How Health Care Changed While You Were Watching the Election

After a seemingly endless presidential campaign, we’re just days away from the Nov. 6 election. And to be sure, health care issues remain at the forefront.

Both Barack Obama and Mitt Romney have tried to claim the high ground as Medicare’s number one defender. In his latest column, the New York Times‘ Paul Krugman argues that next week’s vote “is, to an important degree, really about Medicaid.” And writing on Bloomberg View, columnist Ezra Klein takes an even broader stance, concluding that “this election is all about health care.”

But health care isn’t all about the election, despite politics’ seeming ability to draw every sector into its gravitational pull.

In fact, many of the most significant stories in health care from the past two months haven’t come from the campaign trail — where candidates have mostly rehashed their existing policies — but from the private sector, as employers and providers have made aggressive, and sometimes unexpected, deals and changes. Reforms that will continue regardless of who’s sitting in the Oval Office next year.

Here are some of those stories.

Top Employers Move to Defined Contribution

As previously discussed in “Road to Reform,” Sears Holdings and Darden Restaurants have made plans to shift away from their current “defined benefits” — where they choose a set of health insurance benefits on behalf of their workers — and roll out “defined contribution” instead.

Under that model, firms pay a fixed amount for employees’ health benefits and allow workers to choose their coverage from an online marketplace, such as the Affordable Care Act’s health insurance exchanges or the emerging number of privately run exchanges.

In theory, the model would slow employers’ health costs while allowing employees to have more control over their own health care spending. And Sears and Darden’s announcements aren’t wholly unexpected, given that many employers have signaled their interest in making a similar shift.

But given the long-entrenched employer-sponsored health coverage model, some employers needed to be the first movers before the rest would be ready to follow.

Will they? That will be a major industry issue to watch across the next months.

Wal-Mart, More Providers Ramp Up Direct Contracting

As also noted in “Road to Reform,” Wal-Mart has continued to pioneer health care changes that could trickle down to the rest of the nation’s employers.

The company — the largest private employer in the United States — earlier this month announced new bundled payment agreements with six prominent providers. Given Wal-Mart’s size, the deals have major ramifications; the agreements could cover the company’s 1.1 million U.S. employees and dependents.

But Wal-Mart’s hardly alone. More employers are looking to limit their health spending by directly contracting with a selection of hospitals and physician groups that they think deliver the most efficient care — regardless if they’re located miles away from their workers — even as top providers are aggressively seeking such deals.

For example, Seattle-based Boeing on Oct. 1 started covering specialized cardiovascular care for nearly 83,000 employees, retirees and dependents through a new bundled-payment agreement with the Cleveland Clinic. Under the agreement, Boeing will cover the cost of travel and lodging for both the patient and a companion.

It was the seventh such agreement that the Cleveland Clinic has struck with a self-insured employer, with most of the affected employees located outside of Ohio. And if more companies are willing to send their workers across the nation to be treated, what does that bode for the traditional belief that all health care is local?

Mass. Hospitals Make Shift Toward Global Payment

Massachusetts continues to be the testing ground for national reform, given how its state reforms served as a forerunner to the Affordable Care Act. Some experts have argued that what’s happening in the Bay State is a preview of what will unfold across the nation’s health care system in the coming years.

That’s why it was so telling when Partners HealthCare, one of the state’s most prominent hospital systems, this fall chose to rip up its existing contracts with several major insurers and instead accept new deals that limit rate increases and put its providers on a budget.

In many ways, Partners’ deal-making reflects the broader climate in the state. Having already expanded health coverage — through a mix of mandates and a state health exchange that resemble ACA reforms going online in 2014 — Massachusetts is now pushing its providers and insurers to rein in health spending.

Partners also is following the path laid by the Alternative Quality Contract, a payment pilot by Blue Cross Blue Shield of Massachusetts that appeared to slow health spending and possibly reduce inappropriate utilization.

More Changes Ahead

But the emerging push for defined contribution, direct contracts and global payments is only part of the story in the private sector. More changes — ranging from new market entrants to more adoption of risk-based payments — are sure to come.

