Last year at this time we tried to predict what the new president and Congress would do in the first year of the Trump administration. One year later, we have some signals from the administration but there is still a great deal of uncertainty. Beyond the federal government, there are more signs of change, and even some progress, in various aspects of the healthcare sphere.
Here are the top 5 things we’ll be watching in 2018, as well as what we expect and why we care about them (scroll down to see full text):
1. THE FUTURE OF THE AFFORDABLE CARE ACT: Market destabilization and increased state activity
Despite repeated efforts by Republicans, 2017 did not result in a repeal of the Affordable Care Act (ACA). While the ACA still stands, Republicans were successful in starting to erode the law. This erosion included ending cost sharing reduction payments to insurers, shortening the open enrollment period, cutting navigator funding, eliminating the individual mandate, and introducing a number of administrative proposals. It appears the efforts to erode the ACA will continue in 2018, especially through administrative action.
Because of continued efforts to erode the ACA, 2018 will likely bring:
- Higher insurance rates and individual market destabilization: The end of cost sharing reduction payments to insurers, the elimination of the individual mandate and various administrative actions (such as flexibility with association health plans and short-term health plans) will lead to young healthy individuals exiting the individual market, which will leave older sicker individuals. This will create a higher cost risk pool with individuals that need comprehensive coverage.
- State Funding Cuts: States may see some expanded flexibility from the federal government in 2018 but that comes with threats of cuts to funding of public services, such as Medicaid and Public Health. In addition to the potential direct cuts to healthcare related funding, state revenue is projected to have the smallest increase since the recession in 2010, at only 1 percent.
- More State Action: 2018 will likely bring more state action. While uncertainty will continue to loom over states, states will try to read the signals from the administration and take some control. Watch for more waivers and approval of pending waivers. Medicaid (Sec. 1115) waivers are likely to be pervasive, especially with the Trump administration’s support of work requirements and limits to eligibility. Currently, there are 10 states that have pending Medicaid waivers that would limit Medicaid eligibility. While some states will follow the lead of the administration, others will try to combat its actions. In addition, some states, especially those that operate their own exchange, will be looking at solutions to preserve the individual mandate at the state level. Maryland has already taken the lead with a creative solution (read more about their proposed solution here). Another interesting dynamic to watch with state innovation is that 2018 is a large state election year with 36 governors and 82% of all state legislators facing election. This will likely push certain issues into the spotlight could but also delay major policy changes.
Why do we care? Millions of Americans benefit from the coverage and protections provided by the ACA. The ACA is built on a balanced set of principles, embodied in the three-legged stool (see below). If any of those three legs are shortened, the balance is thrown off. This affects health insurance coverage for the millions of people who don’t have employer-sponsored insurance.
2. PROVIDERS & PAYMENT REFORM: More value-based care expected
In 2018 we expect to see:
- Value over Volume: Expect continued movement away from “fee for service” to value-based payment models. Today, about 30% of all health care payments are through some kind of alternative payment model (APM). Adoption of risk-based contracts and APMs will accelerate due to MACRA implementation and Medicaid innovation programs.
- More virtual care: We expect virtual care to become a much more common method of health care delivery. In a fee for service world where a telehealth visit is not reimbursable, virtual care is a great idea, but without financial support. However, a provider in a risk contract will see telehealth as a great way to boost patient experience points while providing more efficient and effective care.
- Increasing partnerships and joint ventures: As health systems struggle to maintain positive margins, they will increasingly look to alternative revenue streams. For some, this could mean forming joint ventures with health plans for an integrated system. For others, it could look like a partnership with an Urgent Care provider.
- Smart Electronic Health Records (EHR): EHR systems are increasingly facilitating clinical decision making rather than functioning as a data repository. The best systems will flag drug interaction risk and recommend treatment options. On the back end, smart systems will collect data in a way that can be mined for predictive analytics and care management referrals. The increasing use of data for healthcare delivery will enhance patient care in 2018.
Speaking of MACRA, 2017 marked the first reporting period for the Medicare payment reform law. While HHS’s increase of the minimum threshold for Merit-based Incentive Payment System (MIPS) will allow many smaller practices out of the program, participation in the more intensive Alternative Payment Model (APM) track is expected to double over the next year as larger organizations with more sophisticated capabilities display optimism about their chances with risk contracts. The 2019 performance year will see substantial increases in risk and reporting requirements, so savvy provider organizations will make sure they are well prepared. (For an overview of MACRA and what it means for providers, check out our highly-reviewed 2016 blog.)
In addition to dealing with regulatory guidelines and payment reform, providers will increasingly be dealing with price-conscious patients with high deductible health plans who demand valuable, convenient, affordable care. We are entering an age where hyper-convenience and low cost is crucial for healthcare consumers, and the providers who adjust will win.
Why do we care? Despite the uncertainty regarding the future of health reform, rising health costs have led to nationwide movement toward value-based payment models that we think, done well, could improve care. And with far-reaching policies like MACRA, it is no longer an option for providers to ignore the trend.
3. EMPLOYERS: Multi-pronged Strategies to Manage Health Care Costs
Between 2007 and 2017, the average annual premium for employer-sponsored health coverage increased by 55% . In 2018, employer-sponsored health costs are expected to rise between 6 – 7% . Couple this with the still-looming Cadillac Tax, scheduled to go into effect in 2020, and it’s no surprise that managing health care costs remains a top priority and a key driver of employers’ benefits strategies. Core components of these strategies getting increased attention in 2018 will include:
- Expanded use of technology to “modernize” benefits delivery, enhance the employee experience and positively influence consumer behavior by helping them choose and use their health benefits wisely, select the right health care provider and manage their health. Consumers will continue to be empowered digitally so that they can help “move the needle” in both improving their own health and in transforming health care to be a more patient-centered, cost-effective system.
