|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
Seeing a slowdown in healthcare spending growth
The Centers for Medicare & Medicaid Services (CMS) released its annual report on National Health Expenditures (NHE) this week, reporting that total healthcare spending in the US grew by only 3.9 percent in 2017, the slowest rate of growth since 2013. Slower growth was observed across all major categories of spending—hospital care, physician services, and retail pharmacy. As a percentage of gross domestic product (GDP), healthcare spending was down slightly in 2017, at 17.9 percent, although per capita spending hit its highest level yet, at $10,739 per person. Total national spending on healthcare in 2017 hit $3.5T. The slowdown in spending was in part attributable to changes in the level of insurance coverage, which expanded rapidly in 2014 and 2015, but declined slightly last year. In particular, the growth of spending in Medicaid continued its three-year decline, following the Obama-era expansion in 2014. Also contributing was a slowdown in household healthcare expenditures, caused by slower growth in out-of-pocket spending in the face of higher deductibles, copays and coinsurance borne by those who get coverage through their employer.
The government’s share of spending held steady at 45 percent, with the Federal government shouldering 28 percent of the total, and state and local governments paying for 17 percent. Of note, Medicare spending now accounts for 20 percent of NHE, with two-thirds of that in traditional Medicare fee-for-service (FFS) and a third in private Medicare Advantage (MA) plans. Medicare FFS spending grew at 1.4 percent, while MA spending grew at 10.0 percent—with nearly all of that difference accounted for by enrollment growth: flat for fee-for-service, up 8.0 percent for MA. It would seem that the continued growth of private Medicare coverage is allowing the Federal government to constrain spending growth to 1.7 percent per enrollee, even despite a 2.5 percent increase in overall enrollment. That, according to CMS, is because MA enrollees “tend to use more physician and less hospital services.”
As always, there’s a lot of data to absorb in this year’s report on NHE. In particular, the perennial debate over what drives increases in health spending in the US—price growth, demographics, or “intensity” of services—seems to be continuing its swing toward price, meaning that the amount we pay for each unit of service accounts for a larger share of spending growth than our increased use of services or the kind of services we use. Surely this latest report will be used as additional evidence that we pay too much for healthcare services—and we do, in the form of prices that are higher than they should be. Amid these arguments, however, it’s worth remembering that the definitions of price and intensity are complex and determining whether we’re getting value for our healthcare dollars is not as straightforward as comparing this year’s spending to last year’s. That said, given the findings of the latest NHE report, we seem to have settled into a more moderate rate of spending growth that puts healthcare more in line with the rest of the economy, after years of outsized healthcare inflation.
A new vision for competition in healthcare
In a report developed over the course of the past year in response to an Executive Order by President Trump, and released this week, three Cabinet secretaries jointly offered more than 50 recommendations for “Reforming America’s Healthcare System Through Choice and Competition”. The report lays out a blueprint for continuing the Trump administration’s efforts to deregulate the healthcare marketplace and encourage private market competition to lower the cost of care. Focusing on reforms to the provider and insurance sectors, as well as to laws and regulations governing the healthcare workforce and use of health information technology, the document calls for sweeping changes to be made by Federal and state governments. Some of these could be achieved unilaterally by the administration, others would require major legislative action. Among the proposals:
- Toughening enforcement of antitrust laws governing provider mergers;
- Broadening scope of practice laws and regulations to allow nurses, pharmacists and others to extend their services;
- Loosening state medical licensure laws to allow for greater workforce mobility;
- Modifying payment and regulatory restrictions to allow for greater use of telemedicine;
- Easing restrictions on foreign-trained doctors and streamlining funding for graduate medical education;
- Repealing certificate-of-need laws; and,
- Eliminating restrictions on physician-owned hospitals.
Also included in the proposal are suggestions for increasing IT interoperability, bolstering price transparency, loosening insurance regulations, and streamlining provider quality reporting requirements.
On the whole, the report, signed by Secretary of Health and Human Services Alex Azar, Secretary of Labor Alexander Acosta, and Secretary of the Treasury Stephen Mnuchin, reinforces the Trump administration’s bias toward harnessing the power of private market competition and consumer choice as the primary means of improving value in healthcare. While parts of the document simply rehash long-standing, anti-Obamacare ideas, others (such as the scope of practice and medical licensure ideas) represent an aggressive vision for deregulation, one that comes at a moment when the healthcare industry seems on the brink of disruption from a number of new entrants. After the recent midterm elections, major new legislation in healthcare is unlikely, but the new report provides a useful roadmap for predicting future regulatory action and policy proposals. To its credit, the Trump administration may have moved past its “repeal and replace” rhetoric and seems poised to advance its own vision of healthcare reform.
A status report on telemedicine in the US
As we’ve written, telemedicine is at a tipping point, with growing consumer awareness, provider adoption and payer coverage laying the groundwork for dramatic growth. Medicare has long lagged commercial payers and state Medicaid plans in paying for telemedicine. But next year for the first time, nearly all Medicare beneficiaries will have access to some telehealth services, thanks to expanded coverage in the 2019 Physician Fee Schedule and with the passage of the CHRONIC Care Act in February. With that in mind, we were excited to dive into the December issue of Health Affairs, which is devoted to telehealth, and takes a deep look into the state of telemedicine access, utilization, efficacy and regulatory issues today.
Both patient use of telemedicine and the number of providers offering telehealth services are growing rapidly. While overall use rates today are lower than many providers anticipated, researchers found that telehealth use more than quadrupled between 2010 and 2015, rising to 113 users per 10,000 enrollees in the commercial population. The same study found an interesting split in mode of utilization between urban and rural markets. Urban telemedicine visits were more often for minor primary care needs and likely to be consumer-initiated, whereas telemedicine use in rural areas was more often provider-initiated, and focused on access to specialty care, particularly behavioral health. On the supply side, researchers found that only 15 percent of doctors practice in a group that offers direct-to-patient telemedicine, with 11 percent reporting that their group offers provider-to-provider telehealth consults. Rates vary significantly by specialty, with the highest use seen in radiology and psychiatry. Unsurprisingly smaller practices face barriers in telehealth adoption, which will only increase given the expansion of insurers and retailers into the space, as evidenced by an analysis showing the numerous virtual health technology and provider acquisitions by these players.
Other studies in the new Health Affairs issue evaluate the efficacy of telehealth for a range of primary and specialty care conditions, with the key takeaway that care provided with telemedicine is largely equivalent to in-person evaluation; however, data on telemedicine’s effect on utilization is mixed. For at-risk and rural populations, telehealth provides an important access boost, particularly for specialty care needs. In accountable care organizations, telehealth use decreased the use of in-person visits by a third, but telehealth users had more visits with providers overall. Remote monitoring for heart failure increased the number of ED visits—but decreased six-month mortality, perhaps by more quickly identifying symptoms needing treatment. Taken together these studies suggest a need to reframe the goal of telemedicine from simply substituting for in-person visits to providing more comprehensive, accessible care across a spectrum of care needs—and for many patients, a way to increase, not reduce, the number of interactions they have with the health system.