Healthcare spending to reach 19.7% of GDP by 2026

Healthcare costs are rising. Medications and services provided by physicians are becoming more expensive. The uncertainty over the status of the Affordable Care Act (ACA) has impacted insurance coverage and premiums. The population of the US is aging and Baby Boomers need more care, even as they transition over to Medicare coverage.

A recent report in Health Affairs states that “under current law, national health spending is projected to grow 5.5 percent annually on average … and to represent 19.7 percent of the economy in 2026.” National healthcare spending is expected to reach the $5.7 trillion mark by 2026. The report points to several “fundamental and demographic factors” driving the increase, including:

  • Trends in disposable personal income
  • Increases in prices for medical goods and services
  • Shifts in enrollment from private health insurance to Medicare that result from the continued aging of the baby-boom generation into eligibility.

Prices for medical goods and services are projected to increase more gradually. The increase in these costs was at historic low rates in the previous three years, have risen only 1.1 percent per year from 2014 to 2016. The projection is for the costs of medical goods and services to increase an average of 2.5 percent per year through 2026.

According to the Health Affairs report, prescription drugs are “projected to experience the fastest average annual spending growth” at 6.3 percent per year through 2026. The projected growth “trend primarily reflects faster-anticipated growth in drug prices, which is attributable to a larger share of drug spending being accounted for by specialty drugs over the coming decade.”

As the population ages, Baby Boomers will become eligible for Medicare as well as Medicaid in growing numbers as their medical needs increase and their income decreases in retirement. Given these factors, the “spending growth in Medicare and Medicaid is a substantial contributor to the faster projected overall growth in national health spending through 2026.”

Sam Peirce
March 20, 2018


Doctors urge HHS to level the playing field for independent practices

Vertical and horizontal integration has impacted the ability of independent physicians to provide quality care to their patients. This was the message sent to the Department of Health and Human Services (HHS), from a group of doctors responding to a Request for Information (RFI) regarding Promoting Healthcare Choice and Competition Across the United States. In part, the RFI’s intent was to seek “input from stakeholders on identifying existing state and federal laws, regulations, guidance, requirements, and other policies that limit choice and competition across health care markets.”

The Physicians Advocacy Institute (PAI) submitted a letter to HHS urging them to consider the independent physician’s contributions as well as their challenges in providing quality healthcare in an age of increased vertical and horizontal integration. Large hospitals and other healthcare facilities are merging, creating even larger and more financially powerful entities. At the same time, many hospitals are acquiring independent physicians’ practices.

The theory behind these integrations and acquisitions is that they lower healthcare costs and improve care coordination. However, PAI questions that theory and instead recommends that HHS “focus on programs and policies that create opportunities for independent physician practices, including solo and small group practices, recognizing the significant contributions these practices make to the nation’s health care.”

The PAI also stated that it “strongly supports HHS’ effort to adopt policies that promote a health care system that provides high-quality care at affordable prices, promotes competition, ensures fair and transparent policies, and prevents excessive consolidation.” Encouraging the HHS to level the playing field for smaller, independent physician practices, the PAI encourages “the Department to take into consideration the differences between practice sizes and the value of each, and to account for those differences as it develops new policies.”

Emphasizing that independent physicians provide quality care to their patients and that the horizontal and vertical integrations quite often impact that level of care, the PAI urged HHS “to have policies that do not limit choice or access, and that support fair practices, bargaining power, and market conditions, so physicians and practices already in the market can continue to provide care to their patients, as well as enabling new entrants and competition into the market.”

Sam Peirce
March 19, 2018


White House holds event to tackle EHR interoperability

Electronic health record (EHR) interoperability was the focus of a White House meeting in December, hosted by Jared Kushner (Senior Advisor to President Donald J. Trump and Director of the White House Office of American Innovation) and Seema Verma (Administrator of the Centers for Medicare & Medicaid Services, CMS). Interoperability is the electronic sharing of patient information between different EHR systems and healthcare providers, improving independent physicians’ ability to effectively coordinate care for their patients.

The meeting on interoperability included several health information technology (IT) experts from across the US, as well as members of the Healthcare Information and Management Systems Society (HIMSS) North America Board of Directors. A group discussion on potential action steps for the government to take regarding EHR interoperability was followed by a number of breakout sessions that addressed more specific topics.

