For Managed Care, the Future Looks Rosy if…

Managed care can survive and may even thrive, experts say. But that will be in a world where public payers loom larger, provider prices are pushed down, the wellsprings of illness are addressed, and consumers aren’t quite so frustrated and angry.

M​edicare Advantage for all? If a four-word forecast of managed care’s future had to be distilled from a series of recent conversations with key health care leaders and observers, that might be the phrase.

The popular MA program, in which private payers manage federal health care dollars, is only for the 65-and-over set today. But it accounts for 34% of Medicare bene­ficiaries, a share that keeps rising. And an expanded MA, or something like it, may be suited to a national consensus that seems to invite a greater federal role in funding health care—and disciplining provider prices—while still prizing what many see as the agility of private players in the insurance market.

Standing vigil over health insurers, of course, is the executioner. The Medicare for all proposals of Democratic presidential hopefuls Bernie Sanders and Elizabeth Warren would either end or dramatically reduce the role of private health insurance. François de Brantes says the idea “should be looked at by the managed care industry as an existential threat.”

De Brantes, a vice president of the Norwalk, Conn.-based consulting firm Remedy and a member of the Managed Care Editorial Advisory Board, finds it a striking rebuke to insurers that the once-fringe single-payer notion may now be included in one of the two major-party platforms. “Then look at the generational divide,” adds de Brantes, who is in his 50s. “My generation is lukewarm [about the proposal] at best. The next generation is so dissatisfied with the industry’s lack of innovation and lack of responsiveness that they figure, ‘Why not?’ Given the nonsense you deal with on a daily basis with your current managed care plan, where you’re still working through some byzantine, ridiculous administrative processes, why shouldn’t it just be the government?”

Still, Medicare for all seems a political improbability given the forces arrayed against it. It’s been called everything from a red herring to a wake-up call. And both boosters and foes strangely downplay the obstacles it would face in getting enacted. Says former CMS administrator Don Berwick, who has advised Elizabeth Warren: “People seem to be acting as if the person elected president gets to put in his or her health insurance plan because they’re president. That’s not the case.” Berwick cites the ACA’s history—and one might add Clinton-era memories too—to attest that no matter who lives in the White House, “the threat of having public insurance mobilizes a tremendous amount of lobbying on the part of the insurance industry and others who have very, very deep pockets.”

Once there’s a wake-up call, though, it makes sense to stay awake. Asked if he glimpses a future for Medicare for all, University of California–Berkeley health economist James Robinson replies: “That’s extreme. I might see Medicare Advantage for all.”

Rushika Fernandopulle, MD, cofounder and CEO of the Boston-based primary care provider Iora Health, agrees that MA is “a really good model. And it’s working, by the way, for people over 65.” (In September it was announced that the collaboration between Iora’s primary care practices with Humana’s MA plans, already active in Arizona, Colorado, Georgia, and Washington, would add 11 more Iora primary care practices in Arizona, Georgia, and Texas.)

But the cheering for MA isn’t unanimous; Berwick is skeptical about the program’s efficiency. “It’s not clear to me that the Medicare Advantage world is doing what it needs to do to help patients and save money for the public,” he says. “There are a lot of transaction costs.”

Get ready for change

Do health plans, as presently constituted, indeed have a future? Thrashing out this question with informed observers is a perilous cliché-avoidance game in which the loser is the first one to utter the phrase “crystal ball.” A prognosis that there will be “winners and losers” is often heard; it has a reassuring ring of reasonable likelihood.

Change is coming—that’s widely agreed. For one thing, experts expect continued growth in Medicare and Medicaid enrollment, and Robinson believes the commercial market will shrink because of “crowd out” by Medicare Advantage and the insurance exchanges. “But I don’t think that hurts the insurance companies,” says the economist. “They play in all those fields.”

Health insurers’ emphasis will continue to shift, says Robinson, from “managing” care by controlling access to services to managing price. Plans’ original cost-cutting strategy, he says, was to attack “unjustified variability in rates of utilization for all sorts of health care services,” weeding out utilization they deemed inappropriate. The public verdict on that is in, he says, and it’s an unambiguous thumbs-down.

“Insurance companies are wildly unpopular when it comes to prior authorization, utilization management—every form of interference with clinical decisions, which in the view of the public should be made by the patient, the family, and the doctors,” says Robinson. “The only reason it’s survived at all is because the insurance companies are not trying to do it very seriously.” Of course, these managed care tools survive, even if less aggressive than they might be—and so do drug formularies. But health plans are wary where public attitudes are concerned. “They’ve been through one managed care backlash,” says Robinson. “They don’t want to live through another one.”

Three rules to live by

“We need the processes of managing care, but I’m not sure we need the private insurers as the vehicle for them,” says Berwick. He argues that many people who oppose Medicare for all are “frightened of change,” and he points to an impression in the public mind that having government as a single payer would make a federal bureaucracy the provider too, displacing one’s doctor and hospital—a confusion he says is “created intentionally.”

Other observers predict an effective role—and business success—for insurers if they heed three tips:

1. Step up your customer relations—a lot. “Ten years from now,” says de Brantes of Remedy, “if the industry hasn’t woken up to the realization that it cannot continue to do what it does in the way it does it today, it’ll be obsolete.” He says most health plans aren’t delivering value from the consumer’s perspective. Premiums are rising, out-of-pocket costs are going up, and in terms of convenience and personal attention, companies aren’t delivering a good user experience, he contends. “And it’s not that difficult,” he says. “This is the frustrating part for a lot of us who believe that a market can effectively function in health care and drive value if it’s done right. Because when you look at some of these new entrants, such as Centivo or Oscar or Bright Health, they’re doing fine. People are happy to renew.”

