With the 2012 elections behind us, the biggest immediate policy question many Georgia businesses face is determining how to make their way forward in a health care reform landscape. That landscape appears stable in the near term, but fundamental changes are ahead.
Based on the election outcome, which ensured that the 2010 Affordable Care Act is here to stay, Georgia business owners and managers are going to be contending with three trends that have been set in motion by the health reform legislation and are unlikely to change. Those trends are elimination of high coverage plans, decentralization of health care delivery, and a focus on tying provider reimbursements more directly to outcomes.
On the first issue, health care reform simply provided a compelling reason for corporate America to take decisive action to drive down the rate of increase on spending for employee health care benefits sooner than many had planned.
Most firms have begun taking steps to use pricing, incentive and availability strategies to discourage employees from selecting so-called “gold plated” plans. Rather, employees are being pushed to select plans with high deductibles, health savings accounts, coinsurance and tools that encourage wellness. This trend has accelerated as a result of health care reform and is unlikely to stop.
Employers will have to work carefully to encourage employees to make wise health decisions in an environment where consumers are being asked to take more direct responsibility for their spending on health care. And doctors, hospitals and other providers will need to adjust their payment mix models to anticipate some reduced demand from higher-paying commercially insured patients — presuming the new system succeeds in driving down utilization.
In other words, the ability to shift costs will decline over time. That said, no one really has a good econometric model for how far down utilization may go, so leaders of medical practices will need to watch trends closely and adjust on the fly in many cases.
In the second area, decentralization of health care delivery, Medicaid policy changes will be a huge factor in what comes next. The Supreme Court decision on health care reform has given states the option of determining whether they will move forward with a major expansion of Medicaid coverage, an option states did not have under the law as it was originally passed.
An eclectic but generally Democratic-leaning group of states – located in the Northeast, in the Midwest and on the West Coast – have already accepted the Medicaid expansion. The largest of these are California and Illinois.
On the other side of the equation, six states in the South have announced their decisions to opt out of the expansion. Georgia is among the six, although our leaders have expressed some willingness to reconsider this decision if the Medicaid program is significantly redesigned to give states more flexibility in implementing it.
Combined with likely implementation of health care exchanges – that are designed to cover currently underinsured workers – these changes will likely increase use of preventative and routine care services.
The expansion of Medicaid, and the push to treat conditions in lower-cost settings, will continue to make hospital-centered delivery of health services a difficult model to sustain. In turn, larger hospitals will focus on establishing networks of clinics by purchasing medical practices and extending beyond their campuses. At the same time, physician groups that have the leadership and vision to remain independent will be able to follow the same course, expanding on their ability to deliver services in lower-cost settings.
Some of this activity will be fueled by a focus on preventive care services, which are not delivered in a centralized setting. A key sector that will feel the impact of this change is health care real estate, which will likely see less spending on centralized higher-end facilities and more spending on smaller, geographically dispersed buildings. The medical industry itself will also see changes, as smaller hospital and physician groups face enormous pressure to cut costs and consolidate.
The final trend we anticipate is a more direct link between payment for services and outcomes delivered. The debate over Medicare payments for patients who are readmitted to hospitals for the same condition represents a key front in this battle. Because it can be difficult to measure outcomes for many patients, this will be a harder piece of policy to implement. However, government and private-sector health plans are increasingly trying to do it, and we can expect to see more focus on this area over the next several years.
This focus will open up some unique opportunities for the private sector to apply technology and process management solutions to health care delivery. Whether “value-based” health care payments take hold will depend partly on the effectiveness of those solutions and partly on whether health care providers embrace the concept.
The bottom line on all of these trends is that the business of health care is going to fundamentally change over the next several years. And Georgia companies are going to be significantly impacted by that change, regardless of whether or not they are directly in the health care business.
Victor Moldovan is an attorney with over 20 years of experience working with the health care industry. He advises companies and trade associations that operate in the health care arena and offers analysis to clients on state and federal proposed rules.
Brad Alexander is a senior vice president who leads the state government relations team in the Georgia office of McGuireWoods Consulting. He is former chief of staff to Lt. Governor Casey Cagle.
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