According to the HIMSS, those working session topics included:

  • Government’s role: This session focused on a discussion of possible actions the government can take toward encouraging interoperability as well as a realistic timeframe for achieving interoperability goals.
  • Technical standards and authentication: The question of what would be needed for full industry support was discussed in this session. Questions included how to verify identities for safety and security around protected patient information.
  • Patient and physician engagement: This session focused on solutions to encourage participation among physicians and patients.
  • Public/private partnership: A discussion around how to encourage private sector innovation was the focus of this session, including how the government can jump-start such efforts.

HIMSS states that it “intends to continue to reach out to CMS, the Office of the National Coordinator for Health IT (ONC), and other government agencies, to share its thought leadership on interoperability and emphasize the points in the HIMSS Call to Action: Achieve Nationwide, Ubiquitous, Secure Electronic Exchange of Health Information. The White House has indicated that it also intends to follow up the December meeting with a plan for next steps.

Sam Peirce
March 14, 2018


What is the new budget’s impact on MACRA?

On February 8, President Trump signed into law a bipartisan budget bill that is designed to extend through September 2019. Included in that bill were a number of items directly impacting the medical community, including independent physicians. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) was also impacted by the new budget.

Jennifer McLaughlin, senior associate director of government affairs for the Medical Group Management Association (MGMA), in a discussion with Physicians Practice managing editor Gabriel Perna, indicated that she and her association were still “trying to dissect and understand how [the changes] will play out.”

One of the significant aspects of the new budget bill, McLaughlin says, is the repeal of the Independent Payment Advisory Board, or IPAB. This board was an “unelected panel that would not be accountable to voters or stakeholders.” IPAB would have been triggered after Medicare spending exceeded a certain threshold, as part of the Affordable Care Act (ACA).

McLaughlin also noted that the budget bill changes, for the most part, make implementation of MACRA much more sustainable. There are some small changes to the Merit-based Incentive Payment System (MIPS) that have a potentially big impact. Changes to the Cost category will be felt the most by independent physicians.

Within MIPS, the Cost category “continues to be a source of confusion for physician practices … because there hasn’t been a ton of discourse coming from CMS about how it will be measured over time.” Independent physicians and organizations like MGMA did not have the opportunity to work with the Centers for Medicare & Medicaid Services (CMS) before the MIPS program was implemented, to work on the Cost category details.

One of the more positive aspects of the budget bill and its impact on independent physicians and MACRA is a tweak to the language specifying that any MIPS bonuses or penalties will not extend to Part B drugs, McLaughlin noted. Since reimbursement of Part B drugs just a passthrough for physicians, the new verbiage should be beneficial for independent physicians as they calculate costs.

Although McLaughlin states that the new budget bill “gives CMS more time to clarify, test, and develop episode-based cost measures,” independent physician practices are still struggling to determine how the cost category will impact them.

Sam Peirce
March 12, 2018


How the proposed White House budget could affect healthcare

Every year, the White House submits a budget outlining the president’s priorities for the coming year. Although the White House budget generally has no impact on the actual budget passed by Congress, it does give a glimpse into the vision of President Trump in regard to major national undertakings such as military spending, domestic programs, and healthcare.

According to the New York Times, the White House budget “request would add $984 billion to the federal deficit next year, despite proposed cuts to programs like Medicare ….” The Times adds that the proposed budget “contains at least $1.8 trillion in cuts to federal entitlement programs such as Medicaid, Medicare and food stamps.”

An article in VoxCare states that specific changes to Medicare and Medicaid would include:

  • Denying Medicaid benefits to people who cannot prove their immigration status
  • Increasing Medicaid beneficiaries’ copayments for improper use of the emergency room
  • Allowing asset testing, which adds up all the value of a person’s property and belongings, in addition to income as a test of Medicaid eligibility
  • Creating an out-of-pocket maximum for drug expenses for Medicare recipients
  • Allowing more flexibility for Medicare Part D plans to set their formularies, giving them more negotiating leverage.

As to the growing opioid crisis and the ability of the healthcare field to respond appropriately with adequate funding, the White House budget submitted by President Trump “provides $10 billion for vaguely defined efforts to prevent opioid abuse and expand treatment,” according to VoxCare. However, experts say much more is needed, as the opioid crisis currently costs “the entire country $80 billion in a single year.”

The White House budget also proposes eliminating the Agency for Healthcare Research and Quality from the Department of Health and Human Services as well as some healthcare workforce programs designed to train medical students.

Sam Peirce
February 28, 2018


History of health policy

Healthcare in the US was not truly regulated for many years. Many healthcare providers had no formal training but rather learned from their mentors or from the local doctors they would eventually replace. Formal training and regulation began to take shape with the formation of the American Medical Association (AMA) in 1846. Healthcare policy would take another 50 years to start forming.

