May 2014, Vol 3, No 3
The Affordable Care Act and Cancer Patients – Winners and Losers in an Unsteady Paradigm Shift: Part 2 The Conclusion of an Analysis of the ACA by Kip Piper, MA, FACHE
In the April issue of PMO, Mr Kip Piper, a leading healthcare policy authority, addressed the benefits of the Affordable Care Act (ACA) for cancer patients and oncologists. In this second report, he addresses the problems the ACA presents. For the ACA’s sword does indeed cut both ways, particularly in terms of its economic feasibility. He now examines the challenges of finance and politics that attend the ACA’s implementation. Paying the bill for the benefits outlined in Mr Piper’s first article remains a stalwart opponent to the durability of the ACA.
As discussed in last month’s article, the “good news” surrounding the ACA centers on ensuring widespread access to healthcare coverage. This, as we shall see, is not the same as guaranteed access to healthcare or even, ironically enough, to healthcare insurance. Increasing healthcare coverage access is done in part by expanding eligibility for Medicaid coverage in about half the states for low-income adults previously ineligible for Medicaid, and by providing substantial subsidies from the newly formed federal healthcare insurance exchanges at healthcare.gov and the state-run insurance exchanges. Individuals with income below 400% of the poverty level are eligible to apply for federal subsidies in the form of subsidized premiums, with patients between 100% and 200% of the poverty level receiving the most federal subsidies. In addition, individuals and families with incomes between 100% and 250% also receive subsidized cost sharing, ie, lower deductibles, copayments, and coinsurance from additional federal subsidies. Medicaid for the most part has no premium, no deductible, no coinsurance, and only nominal copayments for prescription drugs. Other provisions for increasing access include the elimination of preexisting conditions as a criterion for coverage denial or increased premiums.
The net effect of these provisions is to remove the last pretense that healthcare under the ACA is linked to insurance, which would follow strict actuarial calculation of each person’s premium, coverage eligibility, and costs of benefits, all based on an individual’s or a company’s overall risk. Because this criterion is conspicuously absent from the ACA, healthcare insurance has been replaced by healthcare group purchasing – quite a different proposition, a distinction with real differences. Under the provisions of the ACA, those who are healthy and young will subsidize healthcare for older or infirm persons, whose premiums and coverage provisions would otherwise be prohibitively high.
The overall process of the ACA is therefore one focused on wealth redistribution, not health efficiency improvement, and this includes reducing the income of physicians. The ACA legislation is actually not medical legislation at heart but political, or more specifically ideological. It is centered not on medical imperatives but a political premise that “healthcare is a right” and then works backwards into the copious details of healthcare delivery to enforce this imperative. The legislation does not attempt to examine the intricacies of each disease state, but instead treats all diseases as so many cogs in a wheel, identical in the process of redistributing healthcare coverage.
Feasibility of ACA in Oncology
While the ACA was written with the intent of reforming all fields of medicine, oncologists know the special nature of cancer care, and so an in-depth reality check is in order. I will examine the factors involved in delivering on the promises made in the ACA and the basic problems to medicine posed by this insurance paradigm.
The advantages of the ACA are not achieved without cost of another kind; this paradigm shift presents challenges across the entire healthcare spectrum. It comes down to the simple proposition: is the ACA sustainable, is it feasible financially?
The “advantages” side of the ACA have received the lion’s share of attention, and they are regulatory and financial in nature. They are all about how the government regulates the marketplace, how it uses taxpayer monies to subsidize coverage, and how it uses its police/regulatory power to ultimately require individuals, families, and businesses to subsidize other individuals, families, and businesses. Moving forward, the concerns with respect to access that the ACA raises are substantial, and many of these are a combination of both the direct and indirect effects of the incentives in the regulatory paradigm created by the ACA. These effects will be felt by cancer patients, and so oncologists need to understand them in order to anticipate the problems facing their patients over the long term.
One of these challenges is narrow networks. Each plan is required to have a network of providers, including an adequate number of oncologists participating in this network. What we are seeing in the health plans established to be in compliance with the ACA is that many insurers, though not all, have proceeded to devise fairly narrow networks – far fewer providers, by provider type, that a patient may access. Many academic medical centers, which provide much of the tertiary specialized and subspecialty care, do not have contracts with all of the ACA plans. We are seeing that insurers are trying to leverage their buying power in the marketplace, and responding to the regulatory and economic incentives of the ACA, by severely restricting the number of providers from which patients may choose care that are considered “in network,” with substantially increased copays and deductibles for going outside of network.
