Joseph Burns

home

authors

joseph-burns

n the coming years, the federal Medicare program will either need more funding or be forced to make serious spending cuts. The Medicare program is popular with voters and has support among politicians in both parties. But partly because of the expense of the response to the COVID-19 pandemic, policy makers may look to curtail Medicare spending and, more particularly, the Medicare Advantage (MA) program.

Medicare cuts may be needed because one of the two trust funds the government uses to pay for parts of the Medicare program is facing a severe shortfall, according to the Congressional Budget Office (CBO). In February, CBO predicted that the Hospital Insurance Trust Fund would be insolvent within five years.

In response, the Medicare Payment Advisory Commission (MedPAC), a nonpartisan organization established by statute to advise Congress on Medicare policies and programs, suggested eliminating the bonus payments the MA plans get as part of the Star Rating system, which rates the quality of the plans on a scale from 1 to 5.

This is not the first time the Medicare program has been on shaky financial footing; shoulders may shrug as more pressing matters dominate political and policy debates.

But it is only the second time that a projection predicted insolvency within five years, according to the Alliance for Health Policy, a nonpartisan organization that helps policy makers understand health policy. Adding to the sense of urgency is the demographic bulge of baby boomers aging into Medicare coverage at the rate of 10,000 seniors per day for the next 18 years. The past 15 years have been boom times for MA plans, and most indications are that the upswing will continue. But now there are some clouds on the horizon.

The Medicare program is the country’s largest purchaser of healthcare by far, spending nearly $900 billion this year to provide coverage for some 62 million Medicare beneficiaries, about 38 million of whom are in traditional Medicare, and
24 million of whom are in Medicare Advantage plans.

A growing proportion of the $900 billion is flowing to MA plans. CBO projections show that by 2030, more than half of Medicare beneficiaries will be in MA plans. Twenty years ago, only 13% of Medicare beneficiaries were in MA plans. Enrollment has grown because beneficiaries often get drug, dental and vision coverage with an MA plan. The trade-off is a narrower network of providers than traditional Medicare, but surveys show that most MA enrollees are satisfied with their choices. The MA plans say they are increasingly shouldering the burden of Medicare beneficiaries with complex, chronic conditions and health problems rooted in the social determinants of health.

MA has become a major line of business for many of the country’s largest health insurers. The largest commercial health insurers in the MA market are, in order of market size, UnitedHealthcare, Humana, the Blue Cross Blue Shield plans, CVS Health, Kaiser Permanente, Centene, and Cigna, KFF reports. According to the foundation’s researchers, the gross margins — the difference between the premiums insurers collect and the claims they pay out — are larger for insurers in the MA market than in other insurance markets. In 2020, the per-member, per-month gross margin in MA was $188, compared with $143 in the individual market and $80 in the group market, according to KFF calculations.

In its annual report to Congress in June, MedPAC made recommendations for adjusting MA payments. Among them was lowering the benchmarks that the federal government uses to set the per-
beneficiary capitated payments to MA plans by about 2%, according to Gretchen Jacobson, a Commonwealth Fund vice president who focuses on Medicare issues.

The benchmarks are tied to calculations of what it costs to cover a beneficiary in traditional fee-for-service Medicare in the county or region where the MA plan has beneficiaries. Reducing the benchmark would save $10 billion over five years, MedPAC estimated.

That change would, however, have a relatively minor effect on spending compared with eliminating the Star Rating system and other bonus payments Medicare sends to health insurers when plans hit quality metrics, observes Jacobson. The targets include familiar measures such as the proportion of beneficiaries who have been screened for certain cancers, the number with controlled diabetes and hypertension, and the timeliness of insurance approvals and reviews, such as prior authorizations.

The vast majority (80%) of beneficiaries in MA plans are enrolled in plans with ratings of 4 or more stars. That’s good news from a healthcare quality perspective. If it is working as intended, the Star Rating system is supposed to be an incentive to improve care, make preventive services accessible, and encourage insurers to operate fairly and efficiently. But there are questions about how accurately the star ratings reflect quality because of how ratings are calculated. Although Medicare officials consider these questions, the amount that the federal government pays out in bonuses has grown. Over the past six years, what the Medicare program pays in Star Rating bonuses to MA insurers has nearly quadrupled, from $3 billion in 2015 to $11.6 billion this year.

In the past, MedPAC has recommended changes to the Star-Rating system, but doing so could be problematic because ending payments for quality would go against the grain of promoting value-based care, she observes.

“If implemented, that recommendation (to eliminate the StarRating system) would be a very big change,” Jacobson notes. The suggestion to drop the star ratings would follow a recommendation that MedPac made in January 2020 to drop the quality-based bonus system entirely because CMS’ use of a variety of quality-based bonus systems has become extremely complicated, she adds.

Of course, any hint that payments to health plans might decline is bound to stir up fierce opposition from health insurers who rely on the growth of MA enrollment and annual increases in payments for each enrollee to increase revenues, margin and profits. But any consideration of reining in Medicare spending is a step in the right direction, in David Muhlestein’s opinion.