In 1912, Progressive Party candidate Theodore Roosevelt and his newly formed party endorsed social insurance, which included health insurance, as part of their platform. Roosevelt lost the election but that same year the National Convention of Insurance Commissioners developed the first model of state law for regulating health insurance.

Three years later, the American Association for Labor Legislation (AALL) published a draft bill for compulsory health insurance and promoted campaigns in several states; however, the US was entering World War I and the states did not enact the bill. The AMA showed some interest but withdrew their support by 1920.

After WWI, as the US entered the Great Depression, health policy programs began to spring up in earnest. As explained in a Kaiser Family Foundation document, “Hard economic times called for social policies to secure employment, retirement, and medical care. President Roosevelt appointed a committee to work on all these issues, but in the end did not risk the passage of the Social Security Act to advance national health reform.”

The launch of what we know as health policy today began in 1935 with the passage of the Social Security Act. President Franklin Roosevelt continued to push for national health reform throughout his terms in office, but did not get much support from a Congress that was “no longer supportive of further government expansions.”

Additional proposals for national healthcare were introduced and failed throughout Roosevelt’s presidency. The US then entered the second World War. In 1944, Roosevelt outlined “an ‘economic bill of rights’ that included the right to adequate medical care and the opportunity to achieve and enjoy good health in his State of the Union address.”

Today, Congress and the President are still debating and defeating various proposals for national health policy. The Affordable Care Act (ACA) that was implemented in 2008 remains virtually unchanged, except for the repeal of the individual mandate that will take effect in 2019.

Sam Peirce
February 9, 2018


One year under Trump: how healthcare has changed

During the course of President Trump’s first year in office, the national healthcare policy was debated and defeated multiple times. The Affordable Care Act (ACA) was constantly under scrutiny, with efforts to repeal and replace the act a hot topic for Congress and the President.

Although the ACA was not truly repealed nor replaced during 2017, one tax bill did finally pass that eliminated the individual mandate for health insurance that was an integral part of the ACA. That piece of legislation will not take effect until 2019 and could significantly increase the growing number of people who are uninsured in the US.

Notable healthcare changes during Trump’s first year in office include:

Healthcare premiums increased. The average total premium increased by $255 for individuals and over $600 for families. The average amount an employee pays for healthcare coverage also increased in 2017, by just under $100 for individuals and over $400 for families.

Number of uninsured individuals increased. Gallup says that the share of adults without health insurance coverage rose faster in 2017 than in any year since 2008. Approximately 3.2 million more people were uninsured at the end of 2017 compared with a year earlier.

Insurers pulled out of the exchange market. With the uncertainty of the repeal and replace debates, votes, and defeats, many insurers chose to no longer participate in the exchange. That, in turn, caused additional rate increases and may have also contributed to the number of individuals who chose to terminate their healthcare coverage.

Teen drinking and smoking decreased, while illicit drug use increased. The number of teenagers who drink and/or smoke has actually been decreasing for several years. However, the number of teenagers who use illicit drugs, including marijuana, increased slightly in 2017.

Trump’s first year in office also saw the number of Medicaid enrollees decrease. That number may continue to shift as new legislation impacts the Children’s Health Insurance Program (CHIP).

Elation Health will continue to monitor healthcare legislation and report any changes that may affect independent physicians and their ability to be successful in their practices.

Sam Peirce
February 8, 2018


What the ACA individual mandate repeal means and what comes next

After debating for the better part of a year over how to repeal and replace the Affordable Care Act (ACA), Congress finally passed a tax law in December 2017 that eliminated the individual mandate for healthcare coverage. The mandate, effective in 2019, was only one aspect of the ACA, but its impact may be significant for enrollment and costs going forward.

The idea behind the individual mandate was that healthy individuals would be grouped in healthcare coverage pools, along with those who may have more serious, chronic health issues. The combination of providing coverage for those who do not visit their physicians very often, or at all, with covering the healthcare costs of the more infirm would help insurance providers balance their overall costs.

Unfortunately, the first people to leave the healthcare exchange when they are no longer required to participate are those healthy individuals. The number of uninsured individuals has already increased by 3.2 million people by the end of 2017. Fewer healthy people in the pool drives up the cost of providing healthcare coverage for everyone that remains.

