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Dr. Pate’s Prescription for Change

St. Luke’s Health System’s Journey to Transform Health Care

2018 Predictions: Medicaid, the ACA, Insurance and More

By Dr. David C. Pate, News and Community
December 26, 2017

It’s been a full and eventful year on all levels, local to global and everything in between, in health care and in so many other areas of our economy and business activity. We’ve seen considerable change in government, in payer structures, on the regulatory front … I am hard-pressed to think of any area that has not shifted to some degree over the course of 2017, some in fundamental and profound ways.  

So, what should we expect in the coming year?

Health Care Reform and the Affordable Care Act

It appears that Republicans will end the tax penalties associated with the individual mandate with their tax reform legislation.

I also think we can expect yet another bill to repeal the ACA in 2018. I don’t think it will garner enough support to overcome a filibuster in the Senate, so Republicans are likely to try to dismantle as much of the ACA as they can through the reconciliation process, starting with the framework of the Better Care Reconciliation Act sponsored by Sens. Lindsey Graham and Bill Cassidy but not passed in 2017. From there, Senate Republicans will tweak the bill to gain the needed support to pass it along party lines.

I think if Republicans are successful in passing tax reform, and it appears that they will be, then they will be emboldened in their efforts to take health care reform back up. Because of the significant impact to the federal deficit caused by the tax reform legislation, Republicans will be looking for cuts to entitlements next year. This will mean renewed efforts to roll back Medicaid expansion and convert the federal portion of Medicaid payments to block grants, and I predict they will be successful.


Republicans oppose Medicaid expansion in general, even though a number of Republican states have expanded their Medicaid programs. A key part of any health care bill that is passed is likely to end and reverse Medicaid expansion.

Republicans also are likely to convert the present Medicaid federal-state partnership into Medicaid block grants or per capita caps. Medicaid block grants would put significant pressures on state Medicaid budgets and cause states to reevaluate their eligibility and benefits structures.

In Idaho, I do not believe that Medicaid expansion will be adopted, though the state may seek waiver authority to lower the income levels for which subsidies would be made available to assist people in purchasing health insurance and shift high-risk/high-cost individuals from commercial plans offered under the public exchanges into the state Medicaid plan to reduce the premiums of these plans. In my opinion, this would be a positive step for Idaho, a second-best alternative to Medicaid expansion. The one change I would suggest is to utilize the concept of an invisible risk pool, where high-risk/high-cost individuals do not have to move off their plan and onto Medicaid, but can continue seeing their physicians as if they remained on their plan, even though the costs would be covered by the high risk pool.

Pharmaceutical Costs

The United States is unusual among countries comprising the Organisation for Economic Co-operation and Development in that we do not regulate or negotiate the prices of prescription drugs when they come onto the market, as does nearly every other country. Many of those countries will not approve a medication for use unless it confers a significant clinical benefit over an existing drug when price is considered.

For example, Australia’s Pharmaceutical Benefits Advisory Committee has rejected roughly half of the cancer drug applications it has received over the past decade because the benefits did not justify the price.

As a consequence, Americans tend to spend two to three times what citizens of many other countries spend on medications.

The Medicare program is prohibited by law from negotiating prices and must cover all medications approved by the U.S. Food and Drug Administration. This prohibition is unlikely to change as there would be steep opposition in Congress on both sides of the aisle, especially considering the power and influence of the pharmaceutical lobby.

The Veterans Health Administration, on the other hand, is permitted to select the medications it will cover and negotiate prices. As a result, veterans do not have access to all of the medications Medicare beneficiaries do, but VA prices are, on average, 40 percent cheaper.

I believe there will be much greater antitrust scrutiny applied against drug manufacturers going forward, and we are likely to see some settlements, and perhaps even some convictions, for price-fixing. Otherwise, I don’t expect to see much change other than some efforts to promote and speed the arrival of generic medications into the market.

Continued Transformation from Fee-for-Service to Pay-for-Value

The transformation from fee-for-service to pay-for-value has not gone as fast as I thought it would, but pressure to improve the affordability of health insurance and reduce health care costs will not abate.

Hospitals are likely to see continued reimbursement pressures. Changes to the ACA are likely to result in more uninsured people and higher rates of charity care and bad debt. Increases in the use of health savings accounts and high deductible insurance policies are likely to result in significantly reduced health care spending. MACRA will be a greater influence on driving providers to engage in more pay-for-value programs.

