In this episode, Mike Merola, Founding Partner of Winning Strategies Washington, discusses the various approaches to healthcare policy among the field of presidential candidates and the potential implications for hospitals moving forward.
Michael Passanante: Hi, this is Mike Passanante. Welcome back to the Hospital Finance Podcast. I’m glad you can be with us.
Today, I’m joined by Mike Merola. Mike is a Founding Partner of Winning Strategies Washington, the leading government relations firm based in Washington, DC that specializes in hospital issues. And today, Mike is going to provide us with a look at how the proposed policies of current and recent Presidential candidates could affect the healthcare and hospital reimbursement landscape in the years to come.
Mike Merola: Thanks, Michael. It’s a pleasure to be here with you today.
Mike Passanante: This is a fascinating year for presidential politics and I think there’s a lot for us to talk about. So let’s just jump right in. What can you tell us about how the candidates’ approach to healthcare issues is different across the spectrum, especially among the more non-conventional, say Trump and Sanders campaigns?
Mike Merola: Sure. The campaign for me definitely brings to mind that Chinese curse, “May you live in interesting times.” This is definitely the most unsettled, unpredictable campaign of my career. I’ve been doing this for 25 years and I think that includes in the area of healthcare.
Oddly enough both Senator Sanders and Mr. Trump are really the most radical in terms of their approach this year. And surprisingly even though they’re on opposite sides of the spectrum, they’re almost completely aligned in calling for the repeal and replacement of the Affordable Care Act and Universal Health Care for all Americans.
Senator Sanders has been advocating for a single payer system for most of his career. He sometimes calls is Medicare for all and he intends to cover everything including nursing home care, all of the fringe benefits in the system. And he would finance it through a series of very costly tax increases, new revenue streams, building on existing revenue streams. And he would still have employers contribute their share as well.
Mr. Trump, while he is kept it broad brush, he’s asserting that he can make healthcare cheaper and better by using his business acumen to make deals with hospitals and using those savings to finance universal coverage. He was in a town hall in South Carolina not too long ago. And he also referenced Medicare expansion and perhaps making commercial insurance national, which is really not the traditional message for Republican primary audience or candidates. So it’s going to be interesting to see if he modulates this for the general election.
I’m having a hard time getting my head around how the same Republican party that has voted scores of times to overturn the Affordable Care Act is suddenly going to support this notion of universal coverage. Even if they’re different in the details politically, it’s the same thing. You could substitute universal coverage, any Republican in Congress anyway, a member’s mind with the Affordable Care Act.
Yeah, I think it’s fair to say right now Mr. Trump stands a better chance than Mr. Sanders does of being his party’s candidate. So if he does win and he’s able to somehow get this through Congress, it would radically change our entire industry.
But in terms of its effect on hospitals, I think it would continue this trend now that we’re seeing where much more care would move to less costly ambulatory and even digital health settings. There would be more of an emphasis on hub hospitals that provide higher level of acute care. And miniatures or community hospitals that care for low acuity patients would likely evolve into ambulatory centers for advanced care. They’d have to have inpatient beds occupying much less space in order to get capital offering cost low. And you also see population health and its social determinants receiving I think a greater emphasis with organizations of all types having more freedom to develop healthy initiatives to keep folks out of hospitals.
Mike Passanante: It sounds like the solution there is both universal coverage and bending the cost curve through the reimbursement that’s offered. Is that what you’re seeing? Do you hear these candidates talking about bending the cost curve as they go through their proposals?
Mike Merola: Not as much as you would think because that really is the core critical issue I think for our industry and for the country as it grapples with this.
Really before he dropped out, Chris Christie, the governor of New Jersey, was really the only person who kept harping on the idea of entitlement reform and inherent in that was this idea of having to bend the cost curve for the federal government because now – I may be off here a little bit – two-thirds of every federal dollar spent is going into our entitlement programs.
So I think whoever wins the White House this fall is going to have to grapple with that issue in a way that the Affordable Care Act talks about, but hasn’t really done yet.
Mike Passanante: Okay. So when we think about the more traditional Republican candidates, they may or may not be with us by the time this podcast airs, but their ideas may live on. So right now, we’re looking at Ted Cruz and John Kasich. How do their plans and proposals compare to what we just talked about?
Mike Merola: Sure. It’s ironic because I think in a normal year, you would talk more about Kasich as a traditional Republican candidate and Cruz would be way, way out, far, far right. But this year, they’re grouped together just by virtue of Mr. Trump’s candidacy. But both of them are suggesting that they would partially repeal or replace the Affordable Care Act with a more market-based system.