“It’s important that people are willing to reassess how we think about and pay for Medicare and Medicare Advantage, and to make different proposals,” says Muhlestein, the chief strategy and research officer for the consulting firm Leavitt Partners. But CMS doesn’t need to wait to reduce what Medicare spends each year because it could do so when it issues its annual fee schedules that set payment levels for physicians, hospitals and other providers.

“Medicare has the ability to lower their rates and ratchet them down over time,” he notes. “However, there is not a lot of political capital that gives them the sufficient protection they would need to lower rates.” Physicians, hospitals and health plans all say they need a raise every year.

“If you talk to members of Congress about reducing what Medicare pays, there are so many political barriers to do that with fee-for-service Medicare, and it’s likely to be difficult to do it in Medicare Advantage, too,” Muhlestein says. UnitedHealthcare, Humana and the Blues plans have about 60% of the MA market, he notes.

“You can be assured that if there’s going to be any effort to reduce what Medicare pays, those companies will fight that idea tooth and nail — and probably be successful.”

Joseph Burns is an independent journalist in Cape Cod who writes about healthcare and managed care.

Articles

Medicare funding shortfalls may trickle down to the Medicare Advantage plans and the Star Rating program bonuses, which have quadrupled in recent years. 

Medicare Advantage Plans, on a Roll, Could See Some Cuts 

ow that the Biden administration is putting a new team in charge of CMS, advocates for accountable care organizations (ACOs) are preparing to push for changes that they say will bolster CMS’ ACO programs and make risk sharing more palatable.

The National Association of ACOs (NAACOS) says that ACOs have worked as intended to slow the rate of spending growth for the Medicare program. In January, the group put out a statement saying that the new administration should increase what CMS pays hospitals, health systems and physician groups that participate in the Medicare Shared Savings Program (MSSP) and give them more time to take on downside risk. NAACOS noted that number of ACOs participating in MSSP, the largest CMS ACO program, has dropped from a high of 561 in 2018 to 477 this year. NAACOS says that MSSP deserves credit for being CMS’ largest, most successful value-based program. NAACO President and CEO Clif Gaus, Sc.D., says making the incentives to participate more attractive and the risks more manageable would lead more provider groups to participate. NAACOS has proposed that shared savings be split 50-50 between CMS and the ACOs instead of the current 60-40 ratio. The organization also wants an on-ramp of three years before shared savings starts. “Our healthcare payment and delivery system needs to desperately change, and ACOs offer the leading way to make that happen,” Gaus says. “A steady erosion of ACO participation damages our ability to get to where we need to be.”

Data that CMS released in September show that the MSSP ACOs had two years of record savings in 2019 and 2018. In 2019, Medicare spent $2.6 billion less than the CMS spending targets for ACOs. The net savings worked out to $1.2 billion after shared-saving payments — money ACOs receive if they spend less than financial benchmarks based on past spending — are factored. In 2018, MSSP ACOs spent $1.7 billion less collectively than CMS’ financial benchmarks. The net savings were
$740 million after accounting for shared-savings payments and collecting shared-loss payments.

Last June, CMS paused or adjusted many of its value-based programs because of the COVID-19 pandemic and the dramatic decline in the use of healthcare services not related to COVID-19. Among the most significant changes are those that affected Next Generation ACOs. The Next Generation ACO Model, which has 41 participants, gives ACOs a chance to take home higher levels of shared savings, but they are also on the hook for larger shared losses if their spending exceeds their financial benchmarks. ACOs that participate also get waivers from several CMS rules, such as the requirement that admission to a skilled nursing or rehabilitation facility be preceded by a three-day hospital stay. The Next Generation program was supposed to end last year, but the Trump administration CMS, citing the pandemic, granted it a one-year reprieve.

CMS was also gearing up to start the Direct Contracting Model at the beginning of this year but moved out the start to April 1 because of the pandemic. On March 5, the Biden administration said it would stick with that date. As designed during the Trump administration, any provider organization can apply to participate in the program. The model is designed to test two varieties of risk-sharing arrangements. The “professional” track of the program sets shared savings and losses at 50%; the participating provider organization would get half of the difference between a financial benchmark and actual spending if it came in under budget (the shared savings) but also risk paying half of the difference between the benchmark and the actual spend if it went over budget (shared losses). The other “global” track is the full-risk option, meaning providers would get 100% of the savings or pay 100% of the losses.

In a letter to CMS in December, Gaus said that his organization had hoped the direct-contracting initiative would cater to existing ACOs willing to take on more risk. Instead, in Gaus’ view, CMS has provided incentives for health plans to participate in the program and put existing ACOs at a disadvantage. As designed, the direct-contracting program could cut into the current enrollment in ACOs by allowing new direct-contracting entities to take away members (under Medicare’s patient attribution rules) from ACOs, which, Gaus wrote, have served the Medicare program well for the past decade and have reduced the cost of care.

