5 trends shaping reform’s futureNews added by Benefits Pro on May 12, 2014
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By Denis Storey

CHARLESTON, S.C. — You could throw a tote bag at a trade show and hit at least half-a-dozen people who are certain what the next few years hold for those in the benefits business.

But Andrew Hiles at McKinsey & Co. has been crunching the health care numbers for the better part of two decades, so his take carries a little more weight than the guy in the lobby bar.

At the Benefitsfocus One Place event in Charleston, Hiles’ session, “The future of health care is here (almost),” laid out his take on the five biggest trends shaping the (almost) future of health care.
1. Increasing health care costs

We’ve been spoiled the last four years. Well, relatively speaking. We’ve seen an average annual increase in health care costs at just under 4 percent and employers and employees alike have reveled in the respite. (Never mind that over that same period, real GDP grew at less than a 1 percent clip.)

But Hiles says that party’s about to end. And that’s due in no small part to the fact that the recession’s been the single greatest contributor to the slowed health care spending. That’s bound to end eventually. And when it does, people will start spending again, even on health care.

Hiles points to two other factors that will start driving health care costs higher again. One is the changing mix of public-private reimbursements. In 2013, he pointed out, Medicare and Medicaid counted 107 million enrollees. In just five years, he said, that number will jump to 135 million.

Finally, as the aging work force gets even grayer, spending will only accelerate.

2. Legislation and regulation

“We have no idea what the implication of the public and private exchanges will have on the talent pool,” Hiles said.

And that suggests two key areas where the Beltway suits could make an impact.

What legislators do — or don’t do — about the employer opt-out penalty could change the landscape dramatically.

A little further off, the same could be said of the Cadillac tax, set to go live in 2018. As it stands, this would kill the employer-sponsored health care market, especially when you consider that climbing costs will push even the most basic group plans into the Cadillac stratosphere. One solution, Hiles suggested, would be for the feds to convert this from an excise tax into a personal income tax.

3. Acceptance of defined contribution through private exchanges

Will employers be willing to cede control of their workers’ health care management to a third party? That’s what Hiles wonders, admitting the employee dump sounds great on paper, but might cause some to balk in practice.

And, again, Hiles admitted there’s still no good data out there suggesting what the exchange markets will do to the employee attraction and retention market.
Additionally, Hiles pointed out that right now there are 2.5 million employees in the private exchanges, 1.4 million of whom are active. By 2018, Hiles predicted that number will explode to anywhere between 25 to 30 million, rivaling the anticipated number of public exchange participants.

4. Performance of public exchanges

Despite the disastrous rollout of HealthCare.gov, Hiles insisted operational fixes would come. In fact, they already have to some extent. And things will only get better. Next year’s enrollment should only see a fraction of the problems this year’s did, Hiles said.

Then there’s the branding fix. Everyone wants to be Medicare, Hiles said. And to that end, along with the expansion of Medicaid has come a hedging of that name that seems to carry such baggage. Already, Hiles pointed out most states have rebranded their Medicaid departments and subsequent marketing. In fact 13 states now even use the word Medicaid in their name. As that image fades, more eligible residents will start signing up.

5. Supply side innovations

Finally there are the forthcoming supply-side innovations that will help reshape the health care market.

Those begin with payment reform, Hiles said, as the market moves away from the historic fee-for-service model and more toward value-based outcomes.

And we’re already seeing new delivery models, such as ACOs as well as evolving practice patterns with the exponential growth of retail clinics and telehealth options. All of which will help alleviate the fears — and potential reality of the so-called physician shortage.

In short, Hiles suggested the new world of health care, both in terms of delivery and how we pay for it, is a lot closer than we think.

Originally published on BenefitsPro.com
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