- New ways to ensure that the right people get the right care in the most appropriate setting , including expanded use of biometric, claims and clinical data to better understand cost drivers and programs to encourage the use of lower cost providers such as telemedicine, centers of excellence, high-performance networks, and reference-based pricing.
- Provider contracting, whether it be through health plans or directly with employers, will continue to evolve from fee-for-service to value-based payments. Collaborations like Accountable Care Organizations have demonstrated that, over time, value-based payment strategies can reduce costs and improve quality of care .
Why do we care? Employers provide health coverage to approximately 150 million people, which is more than half of the non-elderly U.S. population. The burden of ever-increasing health care costs on employers and their employees has an enormous effect on the nation’s economy, and only when employers, health plans/insurers, providers and the government work together to address the cost issue will substantive gains be possible.
4. PHARMA: Expect Results from Increased Scrutiny
In 2017, the pharmaceutical industry incurred more scrutiny as a driver of high health care costs. Although President Trump has openly criticized drugmakers in response to several highly-publicized drug pricing scandals, 2017 saw no executive or legislative action on drug pricing. This inaction in the face of consumer and stakeholder demand for action has spurred states to innovate in their own markets, and we can expect more action in 2018.
- Increased State Action: States’ action on behalf of their constituents is predicted to increase in light of many factors, including the expected confirmation of Alex Azar to head of HHS. Azar, a former pharmaceutical company executive, is not expected to aggressively advocate on behalf of consumers. States have already been directly and indirectly pressuring pharmaceutical companies to address high costs through legislation that directly controls prices, to regulations requiring reporting on drug prices and justification for drug price changes . As depicted in PWC’s chart, state legislative bills in 2017 targeted manufacturers most frequently, followed by PBMs, payers, and providers. Forty-three states have introduced such legislation, and Massachusetts introduced the highest number of bills (10) in 2017 . Some of these bills look to limit coverage for beneficiaries to curb costs. For example, Massachusetts is seeking to limit prescription drug coverage to Medicaid beneficiaries.
- Pharma Price Predictions: Because of efforts in the statehouse and beyond, there is a bit of good news: this year, Segal’s prediction for prescription drug benefit cost trends is that they will be lower than 2017 . The rationale behind this bending cost curve is largely due to the increased scrutiny of drug pricing and subsequent pressure on manufacturers. In 2018, we expect to see increased use of alternative therapies, setting limits on price hikes, and an increased focus on quality and outcomes via value-based purchasing  across payers, providers, and drug makers.
Why do we care? Pharmaceutical prices continue to be a significant driver of health care cost increases, and those cost increases are unsustainable in the long run.
5. PUBLIC HEALTH ISSUES: Increased Focus
There will be an increased focus on several high profile public health issues in 2018, including:
- Opioid Epidemic: Overdose deaths in 2015 to 2016 increased by 21% to reach 64,000 deaths in 2016 . 2017 brought increased attention to the opioid epidemic but no silver bullet. In 2018, we are likely to continue to see a focus on the opioid epidemic. There will be multisector and multipronged approaches to addressing this issue. These solutions will include alternative pain management and medication, prescriber practices, addiction treatment, prevention, data sharing, and law enforcement practices. For example, Governor Baker of Massachusetts recently released a legislative package that takes a multipronged approach by focusing on treatment accessibility, drug abuse prevention, and educational expansion (read more about the package here).
- Social Determinants of Health: There were many discussions about social determinants of health (SDOH) in 2017. Increasing evidence of the impact of SDOH and the effectiveness of programs to address these determinants, paired with a focus on value based care and risk contracts, has highlighted the importance of addressing social determinants of health. In 2018, we will continue to see a focus on addressing social determinants of health, especially as more evidence about the effectiveness of interventions is published. While there will be a focus on SDOH, the real question is how much investment will we see. Many health systems are taking steps to connect patients to social services and provide more support staff, such as social workers and community health workers. However, fewer are making large investments in addressing root issues, such as housing. While the investment needed for these efforts is large, so is the return, for example a program in Portland, Organ saw healthcare costs drop 55% after the city began placing more the 7,000 residents without homes in a new facility. In Chicago, a similar program led to a 42% reduction in healthcare costs .
- Natural Disasters: 2017 brought a multitude of natural disasters, which cost the country nearly $200 billion. In addition to the high cost, the disasters also brought destruction of infrastructure, injury, loss of jobs, and more. These losses have far reaching consequences that will continue into 2018. Loss of economic prosperity along with destroyed infrastructure will lead to a strain on families and their health in 2018. This is particularly highlighted by Puerto Rico, where more than 3 months after the hurricane, 1.5 million Puerto Ricans remain without power, and hundreds of thousands have no clean water .
Why do we care? Healthcare only contributes 10-20% of determining an individual’s health and wellbeing. Because of this, it is important to focus on the other contributing factors, including individual behavior, and social and environmental factors. Focusing on multiple aspects of what makes people healthy will help reduce healthcare spending, and create a healthier and more productive society.
 PwC Health Research Institute; Medical Cost Trend: Behind the Numbers 2018; June 2017
 2017 Employer Health Benefits Survey; Kaiser Family Foundation; September 2017
 PwC Health Research Institute; Medical Cost Trend: Behind the Numbers 2018; June 2017