Those health systems that can accept and manage accountability for health outcomes and total costs of care will be able to control their destiny; those who can’t are likely to see declining performance.


I do not expect to see any significant shift in antitrust policy or enforcement with the Trump administration. The Department of Justice successfully blocked the mergers of Anthem and Cigna and Aetna and Humana this year. We are sure to see further consolidation in the insurance market, but not mega-mergers like those attempted in 2017.

This will be a challenging year for payers. President Trump has stopped the cost-sharing reduction payments, and we should see premiums on the public exchanges increase 20 percent. Republicans have proposed ending the individual mandate and it appears that ending the tax penalties associated with the individual mandate may be included in the final tax reform bill. If they are successful, we are likely to see premiums for 2019 increase another 10 percent.

Public Exchanges

Despite Republican efforts to weaken the ACA, I expect to see strong participation on the public exchanges. That is because the vast majority of participants are insulated to a certain degree from premium increases resulting from the cessation of cost-sharing reduction payments and the potential termination of the individual mandate due to the structure of the advance premium tax credits.

There will be continued movement to narrow network products in an attempt to hold down costs.

An increasing number of people are discovering their insurance plans are, in essence, insurance for catastrophic illness because of the high premiums and ultra-high deductibles. Premiums, deductibles, co-pays and co-insurance have risen to levels that outstrip the liquid assets of more and more people. This will mean more bad debt for hospitals treating those who are insured under these plans, and perhaps more who will choose to go uninsured because of the lack of affordability.

Information Technology

The focus will be on the use of analytics to better guide management of populations that a provider network will care for. Telemedicine will continue to grow as an option to provide services in lower-cost environments and areas with physician shortages. There will be increasing use of smart phones and apps in the management of health and illness (so-called mobile health or mHealth). The industry will continue to explore what the roles of machine learning and artificial intelligence are for health care.

Cybersecurity will continue to be a threat, as efforts by those who seek to hack into computer systems carrying potentially valuable information become increasingly sophisticated.

Health Systems

This will be a tough year for health systems as they face uncertainty about the future of the ACA, the regulatory environment and continuing reimbursement pressures, despite rising drug costs. For organizations whose boards and physicians are not fully committed to the transformation to pay-for-value, this may be a time when momentum and progress stall. That will be unfortunate, and may weaken their long-term positioning.

I do not expect the pressures for consolidation to lessen, yet some of the largest health systems in the country are financially underperforming, and in some cases, struggling.

To the extent that the ACA is repealed and there is a decrease in the number of people insured through the marketplaces and through Medicaid expansion, we can expect to see a deterioration in hospital financial performance, as bad debt and charity expenses increase.

Those health systems and provider networks that figure out population health and demonstrate the capabilities to manage the health of populations and be accountable for the outcomes and total cost of care for those populations will be the clear winners. A disproportionate number of these systems will have their own health plan or will be significantly partnered with an insurer.

St. Luke’s Health System

The coming year will be a pivotal one for us. We have significantly developed the capabilities and competencies of our network, St. Luke’s Health Partners, and as of this year, 34 percent of our revenue is at full risk or substantially at risk. All of the work we have been doing for the past seven years is coming together to allow us to successfully be accountable for the health outcomes and total cost of care for multiple populations. We are entering our second year under these risk arrangements, and I expect to see the fruits of our services and programs in successfully managing the costs of these populations.

Our partnership with SelectHealth, our work around high reliability that has resulted in our ranking as a Top 15 Health System by Truven Health Analytics for four years in a row and our move to a single, integrated electronic health record across the entire health system are among those strategic elements upon which we are basing our ability to deliver what our communities want and deserve.

I’d like to end by wishing the St. Luke’s team, our committed and passionate board members and physician leaders, our volunteers, our communities and our colleagues in care across the country a successful and rewarding 2018. I have confidence that, together, we can navigate these times and challenges, and build great and lasting care for our friends, our families and our children.

About The Author

David C. Pate, M.D., J.D., previously served as president and CEO of St. Luke's Health System, based in Boise, Idaho. Dr. Pate joined the System in 2009 and retired in 2020. He received his medical degree from Baylor College of Medicine in Houston and his law degree from the University of Houston Law Center.