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Five Things To Watch in Health Care in 2013

“Prediction is indispensable to our lives,” forecaster extraordinaire Nate Silver writes in his new book, “The Signal and the Noise.” Every day, whether wearing a raincoat to work or setting aside funds for future spending, “we are making a forecast about how the future will proceed — and how our plans will affect the odds for a favorable outcome.”

In health care, the mix of ever-shifting technologies, laws and competitive landscape means that many patients’ lives (and industry dollars) rest on whether providers and regulators can make the right bets. And some years, the industry’s direction is relatively easy to predict.

For example, when “Road to Reform” did a similar forecasting exercise last year, the 2012 signposts were clear. March’s Supreme Court case. The November election.

What will be significant in 2013 is a bit murkier, though several major developments await in the months ahead. A slew of ACA-related provisions are slated to take effect, with new taxes and programs like the Bundled Payments for Care Improvement Initiative slated to come online. Both parties continue to discuss entitlement reforms, which could include raising the Medicare eligibility age. The Independent Payment Advisory Board may submit its first draft spending control proposal.

Here are five broader trends that industry observers are watching.

Premium Growth

The Affordable Care Act was supposed to help tamp down health care costs, and some supporters have suggested (possibly prematurely) that the law has been responsible for a slowdown in health spending growth.

But average Americans haven’t seen much of a difference yet. A new analysis released on Wednesday found that workers’ spending on premiums swelled by 74% between 2003 and 2011.

And while the ACA contains measures to control premiums — like new rules on insurer oversight and administrative spending — observers don’t expect any immediate relief.

“Hold onto your hat,” consultant Robert Laszewski warns. Having spoken with a number of insurers in the individual and small group markets, Laszewski says to “expect a 30% to 40% increase in the baseline cost of individual health insurance to account for the new premium taxes, reinsurance costs, benefit mandate increases, and underwriting reforms.”

Those premium hikes may disproportionately hit people in their 20s and 30s, given new regulations that will narrow the difference in health insurance rates between younger and older consumers.

They also allow opponents of the ACA to score political points. The ongoing rise in premium costs “breaks a promise made by the president to lower premiums for families by $2,500,” according to Rep. Phil Roe (R-Tenn.).

Employer Decisions

One of the most significant industry questions post-ACA: Will employers continue to provide traditional health benefits for their workers, drop coverage or adopt new models in hopes of controlling spending?

It’s been hard to get a clear answer, partly because firms have been slow to announce their changes, fearing public backlash. “Road to Reform” recently reviewed a slew of employer efforts to control benefit costs, such as possibly shifting more full-time workers into part-time arrangements, and the accompanying critical news reports.

One of those companies was Darden Restaurants, which has since clarified that it would not be modifying workers’ hours.

“The program was only a test,” Darden spokesperson Matt Kobussen tells California Healthline, and “none of [the company’s] current full-time employees, hourly or salaried, will have their full-time status changed as a result of health care reform.”

But less-public changes to benefit design and provision are well in the works, at Darden and elsewhere. For example, the restaurant company is among several major firms exploring whether using defined contribution — where employers pay a fixed amount into employees’ health plans and allow workers to choose their coverage from an online marketplace — would be a more cost-effective way to provide health coverage.

Exchange Implementation

While HHS moved the deadline for states to decide whether they’re operating their own health insurance exchange, it’s kept the Oct. 1, 2013 deadline for all exchanges to begin enrolling consumers. And most observers agree: It will be a sprint to hit that deadline, especially with more states opting to let the government set up the model.

“Will the [federal government] be ready to provide an insurance exchange in all of the states that don’t have one on Oct. 1, 2013?” Laszewski asks.

“I have no idea. And neither does anyone else I talk to … We only hear vague reports that parts of the new federal exchange information systems are in testing.”

Merger and Integration Activity

The case doesn’t carry the weight of Florida v. Sebelius, but FTC v. Phoebe Putney Health System — and FTC v. ProMedica, for that matter — reflects the broad tension between regulators and providers.

In both lawsuits, FTC is attempting to prevent provider consolidation that the agency says would lead to anti-competitive behavior and higher prices for patients. And victories in those cases would further embolden FTC to intervene in merger activity, lawyers tell “Road to Reform.”

But hospitals, physicians and other providers say that they must move into new arrangements in hopes of navigating the changes wrought by the ACA, which is intended to reward more integration and care networks.

Comparative Effectiveness Research

While many experts polled by “Road to Reform” highlighted some of the ongoing policy issues that will spill into next year — from states’ decisions on expanding Medicaid to “fiscal cliff” negotiations — one pointed to potential changes in care quality as a top 2013 priority.

“I’m thinking a lot about” the Patient-Centered Outcomes Research Institute, economist Austin Frakt tells California Healthline.

