Expansion towards Universal Coverage and Lifecycle Management

Healthcare reform is a 2000+-page legislation that could have a significant impact on the lifecycle management of pharmaceuticals, medical devices, and diagnostic imaging procedures.  Reading the legislation indicates that the following aspects of healthcare reform are of particular interest to healthcare manufacturers.

• Expansion towards universal coverage
• Funding expanded coverage
• Biosimilars
• Enhancing the quality of care
• Comparative effectiveness research
• Episodic and bundled payments
• Funding preventive care

Over the next few days, we’ll examine the various aspects of healthcare reform that fall into each category.  We’ll evaluate their impact on lifecycle management of pharmaceuticals, medical devices and diagnostic imaging procedures.  Our analysis will show that healthcare reform offers healthcare manufacturers many new levers to pull in their quest to maximize their return on investment.

Expansion towards Universal Coverage

In many ways, healthcare reform will move us towards universal coverage of all US citizens. 

• Medicaid expansion – Healthcare reform requires all states to expand coverage to everyone below 133% federal poverty limit (FPL).  This includes providing coverage for childless adults who meet the income limit.
• National insurance exchange – Healthcare reform will establish non-profit co-operatives where the uninsured and those who prefer to not use their employer-provided plans can purchase coverage.  Premiums will be set by the market.  The federal government will subsidize the cost of premiums for citizens who qualify based on income considerations.  Citizens with income up to four times the FPL will qualify.
• Elimination of preexisting condition exclusions – After 2013, health plans will not be able to deny coverage to applicants based on preexisting conditions.
• Coverage of all dependent children until 26 – All children, regardless of income or place of residency or marital status will qualify for coverage under their parent’s policy.
• Prohibit lifetime limits and annual limits on the dollar value of benefits for all beneficiaries – In today’s market, most health plans place an annual and lifetime limit on the benefits they will provide for medical and pharmacy coverage.  Healthcare reform will terminate those limits. 

These aspects of healthcare reform will have a significant impact on the lifecycle management of pharmaceuticals, medical devices, diagnostic imaging procedures and more.

• Increase in number of covered US citizens – The most obvious impact of healthcare reform is that almost all US citizens will have coverage for their healthcare costs.  Moving towards universal coverage leads to increased utilization of healthcare resources and a greater revenue opportunity for manufacturers. 

  However, on the flip side of the coin, the increase in the number of covered lives and healthcare resource utilization will drive health plans and the Centers for Medicare and Medicaid Services (CMS) to more closely manage costs.  For example, health plans will feel an increase in pressure to reduce the number of hospital admissions and emergency room visits, utilization of diagnostic imaging procedures and access to select drug therapies.

  The movement towards universal coverage, in conjunction with the wave of mergers and acquisitions among health plans, will increase the number of covered lives per health plan.  The increase in the number of covered lives per health plan increases each organization’s negotiation leverage with healthcare manufacturers.  That leads to downward pricing pressure for healthcare manufacturers.

  Moving towards universal coverage will increase the workload for physicians, hospitals and other providers.  Any pharmaceutical, medical device, diagnostic imaging procedure that saves time for the manufacturer will enable the provider to manage their workload.  This is a benefit that healthcare manufacturers can market to the extent that labor savings are documented by compelling data.

• Change in commercial plan demographics – Healthcare reform will lead to a change in the demographics of the lives that commercial plans cover.  For example, there will be an increase in the number of young adults who become covered by their parent’s policies.  Patients who previously were denied coverage due to a chronic disease will now have coverage.  Patients who suffer from diseases that are costly to treat, such as cancer, and exceed their annual or lifetime limits will now have continuous coverage.  These changes in demographics could affect the priorities that health plans assign to select disease states and how they manage the products and procedures used to diagnose and treat them. 

  This could enhance access to some healthcare procedures and products and, therefore, increase their utilization.  Conversely, changes in the demographics could reduce access to procedures and products and, therefore, increase their utilization.

• Change in Medicaid demographics – Raising the income limit to qualify for Medicaid coverage and allowing coverage of childless adults will change the demographics of Medicaid plans.  A significant number of new beneficiaries who previously were uninsured will be older and sicker than those currently covered by Medicaid.  Today’s Medicaid beneficiaries are primarily younger women and children. 

  For the same reason and with the same implications, some people currently covered by commercial plans will qualify for Medicaid coverage and convert.  Converting to Medicaid coverage will reduce the cost of coverage.

  Changing the demographics of Medicaid beneficiaries could lead to a change in priorities of for managing diseases and the emphasis on negotiating rebate contracts and managing access to products and procedures.  For example, after 2013, Medicaid plans could place a higher priority on managing cardiovascular and chronic diseases and a lower priority on managing schizophrenia.  Changing priorities for negotiating contracts could exert downward pricing pressure on some healthcare products and lessen pricing pressure for others.

  Covering older and sicker patients could improve the overall, historically-low Medicaid compliance rates.  This could enhance the utilization of products among Medicaid populations.

• Uninterrupted coverage – Upon implementation of healthcare reform in 2014, there will be uninterrupted coverage for patients receiving high-cost therapies due to elimination of lifetime and annual limits.  This is likely to increase the utilization of products and procedures associated with diseases that are very costly to treat.
• Elimination of the Medicare Part D coverage gap – Healthcare reform will gradually eliminate the Medicare Part D coverage gap by 2019.  This will enhance access to therapies for Medicare Advantage beneficiaries, which will drive their increased utilization.

In our next blog post, we’ll look at how healthcare reform will be funded and how that could affect lifecycle management of healthcare products and procedures.

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