Bass, Berry & Sims attorney Angela Humphreys—Chair of the Healthcare Practice and Co-Chair of the Healthcare Private Equity Team—sat down virtually with Paul Keckley—a healthcare policy analyst, industry expert and Managing Editor of The Keckley Report —to discuss the anticipated healthcare policy changes under the Biden administration and what impact these changes could have on the healthcare industry.

Keckley expects the Biden administration to pursue incremental policy shifts. The environment is not politically ripe for sweeping changes, he said, although toward the end of this decade, the aging of the population and other factors may align for change on the scale of the Affordable Care Act (ACA).

Biden’s Healthcare Priorities

The Biden administration will have to balance the desire to expand healthcare access with a growing federal budget deficit and many large, competing interests, such as pandemic relief and climate initiatives. Keckley sees four healthcare priorities for the administration:

  • Access to care: To insure more people, the administration will pursue greater subsidies for people buying coverage on health insurance exchanges set up by the ACA, further Medicaid expansion, and a “public option” plan on the ACA exchanges.
  • Affordability: Competition policy (see below) and more transparency are the most likely policy actions to improve affordability.
    • On transparency, Keckley expects the administration to focus first on drug prices, noting that Medicare beneficiaries with traditional coverage are more sensitive to drug prices than the cost of hospitals or physicians.
    • Another potential target is the 19% of hospital costs that are allocated for administration expenses.
  • Plugging ACA gaps: Politically, the ACA is now considered a middle ground between “Medicare for All” and a deregulated approach that focuses more on market-oriented solutions, Keckley said.
    • First, the administration will work to reverse changes made under the Trump administration aimed at weakening the ACA.
    • Over time, it also will look to expand coverage and make ACA plans more affordable while keeping private payers and providers in the system.
  • Competition policy: On the provider/payer side of consolidation, Keckley expects the Federal Trade Commission to take the lead with more rules to stimulate competition.
    • Changes in the delivery of care suggest rethinking how regional healthcare markets are defined—inpatient care is shrinking in importance and, as Keckley notes, ACA accountable care organizations use primary care as the basis for determining the market.

Healthcare Disruption

Traditional healthcare provider companies face new entrants from two distinct camps: The first camp consists of giants from tech, retail and insurance; the other is competition from digital health startups.

  • The giants crossing over from other sectors are looking at healthcare differently, Keckley said.
    • They have fewer legacy costs and practices to consider as they chart a course.
    • These companies are more willing to take on risk since they are making big bets in healthcare. They are not as concerned with compliance: With their scale in multiple businesses, they can afford to pay fines for non-compliance as a cost of doing business.
    • They face government scrutiny on both competition and data privacy fronts, he added.
  • Digital health companies may benefit from the Biden administration’s impulse to stimulate competition to control costs.
    • Private equity’s interest in digital health has provided ample capital to pursue solutions that improve care or experience and/or lower its cost.
    • The challenge they face with policymakers is making digital health more equitable and inclusive, Keckley said.
    • For digital health to move beyond shifting in-person access to virtual models, the administration will create incentives to make underserved populations their primary market.

Alternative payment models are a policy lever to further disruption.

  • Keckley expects the number of value-based care pilots to be trimmed—there are more than 50 in Medicare right now.
  • Those that survive will be broadened: More providers will be required to participate; benchmarks and incentives will be shifted to draw more participation; and while downside risks will increase, the upside will be easier to attain.
  • The administration will continue to tweak regulation of Medicare Advantage (MA) plans to make membership more closely reflect the overall Medicare population, Keckley said. Currently, MA enrollment skews toward healthier Medicare beneficiaries.
  • Managed care also will be promoted further for Medicaid, expanding on the 39 states that already offer some form of managed Medicaid.

Ultimately, Keckley predicted, healthcare is likely to move throughout the 2020s to a more integrated model with a few “supermarkets of health” that provide care broadly as privately operated, tightly regulated, publicly funded utilities.

If you have questions about any of the topics covered during the webinar, please contact Angela Humphreys.