What do the two presidential candidates have right in healthcare policy? Where do they both go wrong? And what will it take for payment reform to take off? Michael Abrams of Numerof discusses what comes after Election Day.
As voters head to the polls today, Americans view the Affordable Care Act (ACA) more favorably than they did just a year ago, according to the Kaiser Health Tracking Poll. Although the economy and the coronavirus disease 2019 (COVID-19) pandemic are more topic of mind than healthcare policy, the fate of the ACA is very important to Democrats and independent voters. Notably, the Kaiser poll has consistently found that Americans overwhelmingly support a mandate that insurers cover pre-existing conditions, something that was not required before the ACA passed.
President Donald Trump has signed an executive order requiring insurers to retain such coverage if the ACA is overturned by the Supreme Court, although some legal experts have questioned how much weight the order carries. Vice President Joe Biden, who was in office when the ACA took effect, has promised to expand upon it and add a “public option.”
So, what will happen in healthcare policy after one of the most contentious elections in US history? For insights, Managed Healthcare Executive® turned to Michael Abrams, MA, a co-founder and managing partner of Numerof, which advises on payment delivery models and payer strategy. This interview is edited slightly for clarity.
Managed Healthcare Executive®: For each of the candidates—President Donald Trump and former Vice President Joe Biden—what proposals for healthcare stand out to you as being particularly important or perhaps particularly problematic?
Michael Abrams: The candidates agree on more than a few things. They agree that the cost of healthcare is too high. But they have very different ideas and very different rationales about what the solution to that problem is. And I would say that in both cases, neither of them seems to have a solution that's likely to be effective.
The Trump administration has been working on the fundamental assumption that the less involved the federal government is in everybody's life—and particularly in their healthcare—the better off everyone will be. That’s reflected in the actions the Trump administration has taken; most notably, the administration has sponsored efforts to dismantle the Affordable Care Act, or “Obamacare.” Trump has made it plain that the administration's position is that the Affordable Care Act is unconstitutional, ineffective, and an overreach by the federal government into territory that, from the administration's point of view, should be the business of states.
To reinforce that point, the administration has given the states opportunities to customize healthcare delivery; to experiment, for example, with new ways to pay for Medicare. The administration has not come up with a comprehensive plan that would replace the ACA, although in the run up to the election, it has committed itself to upholding some of the features of the ACA that are most popular, most notably allowing children to stay on their parents' plan until the age of 26 and coverage for pre-existing conditions.
Now, a Biden administration would take a very different approach to trying to reduce healthcare costs, and that would be by involving the federal government more deeply in healthcare. A Biden administration would build on the Affordable Care Act, by creating a public option similar to Medicare, which individuals could buy into.
Both candidates talk about the high cost of healthcare, but in reality, they're talking about the high cost of healthcare insurance. Both candidates seem to be struggling with the fallacy that you can reduce the cost of healthcare insurance without doing anything about the cost of healthcare itself, which is, I think, a fallacy that has plagued many administrations for some time.
Although the current administration has, through CMS, taken some steps to force the healthcare delivery sector to function in a way that's more transparent and more consumer responsive, those actions—while they are steps in the right direction—I would not say that they rise to the level of a plan. At the current rate of implementation, they would not bring the cost of healthcare down to reasonable levels in time to basically prevent bankrupting the economy.
Likewise, the Biden plan to federalize healthcare delivery promises to make the deficits that we've seen in Medicare look paltry by comparison. And, I think [this] will hasten the point in time at which Congress will have to make choices between bankruptcy and healthcare rationing.
So, in the sense that neither candidate has a plan to restructure incentives built into the current system that reward organizations for delivering more and more expensive care to patients —they share a common commitment, I think, to failure. When it comes to solving this problem, neither has a viable answer. I think that’s one of the signature issues of this election.
MHE: Are there anything aspects of the Trump administration's approach that have worked?
Abrams: The Trump administration, once it found that it could not get rid of the ACA, set its sights on taking it apart piece by piece. They started with the individual mandate, which the administration considered to be unfair; they succeeded in reducing the individual mandate, basically to zero—making it a non-issue. I'm not sure that I could call that a success with the populace. I'm not sure how many people really noticed. But certainly, it has been a success from a legal point of view, because it opened the door to making a legal case that the law itself was unconstitutional, in as much as the mandate could was no longer there. you couldn't consider it to be a tax when it was zero. The success of that particular effort is questionable.
The administration has opened the door to enable states to add work requirements to Medicaid. And, you know, as part of the ACA, the federal government subsidized the cost of expanding Medicaid eligibility by including all low-income adults and raising the income threshold. And so far, 37 states have opted into this provision. What the administration has done is to offer states a path to imposing work requirements on beneficiaries that requires them to document that they're either in school, or that they are putting a minimum number of hours per week or per month, into some kind of community engagement. Quite a number of the states that have expanded Medicaid have indicated that they plan to implement this provision. But for most of those efforts, it's too early to evaluate whether they've had any impact one way or another.