“These ACOs embraced the transition to value early on and worked with CMS to grow and refine the models so they would be successful long term,” Gaus added. “These providers were on the forefront of the value transition and took great risk to blaze a trail for other providers to follow. Many did so without financial backing and by investing their own resources with uncertainty about a return on their investment. Their commitment to clinical transformation and value-based care has advanced the entire healthcare industry, and they should be rewarded, not penalized, for these efforts.”

America’s Physician Groups (APG) also is aware of these concerns, but APG President and CEO Don Crane, J.D., says his group remains confident about the future for both the Next Generation ACO and direct contracting. His organization, which represents 345 physician groups in 44 states, has long supported CMS’ efforts to promote value-based payment models that use risk sharing, he says.

APG wants CMS to cast a wide net. “We want CMS to move forward with the Direct Contracting Model and with the risk-sharing arrangements in Next Gen ACOs,” he says. “We’re interested in all of the models, frankly. That’s why we say to Medicare, ‘Let’s go forward with these models.’”

Under professional-risk arrangements, a physician assumes the financial risk for the care and services delivered to patients, Crane explains. That’s a lower level of risk than global risk, in which a physician or physician group is responsible for the cost and quality of all the care a patient receives from the health system, whether that care is delivered in a hospital or from a specialist physician.

“What distinguishes APG and its members is that we’re all generally committed to the movement toward value-based care and more specifically to risk-based contracting,” Crane says. “We view capitation as being the ultimate destination for payment. Capitation used to be a dirty word but no longer.”

oseph Burns is an independent journalist 

in Brewster, Massachusetts, who covers healthcare.

The number of participants in the Medicare Shared Savings Program has tapered off, and the Direct Contracting Model may put accountable care organizations at a disadvantage. The National Association of ACOs wants the Biden CMS to make some changes.

Whither the ACO? 

For health insurers, making actuarial calculations is like driving a car while using only the rearview mirror. This analogy was never truer than it was early last year, when actuaries read about the first reported cases of COVID-19 and feared a looming tsunami of the dreaded IBNR — incurred but not reported — claims.

Since then, actuaries have learned that any planning they did in 2019 likely had little value as COVID-19 infections spread nationwide, employers laid off workers, and governors shut down schools and businesses. Although some costs rose due to increased spending for the care of insured members who contracted the SARS-CoV-2 virus, the shutdown of other healthcare services eased the financial pain for many insurers.

“The pandemic and resulting economic crisis have upended any expectations about what health spending, utilization and the subsequent financial performance of insurers might have looked like this year,” according to a report in December 2020 from Kaiser Family Foundation researchers.

Many for-profit insurers reported record profits in the second quarter and for the full year of 2020 because their members did not visit the hospital or see their physicians at usual levels. Some of those sky-high profits were tempered in subsequent quarters when pent-up demand for care caused insurers’ costs to rise. The financial ups and downs of a pandemic-afflicted year became apparent early in 2021 when three major health insurers reported on their financial performance for 2020’s fourth quarter and the full calendar year.

On Jan. 20, the nation’s largest insurer, UnitedHealth Group, reported its full-year 2020 profit of $15.4 billion, including $2.2 billion in profits for the fourth quarter,
$3.2 billion in the third quarter and $6.6 billion in the second quarter. The insurer said profits were substantially higher than normal due to the unprecedented delay in elective and nonemergency procedures, the 

On Feb. 3, Humana reported a loss of $458 million in 2020’s fourth quarter, a considerable drop from the $593 million in profit the company reported for the fourth quarter of 2019. The insurer attributed the loss to a big jump in hospital admissions for patients with COVID-19 in nearly all of its markets.

Although spending for non-COVID-19 care fell below normal levels by approximately 15%, Humana said that drop did not offset the rise in costs for testing and treating members with COVID-19. For 2020, however, Humana reported a profit of $4.6 billion, a 40% increase over the company’s 2019 profits of $3.5 billion.

The day after Humana reported its financial results, Cigna reported $4.1 billion in profit for the fourth quarter of 2020, a big jump over the $977 million in 2019’s fourth quarter. For the full year, Cigna earned $8.5 billion in profits, a 66% increase from the company’s profits of $5.1 billion for 2019.

“By all accounts, the publicly traded health insurers did very well last year,” said economist Sara R. Collins, Ph.D., vice president for healthcare coverage and access at The Commonwealth Fund. “By that I mean they were quite profitable.”

Among insurers, the all-important medical-loss ratio (MLR) fell. Most health plan companies had higher costs due to payment for members’ COVID-19 treatments, but they also had lower costs because so many Americans delayed elective and other nonemergency care. “In general, they had lower claims from less utilization, and that was in all coverage segments: the individual market, the group market, Medicare Advantage (MA) and Medicaid managed care,” Collins explains.

The Kaiser Family Foundation’s analysis was similar. Using data from the National Association of Insurance Commissioners compiled by Mark Farrah Associates, researchers found that average profit levels at the end of September in the four main insurance markets — individual, group, MA and Medicaid managed care — were high and that MLR levels were low or flat compared with levels in the third quarter of previous years. “These findings suggest that many insurers have remained profitable even as both COVID-19-related and non-COVID-19 care increased in the third quarter of 2020,” the researchers wrote.