What this means to patients is that, when they are newly diagnosed, they have difficulty seeing all the different types of providers they need. They will be funneled into a narrower range of the multiple specialists and hospital facilities covered by their plan. This, of course, will have an effect on the practical business of oncology and the ability of oncologists to serve their current patient base, because at a certain point the patients will not have access to their doctors.
Another issue is that the ACA has resulted in many products having high deductibles. The government and the insurers are shifting many patients into high-deductible health plans. This perhaps may be one of the unintended consequences of the ACA, but one that is quite predictable. Analysts knew all along that the incentives and the market rules like guaranteed issue and adjusted community rating would necessitate a change in the benefit designs of the plans, with insurers moving to higher-deductible plans, since they are not able to affect revenue behavior in the old ways. We are also seeing a noticeable trend toward health plans having high coinsurance on biologics. Where in the past a coinsurance of 20% or 30% of physician-administered drugs and biologics was common, we are now seeing more plans with 30%, 40%, or 50% coinsurance for biologics.
Here we see a good news/bad news scenario: many new biologics coming on the market, full of promise for improving patient longevity and quality of life, and so oncologists rely heavily on them to treat patients; but the biologics, particularly the newer ones, are quite expensive. Hence, many cancer patients will see much higher out-of-pocket costs owing to higher deductibles and higher coinsurance on biologics.
We are also seeing much tighter drug formularies, with health plans under the ACA tightening up on drugs in different therapeutic classes. We are also seeing health plans engage in more robust, stringent utilization management practices in order to limit spending. That will play out over time, but patients face a combination of narrow networks; higher out-of-pocket costs in the form of higher deductibles; higher coinsurance; a shift by plans away from copays to coinsurance, where the patient pays a percentage of the total drug cost rather than a modest, fixed dollar amount per prescription; tighter utilization management; and narrower drug formularies. These will all push back against the initial moves that were made to increase access, since these forces are designed to impede access to the newer, more expensive therapies.
The other disadvantage that we are seeing, of course, which was predictable, is lower reimbursement, a downward pressure on physician rates. Many of the health plans that devised products for the new health insurance exchanges were not offering traditionally accepted reimbursement rates for providers and in most cases were offering rates substantially lower than traditional commercial plans – in some cases closer to Medicare levels and even Medicaid rates. On average, they may not end up going as low as Medicaid but may approach Medicare or Medicare plus 10% or Medicare plus 5% rates. This further complicates matters since Medicare rates are not rising but are remaining stagnant, and when Congress has increased Medicare rates, it has tended to raise them only nominally, eg, 0.5% or 1%, which of course does not keep up with cost inflation. Consequently, over the past decade, physicians treating patients in Medicare Part B have lost substantial ground financially.
This will cause physicians to have to make difficult decisions concerning how many patients they will choose to serve in different markets. Take, for example, Medicaid: more people are going to be coming onto Medicaid; they will be insured. But access to insurance does not mean access to healthcare. This places physicians in the difficult position of either trying to limit the number of Medicaid patients they treat or trying to receive higher reimbursement rates from commercial insurers in order to compensate for gaps in Medicaid reimbursement. This is the plain, simple fact of cross-subsidies among the payers.
So there is all this money moving back and forth. But as the highest boundary, traditionally the commercial payer, moves their pricing downward, there is simply less of an opportunity for oncologists and other providers to shift losses – uncompensated or undercompensated care – from government programs to the higher-paying private sector because the commercial payer will not be providing that extra increment anymore. This is going to happen over time, and it will be further exacerbated as patients move from purely private plans into either government plans or government-paid or heavily subsidized plans. This increases the financial pressure, because the government is never going to be the highest payer.
Change is upon us, and stepping up to the challenges requires understanding their dynamics first, then considering the downstream effects of the ACA, and finally, reconciling this legislation with the realities of medicine, putting the patient’s interests first and managing our resources realistically, compassionately, and intelligently.
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