My Favorite Question (and Answers) at JPM 2017

My Favorite Question (and Answers) at JPM 2017

“Anyone who says they know what’s going to happen is kidding themselves.” VS “You have to have a point of view as to what is going to happen.” Can both these statements be correct?

Last week, the icebreaker question at the 35th Annual 2017 J.P. Morgan Healthcare Conference was any variation of this: How will healthcare policy look under President-Elect Donald Trump’s incoming administration? Having 10,000 people who spend most of their time trying to anticipate how we conceive, deliver, and pay for healthcare converge in San Francisco for the J.P. Morgan conference provided no shortage of opportunities to ask or answer this question.

My favorite responses included those which challenged me to contemplate things differently. There was plenty of talk of increased focus on Medicare Advantage, block grants for Medicaid, and continued growth of bundled payments. During the discussions, I didn’t hear anyone disagree that Obamacare will be repealed quickly or that any replacement strategy will require a new name for “individual mandate”. However, quite a few unorthodox ideas were tossed around throughout the week, and those musings definitely caught my attention.

With no further ado, the more thought-provoking ideas gathered from this year’s conference:

1. Qualifications for Medicaid eligibility will increase to 150%.

The Affordable Care Act (ACA) expanded Medicaid by enabling states to provide benefits for individuals under 65 with incomes up to 133% of the Federal Poverty Level (FPL). As of March 2016, in the 20 states that opted not to expand Medicaid, the median eligibility limit for parents is 42% FPL – with those who are not parents ineligible in every state except Wisconsin. That means a single parent with one child would need to make less than $6,728.40 per year to qualify for Medicaid. (In Texas and Alabama that amount drops to less than $2,883.60 per year.)

How might a new plan protect our most vulnerable while breaking with the ACA? One solution would be to peg eligibility for Medicaid to 150% FPL as part of a shift of making block grants to the states. How this would be reconciled as different from the “expansion” fought by so many Republican governors can be hand-waved away by the overarching public relations effort any replacement plan will employ. Whether the authorizing statute for a block grant could include such a prescriptive requirement is something I’m not qualified to comment on.

2. Lower the corporate tax rate to 15% and eliminate any tax benefit of employer-sponsored insurance.

Trump wants to lower the corporate tax rate. Any plan to push insurance to the private market while maintaining coverage for preexisting conditions requires a mechanism to ensure that a robust pool of healthy people purchase insurance. Since the “individual mandate” is unpalatable, we need another vehicle to achieve a similar result. Here enters a two-birds-and-one-stone solution.

By eliminating any tax benefit to employer-paid premiums, Trump can offset the impact to the treasury of lowering the corporate tax rate and encourage employers to push employees into the individual market to buy insurance. If the individual tax code was revised to make it easy for employed individuals to pay for premiums with pre-tax dollars, we could have a viable replacement to the individual mandate. Effectively, we would also have an end to employer-provided healthcare.

3. Tom Price is a fee-for-service guy and will try to slow the shift to value-based care.

With a strong American Medical Association (AMA) endorsement for Trump’s pick of Tom Price to head the United States Department of Health and Human Services, the former orthopedic surgeon is widely recognized as a supporter of providers. This is evidenced by a sample of legislation he co-sponsored in the past few years: H.R. 2652 Protecting Patients and Physicians Against Coding, H.R. 3940 Meaningful Use Hardship Relief, and H.R. 6276 Physician Shortage Minimization. Price is also an opponent of the ACA.

Following the nomination of Price, Robert E. Hertzka, an anesthesiologist and the former head of the California Medical Association told the New York Times, “Tom Price may turn out to be the best friend that physicians and patients have ever had in that role”. Others have speculated that his nomination will slow down the shift to value-based payments.

4. Power will shift to healthcare providers.

Price is presumably taking the reins at HHS, and a number of other voices influencing the replacement strategy are long-term proponents of consumer-directed care. Regardless of our philosophies, we all start from a recognition that “our system of healthcare financing is broken in its orientation and grossly inefficient.” (American Enterprise Institute’s Improving Health and Health Care, An Agenda for Reform, December 2015, page 6).

The ACA put mechanisms in place to move to a limited set of larger healthcare insurers and providers with the notion that a consolidated provider can leverage buying power to lower prices and drive efficiency. Representatives of the incoming administration oppose centralized control and believe the inefficiencies in the delivery of healthcare result from an overly prescriptive government. So, where does that get us? One idea I heard was that the replacement plan will encourage models like Direct Primary Care and other strategies which shift power to healthcare providers and away from the insurers – an effort to drive fragmentation and encourage more “free market” activity.

What was very clear at the J.P. Morgan Healthcare Conference is that there is great uncertainty of what a post-ACA world is going to look like. While the macro trends of the exchanges, the shift to value, and the legislative and regulatory changes play out in the coming years, this unpredictability creates opportunity for those who continue to focus on the fundamentals of building a strong business and maintain an ability to adapt to changing market conditions in the healthcare ecosystem.

Do you have any reactions to what attendees were saying or any bold predictions on what the incoming administration will do? We welcome you to add your thoughts to the discussion by commenting below.

The future of healthcare is in making it a conversation.