“I would characterize employers as increasingly impatient and sophisticated,” said Chas Roades, chief research officer at the Advisory Board Company. (The Advisory Board Company publishes California Healthline for the California HealthCare Foundation). 

Employers “are not just shifting more cost onto employees,” adds Roades, “but getting more aggressive about putting dollars at risk for wellness, health maintenance, and disease management.”

Looking Forward

The changes in the private sector don’t diminish the importance of next week’s vote to the health care industry. An Obama victory would likely preserve the ACA for years to come; a Romney win could lead to partial or full repeal of the law and scaling back of the nation’s Medicaid program, among other possible reforms.

And according to a Kaiser Family Foundation poll released on Wednesday, about one-third of likely voters do rank health care issues as “extremely important” to their vote.

But as recent events bear out, many top employers, providers and payers aren’t waiting on Washington to make big changes. So with rhetoric sure to mount until Tuesday, keep in mind that while the election’s the thing — it’s not the only thing.

Here’s what else is happening around the nation.

Administration Actions

On Thursday, HHS announced that Medicare beneficiaries have saved $4.8 billion on prescription medications since the enactment of the Affordable Care Act, in part because of a provision designed to close the coverage gap in the Medicare prescription drug benefit known as the “doughnut hole.” In total, about 5.6 million beneficiaries have received a rebate or drug discount, including 2.3 million this year, who saved an average of $657 after they reached the gap. Drugmakers’ discounts also contributed to the savings (Baker, “Healthwatch,” The Hill, 10/25).

Inside the Industry

Physicians, state officials and Medicaid managed care plans are voicing confusion about certain details of ACA’s temporary increase to Medicaid payments for primary care physicians. Starting Jan. 1, the federal government will spend $11 billion to bring Medicaid reimbursement rates for PCPs in line with rates paid by Medicare. The higher rates are expected to last for two years and result in a 64% average pay increase. Stakeholders have expressed concern that time is running out for the government to release a final rule on the rate increases (Galewitz, Kaiser Health News/Washington Post, 10/23).

In the States

Twenty-two states — including California — and the District of Columbia have taken action to promote the availability of child-only health insurance policies, according to a new report from the Commonwealth Fund. Many insurers previously said they were concerned that their costs would substantially increase under an ACA provision intended to expand health coverage to children with pre-existing conditions. According to children’s health advocates, states’ efforts to promote the child-only policies have encouraged insurers to re-enter the child-only market, and in some cases, new insurers have begun selling the policies (Andrews, Kaiser Health News/Washington Post, 10/22).

On the Hill

Three Republicans on the House Oversight and Government Reform Committee have sent a letter to the Internal Revenue Service saying they will issue subpoenas if the agency does not submit more records about how it is implementing ACA’s health insurance subsidies. Committee Chair Darrell Issa (R-Calif.) and Reps. Scott DesJarlais (R – Tenn.) and Trey Gowdy (R-S.C.) gave IRS until Oct. 25 to release the records before launching a “compulsory process,” which could include the subpoenas (Baker, “Healthwatch,” The Hill, 10/23).

Studying Its Provisions and Effects

The estimated cost of providing health insurance subsidies under ACA has increased by nearly 25% since the law was enacted and the cost is expected to rise even further because of certain economic factors, according to a new report from the conservative American Action Forum. For the report, author Douglas Holtz-Eakin — president of AAF and a former director of the Congressional Budget Office — compared data from CBO’s initial cost projections for ACA with data from the agency’s recent update, issued after the Supreme Court upheld the law (Baker, “Healthwatch,” The Hill, 10/29).

The Supreme Court Ruling

In an interview with Rolling Stone magazine published last week, President Obama said the Supreme Court used the wrong reasoning to uphold ACA. “I was always confident that [ACA], a.k.a. ObamaCare, was constitutional,” he said, noting that the court should have upheld the law using the Constitution’s Commerce Clause. “It was interesting to see them, or [Chief Justice John] Roberts in particular, take the approach that this was constitutional under the taxing power,” Obama said, adding, “The truth is that if you look at the precedents dating back to the 1930s, this was clearly constitutional under the Commerce Clause” (Baker, “Healthwatch,” The Hill, 10/25).

Related Topics

Insurance Road to Reform The Health Law