Medicare rates increasingly impacting health care

April 2—Even assuming the federal government does not adopt a single-payer model such as Medicare-for-all, industry watchers see Medicare’s impact on the healthcare sector expanding.

Peter Hayes, president and CEO of the Maine Health Management Coalition, an employer-led regional collaborative, said health care is nearing “a tipping point.”

That pressure has increased the role of Medicare at the state government level, with Montana, North Carolina, and Oregon moving to base their employee-plan payments to hospitals on Medicare rates.

As a result, Hayes told the Healthcare Costs Innovation Summit in Washington, D.C., he sees healthcare providers starting to “come to the table and saying they want to be part of the change. Providers will resist to the nth hour. But we’re almost there.”

Hayes has seen that shift among hospitals in his state that are moving from resisting value-based payment (VBP) to reaching out to his group to ask how they can get involved in bundled payment models.

John Bardis, former assistant secretary with the U.S. Department of Health & Human Services in the Trump administration, said it can be “a daunting task to get health systems to take on VBP” because it is much harder to earn revenue under such models.

Expanding Medicare expansions

The increasing effect of Medicare on the healthcare system comes amid a growing number of Medicare expansion proposals, including single-payer Medicare for-all bills. For example, Sen. Michael Bennet (D-Colo.) reintroduced legislation to create Medicare-X, a government insurance option for the individual market.

The bill immediately drew criticism from hospital advocates.

“The public option may be well-intentioned, but it will undermine the private options available for coverage, not expand them,” said Chip Kahn, president and CEO of the Federation of American Hospitals. “Even worse, it will make it dramatically more difficult for hospitals and caregivers to be there to serve their patients and communities.”

Donna Brazile, former chair of the Democratic National Committee, said seven of the 19 major candidates for the Democratic presidential nomination have plans for “Medicare plus,” Medicare-for-all, or “Medicare extra.”

The plan of the candidate who wins the nomination will be added to the Democratic party platform and will be taken up in the next Congress, assuming Democrats control at least one chamber, Brazile said at the meeting.

“I don’t see it as part of the [current] Congress,” Brazile said.

Impact on employer plans

Even without vast expansions of eligibility, Medicare is expected to enroll 10,000 new beneficiaries each day over the coming decade as the population ages. Many of those are likely shifting into the program from commercial insurance, thus reducing the share of patients who are commercially insured. That trend only will increase the pressure on providers to obtain even higher payments from commercial health plans, Bardis said.

“Many with employer insurance will see dramatic price increases,” Bardis said.

Bardis doubted that healthcare providers would broadly take on more financial risk through value-based payment (VBP) without some sort of external prodding. He encouraged employers and generous union plans to shift to Medicare rates to drive VBP adoption.

“We can no longer afford to give a blank check to our private healthcare delivery system,” Bardis said.

Getting a handle on costs

Tim Lash, chief strategy officer for West Health, backed three approaches to controlling healthcare costs:

• Mandating that providers shift to value-based payment
• Allowing Medicare to negotiate drug prices
• Mandating price and quality transparency

Shifting to Medicare rates may not be likely, according to an industry assessment by Lauren Vela, a senior director at the Pacific Business Group on Health. Employees covered through work don’t see provider rates as driving their coverage-cost increases, so they may not support employer efforts that aim to reduce prices.

Company benefits professionals “are making decisions to be sure that their employed population is being kept happy and quiet. They are very careful not to upset the folks they are paid to attract and retain,” Vela said.

Employers nonetheless are working to convince employees that initiatives like formularies and narrow networks are needed to control costs, she said. Such efforts may prove persuasive since 35 percent of insured Americas are either “concerned” or “very concerned” that their household will be unable to pay for basic healthcare expenses over the coming 12 months, according to a survey released April 2 by West Health and Gallup.

Among employers, Hayes said, another newer cost control approach is to examine local healthcare costs when deciding where to open facilities in various parts of the country.