Health Business Blog

Health care business consultant and policy expert David E. Williams share his views

#CareTalk November 2018: Bipartisan breakthroughs in health policy

The latest edition of #CareTalk is out. CareCentrix CEO, John Driscoll and I dig into the healthcare impact of the recent election.

Here’s what we covered:

  • (0:32) What are your keys takeaways for healthcare coming out of the 2018 mid-term elections?
  • (3:09) Medicare Advantage plans can offer supplemental benefits in 2019. Is this a big deal?
  • (6:22) The Trump Administration wants to tie some US drug prices to foreign benchmarks. Is this a serious proposal?
  • (8:17) Are you surprised to see the FDA clamp down so strongly on vaping?

Lightning round

  • (10:29) Did you talk about healthcare at the Thanksgiving table?
  • (10:57) Will the Supreme Court overturn Roe v Wade?
  • (11:30) How are you liking your new Apple Watch?
  • (12:01) How about them Red Sox?

By healthcare business consultant David E. Williams, president of Health Business Group.

A couple observations about Tuesday’s elections

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Checking the box

Healthcare was on the minds of mid-term voters this week. Candidates emphasized healthcare in their campaigns and voters in at least six states had an opportunity to weigh in on healthcare via ballot questions.

One observation is that voters are being asked to decide some fairly technical questions, including whether dialysis center profits should be capped in California, whether hospitals should have to maintain specific nurse staffing ratios in Massachusetts, and whether Medicaid eligibility should be expanded or current expansions extended in Idaho, Utah, Nebraska and Montana.

The California dialysis measure was the most fascinating. It was essentially a proxy war by the SEIU, which wants to unionize dialysis centers, against the big gorillas in the dialysis industry: Davita and Fresenius. To get a sense of the stakes, the companies ponied up more than $100 million to fight the measure and were very successful. Davita’s market cap rose by $1.2B the day after the election, if that tells you anything. Both the pro and anti groups had the word “Patients” in their name, which is typically a good hint that patients were incidental to this effort.

In Massachusetts, the nurse’s union was behind the ballot question, while hospitals opposed it. Initially the polling looked good for the measure –after all who doesn’t want adequate nursing– but hospitals managed to throw enough doubt and confusion into the measure to set public opinion against it.

In both cases, the ballot questions may set the stage for future state-level legislation.

Medicaid expansion results were interesting. The questions passed in the conservative states of Idaho, Nebraska and Utah, but failed in Montana. Interestingly, the Utah measure included a 0.15% increase in the sales tax, enough to offset the incremental cost to the state.

The Montana situation was different for two reasons. First, it was a proposal to continue the expansion that was approved by the legislature in 2015 with a sunset provision. Second, it included a big tobacco tax, amounting to about $2 per pack of cigarettes. That apparently was too much for voters to handle.

Idaho, Nebraska and Utah join Maine as the only states to institute Medicaid expansion via ballot initiative. Implementation of Maine voters’ will was stymied by Republican Governor LePage. Now that he’s being replaced by a Democrat, Maine can be expected to implement the expansion along with the others.

By healthcare business consultant David E. Williams, president of Health Business Group.

CVS Aetna merger goes through. I’m quoted in Chief Executive

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Hand it over!

The combination of CVS and Aetna will work out great for the investment bankers and members of senior management who are able to cash out. Beyond that I’m skeptical about what value this colossus will add to the health care equation.

When the deal was announced I expressed skepticism about the rationale (CVS + Aetna. Are we sure this adds up?)

If the idea is to get health insurers to offer plans that favor retail clinics, why not just contract with those plans? Aetna is a big company but as a national plan its market share in many geographies is relatively modest. Often –like here in Massachusetts– the local Blue Cross has the biggest market share. If CVS is big and powerful enough to actually buy Aetna, surely it can get that company and others to come to terms on retail clinics.

Now that the deal is done, Chief Executive asked me for my take. (CVS-Aetna merger approved by DOJ: What CEOs should know). They put me, quite rightly, in the “skeptical” category and quoted some of my concerns.

By healthcare business consultant David E. Williams, president of Health Business Group.

Whatever happened to consumer directed health plans?

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A sad story for consumers

“Consumer directed health plans” were all the rage in the mid 2000s. The big idea was that if patients had ‘skin in the game’ in the form of greater financial participation in the cost of their care, they would use their well honed shopping skills to find the best deals and thereby drive costs down and value up. Employers embraced the idea, since it could reduce their costs and keep employees happy.

There was a general acknowledgment that patients would need better information and tools to transform into consumers, and there was plenty of optimism that these would be made available.

But now as Kaiser Health News reports (High-Deductible Health Pans Fall From Grace In Employer-Sponsored Coverage) employers are going back to more traditional plans.  There are a few interesting things to note:

  • No one uses the term “consumer directed” anymore. There’s an acknowledgment that this term became a euphemism for cost-shifting
  • Employers tweaking health insurance offerings is not going to solve the healthcare cost problem in this country
  • Employees don’t like the plans and in a tight labor market employers have to abandon them

Kaiser reports that:

Because lots of medical treatment is unplanned, hospitals and doctors proved to be much less “shoppable” than experts predicted. Workers found price-comparison tools hard to use.

Not all “experts” jumped on the consumer directed bandwagon. Back in 2007 I attended the World Health Care Congress where I heard people gushing about the benefits of consumer directed plans. They used employer sponsored 401(k) plans as a model of how employees would take responsibility once offered compelling products, information and customer service from companies like Fidelity and Vanguard.

But as I pointed out at the time in “What if the consumer can’t hack it?” employees had actually done poorly with 401(k)’s, investing too little, choosing low return investments, concentrating their holdings in their own company’s stock, etc. As I wrote:

In my view, 401(k)s are a lot simpler for employees to understand than health care. In a 401(k) you can make one or two decisions and then be on auto-pilot. For example, just contributing the maximum amount and picking a target-date retirement fund is about all that’s really needed. Results can be easily and objectively measured over time and compared with benchmarks. We’ll never be able to do that in health care.

I don’t totally discount the 401(K) analogy but we should at least acknowledge that the 401(k) experience has been far from perfect and that health care is going to be a harder nut to crack.

Looks like I was right.

By healthcare business consultant David E. Williams, president of Health Business Group.