“Comparative effectiveness research is far more important than most of the tinkering that gets proposed (like raising the Medicare age),” Frakt adds.

But is PCORI properly designed to help transform health care, or is it just another pool of research funding? As Michael Millenson writes, the institute is slated to spend $300 million on patient-centered outcomes research next year, which could make it a major player in funding new quality initiatives. But PCORI’s designers intentionally tamped down, worried that too much focus on “comparative effectiveness” would be seen as prioritizing “cost-effectiveness,” and even rationing.

“PCORI is the offspring of a shotgun marriage” between regulators who favor government-led reforms and those who are skeptical of them, Millenson concludes. “[And] no one is quite sure yet what this child will be once it grows up.”

Looking Forward

As forecasts go, all observers that “Road to Reform” talked to agreed: It will be another fast-paced year for the industry.

Of course, there’s always this maxim from expert prognosticator Silver: “It is amusing to poke fun at the experts when their predictions fail.”

Here’s what else is happening around the nation.

Eye on the Exchanges

  • On Monday, the Obama administration granted conditional approval to six states to operate their own health insurance exchange. The states are Colorado, Connecticut, Maryland, Massachusetts, Oregon and Washington (Pear, New York Times, 12/10). HHS officials said the states were the first to apply and the decision does not indicate whether the remaining eight states that have submitted plans for a state-run exchange will be approved (Baker, “Healthwatch,” The Hill, 12/1).
  • For the second time this year, New Jersey Gov. Chris Christie (R) has vetoed a bill (S 2135) that would have established a state-based health insurance exchange, a move that paves the way for the federal government to operate an exchange in the state (Rudegeair, Reuters, 12/7). Christie said, “I will not ask New Jerseyans to commit today to a state-based exchange when the federal government cannot tell us what it will cost, how that cost compares to other options, and how much control they will give the states over this option that comes at the cost of our state’s taxpayers” (Viebeck, “Healthwatch,” The Hill, 12/6).
  • On Monday, Tennessee Gov. Bill Haslam (R) announced that his state will not create a state-based insurance exchange, instead leaving the task to the federal government (Baker, “Healthwatch,” The Hill, 12/10). However, Haslam said he remains undecided on whether to participate in the Medicaid expansion (AP/Modern Healthcare, 12/10).

Administration Actions

  • Last week, the Office of Personnel Management proposed rules for two multistate health plans to be offered in health insurance exchanges. The plans will mirror offerings in the Federal Employees Health Benefits Program, which OPM has found success in administering. Hence, the proposed rules pledge to facilitate the most beneficial deals for consumers in the exchanges (Lunney, Government Executive, 12/4).

Benefits of Reform

  • HHS recently announced
    that since 2010, 5.8 million Medicare beneficiaries have saved a total of $5 billion under an Affordable Care Act provision that requires drugmakers to provide discounts to those who reach the “doughnut hole” in the prescription drug benefit. HHS said the discounts helped beneficiaries save $1.86 billion on their medications in the first 10 months of 2012 (Kennedy, USA Today, 12/3).

In the States

  • Although Texas Gov. Rick Perry (R) has said publicly that his state will not participate in the Medicaid expansion under the ACA, state Democratic lawmakers say they are optimistic that they will be able to reach a veto-proof agreement with their Republican counterparts that could bring in billions of dollars in federal funding for the program (Aaronson, Texas Tribune, 12/3).
  • Last week, 11 Republican governors — members of a health care working group under the Republican Governors Association‘s Public Policy Committee — sent a letter to President Obama requesting a meeting to discuss the effects of the ACA, particularly the requirements of the Medicaid expansion and the extent to which states would have control over the program (Mitchell, Tampa Bay Times, 12/5).

On the Hill

  • Last week, the GOP-led House Small Business Committee released documents that aim to help small-business owners meet the requirements of the ACA that are scheduled to take effect in 2013 and 2014. The guides detail each ACA provision “in plain English” and describe its “consequences for small businesses” (Viebeck, “Healthwatch,” The Hill, 12/6).

Repeal and Replace

  • On Monday, the American Enterprise Institute released a 59-page blueprint that would serve as a replacement to the ACA, if opponents succeed in repealing the law. The paper promotes a market-based overhaul of health care entitlement programs and changes to health insurance regulations. Under the plan, Medicare would be converted into a premium-support system and Medicaid would be transformed into a block-grant system (Viebeck, “Healthwatch,” The Hill, 12/10).

Studying Its Effects

  • New taxes on health insurance policies under the ACA will cause premium rates for families to increase by an average of $7,200 over 10 years, while generating about $100 billion for the federal government over that period, according to a study from America’s Health Insurance Plans. The insurance industry has urged lawmakers to repeal such taxes, claiming they will cause a dramatic increase in premiums (Baker, “Healthwatch,” The Hill, 12/5).

Related Topics

Insurance Road to Reform The Health Law