When their costs increase, insurance companies then tend to pull out of the healthcare exchanges. As the Washington Post points out, this trend generally happens “in places where there aren’t wide swaths of insured Americans — such as rural areas in Iowa or New Hampshire.” And when insurance companies pull out of the exchanges in those areas, the law is weakened further.

Another option for those healthy individuals who choose not to participate in the ACA, if they work for themselves or for very small businesses, is to join an association health plan. Looser regulations on these associations have been proposed. However, critics say they “fear they would promote substandard coverage and weaken the ACA’s already fragile insurance marketplaces.”

Fewer choices and higher premiums, as healthy people and major insurers leave the healthcare exchange, could become the norm for healthcare under the ACA through at least the near future.

Sam Peirce
February 5, 2018


The impact of CMS’ new voluntary bundled-payment model for independent physicians

The Centers for Medicare & Medicaid Services (CMS) has announced a new incentive for independent physicians, called the Bundled Payments for Care Improvement Advanced (BPCI Advanced). The announcement comes as many independent physicians are being challenged by the reporting requirements and regulations involved in the CMS shift to value-based services during which CMS is encouraging physicians to move away from the fee-for-service model.

When making the announcement, CMS Administrator Seema Verma stated that “BPCI Advanced builds on the earlier success of bundled payment models and is an important step in the move away from fee-for-service and towards paying for value. Under this model, providers will have an incentive to deliver efficient, high-quality care.”

CMS previously implemented the Quality Payment Program (QPP) as part of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Under the QPP, independent physicians have the option between two payment models: Advanced Alternative Payment models (APMs) or the Merit-based Incentive Payment System (MIPS).

CMS’s announcement emphasized that “under this bundled payment model, participants can earn additional payment if all expenditures for a beneficiary’s episode of care are under a spending target that factors in quality.” According to CMS, additional impacts for independent physicians include:

  • BPCI Advanced participants may receive payments for performance on 32 different clinical episodes
  • BPCI Advanced will qualify as an Advanced Alternative Payment Model (Advanced APM) under the Quality Payment Program.

The announcement continued that “BPCI Advanced seeks to support and encourage participants who are interested in:

  • Continuously redesigning and improving care
  • Decreasing costs by eliminating care that is unnecessary or provides little benefit to patients
  • Encouraging care coordination and fostering quality improvement
  • Participating in a payment model that tests extended financial accountability for the outcomes of improved quality and reduced spending
  • Creating environments that stimulate rapid development of new evidence-based knowledge
  • Increasing the likelihood of better health at lower cost through patient engagement, education, and on-going communication between doctors and patients.”

The BPCI Advanced model performance period runs from October 1, 2018, through December 31, 2023. Independent physicians interested in more information or in applying for the program should visit the BPCI Advanced website.

Sam Peirce
February 1, 2018


Alex Azar confirmed as new HHS Secretary

A former drug company and government executive has been confirmed as the next Secretary of Health and Human Services (HHS). Alex Azar was confirmed by a 55-43 vote, to replace Tom Price who resigned in the fall of 2017.

Azar is the former president of Eli Lilly & Co.’s US operations, where he spent five years overseeing the production of medications, including Cialis, Cymbalta, and several forms of insulin. Prior to his work at Eli Lilly, Azar served in the Department of HHS under President George W. Bush.

In his new role as HHS Secretary, Azar will oversee the Food and Drug Administration (FDA), the agency that regulates those medications produced by companies like Eli Lilly, as well as Medicare and Medicaid. Rising drug prices are a major issue facing the new Secretary.

PBS reports that Azar has indicated he will have four main priorities in his new role: “to help curb the high cost of prescription drugs, make health insurance more affordable and available, continue bipartisan efforts to focus Medicare payments on quality, and confront the growing opioid addiction epidemic.”

A lawyer by profession, Azar has also served on the board of directors of the Biotechnology Innovation Organization, a trade group for biotech companies. Although some have doubted that he can fulfill his promise to reduce the costs of prescription drugs, others have described Azar as “steady, knowledgeable and willing to hear both sides.”

Azar’s ties to the pharmaceutical industry have raised questions among many consumer groups as to whether he can be impartial. Azar responded that he is his own man. “I don’t have pharma’s policy agenda,” he told the Senate Health, Education, Labor and Pensions Committee. “This is the most important job I will have in a lifetime, and my commitment is to the American people.”

Elation Health will continue to share pertinent news about HHS and the newly confirmed Secretary, Alex Azar, as part of our mission to support independent physicians with the information they need to be successful.

Sam Peirce
January 30, 2018