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Healthcare Costs: The Silver Bullet for Congressional Consensus

The midterm election results are in, putting us on the cusp of more changes in Washington, D.C. A divided government will create a new political reality with real implications for healthcare. While there are big divisions between the parties on their overarching approaches to healthcare policy, there is also a lot of common ground on which important progress can be made.

Both parties will continue to view healthcare as the piggy bank to break for savings.

Anyone clinging to “repeal and replace” is lost in a 2016 time warp. Democrat control of the House will doom repealing and replacing of the Affordable Care Act, at least for the time being, and most likely in the long term.

However, one thing is for sure – our leaders will agree to zero-in on decreasing healthcare spending.

Specifically, we anticipate a continued focus on drug costs. This is a bipartisan issue, although big differences exist as to how to accomplish reducing drug costs. Some of the actions Congress might take include:

  • Increasing competition among generics, biosimilars and branded products.
  • Closing loopholes and stopping games that let manufacturers keep their product exclusivity (this is an area where deals could get cut).
  • Increasing the power of negotiators like Premier® to create competitive friction.
  • Removing added costs in the system with rebates and special fees.
  • Promoting the use of value-based contracts that take into account product efficacy and ability to improve patient outcomes.

The Trump administration will also press ahead, to the extent that their power allows, on work to rein in those costs.

Additionally, Congress could take steps to constrain spending with action around the transparency of cost and quality data, and by incentivizing healthcare providers to take on more risk. They may also move forward with reforms to the Stark and Anti-kickback laws, as well as take action to continue to address the opioid epidemic.

The main event shifts to the agencies.

With Congress largely at loggerheads, the bulk of healthcare action will shift to Alex Azar and the U.S. Department of Health & Human Services (HHS). There, we expect an extremely aggressive change agenda focused on:

  • Lowering drug prices through increased competition.
  • Creating more affordable insurance options.
  • Rapidly pushing providers to value-based care and assuming more risk.
  • Health information interoperability and access to data.

In particular, we expect HHS to double-down on value-based payment and the movement to two-sided risk. This means that providers in alternative payment models (APMs), such as accountable care organizations (ACOs) or bundled payments, can either increase their revenue by achieving program savings or have to pay Medicare back for increased spending if they don’t meet performance goals. The value-based payment train is moving fast, and the launch of more APMs is imminent. Think of value-based care like a treadmill speeding up. If you stand still, you’ll be thrown off. The only option for providers is to figure out how to keep pace.

Keeping pace for healthcare providers means taking on more risk. For example, Medicare recently proposed a redesign to the Medicare Shared Savings Program (MSSP), which would put participating health systems on a fast track toward two-sided risk. This, and the fact nearly 1,300 entities are participating in CMS’s new bundled payment program, which requires providers to be at downside risk from the start, is proof that the administration means business. Moreover, while many APMs have been voluntary, we expect 2019 to be the year where mandatory models come back to the national stage. This means movement to risk will no longer be optional for most healthcare providers.

While the government has moved slowly on making health information systems interoperable and providing more access to data, there will also be considerable focus in 2019 on supporting patient access to quality and cost information through open application programming interfaces (APIs). In fact, that train has already left the station. HHS is queuing up regulations that it will be issuing in the coming months to address information blocking by locked EHR systems that restrict the use of data and address the challenges patients face with opaque and inaccessible data.

Additionally, Medicaid expansion is continuing with three states (Idaho, Nebraska and Utah) passing expansion in ballot initiatives and three successful Governors who ran on expanding Medicaid (Kansas, Wisconsin and Maine). The administration will continue to grant increased flexibility to states to run their Medicaid program, and states will seek more waivers. This will create opportunities for providers to innovate, as well as potential challenges with Medicaid reimbursement, both from Medicaid managed care plans and recipients. It is also likely that many of the “red” state expansions will include work and other personal responsibility requirements.

These are just some of the highlights around what’s next for healthcare.

No matter what happens as we usher in the new Congress, Premier will continue to use the influence of our entire alliance to impact legislation, federal regulations and demonstration projects to achieve measurable results that align with the key strategies of our members. As always, our goal is to provide insight and solutions to keep Premier members ahead of these changes and help solve the nation’s largest healthcare challenges.

For more election insights, contact us.

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