As we start the new decade, there are multiple public and private sector forces likely to make an impact in the health care industry in 2020 and beyond.
Here’s our Top 5 for 2020, including what we expect and why it matters.
Healthcare will remain a key topic in the 2020 political conversation as we head into the November election. The two key factors driving this are the continued threats to the Affordable Care Act and the inexorable rise in the cost of healthcare (which keeps getting passed on to consumers). These factors combine to create too many pain points for the average American voter to ignore.
Few of the proposed plans have been adequately explained publicly, partly because of how complicated these issues are and partly because most are not fully formed. While the GOP remains behind President Trump for re-election, there is no pressure for the administration to elaborate on its future healthcare plans. Conversely, there is much appetite for healthcare reform on the left—every Democratic candidate has a healthcare proposal which differs in varying degrees from the status quo.
As the primaries move on, we will likely see a push for candidates to further explain their policies, identify sources of funding, and define detailed implementation plans. This has already tripped up candidates advocating for Medicare-for-All who weren’t prepared to explain how to pay for a program that could cost an average of $4 trillion per year over a 10-year period (it will start lower and end higher over that period). Americans have declared healthcare a primary voting issue and will demand answers. However, getting into these specifics will likely further divide voters, as the details of health reform often do.
Why does this matter?
The healthcare industry is so intertwined with the government that anyone not paying attention is taking a big risk.Virtually all health reform proposals coming out of the Democratic party would cause changes in the healthcare industry. More extreme proposals like Medicare-for-All would drastically reduce the role of the health insurance industry and force many providers to operate with severely diminished cash flow. The moderate proposals like buy-in programs would have similar but less extreme effects. Any of the reforms that are proposed on debate stages would require a federal law to be passed (an unlikely prospect if the Republicans hold the Senate) but a President’s regulatory agenda could have important impacts as well.
2. Cost sharing will reach a breaking point
The issue of healthcare costs is not new news; however, out-of-pocket costs to the half of Americans with employer-sponsored insurance (ESI) plans and the employers paying for them are hitting a breaking point. Costs for families with ESI are up 67% since 2008, rising twice as fast as wages and three times as fast as inflation. An average family of four spent $2,838 on premiums and $1,779 on cost-sharing (deductibles, co-pays, co-insurance) in 2008. In 2018 they spent $4,706 on premiums and $3,020 on cost-sharing. Much of this growth in out-of-pocket costs to families has come in the form of increased deductibles over the last decade. A recent study showed that one-third of employees with a high-deductible health plan from their employer don’t have enough money saved to cover their deductibles.
Although employers frequently catch flak for shifting health costs onto their employees through higher cost-sharing and premiums and restrictive networks, in truth they do absorb much of the cost increases as well (although employees absorb more). Over the last ten years, employer contributions for insurance rose from $10,008 to $15,159 and are expected to rise another 6% next year (up from 5.7% over the previous two years).
Why does this matter?
Employers are already beginning to take matters into their own hands by negotiating with health systems directly and creating primary care opportunities on site or through telehealth. We expect to see more of this in 2020, but we also may begin to see employers join forces to put pressure on the system to reduce prices (prices, not utilization, are the chief cause of rising costs). Michael Thompson, CEO of the national Alliance of Healthcare Purchaser Coalitions stated, “If market-based solutions don’t work, employers may push for healthcare to be regulated like a public utility.” With half the country being covered by employer-sponsored insurance, any conversation swinging toward regulation is sure to garner attention – and maybe even change.
3. More states will attempt to establish a public health insurance option
As threats to repeal or replace the Affordable Care Act continue, some states are proposing instead to refine it by offering a public health insurance option. Similar to a few of the presidential candidate national proposals, these public option programs would be run by the state and would seek to lower the cost for patients. Most of these proposed plans build on current state-run programs like Medicaid or state employee health plans.
The goal of offering a public option is for states to better control their healthcare costs, improve quality, and improve coverage for their residents. Provider reimbursements will be capped, and individual premiums will be lower. Consequently, there will be likely be strong pushback hospitals and providers, and private insurers will be forced to compete with the public option’s lower costs.
