|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
Taking another shot at Medicaid block grants
On Thursday, Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma unveiled a proposal to dramatically change the way states and the federal government fund the Medicaid program. Dubbing the proposal “Healthy Adult Opportunity”, Verma described the approach as giving states “unprecedented flexibility to administer and design their programs”, by converting federal payments for enrollees made eligible by the Affordable Care Act’s (ACA) expansion of Medicaid into so-called “block grants” or “per-capita caps”. Reviving a conservative policy idea first proposed by the Reagan administration, and again as part of the failed Republican attempt to “repeal and replace” the ACA in 2017, the approach would provide capped, lump-sum funding for expanded Medicaid to states that apply for a special waiver, allowing them to change provider payment levels, eligibility requirements, and benefit designs to generate savings relative to a capped payment. Of particular note, the program would allow states to implement narrower drug formularies, limiting the availability of certain high-cost drugs to enrollees.
The new waiver program is likely to attract the interest of red-state holdouts that have not expanded Medicaid under the ACA, along with some that already have. Oklahoma Governor Kevin Stitt, for example, described the new program as a “game changer” and announced plans to apply for the waiver. Meanwhile, Tennessee has separately applied for a block-grant waiver outside the scope of the newly announced program. Critics of the block-grant approach warn that it will result in fewer low-income people having access to Medicaid coverage, and will encourage states to divert funding away from critical health services. Experts are also dubious about the legality of the program, which will surely be challenged in court, as it may violate the statutory requirements Congress set for the Medicaid program. Given the lengthy process of applying for a waiver to allow the transition to block grants, it’s unlikely any state will be able to implement the program until sometime in 2021, adding political uncertainty to the legal and economic questions that loom over the new proposal. What’s clear is that the Healthy Adult Opportunity program represents another political shot across the bow of the ACA by the Trump administration, which has continued to administer the landmark 2010 law with a “fix what works, change what doesn’t” approach—ensuring a fierce political battle on the future course of Obamacare as part of the ongoing Presidential election campaign.
Betting on the growth of government insurance
As of late last week, the US now has a new #3 health insurance company, at least as measured by number of enrollees. Centene Corp. and WellCare Health Plans, Inc. completed their $17B merger, first announced last year, having cleared all regulatory hurdles and passed antitrust review by the Department of Justice. The combined company now ranks behind only UnitedHealthcare and Anthem among the nation’s largest insurers, but looks very different from its giant competitors. With the merger, Centene solidifies its position as the largest provider of Medicaid managed care insurance, while adding WellCare’s substantial Medicare Advantage (MA) and Medicare Part D books of business to its arsenal. The company now has operations in all 50 states, including 17 in which it offers plans in the Medicare, Medicaid, and individual exchange segments. Centene is much less reliant on the commercial insurance business than its peer companies, and earns much less revenue from administrative service only (ASO) arrangements with self-funded employer clients. Rather, it has focused squarely on the government business, which continues to grow rapidly thanks to the aging of the Baby Boom generation into Medicare, the growth of MA coverage, and the continued expansion of Medicaid managed care. According to Modern Healthcare, Centene President and CEO Michael Neidorff recently suggested that WellCare may become the MA brand of the combined company, serving about 1M enrollees. It will be worth watching how this government insurance behemoth continues to grow over time—particularly in states where it has a firm foothold in the Medicaid and individual marketplaces, like California, Florida, and Arizona. How it leverages that presence, and its expertise in navigating government insurance programs, to capture the coming wave of MA growth will determine just how nervous UnitedHealthcare, Aetna, and Humana should be.
Nation’s second-largest physician group supports Medicare for All
Discussions of Medicare for All (M4A) continue to dominate healthcare policy debates in the run-up to next week’s Iowa caucuses. Last week the American College of Physicians (ACP) provided progressive Democrats perhaps their most critical M4A endorsement yet. In a series of articles, ACP, which represents nearly 160,000 internists, called for universal coverage through either a move to a single-payer healthcare system or a publicly-financed option with regulated private insurance. The organization issued the guidance as a bold call to action, saying it rejects the view that the status quo is acceptable, or that it is too politically difficult to achieve needed change. Last summer the American Medical Association (AMA) narrowly voted to maintain the group’s opposition to single-payer healthcare, but shortly after exited a coalition focused on blocking M4A and public option proposals. ACP’s support for M4A is another sign of a sea change among physician attitudes toward acceptance of more sweeping healthcare reform proposals, which will likely continue to grow as younger doctors enter the field. As the 2020 elections near, candidates would be wise to remember that patients trust their doctors: a rising tide of physician advocacy for universal coverage could provide a huge boost to voter support for M4A and similar proposals.