEO, Dan drives Moxe’s strategic vision of accelerating the exchange of clinical data from all corners of the healthcare ecosystem. Moxe provides a clinical data clearinghouse, facilitating the real-time bi-directional exchange of clinical, analytic, and administrative data among providers, payers, and HIT vendors. Moxe delivers real-time automated chart retrieval solutions through Substrate, an electronic medical record integration platform. Moxe also provides solutions for quality measures like HEDIS and Stars, HCC Reconciliation, and gap closure management within Convergence, a framework for embedding web applications within the EHR.