The 8 biggest healthcare issues in 2015 so far

As we move into the second half of the year, this article examines some of the biggest issues that have emerged so far.

1. Healthcare costs for the average family are going up. Over the past two to four years, something fascinating happened. First, healthcare insurance costs stayed largely the same. This gave some people the illusion that family healthcare costs might be staying flat. In reality, the consumer portion of costs went up very substantially. "Healthcare costs for this family have doubled in the past decade, and tripled since we began tracking this information in 2001," said Sue Hart, co-author of the Milliman Medical Index. "As has been the case throughout the time we have studied costs for this family, the rate of increases far outpace the consumer price index." The concept where employers shift more of the costs to employees and insurance companies offer more high deductible and similar types of plans is not abating. Rather, insurers are preparing for another set of significant increases in costs.

2. Consolidation continues at a fairly rapid pace; will regional systems consolidate; will payers consolidate. It has become increasingly clear that rural hospitals and independent hospitals may have a very hard time surviving in the future. Thus, more and more of those are looking to align with bigger systems. And on the other hand, bigger systems are eagerly searching for hospitals that can expand their market reach.

A fascinating issue will be whether the regional systems, and there are increasingly great regional systems in the country, (see "50 Great Health Systems" at Becker's Hospital Review), will start to align with each other. These types of deals, often referred to as "mergers of equals," can be transformative for organizations and their markets.

A second fascinating issue has emerged this past month. Here, it seems as if a merger frenzy or bubble is heating up among the big five insurers as (1) Humana puts itself in play, and (2) Anthem and United make bids for Cigna and Aetna and vice versa.

3. State budgets, whether states picked up Medicaid expansion or not, are being shellacked. State budgets are now in trouble on two different fronts. They are, in many states, overwhelmed by the cost of pension and healthcare responsibilities to former state government employees. Second, they are increasingly overwhelmed by Medicaid expenditures, and in some states the decision about whether to expand Medicaid is a messy one. In Florida, the Senate is deeply divided from the House and governor are deeply divided about a plan to expand the program. Medicaid expenditures, and the burden they bear on state budgets, will get worse as, under the healthcare law, more costs are shifted to states under Medicaid programs.

Paul Volcker, the former chairman of the Federal Reserve, recently issued a report that said neither Democrats nor Republicans can claim to have superior budgeting practices at this point. He criticized states for kicking the can down the road, living beyond their means year after year in a "never-ending sense of crisis" that results in "stop-and-go funding of vital programs," such as those for infrastructure, education, pensions and city and county services.

As 45 states prepare their budgets for the fiscal year beginning July 1, many are facing significant shortfalls and calling for special legislative sessions. A survey by Associated Press reporters found 22 states were projecting shortfalls for the coming fiscal year, with Illinois leading the way with the largest budget gap.

4. Healthcare exchange enrollments see fewer sign-ups than expected; King v. Burwell adds another element of uncertainty. To bolster enrollment numbers, the government provided subsidies to people in states that did not add their own healthcare exchanges, even though the law seems to have said something different. Of those who gained coverage through the exchanges, roughly 6.4 million of them are receiving government subsidies. Depending on the outcome of King v. Burwell, those people risk losing those subsidies. The King v. Burwell case will either stabilize the healthcare law or lead to a situation where the cost of the law versus the benefits of the law become that much more outsized. In essence, as a smaller portion of new people will be enrolled under the law, it may become illogical to have such a change in the American healthcare landscape with little benefit.

Supporters of the healthcare law point to the amount of people enrolled through healthcare exchanges under the healthcare law. Earlier this month, HHS announced 10.2 million people purchased coverage during the most recent enrollment period. That's a drop-off from the 11.7 million people who enrolled for coverage, a decrease that was expected since some people did not pay their premiums. Yet the Obama administration is on track to meet its goal of having 9.1 million people paying for coverage under the exchanges, the administration's 2015 goal.