Another view of the health insurance market comes from Fitch Ratings, which analyzes companies’ credit worthiness. While stating that 2020 was a turbulent year for insurers, Fitch reported that these companies had strong operating performance in 2020, and Fitch expects that level of performance to continue in 2021. Fitch report added, however, that this year could see “elevated volatility” among insurers and from one quarter to the next.

Although MLRs declined in the second quarter of 2020 as healthcare utilization fell, Fitch does not expect MLR levels to go down again this year. “Fitch currently has stable outlooks on nearly all of its ratings in the U.S. health insurance sector,” the company stated in its 2021 outlook report.

This situation is common among large, publicly traded, for-profit insurers. “You can’t really generalize for the entire health insurance market, because every market is unique,” says Margaret A. Murray, CEO of the Association for Community Affiliated Plans (ACAP) and a member of the 

® editorial advisory board. ACAP represents 78 nonprofit health insurers serving more than 20 million low-income members with complex healthcare needs. Those 20 million members represent more than a third of all Americans in Medicaid managed care plans, according to ACAP.

In August, ACAP reported that its member health plans contributed more than $175 million to support physicians, hospitals and community health centers (CHCs) that needed financial assistance during the pandemic. With those funds, the providers and CHCs paid for personal protective equipment, donated to food banks and food delivery services such as Meals on Wheels, and provided shelter for homeless members who had COVID-19 but were not hospitalized, ACAP reported.

Some of ACAP’s insurers have insured members in long-term care settings and others who need care at home. “We provide support for these members so they can stay at home or in nursing homes or other settings,” Murray notes. Some of those plans have had high hospitalization rates, and many of their members died of COVID-19, she says.

“Our plans actually lost a lot of members to COVID-19, and, as a result, they really took a hit financially,” Murray says. “But, at the same time, our plans make a lot of capitated payments to their physicians and sometimes to hospitals, and those payments allowed providers to maintain full operations throughout the year.”

ACAP members reported that the capitated payments to network physicians and hospitals have supported providers throughout the pandemic when revenue from fee-for-service payment withered due to lack of utilization. In addition, keeping physicians and hospitals solvent during a pandemic is in all health plans’ interests because it helps plans retain providers, which helps them to hold on to their insured members, as well.

Ceci Connolly, president and CEO of the Alliance of Community Health Plans (ACHP), agreed that one of the lessons learned from the pandemic was the value of capitated payment. ACHP has 24 nonprofit health plans serving 22 million insured members. ACHP’s member plans include powerhouses such as Geisinger Health Plan, Harvard Pilgrim Health Care and Kaiser Permanente.

Early last year, the CEOs of ACHP’s member plans feared the pandemic would last beyond a year and worked with their actuaries to prepare budgets over two years. “That’s a smart way for our plans to think about the challenges they would face in their operations and prepare to have the financial resources to cover the costs that could come up during an unprecedented level of uncertainty,” Connolly says.

“Uncertainty is challenging for actuaries because they’re supposed to forecast risk accurately over a certain time and then ensure that they have the dollars to care for all of the people in their membership,” she adds. “Over the years, they’ve [become] good at that because they understand the population and what are … the standard number of heart attacks and babies born and that kind of thing. But the pandemic provided an unexpected level of risk that no one could have predicted.”

Notwithstanding the COVID-19 vaccines, many health insurance experts are concerned about the cost of care related to COVID-19 infections and a potential surge that could create a double peak in costs and claims for services that Americans have put off. Using data from a PwC report on medical cost trends, CNBC reported that if most of the care that health plan members deferred in 2020 is delivered this year, medical costs could rise 10% above pre-pandemic levels. That would result in the highest rate of medical-cost inflation since 2007, CNBC stated.

Large employers also are bracing for huge bills from deferred care, CNBC reported, citing the results of a survey from the American Benefits Council. “Large self-insured employers worry that delayed treatment this year will result not only in a higher number of medical claims in 2021 but also higher overall costs for more acute care,” CNBC said.

The pandemic has scrambled predictions. If, as Connolly suggested, actuaries dislike uncertainly, they will loathe this assessment from PwC’s analysts: COVID-19 has created so much uncertainty that it’s difficult to say precisely whether medical-cost trends will be significantly lower or higher
this year.

is an independent journalist in Brewster, Massachusetts, who covers healthcare.

Companies could be hit with a double peak of claims for COVID-19 patients and care that people put off because of the pandemic. 

The Pandemic One Year In: Despite Large Profits in 2020, Health Insurers See Volatility Ahead

For several years, the Association of American Medical Colleges (AAMC) has presented data showing that the United States faces a shortage of physicians in almost every specialty. In June 2020, the association issued its sixth annual report on the shortage, predicting that in just over a decade, the U.S. healthcare system would face a shortage of between 54,100 and 139,000 physicians in primary and specialty care.

