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Health Plan Forecast: Fewer Headlines, More Wonkery in 2014

 |  By Margaret@example.com  
   December 18, 2013

After a year of headline-grabbing changes—most notably the troubled launch of the federal health insurance exchange—look for a focus on the mechanics of change in 2014.



Mark Lutes, Member of the Firm,
Epstein Becker Green

If you set aside the complete misfire of the federal health insurance exchange, then 2013 has been something of a watershed year for healthcare reform. Price transparency made a quantum leap with the release of chargemaster data, the rate of growth for healthcare spending began to slow, and Congress inched toward a doc fix.

What will happen in 2014?

I recently spoke with Mark Lutes about the healthcare issues he thinks will be important in 2014. Lutes is an attorney and principal in the healthcare and life sciences practice at Epstein Becker Green, a law firm whose specialties include healthcare, labor and employee benefits. Lutes, who is something of a Washington, DC insider, gave me his take on some of the fundamental healthcare matters—not necessarily the headline grabbers—that he will be paying attention to next year.

HLM: What are some of the healthcare issues you have on your radar for 2014?
Lutes: Attempts to make the coverage expansion work are the part of healthcare reform that get all the media attention. That is only part of the story; the value-based purchasing leg of healthcare reform is of equal significance.

Can we deliver the care or arrange for the care in a cost-effective, high-quality manner? We're giving short shrift to the discussion of the value-based purchasing part. The provider community and the services sector need to have frank conversations around the topics of the value-based purchasing.

HLM: What should be included in that discussion?
Lutes: Risk adjustment, for one. That's a fundamental concept to value-based purchasing. There needs to at least be a basis for risk adjustment relative to the complexity of the patient.

Medicare now has a number of years under its belt with its condition coding. That system is a bedrock of Medicare Advantage and has been adapted to the ACO formula. It has also been incorporated into risk balancing among exchange plans. It's central to the economic bargain—the financial bargain—being undertaken.

HLM: Isn't risk adjustment happening now?
Lutes: It happens now in Medicare Advantage where plans are paid on a risk-adjusted basis. The value-based purchasing equation is asking providers to be involved in, to some degree, financial risk—bonused, or penalized, or maybe even fully capitated—for the cost of care of a population. It matters how the expected cost of treating that population is defined so you can decide if the provider has done better than expected or worse.

HLM: Will this involve any type of policy rewrite?
Lutes: Policy is very much involved, including when a population's risk is reviewed, how it's scored, [and] how many times during the life of a contract it's adjusted. So when the CMS Innovation Center structures a program, it has to think about how risk adjustment will occur.

None of that discussion works unless everybody is fully cognizant of how the score is going to be kept. It's happy talk until it's boiled down to a score. And that score needs to be risk-adjusted.

HLM: Who will be responsible for the risk adjustments?
Lutes: It depends on the context. For Medicare Advantage, CMS risk adjusts what it pays the plans. That's one context. CMS risk adjusts the Medicare Shared Savings ACOs. And every value-based purchasing contract, whether it's called a quality scorecard or something else, that looks at the impact of the provider's behavior on cost has implicit in it some assumptions as to the complexity or changes in the complexity of the population being measured.

So, every commercial deal between a payer and a provider that has a quality scorecard component implicitly deals with risk adjustment. They may not talk about it as much as they should, but it's in the mix.

HLM: What else do you see as important development coming in 2014? There seems to be interest in defined-contribution and high-deductible health plans.
Lutes: I think the portion of the commercial market that is most at risk to cost trends is actually large employers because they're self-funding and they are bearing the insurance risk. Therefore, they should have the same interest in value-based purchasing as CMS.

The high-deductible health plan is a partial answer. It gives the employee a stake in conservative use of services. It shifts an increasing amount of the cost of coverage, of risk to the employee. We will try to incentivize conservative use of services by the high deductible.

HLM: Some observers say health insurance exchanges are an opportunity for employers to convert to defined-contribution plans, which would caps their costs. What do you think?
Lutes: Right. We're all going to watch that space and see what businesses see as the opportunity. In some sectors of the labor market, it may be that defined contribution becomes the norm, and employers don't suffer in hiring.

But there will be some constraints on that where their competitors in the labor market continue to offer benefits. That's the dynamic we're grappling with. What companies can introduce defined contribution into their benefit offerings, without suffering employee loss?

HLM: What is really driving healthcare policy in Washington, DC?
Lutes: A need to get control of federal healthcare expenditures running up against a perception of what the electorate will tolerate. And running up against the perception of what key business interests, which are often provider system interests, can live with.

If the government is spending large amounts on Medicare, policymakers think about how to get that under control. Do we means test and deal with the political fallout? Do we look at payments to hospitals, which are probably the largest category of payments out there, and deal with the impact of that on the largest employer in their district?

There's no painless solution in that equation. Value-based purchasing [is viewed as a way] to achieve savings without directly cutting from either of those camps.

HLM: How will healthcare policy change in 2014?
Lutes: 2014, particularly after this budget deal, doesn't feel like a year for major restructuring.

There is an opportunity for new approaches to government savings in the context of the SGR fix, whenever that ultimately occurs. Each time partial fixes are undertaken, there's an opportunity for legislation that impacts that dynamic. I can easily see more being done around bundling as a pay-for for the SGR. That's an example of the most likely type of policy change—one that has a cross-savings impetus to it.

Instead of "grand bargain" type changes in the Medicare eligibility age or means testing or any of those big-picture type solutions, we're probably going to see more tactical steps taken, such as increased amounts of bundling.

HLM: How will the situation be different this time next year?
Lutes: I don't think it will be appreciably different this time next year. I think we'll be working on the same problems. We'll be trying to figure out how to control Medicare and Medicaid costs. I think the same menu of tools are likely to be out there. We'll be making progress towards increasing efficiency through value-based purchasing, but it's going to be a long, long trajectory.

HLM: Do you think there will be a time when Congress can dip into the PPACA to make changes that make it more effective?
Lutes: I think that will happen, but it may be after the election. We just have to get beyond the point where we say we can't touch anything. We have to get to the point where we're willing to do adjustments rather than replace. That's the hurdle to overcome.

HLM: In the current political atmosphere that seems a forbidding task.
Lutes: In this political atmosphere, it is a forbidding task. But things do change. It's remarkable how what is gospel at a given time can change. Did anyone think four months ago that we could have the Ryan-Murray budget deal? Nope. And now it's like yeah, no big deal.

That's because people went through hell, and they don't want to go through hell again. That changes things. So, that's evidence that while things may seem hopeless at any given month, four months later they can be quite different.

Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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