The state of Washington was the first to enact public option legislation. There are currently eleven more states considering public option legislation and three states that have passed legislation to study the issue.
Map of States Considering a Public Option
Why does this matter?
Public option plans are more than just another option for consumers. Their presence can have ripple effects throughout the entire healthcare industry. Payers may face stiff competition from public option plans, whose lower administrative costs, potentially lower provider rates (due to stronger negotiating power), tax exemptions and resultingly low premiums could prove to be highly popular with consumers. This competition could force private insurers to find ways to reduce their rates so that they don’t lose members to the public option plans. As a result, more providers may receive lower reimbursement under this system. While this could help to drive down overall healthcare costs, provider participation and the quality of care patients receive could be affected.
4. The march toward value-based care will continue
Value-based reimbursement is transforming healthcare delivery, helping to reduce healthcare costs and improve quality. As we head into 2020, we expect the transition from volume to value to continue. Here are some trends we see driving the transition, and challenges that remain.
- Medicare ACO, medical home and bundled payment models continue to evolve. While CMS has not yet reached its goal of tying 50% of Medicare payments to quality or value, significant progress has been made. As for Medicaid, 44 states have one or more delivery system or payment reform initiatives in place, with 14 adding or expanding these reforms in 2020.
- Commercial payers are using value-based models and reimbursement in a variety of ways. For example, 63% of payers offer narrow/high-performance networks, 61% offer ACOs and 57% use primary care models such as patient centered medical homes.
- Across all segments, enrollment in ACOs continues to grow. As of the end of the 3rd quarter in 2019, there were approximately 1,000 ACOs nationally covering almost 44 million lives. Commercial ACOs represent 60% of ACO covered lives, Medicare 30%, and Medicaid 10%.
The transition to value-based payments is having a positive impact on cost and quality. Payers reported average savings of 5.6% across all markets associated with value-based reimbursement models as well as improvements in quality of care, patient engagement and provider relations. However, adoption of these payment models has not been universal. Although providers expect only 36% of overall 2020 revenue to remain fee-for-service, the shift to value in commercial contracts has been particularly slow. Fee-for-service constitutes 63% of revenue with only 20% coming from “risk contracts,” through which both gains and losses are shared.
Why does this matter?
Value-based care presents a meaningful, but not fully realized, opportunity to improve healthcare quality and reduce costs because significant impediments remain:
- Data challenges, particularly the lack of access to administrative claims data and data that is not actionable;
- Different reporting requirements across multiple payers; and
- The cost and resources required to build value-based infrastructure and administrative capabilities.
These challenges need to be addressed through purchaser, payer and provider collaboration.
5. Consumer-facing technology will gain significant traction in the healthcare industry
Despite the fact that consumer-facing technology has proliferated through 21st century life at a breathtaking speed, only a small fraction of consumers use it in healthcare. This is partly due to privacy concerns, but also practitioners themselves question the reliability of the data they produce. However, many of these wearables, portals, platforms, tools, and monitors make good business sense and have a proven track record of maintaining privacy and producing useful data. We’ll be watching to see which ones finally begin to live up to their potential in 2020, with a particular focus on telemedicine and cost estimator tools.
- Telemedicine may be the technology with the biggest potential to favorably disrupt status-quo healthcare delivery. The technology has strong evidence supporting it in specialties like psychiatry and dermatology. Yet fewer than 1% of seniors have ever used telemedicine, and fewer than 0.5% of large-group beneficiaries used telemedicine in 2016. This past year, Medicare eased a number of its notoriously tight restrictions on these services. Hospital adoption of telemedicine also grew rapidly, with more than three-quarters planning or implementing programs.
- Cost estimator tools are another great example of consumer-facing technology which could lead to positive outcomes. Offered by health plans, these tools help patients find lower-priced care options, most frequently for imaging, colonoscopies and maternity services. According to the Massachusetts Attorney General’s Office, cost estimator tools are only used two to seven times per year for every hundred members.
Why does this matter?
Telemedicine can make doctor visits faster and more convenient. Cost estimators can save a lot of money for both individual consumers and the overall system. The fact that these tools can effectively address two of healthcare’s biggest problems makes their low uptake all the more vexing. But if adoption accelerates, the positive impact could be significant.