Commenting on that report, AAMC president and CEO David J. Skorton, M.D., said the gap continues to widen between the available supply of physicians and the number of doctors the country needs. Michael Dill, the association’s director of workforce studies, cited several factors that contribute to the shortage, including a wave of retirements of older physicians and increased demand for physician care because of an aging population and COVID-19.

Christopher Kerns, MBA, executive vice president, and David Willis, MBA, vice president, both at the Advisory Board, took the opposite position in a 

 article published in March 2020. They argued that the nation should have more than enough primary care physicians based on reports from HHS and other organizations. Many issues keep the U.S. healthcare system from using the existing supply of physicians more efficiently, they wrote, including an uneven distribution of doctors, high rates of uninsurance that decrease access to primary care physicians and inflexible care-delivery models.

® interviewed Dill and Kerns about these opposing points of view on the potential shortage of physicians.

Kerns says that health insurers and healthcare systems need to adopt innovative care delivery models that give physicians more support for delivering team-based care with other providers, such as nurse practitioners (NPs) and physician assistants (PAs). “One of the problems is a shortage of courage to disrupt the healthcare system that we have,” says Kerns. Healthcare professionals need to deliver care at the top of their license, he adds, and patient care should be organized more carefully according to the kind of healthcare professional who could meet patients’ needs.

If patient care were segmented this way, physicians could manage the care of patients who have the most chronic and pressing healthcare needs, and other members of the care team would care for patients who have less pressing needs, Kerns says. “If we segment patients, we can move them through the health system faster because physicians will be specializing in one (type) or just a few types of patient care, such as senior care, for example,” Kerns comments.

But Dill says the association’s projections of a shortage take into account an expanded role for PAs and NPs. “Making greater use of the entire team of health professionals is crucial to meeting our healthcare needs,” he says. “Our baseline projections assume that PAs and NPs will continue to contribute to meeting the nation’s healthcare needs at the level they are currently doing so and that their numbers will continue to grow. We also include two scenarios that include an increased role for them in meeting those needs. In those scenarios, we clearly see smaller shortages in the future — but we still see shortages.”

Kerns and Willis argue that the physician shortage is more a matter of how physicians are distributed than a shortage in total numbers. Organizations that employ physicians, such as health systems, large medical groups and major health plans, have a significant role to play in ensuring adequate primary care coverage, Kerns says. “Most of these organizations have enough leverage to locate physicians in high-need areas and provide options such as telehealth and advanced practitioners (NPs and PAs) in low-density regions,” he notes.

In response, Dill says medical schools have no control over where physicians choose to practice. “We need more physicians to meet the demands in some rural and other underserved areas, but even if we add more physicians, that factor alone doesn’t guarantee that they’re going to locate in any particular place,” he observes. “Therefore, we need to spend less time figuring out how to get exactly the right number of physicians in exactly the right places. Instead, we need to spend more time determining how to connect people who don’t have access to physicians.”

Wider use of risk-based payment for physicians throughout the healthcare system would help foster greater use of team-based care, says Kerns. Patient-centered medical homes, accountable care organizations and other care models that have some degree of capitation would push the healthcare system — and physicians — to become more efficient. Shifting care away from physicians to other sorts of providers is a necessary ingredient of that efficiency, he notes.

“Value-based care will encourage greater use of NPs, PAs and other midlevel providers, and, in turn, that greater use will decrease the need for more physicians,” Kerns adds. “Value-based care helps provide the necessary incentives to match patient need with provider expertise and can help increase the effective reach of primary care providers.”

Kerns sees growing enrollment in Medicare Advantage (MA) as having a similar effect. “Medicare Advantage is a form of risk-based payment, and that means that those physicians who specialize in treating seniors in MA plans are more likely to employ behavioral health clinicians as a way to keep utilization to manageable levels.”

Dill counters that the shift to more team-based care has been happening for some time. “We see it as ‘necessary but not sufficient’ to address projected shortages,” he says.

“In fact,” he continues, “for years, some observers have made the assertion that changing the way we pay for care will solve the shortages. Yet shortages persist because the underlying driver of the shortages is a growing and aging population, not a lack of efficiency.”

The COVID-19 pandemic has increased the use of telehealth, and many see telehealth becoming a permanent part of American healthcare. Kerns says telehealth allows physicians to reach more patients. “The use of artificial intelligence combined with telehealth can reduce the amount of time needed to see certain low-acuity patients, thereby helping increase effective physician capacity,” he explains.

Dill says greater use of telehealth has helped offset the decreased access to in-person care brought on by the pandemic and could improve access in rural and other underserved areas. “We continue to look at the data on how telehealth affects the demand for an effective supply of physicians, but they remain inconclusive,” Dill comments. “However, to the extent that telehealth expands access to previously underserved populations and areas — which is a good thing — we would also see an increase in demand for physician services when we are already projecting growing shortages. In fact, underserved populations are one of our primary concerns during a shortage.”

