A view from the Center

Deloitte's Life Sciences & Health Care Blog

In health care, we’ve learned to expect the unexpected

“Uncertainty” is probably an overused word in our communications these days. But we haven’t found a better term to describe the political, policy, and marketplace outlook surrounding the Affordable Care Act (ACA), and ongoing efforts from Congress and the administration to repeal and replace significant chunks of that landmark statute.

As of this writing, the Senate’s effort to use the fiscal year 2017 budget reconciliation process to legislate an ACA overhaul is an unresolved mystery (see story below). Many commentators are calling the Better Care Reconciliation Act (BCRA) dead, though we’re avoiding that term for now, as we think it is premature.

We try not to count any chickens before they hatch. And that’s not a pun about the chairman of the Senate Finance Committee.

In the midst of this historic uncertainty, I am thinking about a number of interrelated topics, including a handful of observations below:

  • Traditional scenario planning is not cost-effective in this environment. Over the years, our health care practice has used classic scenario planning techniques and models to help many industry leaders plot their strategic options and position for long-term success. But the current political and policy environment is so unsettled and unpredictable that we don’t want our clients to over-invest in or over-engineer their strategic planning approaches. Don’t get me wrong – we maintain an up-to-date set of market scenarios that we use internally and with our clients on a regular basis. However, it’s generally not cost-effective right now to go into our traditional level of narrative or quantitative detail. Instead, we’re finding more value in far-ranging, lightly-facilitated conversations with client executives and boards in order to circumscribe and probe the art of the possible and associated high-level implications. This approach brings a modicum of helpful structure to support our maxim of expecting the unexpected.
  • The individual health insurance market could be entering an even more painful phase. Our financial analysis plus anecdotal observations from our client work demonstrate that the individual market continues to improve in 2017 in many meaningful respects. But our hopes for 2018 are growing dimmer by the day, taking the vantage point of consumers, insurers, and providers. The uncertainty surrounding ACA repeal and replacement is one important driver of our unfavorable outlook. Just as important is current-year uncertainty surrounding ongoing ACA administration, including cost-sharing reduction payments to insurers, enforcement of the individual mandate, management of this fall’s open-enrollment period, mixed messages to stakeholders, and more. I have the pleasure of working with 120 of the best health actuaries in the business. Every time I talk to them about the individual market, their qualitative and quantitative outlook grows more pessimistic. I think they’re right.
  • The role of Medicaid is becoming better and more widely understood. Medicaid’s importance – not just in the ACA coverage expansion, but in the US health care system overall – is finally receiving the attention that it warrants. The program has historically suffered (unfairly, in my view) from comparisons to Medicare, its 1965 Social Security Act Amendments sibling. It took the House and Senate repeal and replacement debate to bring Medicaid issues into a bright, national spotlight. Let’s hope that Medicaid’s moment in the sun is not like Andy Warhol’s proverbial fifteen minutes of fame. Medicaid is a foundational pillar of our national health care system. It deserves broader and sustained focus as the reform debate evolves.
  • Federalism maintains an ascendant trajectory. This is an issue where we’ve maintained high levels of certainty and consistency since the November 2016 elections. The administration and the Congress demonstrate clear commitment to shifting responsibility and decision rights from Washington, DC to state capitals across the country. There is of course uncertainty about whether BCRA and/or other legislation will change fundamental statutory relationships between the federal government and the states. The BCRA Medicaid per capita cap and block grant proposals are the foremost examples of such a fundamental shift. However, even in the absence of major legislative change, existing statutory authorities provide US Department of Health and Human Services (HHS) with broad latitude and powerful tools to support the shifting of discretion to states. The most important of these are Medicaid section 1115 and ACA section 1332 waiver authorities. I expect the administration’s expansive federalism will have a major impact on health policy and health care markets under any legislative scenario.
  • There is no “done.” As the Tom Hanks character decried in A League of Their Own, “There’s no crying in baseball!” And so it is in our business. There is no “done” in health reform, or in health policy, or in health care, no matter what happens in the 115th Congress. Too many intractable problems. Too much opportunity for improvement. Too important for individuals and families. Too critical for our nation. Too much to do.

Expect the unexpected.

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Author bio

Greg Scott, Deloitte Consulting LLP, is national leader of the Health Plans Practice. He has over 25 years of industry experience as a management consultant, insurance company executive, and government official. Greg’s expertise includes health system reform, Medicare, Medicaid, market strategy, operational performance improvement, and M&A. He has served commercial health plans, integrated delivery systems, PBMs, and federal and state government agencies. Greg joined Deloitte in 1998.