2. Demand lower provider prices. A Rand Corp. study last spring showed that employer-sponsored health plans were paying hospitals 200% to 300% of their Medicare charges. “These days, when carriers and hospitals fight it out over prices, the hospital almost always wins,” says Christen Linke Young, a fellow at the University of Southern California–Brookings Institution Schaeffer Initiative for Health Policy. For health plans to prosper, experts say this has to change, although provider consolidation in many markets has given providers the upper hand, particularly when there is an apparently essential local hospital for its network.
When Robinson speaks of “managing price,” he means that insurers will be pressed to work more effectively to reduce prices charged by hospitals, doctors, and drug companies. Pushing for government regulation can help, he says—for example, to restrict some tactics used by providers to raise prices, including surprise billing, “any-willing-provider” laws, all-or-nothing network contracting, vertical and horizontal integration, and lack of transparency on prices. If a “public option” is created, says Young, “the health plans that can figure out how to leverage the public option to negotiate lower prices are the ones that will be successful. Their margins will be the same; they just have to waste less money paying needlessly high prices to providers.”

3. Truly address the social determinants of health. Health plans, says Young, “are getting the opportunity to put their money where their mouth is.” A steep learning curve will likely be required, as plans that are accustomed to paying doctors and hospitals figure out how to help support housing programs, food pantries, transportation systems, and violence-prevention initiatives as well. But as Berwick points out, so much more is known about health risks today—and so much power is available by harnessing data—that it should be possible to address many problems upstream before they become super-costly. A decade from now, predicts Young, “you’ll have an industry that knows its customers better and is better at encouraging them to seek out the kinds of care that can keep them healthier longer.”

A problem-free future for managed care is not in anyone’s forecast. While others hail “Medicare Advantage for all” as a useful model for how a public option might work, for example, Berwick worries that if there’s gaming of the system—as there is now—the country could end up with a two-tiered system in which the MA-like public option plan is “the place where the sick people get their coverage.” But he quickly adds: “We have to be careful not to generalize. There are Medicare Advantage plans that behave quite responsibly.”

Young offers an upbeat forecast. “While there are a lot of problems with American health care, there are solutions that can make us a lot better off than we are today,” she says. “If we can put together the will, we’ll be on a fine trajectory.”

There’s even hope on the cliché front. In an extensive December-issue discussion full of chastening glimpses of the future, nobody once mentioned Scrooge.

Is value-minded primary care the secret to winning consumer loyalty?

Marty Makary’s 2019 book The Price We Pay criticizes the health care industry for overmarketing, overdiagnosis, overtreatment, and overcharging. But the Johns Hopkins surgeon extols the team-based approach of Boston-based medical group Iora Health.

“The current health care system is like a game of whack-a-mole,” Makary writes. “Iora shows that good health care is best achieved by a team of doctors and nondoctors who can dive deep into their patients’ work, social, eating, sleeping, stress, and exercise life.” An 18-month study of more than a thousand Iora Medicare enrollees showed hospital admissions reduced by half and emergency department visits by 20%, he reports. And he lauds Iora cofounder and CEO Rushika Fernandopulle and his colleagues’ “mission of restoring humanity to medicine through what they call ‘relationship-based’ care.”

Both Makary and Fernandopulle believe health care entities should strive for a strong “net promoter score”—an index of customers’ willingness to recommend a satisfactory service provider to their friends. While Apple, Amazon, and Nordstrom have famously high ones, most health plans’ scores are down in the cellar with the cable TV companies and the badly run airlines. “How many CEOs of health plans are actually being compensated based on the net promoter scores of their organizations?” asks de Brantes of Remedy. “I don’t know if any of them are.” And that will matter more in the coming years because, like retirees who select MA plans today, employees—not their human resources directors—will increasingly be choosing where to go for insurance. That’s because the historic link between employment and health insurance, in Fernandopulle’s words, “has to erode over time.”

“A lot of doctors have come to us saying they really don’t like working for insurance companies,” says Christopher Chen, MD, CEO of Miami-based ChenMed, another medical group that, like Iora, takes global risk—and wins Makary’s praise.

While a typical primary care doctor has a 2,300-patient panel, he explains, a ChenMed doctor treats only 400. When he approaches health plans as potential contract partners, some of them think he’s crazy. Others realize that such an investment of time and resources in primary care can help drive down costs. (So far, his group has contracts with 22 plans.)

Hospital systems that enjoy a monopoly—or duopoly—in their markets can still turn a deaf ear to demands for accountability for outcomes, says Chen: “If you’re a large enough system, you can say, ‘Go fly a kite. We own this market.’” He cites a few good-guy counterexamples that have responded to the value challenge—usual suspects like Intermountain, Geisinger, and Kaiser—but says many provider organizations still feel they’re doing fine when the cash registers resound the old more-is-merrier way.

“The problem isn’t the payers,” says Chen. “It’s the delivery systems unwilling to pivot their fee-for-service models to be accountable for outcomes. Either you transform your industry to meet the consumer, or the consumer is going to force transformation.” He believes that force may come in the form of downward pressure on hospital prices from Medicare.

As for the fate of health plans? Some will prosper in the years to come, Chen predicts, while others will flounder. “The ones that are going to make it,” he says, “are those that can figure out how to partner with aligned primary care groups to prevent a catastrophic event and improve health.”

After 28 years of publishing, our last issue of Manage Care was December 2019.

While sad, we have much gratitude for the many writers, editors, researchers, reviewers, salespeople, and advertisers who kept us going and made Managed Care a standout publication. And not to be forgotten, we thank you for reading our publication and visiting our website.