While not dismissing Kerns’ and Willis’ numbers, Dill says the statistics they cited in their 

 article seem akin to making back-of-the-envelope calculations that lack the rigor of the research that AAMC has done. “We’ve worked with an expert consulting company called IHS Markit to develop a sophisticated model of the physician workforce based on current utilization patterns and the likely factors that will affect future utilization of care,” says Dill. “Based on those numbers, our projections show there are shortages now, and we will see more shortages based in part on the aging of the population. Most baby boomers are now in their 60s and 70s, and health problems tend to accrue as people age.”

Kerns counters: “The Advisory Board’s calculations are not meant to show how primary care demand will manifest given current expectations about what physician distribution and patient complexity are likely to look like in the coming years. In fact, we agree that at (the) current course and speed, the country is likely on track for shortages in many regions. Rather, our modeling exercise was intended to show how emerging innovations in care delivery — scaled broadly — could help mitigate current and future shortages.”

“It’s certainly true that demand for care increases with age, but it’s also true that much of that care tends to be chronic in nature,” Kerns notes. “Remote patient monitoring plus regular remote check-ins can reduce the need for both more frequent doctor visits and, crucially, more trips to emergency departments. Care models that embrace regular but lower-intensity patient interactions are more efficient, especially for physicians and groups that specialize in senior care.”

Recognizing that Americans have postponed the use of healthcare services during the pandemic, Dill says those postponements will lead to an increased demand for care later. Much of that pent-up demand will come from those who have chronic and multiple comorbid conditions, along with those who need behavioral healthcare services. In addition, he predicts that the burden of dealing with this surge will fall disproportionately on primary care physicians.

Kerns doesn’t disagree entirely: “We’re already seeing the effects of deferred care on patient acuity, with oncologists reporting spikes in higher-stage cancers presenting at their offices. That increased intensity also increases physician burnout, likely contributing to an increase in physician retirements. These effects only accelerate the need for new care models (that allow) for more efficient and more equitable care — for all patients everywhere.”

Joseph Burns is an independent journalist in Brewster, Massachusetts, who writes about healthcare.

For several years, the Association of American Medical Colleges (AAMC) has presented data showing that the United States faces a shortage of physicians in almost every specialty. In June 2020, the association issued its sixth annual report on the shortage, predicting that in just over a decade, the U.S. healthcare system would face a shortage of between 54,100 and 139,000 physicians in primary and specialty care.









Does the U.S. Have a Shortage of Physicians?

One lesson learned from the ACA is that the risk of failure for the law’s health insurance co-operatives was quite high. All but three of the ACA’s 23 co-op insurers have failed since 2015, one year after the ACA exchanges were launched.

The three survivors are Maine’s Community Health Options (CHO), Mountain Health CO-OP in Montana (which also offers coverage in Idaho and Wyoming) and Common Ground Healthcare Cooperative (CGHC) in Wisconsin. Called the “little miracles” for their ability to survive despite the risks and increased competition, each reported a profit in 2018 and 2019 after suffering big losses in their first three years of operations. All three were profitable again in 2020, but it is too early to say by how much.

Although insurance is always risky, all three co-ops entered 2021 with stronger balance sheets thanks to three years of profits and much larger reserves after getting some long-overdue risk corridor funds that the federal government promised insurers under the ACA. Those funds were delayed for four years because the government illegally limited what HHS could pay out, says Kevin Lewis, CHO’s president and CEO. (The GOP-led Congress had blocked the risk corridor payments.) The three co-op insurers sued HHS, and each received a multimillion dollar settlement last year.

In interviews, executives with the three co-ops talked up the value of operating nonprofit, co-operative insurers, which, by design, must focus on meeting members’ needs. “I don’t think a for-profit operation is a good model for running a health insurance company,” says Mountain Health CEO Richard Miltenberger. Before joining Mountain Health in 2018, Miltenberger had decades of experience as an executive running for-profit health care companies and health insurers. “You shouldn’t be mixing Wall Street demands with how much care we’re going to give members,” he adds. CGHC’s CEO Cathy Mahaffey agreed, saying, “Individuals and employers need a nonprofit, member-centric health insurance company that puts members’ needs first.”

Lewis comments, “Being a nonprofit, we win on service, our local knowledge and having a local presence. Our only calling is being focused on doing what’s right for our membership.”

The co-op model has stimulated competition among health insurers, as Congress intended when it included provisions allowing for co-ops in the ACA, which was signed into law by President Barack Obama in 2010. Seeking to remain competitive in Maine, for example, other insurers have adopted some of CHO’s benefit designs, Lewis notes. “In addition, the state has mandated that in some cases, all insurers need to adopt some of our benefit designs,” he says. “Also, the more competition there is, the better consumers are served.”

All three co-ops will be able to serve members’ needs more effectively because, in April 2020, the U.S. Supreme Court ruled in Maine Community Health Options v. United States that the three co-ops and one other insurer were entitled to more than $12 billion the government had not paid them from 2014 to 2016 under the ACA’s risk corridor provisions. Established to encourage health plans to participate in the ACA’s Marketplace, the risk corridor program required the federal government to shift some of the profits from high-earning insurers to stem losses among insurers with deficits.

