The Supreme Court on June 25 announced its 6–3 decision upholding the Affordable Care Act challenge brought by David King and his three Virginia co-plaintiffs. The justices concluded that the intent of section 1321 of the ACA was to provide tax credits for eligible enrollees regardless of whether their exchange is state-run or not.
The court’s opinion had the immediate impact of reducing anxiety for the 6.4 million Americans who might have lost their tax credits and hospital chief financial officers who faced higher bad debt. It sent hospital and health insurer stocks up and the 18 GOP and Democratic presidential aspirants out either lauding the decision or promising to undue the ACA altogether if elected next year.
But the road to health reform is not smooth nor is the future of the ACA settled. No doubt, other legal challenges to the law are forthcoming. The GOP-led House of Representatives has voted 54 times for its repeal. It remains highly divisive. Kaiser Family Foundation tracking polls consistently show the nation almost evenly divided for/against the law. And ironically, many elements of the law, including more constraints in the ways insurers do business, remain popular.
In the near term, no doubt a number of ACA repairs or changes will be in the news. Will the individual penalty — this year $325 or 2 percent of applicable income for an individual — result in increased access to coverage or an IRS accounting nightmare? Will the threshold for the employer penalty increase from 50 to 100 full-time employees?
Is the 2.3 percent device tax killing jobs and irreparably harming the $90 billion industry?
Looking more broadly, within health care circles, health reform is much broader than the ACA. These five overarching issues are sure to get attention in the weeks and months ahead:
Health costs: For the past five years, overall health spending increased at a rate of 4 percent or less. For the next decade, it will increase closer to a 6 percent pace. That’s good news for the health care industry as it means more money flowing into the system. For investors, it’s good news as well. Investments in health care are up 26 percent in the last 12 months and have outperformed the S&P 500 index significantly for five years. But for households, employers, and states, it’s bad news. It means families that can’t afford co-pays and deductibles forego care. It means employers might reduce coverage or drop it altogether. It means state budgets will be stretched thinly to cover employees and pensioners, along with their Medicaid responsibilities. Reducing health costs will be Job 1 for COOs and CFOs who have already addressed the low hanging fruit — supply chain management, revenue cycle improvement, workforce productivity and others. It requires that new approaches be considered with outsourcing getting a fresh look.
Consolidation: While the Anthem-Cigna, Aetna-Humana deals get most of the attention today, the fact is that accelerating consolidation is a matter of fact in every sector of health care. In some sectors, the impact is local — hospital-hospital, hospital-physician, hospital-post acute, and so on. In others, it’s playing out nationally and regionally where a few strong players are buying out weaker ones, or opportunists see advantage in greater scale. In retail drug, private physical therapy, drug manufacturing, biotechnology, medical devices and others, scale is the driver. In renal dialysis, home care and others, regulatory headwinds make consolidation sensible. No doubt, the surge to merge will escalate and with it increased scrutiny from regulators and wary industry watchers.
Medicaid: For the first time in 27 years, more than half (51 percent) of the states' total revenue comes from the federal government for Medicaid. Governors and legislators in most states face voters who favor lower taxes and less governmental control. Medicaid expansion is the political hot potato in the 22 states that did not expand coverage. The road to a transformed health system runs through state capitals and Medicaid expansion is Issue 1.
Physician discontent: The world’s changing for physicians. Transparency in their business relationships and conflicts of interest are now front-page news. The accuracy of their diagnoses and adherence to evidence-based best practices can now be measured and reported. And increasing accountability for patient outcomes necessitates that they use advanced information technologies and team-based care management techniques that many consider unnecessary or too costly. Growing discontent among physicians, especially those in mid-career, is palpable. For some, it’s a holy war for the future of the medical profession.
Defining value: Perhaps the biggest and most complicated theme is value. Do we get a dollar’s worth of good from the dollar spent in our health care system? Could dollars be spent more wisely with greater value the result? How should we define value? There’s no consensus in our system about how to calculate costs nor regulatory methodology for determining comparative effectiveness in what we provide. The ACA set in motion several demonstrations and pilots to nudge the system away from volume to value — bundled payments, accountable care organizations and others. In 2015, under the Hospital Value-Based Purchasing program, 1,375 hospitals will get a payment reduction, and 1,714 will see an increase based on the quality of care provided, but are these programs getting to the root question of value? The algebra for calculating value has two important elements: inputs and outputs. Some simply say it’s dividing costs by quality but, in our system, neither is easy. As a result, “value” is an abstract defined by users to include what they consider appropriate, and excludes views of others.
The King v. Burwell resolution settled for the time being the status of the Affordable Care Act as the legislative framework for our health system’s immediate future. But health reform in the United States is bigger than the ACA.
Paul H. Keckley, Ph.D., a health economist and expert on U.S. health reform, is managing director at the Navigant Center for Healthcare Research and Policy Analysis. His H&HN Daily column appears the first Monday of every month. He is a member of Health Forum's Speakers Express. For speaking opportunities, contact Laura Woodburn.