The administration also took steps to end cost-sharing subsidies to insurers. These subsidies were part of the original ACA, subsidizing ensures cost of care delivery, on the assumption that it would help to keep premiums low and incentivize participation in the program. In 2017, the current administration ended those subsidies that left a lot of insurers in a bind, because they were obligated as part of the ACA to subsidize the cost of coverage for low income beneficiaries, but they were no longer getting the subsidies from the federal government that they had planned on. So I guess it's really not surprising that they did figure out a way to solve their problem. They simply raised the cost of Silver Plans, which are the basis for tax consequences of the whole program. And since Silver Plan pricing is what factored into tax credits, the net effect of this change has been that the government pretty much spent what it might have saved on insurance plan subsidies in a different way. So net-net can say we have any home runs there?
Also, the administration has tweaked what are called “skinny” insurance plans. The ACA initially established rules that health plans sold on the exchanges had to cover people with pre-existing conditions and had to provide a certain set of essential benefits. And any plan that didn't do that was limited to a duration of three months. What this administration did was to change those rules and enable such plans with less than the usual list of essential benefits to be offered up for as a term up to 364 days and renewable for up to three years. So basically, this was an option for individuals who were willing to trade off cost because these plans are less expensive for breadth of coverage. From the administration's point of view, this was giving consumers more choice, and the freedom to make those kinds of economic trade-offs.
Access to those plans was very variable by geography. And I guess the only conclusion that we can draw at this point is that signups on the exchanges have remained fairly stable, which perhaps is an indication that these skinny plans have not accounted for any significant amount of market share.
Finally, I guess the administration made cuts to the budget that would otherwise have been used to promote the exchange plans. There were navigator programs that provided individuals that would help consumers work their way through the complexities of the whole process. And there was money that was intended for advertising the plans, most of that, if not all of it went away. Again, I guess I would say that since signups on the exchanges have remained relatively stable, it hasn't made a difference one way or the other, in terms of public participation in exchange plans.
MHE: As we know, the lawsuit from the attorneys general to overturn the ACA is going to the Supreme Court right after the election. It’s going to come down to the question of severability. Do you think that the court will entertain that option? And if so, which parts of the ACA do you think would have the potential to survive? Two areas we have heard discussed are the Center for Medicare and Medicaid Innovation (CMMI) and the areas of the law that concern promoting biosimilars.
Abrams: At this point it’s very much an open question what the outcome of that process could be, it's possible that the court could uphold the entire Act. But that does seem to be a long shot. The fact that the [individual] mandate has basically gone away … remains a very significant change in the picture because the case can no longer be made that this is a tax. And that's what landed it in the realm of acceptability because that was something that Congress could do. So, in terms of where we go from here, aside from the unlikely outcome that the court upholds the entire law, they could void the individual mandate, but uphold the rest of the statute. And that would essentially maintain much of the healthcare system the way it is. Another option is that the court could strike down the law, but give Congress a chance to change the parts of it that are deemed unconstitutional, depending upon when that happens. And [depending upon] the makeup of Congress, pretty much anything could happen.
MHE: Could they put a timeline on it? Give Congress a date to fix it, or something like that?
Abrams: Yes, I would imagine they would want to draw some parameters around it, so it doesn't drag on forever.
As far as CMMI, there has been some discussion about making changes to CMMI; that the role of CMMI was intended to be a perhaps change leadership role. They have been in the business of instituting pilot programs that have been voluntary, for the most part. The idea is to give healthcare provider organizations, some limits—along with some exposure to and some experience with—programs that would make them accountable for the cost of the care that they deliver, and also accountable for the quality of the outcomes that that they get.
The problem is those efforts have been entirely voluntary, and have been very modest in their ambition. And the net effect of it is that healthcare delivery institutions, in many cases, have given lip service to the concept of accountability for cost and quality by participating in a very nominal fashion with these programs; participation is, relative to the total volume, typically, it is less than 10% of their total revenue picture.
And I do understand healthcare provider organizations are, interestingly enough, very nervous about the idea of being accountable. And as long as they have the option of not being accountable for the cost of care and the quality that they deliver, they're not going to voluntarily move in that direction.
Numerof does an annual survey that looks at the penetration of these Value Based Payment programs, across healthcare organizations in the country. We've done this now for five years. And healthcare executives across the country all agree that alternative payment models, value-based models that hold them accountable for cost and quality are inevitable—they’re definitely coming. But most of them have successfully resisted making any significant portion of their revenues dependent upon such programs. I think the bottom line is that unless CMMI is empowered to make such programs mandatory across healthcare institutions in this country, we're not going to see progress towards a value-based approach anytime soon.