As a result of the Supreme Court ruling, Mountain Health received $56 million in August 2020 and used about 15% of the sum to pay legal fees. About 10% went to policyholders in the form of premium credits. The remainder went into reserves and for marketing to attract more members, including employers in the small group market (those with fewer than 100 workers), Miltenberger says. CGHC received $90 million at the end of November and used a portion to repay an obligation to an unnamed organization that provided what Mahaffey calls a financial lifeline of $30 million in 2016. Those funds helped CGHC continue operations when it otherwise might have closed in 2016, she says.

CGHC used the risk corridor funds in multiple ways. “We used part of that money to pay our legal fees, four our obligations for the financial lifeline and to issue rebates to our members,” Mahaffey says. Any amount left over will go into reserves, she says.

At the end of September, Lewis’ CHO received $59 million in risk corridor payments. As in Wisconsin and Montana, some of those funds went to pay legal expenses, 16% went to policyholders in the form of rebates, and the remainder will go into reserves, Lewis says. “Having a healthy reserve allows an insurer to weather whatever comes up in the market,” he adds. “If you don’t have sufficient capital reserves, that could lead an insurance company into trouble.”

The risk corridor funds also allow the co-ops to market health insurance to more individuals and to employers, as Mountain Health has done. After it was founded in 2014, Mountain Health moved into Idaho in 2015, offering individual and small group coverage. This year it began selling similar plans in Wyoming. Mountain Heath is the only co-op to offer health insurance in more than one state, Miltenberger says.

In late December, Miltenberger says, enrollment had increased in Wyoming and Montana, but the numbers were changing because many enrollees still needed to make their first premium payments in January.

Until this year, Blue Cross Blue Shield (BCBS) of Wyoming was the only insurer offering major medical coverage in the state and had an enrollment of about 25,000 individuals. Once Mountain Health entered the market, BCBS of Wyoming dropped its rates by about 10% for this year, according to Louise Norris, an insurance broker in Colorado who tracks insurance rates for HealthInsurance.org.

CHO is also seeking to add new members. After Maine expanded its Medicaid program rules in 2019, enrollment in ACA exchange plans declined from 71,000 individuals in 2019 to 62,000 in 2020, according to Norris’ figures. That drop affected the Maine co-op; the number of individuals it insured declined slightly from 26,800 in 2020 to about 25,500 this year, nearly half of whom are in the employer market, Lewis says. “That modest decline is due to a shrinking individual market and aging into Medicare,” he says. CHO’s competitors are Anthem, which reentered the Maine market in 2019 after leaving in 2017, and Harvard Pilgrim. Despite this competition, CHO expects to report a profit for 2020, Lewis says.

CGHC is continuing to expand, Mahaffey says. In 2018, the Wisconsin co-op was the only health insurer in seven Wisconsin counties, but as of last year it had 54,000 members (down from 62,000 in 2019) in 20 of the state’s 72 counties. In December, Mahaffey estimated the co-op would have 50,000 covered lives, although CGHC did not yet have numbers for the small group market.

A favorable Supreme Court ruling has improved the financial outlook of the three nonprofit health insurers. 

Risky Business: Only Three of the ACA’s 23 co-ops Remain

It’s difficult to imagine how the nation’s two political parties could be further apart on health care. With voters going to the polls early in record numbers and Election Day next week looming large in the country’s collective consciousness, it seems there is little, if any, agreement between the Democrats and Republicans on healthcare issues. The division has been widened by the COVID-19 pandemic, with President Trump saying the country is “rounding the corner” with respect to the pandemic and Democratic candidate, Joe Biden, calling for national mask mandate.

Republicans v. Democrats on the ACA, health insurance

The Democrats who have a list of what they see as the solutions to the healthcare problems that many Americans face as the cost of care rises and the economy wobbles because of the pandemic. Increasing unemployment has meant more Americans (perhaps as many as 12 million according to some estimates) have lost their employer-sponsored health insurance and the Democrats want to provide them with coverage. The Democrats would prefer to provide coverage under the ACA, which was signed into law in 2010 with the major provisions going into effect in 2014. They could do so through Medicaid — at least in the 38 states (and Washington, D.C.) that chosen to expand the state-and-federal health care program under the ACA. In addition, some progressive Democrats favor a sweeping Medicare-for-all, single-payer system. The centrists in the party, including presidential candidate Joe Biden, favor modifying the ACA. Biden has proposing increasing subsidies for people buying coverage on the ACA exchanges and allowing people to enroll in Medicare starting at age 60.

President Donald Trump and Republicans want to repeal the ACA. The administration supports the 20 states that filed a lawsuit arguing that the ACA is unconstitutional because the individual mandate provision was eliminated. The U.S. Supreme Court is scheduled to hear oral arguments in that case, Texas v. California, on Nov. 10.

