AMCP: Plans respond to market with clever products and policies

April 4, 2014

While Medicare will use blunt instruments to institute payment reform, private payers will be more nimble, causing providers to abandon fee-for-service Medicare in favor of Medicare Advantage.

There is bipartisan support of payment reform, according to Scott Gottlieb, MD, speaking at yesterday's general session. He said the Sustainable Growth Rate bill-which he believes will pass this year-embraces and codifies payment reform.

"That is something that I think is inevitable," Dr. Gottlieb said.

While Medicare will use blunt instruments to institute payment reform, private payers will be more nimble, causing providers to abandon fee-for-service Medicare in favor of Medicare Advantage. However, the private market does tend to follow some of the momentum of Medicare, so he believes that capitation models and bundled payment will be part of both markets.

For health plans, the contours of coverage will bifurcate. Specifically, he envisions profound change coming from employers' desire to move to defined contribution and away from defined benefit. As more workers shift to private exchanges as a result, health plans will design two types of plans: one type for private exchanges and one for the state and federal marketplaces.

And the trend will grow among employer groups.

"The idea that large employers won't move workers to the exchanges is hard to believe," Dr. Gottlieb said. "Once we have certainty around the political dynamic [in 2016], you'll see more employers move those workers into exchanges."

Plans have indicated their private exchange products will resemble Silver metal plans (70% actuarial value). Dr. Gottlieb said the networks will most likely be different between the two platforms.

2016 Election 

Republicans will need to propose more details on health reform, especially improvements to the Affordable Care Act (ACA) in the 2016 race. The Patient Choice, Affordability, Responsibility and Empowerment Act, or Patient CARE Act (PCA) is one example of how such reform might be constructed.

"The reality is you can't just repeal ACA," Dr. Gottlieb said. "You have to replace it with something that looks like the ACA structure."

For example, the subsidies now available to families in the working class and low-to-middle income populations are transformative. Consumers who couldn't access healthcare because of premium and out-of-pocket costs now have benefits. Taking that away will not fly politically now.

"Republicans will do much better coming up with a thoughtful plan this time," he said.

For 2016, the number of people who will gain or have gained coverage under one party's policy will not be the top-line comparator as it was with the Obama/McCain race. Rather, the human dimension of access to care and coverage will have more appeal.

"We'll have more Republican politicians talking about access as a moral issue," he said.

Political Risk

In the meantime, the cost of coverage remains a hot-button topic among pundits.

Even though premium increases in 2015 seem like a given, the issue that will cause greater outrage will be the clawback from the IRS for consumers who have income changes that affect their estimated and actual subsidy credit in the exchanges. 2014 subsidies were based on 2013 income. Those who received more generous subsidies than they were entitled to will end up paying back the government.

"I suspect more people will get clawbacks than checks," Dr. Gottlieb said.