Senator Cruz is talking about opening insurance markets across state lines, expanding health savings accounts and de-linking health and insurance from employment. His reforms are really aimed at the commercial insurance market. And so if he were to win and successfully shepherd these proposals through Congress, which I think again is a big if because he’s probably the most unpopular Senator in my time and probably going back to Senator McCarthy. He’s just universally disliked by his colleagues. So even if he does win, it would be hard for him to get some of these big reforms through.
But I think you’d see this continued national consolidation of healthcare providers and payers. You’d have national provider and insurance systems developing, creating hub and spoke healthcare systems, really, really different characteristics. Some would go after the broad middle market. Others the higher tier, higher, upper echelons. And many of the systems will have multiple offerings in their hospitals and ambulatory settings. They’re going to have to reflect these and look in experience as well.
You’ve got to give Cruz credit though for being specific. Governor Kasich has kept his health reform proposals much more general. Not surprisingly, he wants to limit healthcare spending, but he maintains that access to affordable healthcare and health insurance is really vital, but that he can find a way to provide that less expensively than the Affordable Care Act.
For him, the touchstone, according to his website and everything he’s putting on his campaign is that ObamaCare in Ohio drove the cost of health insurance up by almost 80% and raised taxes to help subsidize health insurance coverage for families making up to $94,000 annually. So that’s the origin of his position here.
I think he’s really looking at prevention and primary care as a solution. He was recently on a local radio program. He said something to the effect that we’ve got to start practicing quality healthcare and not quantity healthcare. He wants a much greater role for primary care physicians. He’s not plowing a whole lot of new earth there, we hear that all the time, but he seems to have picked up the Christie mantle and he’s really talking about reforming entitlement programs, their uncontrollable growth as unsustainable and that we’ve got to reform them to make them more efficient.
And you did reference some of the candidates that aren’t with us. This is probably the best place to talk about Senator Rubio because although he is no longer in the race, I could see either Trump or really any of the candidates who are still in adapting some of his proposals. They were a little bit more detailed. He talked about reforming the commercial insurance market by using a refundable tax credit to allow every American to purchase insurance through a state-based system.
He also wanted to end certain aspects of the ACA like cutting Medicare Advantage, getting rid of the Medical Device Tax and taxes on health savings accounts. So we’ll have to see if these prescriptions do live on as the candidates on the Republican side have to get a little bit more detailed.
I think especially with Rubio’s proposals, you would continue to see more original consolidation of providers. You’d see more hospital closures and hub hospitals really thriving as more inpatient volume is funneled to them.
Mike Passanante: So we’re going to jump to the other side and look at the proposals of the Democratic frontrunner Hillary Clinton. What do you see in her proposals that is the same or different than what you’re seeing out of the crop of Republican candidates?
Mike Merola: Sure. She’s been very clear that she intends to keep and improve the Affordable Care Act. She gives a litany of below that line objectives or goals. She wants to expand affordable coverage, slow the growth of all the healthcare cost including prescription drugs, it’s getting a lot of attention these days in DC, and make sure providers are driving towards quality care.
Although she hasn’t said so exclusively how she’ll do it, by reading between the lines of her assertions, the only way she can get there is if she ends the fee-for-service reimbursement program. And CMS is experimenting with a lot of this already as many of your clients are well aware, but I think she would really have to take that to the next level.
Mike Passanante: Okay. So at this point in the process, if you’re in the hospital, what would you be doing to insure that your voice is heard in the debate?
Mike Merola: Sure. I think most importantly right now, hospitals should be identifying to the best of their ability either through their national associations or through folks they may work with in Washington who their points of contact on the various campaigns are and even if they want to start with Mrs. Clinton and Mr. Trump because it looks like those will be the candidates. So that they can at the right time, which is probably June to July timeframe really get engaged with the transition teams. So that they can make sure that as these individuals are putting policy papers together and advising their candidates that their either individual or collective voice through their associations are heard. I think that’s going to be really important.
And it’s not always easy. The folks running these campaigns are very busy. But I think it’s worth the effort, worth the attempt. And if any of your clients want to learn more about that, I’m happy to help them offline.
And then I think there are just things that they could be doing generally to help position themselves for whatever is going to come next on the policy front in the next Congress with the next administration, things like continued focus on community partnerships, accelerating the development of lower cost, ambulatory and digital healthcare offerings and just creating the operational efficiency both in the hospital and in their ambulatory settings.
Mike Passanante: Mike, that was a great analysis. Thank you so much for spending some time with us today and breaking down this year’s Presidential politics.
Mike Merola: Thanks, Michael. My pleasure.