In place of the ACA, which sets requirements on what health plans must cover, the Trump administration and the Republicans have promoted short-term, limited-duration (STLD) health plans and association health plans. The premiums for these plans are lower than plans that comply with the ACA, but they are limited in the services that they cover.

On its website, the campaign to re-elect President Donald J. Trump touts such accomplishments as expanding access to Association Health Plans (AHPs) to allow small business to pool risk across states and for allowing STLD plans to be extended for as long as 364 days for consumers seeking lower premiums and less robust coverage.

Under the Tax Cuts and Jobs Act of 2019, the Trump administration repealed the individual mandate that had been part of the ACA. On its website, the Trump campaign says the mandate forced consumers to buy expensive insurance. The website also mentions that the president signed a six-year extension of the Children’s Health Insurance Program to pay for health insurance for 9 million children.

Controlling drug prices top issue for Republicans

Controlling drug prices is a top health care priority of the Trump administration, says James C.

 Capretta, a resident fellow and the Milton Friedman Chair at the right-leaning think tank, the American Enterprise Institute. “In the healthcare sphere, drug pricing would be number one,” he said. “Then other issues, such as price transparency and health reimbursement accounts, would follow behind that.

If Trump wins re-election and the Republicans control at least the U.S. Senate, then it’s safe to say that past will be prologue for 2021 if not longer, Capretta observes.

“The agenda for Republicans is almost certainly going to remain as it has been since 2017,” he notes. “By that I mean there will be a focus on administrative action related to loosening regulations.”

If there is a second Trump administration, executive orders and administrative changes are likely to be the main tools of its healthcare policies because Democrats are expected to retain control of the U.S. House of Representatives regardless of how the presidential vote turns out — and whether the Republicans keep their current 53-47 hold on the Senate.

“It’s possible that there could be some legislation in a second Trump term around drug pricing, but it’s more likely that the president and his team would push something around an international drug-price index,” Capretta says. During the second half of this year, Trump has signed a flurry of executive orders that would, among several things, tie prices that CMS pays for certain Medicare Part B and D drug to the lowest price paid by a comparable country. Trump has also signed executive orders that would facilitate the importation of drugs by individuals.

“The idea of any kind of Trump legislative initiatives making it through the Congress seems quite remote,” Capretta continues. “Moreover, I don't think they have a legislative health agenda that they would be ready and wanting to push as a priority.”

Among the administrative and regulatory changes they are likely to pursue is price transparency initiatives that HHS proposed in 2018 for hospitals and health insurers. “This is a huge priority for the administration,” he said. That means the Republicans will press for even more disclosures on price and ways to make price transparency useful for consumers.

In addition, the administration is likely to push for wider use of health reimbursement arrangements (HRAs) by promoting them hat as an option for consumers buying health insurance in the individual market and encourage that employers promote HRAs to their workers as a way to cut health care costs, Capretta suggested.

Expanding healthcare insurance coverage top issue for Democrats

While Trump and the Republicans will focus on drug prices and cost control, the Democrats will call for more health insurance coverage for those who are uninsured, including those who have lost their employer-sponsored insurance, says Daniel Mendelson, the founder of the health care consulting firm Avalere Health.

Healthcare is almost always a top priority for Democrats, and healthcare and COVID-19 are together because virtually all Democrats want to get the pandemic under control, Mendelson said.

When the pandemic took off this spring, most of infections and serious cases and deaths were in blue states, including Washington State, which is where the first outbreak occurred, California and New York where the most deaths occurred. But the pandemic started to affect red states this summer and fall. This week, the CDC is reporting that North and South Dakota, Montana, Arkansas and Tennessee are experiencing the highest rate of deaths per 100,000 population.

"As a result, it has changed from being a blue-state issue to being one that all of us share collectively,’ says Mendelson.

What that means, in Mendelson’s opinion, is that the government’s role in healthcare is likely to increase.

Layoffs and the loss of employer-sponsored health insurance will create an urgency for a public option, Mediare for all, or both, says Mendelson.

“Even before the recession, Medicare and Medicaid and then after the recession started, even more people became eligible for Medicaid,” he reported.

“Interestingly, the states are expanding Medicaid through ballot initiatives, and some of those initiatives have succeeded because voters in those states are concerned about the issues around uninsurance and the high cost of health care,” he noted.

Mendelson also noted that more seniors choosing to sign up for Medicare Advantage plans rather than traditional Medicare because they want more control over their health care expenses.

“Those two trends mean that the government role in health care is growing and health plans are very attentive to these trends,” Mendelson explained. “That’s one of the reasons they are focused on having great relationships with the state governments and with the federal government.”

For all these reasons, Democrats are likely to work to expand health insurance for more Americans, he predicted.

“If Biden wins, Democrats will want to expand coverage options through the channels that are in place now, such as Medicare, Medicaid, and the health insurance exchanges,” he said. “They are not likely to try to create massive new government programs or to put everybody into Medicare.”

Here's what healthcare executives can expect depending who  wins next week's election.