There are no summer doldrums when it comes to healthcare news. Here are a few of the events that have been dominating the healthcare wires over the past several weeks.
Healthcare mergers are in full swing as the largest insurers look to consolidate. A few weeks ago, Aetna and Humana announced their intention to merge. Just this past week, Anthem and Cigna announced the same. The deals will take some time to work their way through federal and state approval processes, with regulators looking closely at the impact on competition and consumers in each state. In the end, both mergers are expected to receive approval after some mandated divestiture in certain areas to preserve product offerings and choice. The process for each could take between 12 and 24 months and the Justice Department may bundle its investigation of the two mergers.
The mergers are a sign of changing times for health care. The new healthcare accountability model focuses on tight bidding and quality-based reimbursement. To succeed, insurers and health plans need the power of numbers and a laser-like focus on outcomes to attract members and gain additional revenue.
State Exchanges Facing Financial Troubles
About two-thirds of all states never set up their own Marketplace Exchange and many of the dozen or so that did are now rethinking their decision. Despite generous grants from the federal government to set up independent Exchanges, many states are facing initial cost overruns, major ongoing administrative costs, and lackluster success in attracting members. A number have already begun looking at turning over operations to the Federal Marketplace. Hawaii has already made the decision to abandon operating its own Exchange for 2016 and several more turnovers could be in the making. Nevada and Oregon already abandoned operating their own Exchanges.
While having greater input into healthcare policy was a strong rationale for the dozen states to set up their own Exchanges, the Supreme Court took away one of the other strong reasons for independent state Exchanges this term. In a 6-3 decision, the high court ruled that the federal government can grant premium and cost-sharing subsidies to citizens who are in states where the federal Exchange operates. With this important part of the Affordable Care Act law clarified, states may opt for partnership with the Centers for Medicare and Medicaid Services (CMS), the federal entity that is responsible for health care, rather than assume the costs of full independence. As an alternative, some policy makers see states grouping together to form regional partnerships over time as well.
Federal Trust Funds in Trouble
More bad news for the status of national trusts funds for various safety net programs emerged last week. Medicare turns 50 and Social Security will soon be 80. The impact of the aging of America is taking its toll on the programs.
The trustees who oversee the Medicare and Social Security trust funds report that while the Social Security Trust Fund proper looks in better shape than thought (it is solvent until 2035), the Social Security Disability program has major financial problems.
About 11 million Americans rely on payments from the disability program, which is predicted to run out of money by late 2016. This would trigger an almost 20% reduction in benefits, or on average $193 monthly per beneficiary. In addition, the Medicare Part A Trust Fund looks destined to run out of money by 2030. Because of major increases in Part B Trust Fund costs, major premium increases for Part B are expected. While most Social Security recipients will not be exposed as their increases are capped at the amount of the cost-of-living increase in Social Security, new beneficiaries, direct payers of the premium, and higher income recipients will see an increase of $54 to $174 per month, an increase of 50% on the low end. States will be hit hard as well, as they pay all or a portion of Part B premiums for dual eligible.
While reforms have slightly lengthened the life of the Medicare funds, it is clear that much more drastic reform of the Medicare fee-for-service – changes that impact quality and cost reduction – are needed to ensure the long-term viability of a system that 60 million Americans rely on.