A view from the Center

Deloitte's Life Sciences & Health Care Blog

Four critical questions for health care in the face of a new administration

The campaign is over. The nation has voted. 2016 is behind us. Today, Donald Trump will take office and the Republican Congress plan to repeal and replace the Affordable Care Act (ACA) – the one main policy issue related to health care that his campaign focused on. What other areas of health care are likely to be impacted? How much change can we expect? And at what pace?

Looking ahead, I think there are four critical areas and questions for health care in the face of a new administration:

Coverage. What is the fate of the ACA? What is the projected growth in Medicare, Medicaid, and the commercial market? Are the Exchanges sustainable?

The wheels here are already in motion. On the first day of the new, GOP-controlled Congress, the Senate proposed a budget resolution with instructions to key congressional committees to find $1 billion in savings by repealing the ACA. The move is a central element of an effort being described as “repeal and delay” that Republican congressional leaders have outlined since the November 2016 elections. A reconciliation bill detailing exactly how ACA repeal will proceed will follow, the details of which cannot be known at this time and may not be known for several months. But, some Republicans have called for a transition period of as long as three years, while others have called for a more expeditious transition. The transition period is intended to provide time for Congress separately to develop an alternative approach to addressing health care coverage, particularly in the individual and Medicaid markets.

Affordability. How will the issues of high premiums and drug costs be addressed?

Much of the discussion during the campaign focused on the access issues of the ACA, and less on the main drivers of cost increases. Drivers of cost growth will likely continue regardless of any fix that we settle on for the access issue. In general, we live longer today than ever before, new treatments are expensive, and incentives are misaligned. If you chart spending per capita against life expectancy compared to all the other industrialized nations, the US spends two-to-three times more, but our life expectancy is less than any of the other industrialized countries. Some of this has to do with the structure of our health care system. I think both parties understand that, but where they differ is how to approach change.

There is also quite a bit of anxiety in the industry that coverage is likely to decrease in some way and that a greater percentage of the population could have high deductible plans. The average American family earns little more than $50,000 a year and carries a credit card balance of $5,700.1 And, for families in an employer-sponsored high-deductible health plan, the average deductible is more than $4,000. If they fall seriously ill and suddenly owe $5,000 in medical expenses, the math does not add up; they will have trouble paying. Hospitals are feeling the pressure of bad debt, slow pay, or even no pay because people simply don’t have the money. Concerns about changes in Medicaid spending and a rollback of the expansion that has occurred in recent years also amplify the looming question of what could happen to the approximately 20 million Americans that have recently gained coverage. The health care delivery system is facing potential risk for further financial challenge.

We also can’t overlook the role of the economy. If the economy takes off, growing more than it has in recent years, it could alleviate some affordability concerns. If it doesn’t, the problems in 2017 will likely be very acute, and the economy will be an important part of the health care policy of the new administration.

Payment reform. What is Congress considering next on future payment and delivery reforms and/or entitlement reforms?

Trump has not indicated any interest in unravelling payment reform or the focus on reducing cost and improving quality. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) was a bipartisan, bicameral agreement and addressed a long-standing problem. MACRA is poised to transform our delivery system as it creates financial incentives for clinicians to move away from traditional volume-based services to new value-based and coordinated-care models.

But, Trump’s pick for Secretary of the US Department of Health and Human Services, Tom Price, an orthopedic surgeon from Georgia, has raised some questions about the future of these payment and delivery reform programs. For one, Price has been vocal about his concerns with the burden that many of these regulatory and legislative changes places on clinicians and patients. Moreover, he has opposed the mandatory bundled payment programs initiated by HHS under the Obama Administration, and could seek to reverse course on those initiatives as Secretary. With the new administration and under the direction of a Secretary Price, we could see dialing back of some of these initiatives.

Tax reform. Will Congress tackle tax reform and make major changes to the tax treatment of employer-sponsored plans and benefit designs?

With the call to repeal the ACA, it is likely that many of the individual and business taxes enacted under that legislation will be on the chopping block as well. Among the business taxes expected to be eliminated are:

• The 2.3 percent excise tax on covered medical devices, which was suspended for 2016 and 2017 (after originally becoming effective in 2013) and is now scheduled to take effect again in 2018.

• The so-called “Cadillac” tax on high-cost employer-provided health plans, which, after being delayed for two years, is currently set to take effect in 2020.

• Suspension of the ACA tax on health plans began on January 1, 2017. The tax was suspended for one year. It was in effect until December 31, 2016, but will begin again on January 1, 2018.

However, Congress’s appetite to repeal these taxes may be impacted by any plans lawmakers have for broader tax reform.

So while pundits can make some predictions, we are in a time of uncertainty. In the first 100 days of the Trump administration perhaps we will see progress in a particular direction. Only time will tell how things will pan out. But regardless of your politics, I think most can agree that our health care system needs some fundamental change. The status quo is not sustainable.

Source:

1 Federal Reserve Board, Survey of Consumer Finances, 2013.

 

Author bio

Dr. Mitch Morris is the Vice Chair and Global Leader for the Health Care Sector at Deloitte, including Consulting, Audit, Tax, and Financial Advisory Services. Dr. Morris has more than 30 years of health care experience in consulting, health care administration, research, technology, education, and clinical care. Earlier, he served as a Senior VP of health systems and CIO at MD Anderson Cancer Center where he was also Professor in Gynecologic Oncology and in Health Services Research.