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Maximize Value January 16, 2017

Providers’ Repeal-and-Replace Playbook

Partner and Chief Medical Officer, Health & Life Sciences, Oliver Wyman
Key Takeaway
In this moment of uncertainty for #healthcare, #providers must continue to focus on improving patient-care value

When President-elect Donald Trump is sworn in later this week, we may finally gain a clearer view of his “repeal and replace” plans.

However, as noted in this November 2016 post, we expect that any major changes for providers will be relatively slow in coming – even in the event of full-scale repeal. Vice President-elect Mike Pence has reinforced the need to be careful in changing the law so that families and patients are not disrupted in their access to care. In addition, Republican members of the House are noting that the law may be repealed at once, but the phase-in will be gradual.

For providers to plan for the future, it is important to keep the focus on improving patient-care value and remember what IS steady as she goes:

MACRA

This topic has not been mentioned in any discussion by the House or Senate leadership to date. The bill was passed in the Republican-controlled House and Senate and signed by President Obama. It fixed a longstanding problem with the Sustainable Growth Rate and is unlikely to be changed in the short or intermediate term.

ACA provider payment mechanisms

The provider value-based payment arrangements launched by the Affordable Care Act (ACA) were the only section of the law scored as cost-saving by the Congressional Budget Office (CBO). In fact, in a 2015 analysis on the potential effects of a repeal of the ACA, the CBO noted that “the ACA also includes many other provisions related to health care that are estimated to reduce net federal outlays, primarily for Medicare. The provisions with the largest effects reduced payments to hospital, to other providers of care, and to private insurance plans delivering Medicare’s benefits, relative to what they would have been under prior law. Repealing all of those provisions would increase direct spending in the next decade by $879 billion, CBO estimates.”

This $879 billion dollar savings was applied to the Medicare Trust Fund to extend the life of the program, and was also retained as a savings in the House Bill to “repeal Obamacare” sponsored by Rep. Tom Price, the incoming nominee for Secretary of HHS.

Where providers should prepare for change

That said, not all will be status quo. Providers should anticipate the impacts of potential changes to:

Medicaid funding:

The potential conversion of federal funding of Medicare to a system of “block grants” to states would closely follow the defunding of the federal and state exchanges. This action, coupled with the appointment of Dr. Seema Verma, the architect of the Healthy Indiana 2.0 model, might encourage the expansion of this model to other states.

Healthy Indiana 2.0 is an HMO managed program with forced use of Health Savings Accounts. At the time of its approval, this Medicaid expansion program was considered the most significant departure from traditional Medicaid ever approved by CMS. The program claims:

  • Reduced Emergency Room visits
  • Increased use of urgent care
  • Rates of preventive care comparable to commercial insurance

Medicare Advantage Funding:

Reduced funding for Medicare Advantage is under discussion as a part of reducing the federal budget deficit. Because this is subject to administrative, not legislative, action, it could occur quickly. Providers will likely feel increased unit cost pressures in both hospital and physician fees, as well as increased downward pressure on utilization.

Provider playbook

While much uncertainty remains about the scope and staging of repeal and replace, provider health systems and physicians should still begin preparing. Short-term action items include:

  • Immediately implement the changes in care processes, computer systems, compensation and others required for success under MACRA.
  • Anticipate minimal changes in the announced Centers for Medicare and Medicaid Innovation programs, even if the Center itself is eliminated or restructured in some way. The start of new programs may be slowed.
  • Continue an aggressive move to value-based and population-based  care.
  • Continue to push for appropriate risk-based contracts with insurers.

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