5. The PPACA has a few great points; note, however the balance between taxes and the costs of government versus the increased coverage remains unclear. There are a couple great points in the healthcare law that should not at any cost be repealed. In essence, the ability for people to obtain coverage even if they have preexisting conditions and other certain other concepts are critically important. Despite its lack of popularity, polls have highlighted a complicated relationship between the American public and the ACA, suggesting many people see the value in certain provisions of the law while not supporting the legislation in full. For instance, a Washington Post-ABC News poll found 54 percent of Americans oppose the ACA, but 55 percent think the Supreme Court should not block federal subsidies in King v. Burwell.  

However, the total billions of dollars spent by the government and the increase in taxes that comes with it compared to the benefits of the healthcare law thus far seem out of balance. In essence, the costs seem high and the benefits may be low.

The impacts of these changes can have an overriding effect on the American economy. The increased taxes plus increased insurance costs mean a double hit to American incomes. In 2014, the percentage of money consumers spent on healthcare rose to a record high of 20.6 percent. Healthcare's piece in the consumer spending pie has grown for years, up from 15 percent in 1990, and it remains a big concern especially as baby boomers enter their retirement years. In the long run, higher taxes and greater insurer costs can harm consumer spending, which is a big part of the economic strength of the country, accounting for 70 percent of economic activity.

6. Epic seems to be taking over the world. Each day, we read about a different contract between a provider and Verona, Wis.-based Epic Systems, the largest provider of EMR services in the country. The company recently signed a $1.2 billion contract with Boston-based Partners HealthCare, making it the academic health system's biggest single investment to date. In February, Rochester, Minn.-based Mayo Clinic announced it selected Epic to replace its existing EMR and revenue cycle technology, which was formerly provided by Cerner. Additionally, Epic recently launched a new partnership with IBM Watson Health, the new dedicated healthcare unit of IBM. Together, the IT companies are partnering with Mayo Clinic to apply Watson's cognitive computing capabilities to EMRs. Please read if you have a chance at Becker's Hospital Review, "Epic Decoded." It is a fascinating story about a very influential company that has relationships with some of the biggest names in healthcare, including: Oakland, Calif.-based Kaiser Permanente, Cleveland Clinic, Johns Hopkins Medicine in Baltimore, UCLA Health in Los Angeles, Arlington-based Texas Health Resources, Massachusetts General Hospital in Boston, Mount Sinai Health System in New York City and Duke University Health System in Raleigh, N.C.

7. The antitrust case against Blue Cross Blue Shield is one to watch. It was recently reported that the Blue Cross Blue Shield Association and all 37 of its independently owned companies were sued in suits advancing in a federal court in Alabama. The court consolidated claims into two plaintiff classes. One class reflects individuals and small employers, who allege Blue Cross consolidation has led to higher insurance prices and less competition. The second group of plaintiffs reflects providers stating that the Blue Cross consolidation has led to lower prices and reimbursement. They essentially say that they are able to buy services as a cartel for all practical purpose. Here, the case is interesting in that it survived a motion to dismiss and is backed by very significant lawyers. Blue Cross has previously been sued over the years on antitrust claims, and it is not clear where this will go. It is interesting in the context of the situation where there has been so much consolidation amongst insurance companies between Cigna, United, Aetna and Blue Cross such that in most states one or two is the dominant payer.

8. PPACA has not provided the benefits for nonprofit hospitals as expected. Many nonprofit hospitals, particularly systems, continue to perform pretty well. There was, however, a very interesting statement within a recent Moody's report that clarified how the new health law has not been a tremendous boon for these hospitals. Hospitals in states that expanded Medicaid were largely expected to benefit from more paying customers (unpaid bills fell 13 percent on average), but their 2014 operating margins did not increase any more than hospitals in the 22 states that did not expand Medicaid, Moody's found. This is again an interesting story in that so much has been touted about the healthcare law and Medicaid expansion providing stability for hospitals and health systems, and it seems as though this may not be the case this far. A Moody's analyst said the finding by Moody's questions the political and industry narrative that Medicaid expansion lowers bad debt and drives financial improvements for hospitals.

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