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The health care industry was unprepared for the presidential victory of Donald J. Trump, and executives at insurance companies and hospital systems are now uncertain what their business is going to look like in the years ahead. A Trump administration, coupled with a Republican Congress, is likely to lead to a reversal of many of the policies put into place by President Obama, and could mean a repeal of his signature health care law.
Repeal, replace or something in between?
After spending years and hundreds of millions of dollars to adapt to the Affordable Care Act, making fundamental changes to their business model, health insurers are bracing themselves for as striking an upheaval as they faced when the law was passed in 2010. The companies invested heavily in meeting the requirements of the federal law that dictated how they sold insurance, particularly to people who buy their own. Some 10 million people bought coverage last year through the state marketplaces and are in the process of picking a plan for 2017.
Mr. Trump has indicated he wants a smooth transition from the current program to whatever replaces it. But policy experts say it may be difficult to agree on what the replacement should look like. In addition to overhauling how individuals buy policies, the plan would most likely include some makeover of the Medicaid program that is available to people with low incomes. There is even talk of an overhaul of Medicare as proposed by Representative Paul Ryan, the Wisconsin Republican who is speaker of the House.
“The politics will take some time to play out,” said Larry Levitt, a senior executive with the Kaiser Family Foundation, a nonprofit that studies the insurance markets. He emphasized insurers would need time to adjust — again — to any new playing field, even if it meant going back to what they were doing before the law was passed. “Unwinding creates just as much disruption in reverse,” he said.
Even without repeal, the critical question is whether there will be enough federal money to pay for the generous subsidies that allow so many people to be able to afford coverage. “If the A.C.A. is not appropriately funded, it has the same effect” as repealing the law, said Bernard J. Tyson, the chief executive of Kaiser Permanente, the California-based system that includes hospitals, doctors and a health plan.
At the greatest risk in any spike in the number of people who are insured are hospitals. Having already agreed to accept lower payments from federal programs like Medicare because they said they believed more people would have coverage, hospitals are faced with more people showing up at their doors needing care but unable to pay. Over all, 22 million people have coverage under the law, including through the expanded Medicaid program, and hospitals could face even more cuts in reimbursement in the future. “There’s a worry that the government will kick them when they’re down,” said Sam Glick, a partner with Oliver Wyman, a consulting firm.
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Changing how or how much doctors and hospitals will be paid.
The Obama administration has provided a steady push to the industry’s efforts to find a new way of paying doctors and hospitals that puts less emphasis on volume and more on value. With Medicare leading the way, hospitals and doctors would no longer be paid solely on the basis of how many tests and procedures they perform but on whether they can keep patients in better health and deliver more cost-efficient care. The Republican Congress, which also helped pass legislation changing how doctors are paid, seems to be generally supportive of these efforts.
“Those are bipartisan issues,” said Karen Ignagni, the chief executive of EmblemHealth, a nonprofit health plan based in New York.
But progress has been uneven, and some are skeptical that these efforts will continue as aggressively under Mr. Trump. Given the Republicans’ historic concern over cost, the emphasis will be on reducing what the government pays for medical care, not rethinking how it reimburses providers, said Chas Roades, the chief research officer for the Advisory Board Company, which advises hospitals and other health care clients. “I think it is the end of payment reform, but the beginning of payment cuts,” he said.
Others say the move away from paying piecemeal for medical care is inevitable as efforts remain to figure out how to improve quality while reducing costs. “I think the market has shifted and is not going to go back,” said Dr. David T. Feinberg, the chief executive of Geisinger Health System, a Pennsylvania group that includes hospitals, doctors and a health plan. While he says he believes there will most likely be cuts in reimbursement to providers, he thinks payers, including the federal government, will probably continue to focus on the quality of care.
Expect to see more deals.
Given all the uncertainty, many analysts are predicting more deal-making, as hospitals, health plans and doctors’ groups look to join forces to weather whatever changes come ahead. “You’re going to see a lot more consolidation,” Mr. Roades said, especially among the hospitals that will struggle to remain open in a more austere environment.
Hospitals, in particular, may be attracted to mergers and other combinations as a way to achieve the kind of scale necessary to invest in computerized medical records and other technology that they think will allow them to become more efficient. Being larger also gives them more clout in their negotiations with insurers.
Some of the recent frenzy of deal-making had cooled off because of resistance from federal officials in the Obama administration, who were concerned about how the deals among the nation’s largest insurers and hospitals would affect consumers. Two controversial insurance mergers, between Anthem and Cigna and Aetna and Humana, are being challenged by the Justice Department and are expected to go to trial in the coming weeks.
But the election has created some speculation among investors that a new administration may have a change of heart. Aetna’s stock rose, for example, because investors thought its deal was more likely to go through.
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