The Future of Healthcare National Cooperative Rx Helping Members Through the Politics of Reform Susan Winckler, RPh, Esq Chief Risk Management Officer April 6th, 2016 Anchorage, AK
Goals of Presentation Review 4 Elements of Change Insurance Market Revolution The Affordable Care Act Continues in Crisis Mode? Medical Innovation Election Results 2
Insurance Market Revolution Insurance Market Consolidation Consumer Role in Driving Change Emergence of Value-Based Reimbursement Systems 3
Insurance Market Consolidation: Major Shifts Continue Insurance Market Revolution 4
Insurance Market Consolidation Three possible mergers currently under review 5
Predicted Effects of Insurance Consolidation Increase in Insurance Concentration Increase in Medicare Advantage Concentration Source: Leavitt Partners Internal Resources 6
Potential Implications of Enhanced Payer Market Power Lower product costs and increase coverage value? Leverage providers to bear greater risk? Spark additional payer consolidation? Spark additional provider consolidation? 7
Consumers Driving Change: Lessons Learned from Public Insurance Exchanges Insurance Market Revolution 8
Consumerism Individual consumers are price sensitive, willing to trade narrower networks for lower monthly premiums Enhanced decision support tools and greater transparency will play an increasingly important role in facilitating purchasing decisions 9
Predict increasing use of public health insurance exchanges 2014 2020 (Predicted) Economic pressures and other factors will lead to an increase of those who get insurance through public health insurance exchanges Source: Leavitt Partners Internal Resources 10
Consumers Are Price Sensitive When Choosing Plans Lowest Priced Plan Relative to Average Priced Plan 25 20 15 10 5 0-5 -10-15 -20-25 Effect of Plan Price on Enrollment 0 5 10 15 20 25 30 Percent of Possible Enrollment Source: Leavitt Partners Center for Health Insurance Exchanges Intelligence 11 : Internal reporting shows that increase in price leads to a decrease in market share
Value-Based Reimbursement Systems: Transition Away from Traditional Feefor-Service Insurance Market Revolution 12
The Transition from Volume to Value Today's Headlines Transforming payment models have been driven by many stakeholders throughout the industry, not just from CMS Accountable care models continue to expand, however growth has not been consistent across all markets The end result of payment reform has not been determined; many differing approaches are being tested Creative strategies are being adopted to reduce health care cost, beyond basic management & coordination tactics Significant regulatory activity is often unlikely in an election year; the next President will have direct impact on policy trends 13
Progression of Payment Arrangements Increasing Risk Population-Based: FFS Care Management P4P Shared Savings Shared Savings/Losses Partial Capitation Full Capitation Pre-ACO ACO Episode-Based: Usual & Customary Fee Schedule Prospective Payments Bundled Payments 14
Overall Trajectory 1400 ACO Growth and Contract Growth # of ACOs and Payment Arrangements 1200 1000 800 600 400 200 81 83 95 0 81 85 102 Q2 Q3 Q4 2011 2011 2011 203 157 Q1 2012 254 207 Q2 2012 374 391 306 323 Q3 2012 Q4 2012 536 421 Q1 2013 558 591 448 460 Q2 2013 Q3 2013 640 521 Q4 2013 770 803 855 592 600 624 Q1 2014 Q2 2014 Q3 2014 891 635 Q4 2014 1031 1053 730 738 Q1 2015 Q2 2015 1080 1097 761 782 Q3 2015 Q4 2015 1157 836 Q1 2016 # of ACOs # of Payment Arrangements Source: Leavitt Partners Center for Accountable Care Intelligence 15
HEALTH CARE TRANSFORMATION TASK FORCE 75% of all business activity will be in alternative payment model contracts with triple aim goals by 2020 Patients, Payers, Providers and Purchasers: Committed to Better Value Now
The Affordable Care Act Continues in Crisis Mode? Delays in Cadillac and Medical Device Taxes Sustainability of the Insurance Marketplace Litigation & the ACA 17
Delay the Cadillac Tax o Delayed until 2020, shifting opportunity for full repeal to the next Administration o Originally only applicable to high-end plans o 40% tax will be imposed on modest plans as well as employer-sponsored coverage o Could it be the tipping point away from employer-sponsored healthcare? The Cadillac Tax could have a greater impact than initially projected for employer-based coverage 18
Delay the Medical Device Tax o 2.3 percent tax on medical devices delayed until 2020 o Proponents of tax say it would be a loss of more than $30 billion dollars in revenue needed for health funding o Though it appears to be a minor loss, HHS warns that the tax would widen the deficit and be difficult to offset Source: Wall Street Journal, 2015 19
