Mitchell & Mitchell: Health Care and the Trump Agenda, Part 5: Strategies for Bending the Cost Curve

This is the fifth post in an ongoing series regarding potential changes in health care that may take place—and actual changes that do take place—with the new Trump administration. The likely implementation issues to be encountered for both potential and actual changes are described, based on detailed methods of analysis. The emphasis is on what these shifts mean for legal practices and how attorneys may prepare in the most effective ways.

The Affordable Care Act (ACA) was put forward as a way to extend health care coverage to more of the uninsured population. There was also a hope by the designers of the ACA that it could help bend the health care cost curve—to slow the large annual increases in insurance premium costs. It was argued that a systematic, comprehensive approach to health care, supported by extensive regulations and managed competition, could bring costs under control.

More recently, the preliminary version of the American Health Care Act (AHCA) has proposed to bend the cost curve in health care through the enabling of individual decision making and deregulation of the marketplace.

It is useful to consider—in both cases— what is really meant by, and what the significance is, of reducing costs in health care.

Under the ACA, coverage was required for essential health benefits, while the Exchange marketplaces were to introduce structured competition among insurance companies, and thereby encourage cost control. Other possible cost control methods were also to be explored on a small-scale, experimental basis.

In contrast, cost control through the AHCA involves the idea is that through competitive shopping (both on and off of the Exchanges) individuals will be able to buy the policies that they deem best for themselves. More free market competition is intended to push down policy costs.

Largely lost in the comparison between the ACA and AHCA is the underlying question: what does it really mean to bend the cost curve? The clear objective is for society to spend less on the purchase of care. However, this inevitably means that there will be reduced funding available for health care providers.

Any significant cost control in health care must result in less money being available for hospitals, physicians, and other providers. As discussed in part one of this series, reactions from individuals and organizations to proposed changes help shape actual program outcomes. Thus, if faced with any realistic expectation of such cutbacks, providers may be expected to react in strong, negative ways that change program outcomes.

The likelihood of real cost control by any health care plan may be evaluated by looking at how providers react to the details of the plan.

From this perspective, the full ACA was never likely to achieve cost control, as it was largely endorsed by providers. Major new funding for providers was received through both the Exchange subsidies and expanded Medicaid.

With the preliminary AHCA plan, reduced tax credits would replace subsidies and the Medicaid expansion would end. Providers are already beginning to resist this plan, anticipating the availability of reduced funds.

A simple way to estimate the likely cost-control impact of proposed plans is to determine whether provider reactions are likely to be positive or negative, and how strong such reactions are likely to be. Any bending of the cost curve in health care may be accompanied by strong provider resistance that will, in turn, reshape program outcomes.

This post was written by Ferd H. Mitchell and Cheryl C. Mitchell, Thomson Reuters authors and attorney partners at Mitchell Law Office in Spokane, Wash. They are active in elder law and health law practice areas and have been working together on programs and activities on behalf of the elderly and in health care for more than 25 years. During their studies, they have visited and evaluated the health care systems of Japan and several countries in Europe to learn how the needs of the elderly are assessed and met in other countries, and they have been better able to understand the U.S. health care system and related care issues from these visits. More about the lessons learned from the ACA and issues involved in health program changes may be found in the 2017 edition of the authors’ book, Legal Practice Implications of Changes in the Affordable Care Act, Medicare and Medicaid, published by Thomson Reuters. More about these methods of analysis may be found in Mitchell & Mitchell, Adaptive Administration, published by Taylor and Francis. Click here to read part one of this series, here for part two, here for part three, and here for part four.