Healthcare companies working for publicly-funded programs have one certainty: they will be serving many more Americans getting public coverage, at the same time they will have to bring down the cost-curve.
While the future policies of Medicaid and Medicare remain to be determined, be advised that changes are under way, in developed and much-needed if the nation's fiscal crisis is going to be reigned in, according to Steven Lieberman, a healthcare consultant and visiting scholar at the Brookings Institution.
"Ugly and its getting worse" is the federal government's fiscal outlook, Lieberman said at America's Health Insurance Plans Institute in Seattle.
"Healthcare will continue to be the Pacman eating federal budgets" until "real Medicare reform" comes, and that's not likely until Congress and the President reach a grand budget bargain -- which isn't likely in the short term, in Lieberman's view.
But that doesn't mean Medicare regulators -- and to an ever greater extent, state legislatures and Medicaid leaders -- aren't trying to bend the cost the curve for both the short- and long-term, with policies that could be disruptive to existing business models for hospitals and managed care plans.
In Medicare, don't count on that change coming in a flood all at the once. Medicare Advantage rates are gradually coming down to parity with fee-for-service, not nearly as fast as Medicare advocates like the Medicare Payment Advisory Board would have liked to see.
And accountable care organizations, the prospects for which CMS officials are quite bullish about, need a lot of tweaking before they can be successful on a large scale, Lieberman argued.
"Clearly, rules are going to have to change," he said.
In their first full year, only about half of the 114 Medicare shared savings ACOs had lower expenditures than baseline, and only 29 were able to share in the $380 million savings.
ACOs are "too important an issue for CMS to let it die in Medicare," Lieberman said. Commercial ACOs, without all of Medicare's rules, have a much better chance in leading the way.
In Medicaid, the landscape is equally mixed, if slightly more free for experimentation thanks to the expansive waiver authority CMS is able to give to states.
"Medicaid is a big program and it's growing, getting bigger," said Patricia Boozang, managing director of Manatt Health Solutions.
This year, the Medicaid program is expected to cost $500 billion. By 2020, if all states expand eligibility to low-income childless adults, as many as one in five Americans will be insured by the program -- at an estimated annual cost of $900 billion.
For many states, Boozang said, that could mean Medicaid accounts for 30 percent of their state budgets -- a figure that to many, just isn't going to be sustainable, given the need to invest in education and aging infrastructure.
Coming to that realization while still wanting to cover the newly eligible, populous states like New York are turning to payment reform and "starting to flex their purchasing muscles," Boozang said.
New York in particular is using an $8 billion waiver over the next few years to expand home and community care in a bid to reduce avoidable hospitalizations by 25 percent.
Managed care organizations, which are widely used in New York Medicaid, "aren't really in the money stream for the five years of the waiver," Boozang said, although they are going to be tasked with channeling the pay for performance -- something that will be a big challenge on top of existing ones. Last fall, Excellus BlueCross BlueShield withdrew from New York Medicaid after losing $100 million on the program in the past fiscal year.
Elsewhere, CMS is offering billions of dollars to states for innovation models and waivers, granting flexibility for states like Arkansas and Iowa to expand Medicaid through private health plans.
Other states are using versions of accountable care organizations, such as Colorado, which is trying to pioneer a primary care-focused coordinated care program.
Now covering half of Colorado's Medicaid beneficiaries, the Regional Care Collaborative Organization program yielded a 15 percent reduction in hospital admissions and a 25 percent reduction in high-cost imaging in the 2013 fiscal year, contributing to $44 million in savings.
Most of that $44 million was returned to providers as incentive bonuses, but $6 million went to state coffers -- the type of cost curve bending government health leaders elsewhere are hoping they can emulate with the help of the private sector.