Litigation and the ACA o It continues o Challenges to contraception carve-outs o Challenges based on rate increases o With increasing recognition that challenging already-implemented programs is far more disruptive than reversing policies ACA Changes 20
Medical Innovation: Congress Considers Drug Pricing Incentivizing Innovation Reauthorization of FDA User Fees Precision Medicine 21
Drug Pricing: Sufficient Common Pain? Innovation 22
Rising Drug CPI Consumer Price Index Prescription Drugs vs All Items Relative CPI Year Source: CED, 2016
Congress Considers Drug Pricing Pressures Solutions Under Debate Recent price spikes from some pharmaceutical companies Rising healthcare spend Drug share of total health spend is increasing Implement risk-based contracting Importation Permit government to negotiate prices Compounding Reduce time to approve generic drug Social impact bonds Increase price transparency Revise incentives to use highercost products 24
Congress and the FDA Agenda 21 st Century Cures User Fee Reauthorization Innovation 25
Congress Debates Drug Innovation o House passed 21 st Century Cures bill o Amalgam of FDA fixes, NIH funding and payment revisions o Senate companion bill is on a slower path o Breadth of bill slows it down (multiple committees of jurisdiction) o Debate over inclusion of mandatory funding for medical innovation in NIH Source: The Hill, 2016 26
Reauthorization in User Fees o Reauthorization of 4 FDA User Fee Programs o Next user fee reauthorization is due 9/30/17 and will address the next 5-year cycle (through September 2022) o Allows FDA to maintain predictable and efficient review processes for drugs (brand and generic), biosimilars and medical devices o User fee package nearly always includes others changes in FDA authority/activity o Potential to roll 21 st Century Cures in the UFA package 27
User Fee Program 2013-2017 FDA User Fees ( in millions) Program 2013 2014 2015 2016 2017 Total PDUFA 720 756 800 947 945 4,068 MDUFA 98 115 129 133 134 609 GDUFA 299 306 315 323 332 1,575 BsUFA 20 21 23 28 36 128 Source: Committee Report, 112 th Congress, 2012
Precision Medicine: On the Cusp of Change? Innovation 29
Restructure Average Patient Treatment to Personalized Medicine Most medical treatments take a one-size-fits-all approach, where many decisions are based on the average patient Precision Medicine: Allows for a personalized approach, where medicine takes into account individual differences Gives prescribers tools to better understand complexity behind patient s health, disease, or condition Allows prescribers to better predict which treatments will be most effective End Goal: Linking Precision Medicine to Value
What happens as a result of the election? 31
Election 2016 Affordable Care Act Support Clinton Sanders Key: Support for Value/Integration Cruz Rubio Kasich Christie Trump Bush Access/Subsidies: Medicaid expansion Premium support Value/Integration: ACOs Bundled payments CMS initiatives Desire to Repeal ACA: Low Moderate Support for Access/Subsidies High High Source: Leavitt Partners Internal Resources 32
2016 Senate Election HI AK CA WA OR NV ID AZ UT MT WY NM CO B ND SD NE TX KS OK C MN IA MO AR LA WI IL A MS IN MI TN AL KY OH GA WV SC P A NC FL NH VT NY VA ME CT NJ DE MD MA RI Safe Dem (44 Seats) Leaning D (1) Likely Party Change (2) Too Close (3) Leaning R (6) Safe GOP (44 Seats) Current Seats: 54 GOP 44 Dems 2 Independents (44 Seats) Bennet CO Kirk - IL (44 Seats) Johnson WI Rubio (Ret.) FL Reid (Ret.) NV Portman OH McCain AZ Coats (Ret.) IN Vitter (Ret.) LA Blunt MO Ayotte NH Toomey PA 4 (5) Seats needed for Dem Majority (2 Seats likely to change) To gain majority: Dems need to win 4 out of 10 states (AZ, CO, FL, IN, LA, MO, NH, NV, OH, PA)
2016 Election Outcomes 2016 Election Outcomes Dem Dominance Dem-Status Quo GOP-Dem Split GOP Triple Slam White House Senate House Source: Leavitt Partners Internal Sources 34
Election Outcome Impact Target Dem Dominance GOP-Dem Split Medical device tax IPAB Cadillac Tax 30-hour work week Employer mandate Exchanges Individual mandate HSA Changes Medicaid waiver/fmap changes Risk corridors/risk adjustment Rate Regulations DSR Value Based GOP Triple Slam Action Unlikely Potential Action Action Likely Source: Leavitt Partners Internal Resources
How Do These Pieces Fit Together? Insurance Market Revolution Likely Continued Consolidation The Affordable Care Act Continues Revisions Still Pending Medical Innovation Value Proposition Emerges Elections Some Things Change, Some Stay the Same 36
Questions? 37