Patient Protection and Affordable Care Act, Medicaid costs loom

Reform implementation, Medicaid and sequestration are three key issues facing the healthcare industry in the wake of President Barack Obama’s re-election, analysts, consultants and healthcare leaders said Wednesday.

In the remaining seven weeks of the year, the president and the 112th Congress have a slew of complicated matters to address, including several pending regulations to implement the Patient Protection and Affordable Care Act, the 2%, across-the-board Medicare cuts scheduled to take effect next year; and the anticipated 27% reimbursement cut in Medicare payments to physicians after Dec. 31.

“The wild card in this is sequestration,” said Steve Valentine, president of healthcare consulting firm the Camden Group. “If you listen to enough people talk, it looks like this Congress will pass it to the next Congress and say: you deal with it.”

Michael Mezey, professor of political science at DePaul University in Chicago, echoed that sentiment. Mezey speculated that House Speaker John Boehner (R-Ohio)—who was willing to compromise with the president on last year’s contentious debt deal but met fierce resistance in his own party—might be considering his own job security. “Boehner may give Obama a wink and a nod,” as if to say: “Let me get re-elected as speaker and see what we can do afterward,” Mezey said.

Now the administration’s focus shifts to implementation and rule-writing, which would have come to a halt if former Massachusetts Gov. Mitt Romney had won, Mezey said. Instead, the law’s regulations will move forward. “By the time his second term is over,” Mezey said of the president, “it will be fully implemented.”

As the administration continues to implement the law, hospitals will pay particular attention to the law’s provision for states to expand Medicaid. “The expansions are critically important to all hospitals,” said Chip Kahn, president and CEO of the Federation of American Hospitals. “The whole point of health reform from our standpoint was the expansion of coverage.”

Medicaid expansion in the states is also a top concern for the American Hospital Association, said Richard Umbdenstock, president and CEO of the group that represents about 5,000 U.S. hospitals. Umbdenstock said between the states that are willing to expand Medicaid and those resisting it are undecided states that might have individual conversations about the issue with HHS officials. “We want to work with the department and state associations to provide expansion, but that will require a certain amount of transparency from HHS,” Umbdenstock said.

While most agree that Obama’s win signals a victory for the healthcare law, some contend that Congress will still push back on certain provisions in the law. Bob Moffit, a senior fellow at the conservative Heritage Foundation, said it’s likely Congress will try to strike down provisions such the medical-device tax, the Independent Payment Advisory Board and the employer mandate for coverage. “When they passed the Affordable Care Act, they didn’t solve anything,” Moffit said. “They just initiated the first stage in a 100 years’ war in health policy,” he continued. “All of these things are inherently controversial themselves—each one is a big issue. You will not see this idea of, ‘the Affordable Care Act is here to stay.’ ”

The AHA’s Umbdenstock said that even though implementation is now the top priority, the organization is willing to work on tweaking parts of the 2010 law on Capitol Hill, including repeal of the IPAB. But more important than working to overturn unpopular provisions of the law is working to examine issues the law didn’t address, Umbdenstock explained.

“What can we do to broaden the conversation around advanced-care services?” Umbdenstock said, citing one example. “Certainly at the top of our list is always medical liability reform,” he added.

Meanwhile, health plans will continue to see their margins reduced in the continued implementation of the medical-loss ratio, which requires plans to spend either 80% or 85%—depending on whether they are a small-group or large-group plan—of premium dollars on medical costs. The Camden Group’s Valentine said the industry can expect to see these health plans acquire more retail businesses, such as durable medical equipment businesses, eyeglass companies and hearing-aid companies as a way for plans to drive revenue. “Let’s buy retail healthcare businesses that we can make a margin on and it comes out of the 85%,” Valentine said. “It’s a diversification strategy.”

Paul King and Charlotte Hildebrandt
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