MHE: As an example, CMMI recently tried to make a final model for radiation oncologists mandatory effective January 1, 2021, and they had a lot of pushback. The radiation oncologists threatened to go to Congress and were successful in getting a delay—so that seems to be what happens.
Abrams: The American Medical Association and the American Hospital Association are [approximately] number five and six for the decade in terms of their spending on lobbyists. And I think that accounts in no small measure for the slow pace of penetration of the idea that healthcare providers should in fact be accountable for the cost of care and the quality they deliver.
MHE: So we talked earlier about coverage for pre-existing conditions, which the Trump administration had already talked about retaining. Every poll I've seen shows that has become the most popular element of the ACA along with the provision for leaving children on the family health plan until they turn 26. Have people come to see those elements as a right? Are those features that are likely here to stay no matter what happens at the Supreme Court?
Abrams: No one who buys health insurance would choose to have surprises embedded in their coverage, such as, “Oh, well, you had that before you got the policy, so we're not going to pay for your care.” I think that was always an issue. And like so many other things, the pandemic has exacerbated the issue, with the millions who have now had COVID-19. Many of them, perhaps all of them, might ultimately be judged to have after effects, which is to say, pre-existing conditions, that would go into any future coverage policy. I don't think that anybody is prepared for making that [fall outside coverage]. It was always important, and even more so now than it ever was before.
MHE: We've heard more and more about drug pricing. And we've heard more about employers getting more active about problems with [pharmacy benefit managers]. Where do employers fit in with drug pricing and rebate situations? We've heard a lot of talk, but it’s questionable whether we've seen anything that's really been effective. Do you think that we'll see anything happen with drug pricing, no matter who wins?
Abrams: I think we will, because there's certainly bipartisan support for doing something about it. Now, whether either party has a solution that's going to make a meaningful difference is a separate question.
I think both candidates share a preoccupation with the 15% of the healthcare dollar that is accounted for by drugs. And each has proposed a policy solution that they claim will address the issue of expensive pharmaceuticals. The Trump administration's proposed solution is to index the price that is paid by Medicare, to an international basket of prices that are some of our Western European allies pay for the drugs that they buy from the same manufacturers.
Now, most of these countries negotiate drug prices with manufacturers. And in those negotiations, they leverage the entire purchases that they make in return for better pricing. A key difference between those countries and the United States is that we have legislation that precludes that kind of negotiation between CMS and the manufacturers, that is certainly a part of why we are paying more than these European countries. The solution that has been advanced by the Trump administration would allow CMS to take advantage of negotiations done by our European allies, yielding prices, presumably, that are similar to theirs.
Now, Biden's team has proposed a different route to the same outcome. … I did indicate that the existence of legislation that precludes direct negotiation between CMS and manufacturers is part of the reason that we have the situation that we have. The Biden proposal is to simply do away with that legislation, and enable CMS for at least some identifiable subset of drugs to negotiate directly with manufacturers.
Biden would, in addition, establish a commission that would render decisions about what the real value and presumably the price should be for any given drug or new drug that comes on the scene. And that would factor into the prices that CMS would then pay. So the question is, do either these have a chance of making a difference? I think, like lots of other quick fixes that have been advanced to this problem, the short-term impact for consumers and for healthcare institutions would probably be lower drug costs. Longer term, I think manufacturers would need to make some hard choices in order to sustain the margins that they count on to attract the investors who are being who are opting to invest their funds in the risky business of drug development.
The bottom line is that it's a risky undertaking. And investors want to have a return that's commensurate with the risk that they take. If those returns are going to be depressed, something's going to have to give, and the most likely outcome is that manufacturers will have to take a hard look at their R&D expenditures and will eliminate those drugs in development that they're that are judged to be in the most risky, the longest shot in terms of having of yielding the kind of return that the manufacturer needs to continue to offer the kind of dividends that they've been offering. So, the longer term impact of either one of these, if they managed to get passed, is that it would endanger the preeminent position of US-based manufacturers in the US market, in the whole enterprise of drug development.
MHE: Any final thoughts as we look ahead to 2021?
Abrams: I do think that some of the efforts by CMMI, in terms of the pilot programs that they have run, offer some potential in terms of controlling the cost of healthcare, and ultimately, the cost of healthcare insurance. But I think that the only option that I can see that offers a path to genuine change in this picture is to realign the incentives that currently exist in healthcare.
Right now, we encourage healthcare providers to provide more services and more expensive services to patients instead of getting them to think about the most cost-effective solution or procedure to provide to patients, that gets the best outcome for the least cost. Until we change that, nothing really changes. It's all window dressing. And I think Congress needs to tackle this head on. CMS is the only payer in the country that has the freedom to pretty much do anything that it wants, because it controls roughly half of the volume of insurance in the country. None of the commercial payers are in a position to do that. They will all follow CMS’ lead. So, until that level of leadership is shown, I don't think we can expect anything really to change.