Plumbing and the US Healthcare system

Plumbing matters.  Complexity matters for project timelines and launch dates.

This is overwhelmingly true for health insurance, health finance and healthcare access.

We need to think about why there are transitions periods built into the various healthcare bills that are being proposed by all of the Democratic presidential candidates right now.  These bills vary in scope, complexity and how they interact with the current framework (ACA, Medicare, Medicaid and Employer Sponsored Insurance (ESI)).  That variance leads to very different plausible time frames.  Bills that tweak the current parameters of the ACA individual market by extending subsidies to 600% or 6,000% Federal Poverty Level (FPL) should have shorter minimum necessary lead times than bills that completely restructure eighteen percent of the US economy.

I poked at this type of question in the summer of 2017 when there was a plan-like rumor that one possibility for the GOP was to repeal the ACA with a 12/31/19 drop-dead date and create a crisis point.  At that crisis point, a big bipartisan bill would be signed that would have mostly conservative policy priorities in it but since it was bipartisan, no one would be responsible and no one could be blamed.  One of my points in that post was the seventeen month lead time in that proposal was grossly inadequate for a bill passed that afternoon.

Let’s work our way through the process of a major revamp first and then a minor revamp.  We will assume that your favorite bill (of any flavor) passes this afternoon, everyone has a hangover celebrating on July 31, so actual work starts on August 1, 2019.  I’m going to give a set of scenarios that are in the 95th percentile of GOOD NEWS.  

Major Revamp

Any major revision of the US Healthcare system will need significant rule making from federal agencies.  The federal agencies need to take what Congress has written and figure out how to actually make it work.  The ACA had several hundred instructions of the “Secretary Shall…” and those ranged from when open enrollment periods should be, to how calories were to be counted, and what the de minimas allowable actuarial variation in metal bands could be.  Rule making (at least rule making that will stand up in court) requires notice and comment.  Let’s be super-optimistic and say the major rules are drafted in six months.  This is fast as every interested stakeholder ranging from hospitals, doctor groups, pharmacies, consumer advocates, patient advocates, bed frame manufacturers and thousands of entities in between will want to be in the information sessions.  White papers will be produced faster than trade proposals on deadline day.

Once the draft rule is completed, it has to go through internal governmental review and then it goes out to the public for notice and comment for at least thirty days.  Here the public can comment on the proposal rule.  Some of those comments will be insightful, evidence based and useful, others will be rote repetitions of ideological direction.  The rule making entities has to read and respond to all the comments.  A good rule making process will use this as an opportunity to learn and adjust.  This learning process will take another four to six months to produce a final rule that is neither arbitrary nor capricious.

We’re at a year now.

Now industry (docs, hospitals, insurers, nursing homes, oxygen suppliers etc) has not been sitting around waiting.  They’ve been trying to anticipate what the rules could be given the black letter law and whatever initial guidance that is coming out of the government.  But they’re somewhat stuck until final rules are out to begin major changes to business systems, IT infrastructure and the finance and billing systems.  A major change like Medicare for All or dedicated Health Savings Accounts and high deductible plans for everyone requires massive back-end changes.  Industry scopes out the changes and figure that it is a twelve to eighteen month project.  The ACA plumbing job for insurers to get to initial operating capability was a 24-30 month plumbing job.  But I’m giving good news estimates right now.

So the nerds start programming and the consultants start consulting on change management. We are two years in.  At the same time, whoever came out of the bill signing ceremony as either a policy or ideological loser is in court.  Their case is working its way through the system and by now, it might be appealable to the Supreme Court.  The Supreme Court takes the case and issues a big ruling in the Spring of 2021 that either is a complete thumbs up for the law or a minor change at the furthest corner of the law.  Oh yeah, we just had an election, so there might be a major political curveball about to be thrown.

So now we’re 30-36 months in and the government and industry are about ready to go live.  Day 1, depending on how ambitious your favorite bill is, could see millions to tens of millions to hundreds of millions of people trying to figure out the new system.  It better be mechanically sound on Day 1, so the temptation to pad another six to twelve months of plumbing time into the project timeline is strongly motivated.

All of this assumes that there are few major hiccups in the process.  It assumes that no one in the private sector is going to court to challenge the rule making process, it assumes that the vast majority of the build-out is on time and close enough to scope, it assumes that the Supreme Court is cool with the changes.  It assumes a lot for a fast roll-out.

Minor Tweaks

All of the above is for a major revision of the US healthcare finance and delivery system.

What if we just build on what we have now?

Now that is easier.  A change to the ACA subsidy formula so that no one pays more than 10% of income for a silver plan can’t go live on January 1, 2020 as insurers are just about ready to submit final plans for approval next month.  But the rule making would come out via the routine Notice of Benefit and Payment Parameters in December and the plumbing would not be particularly complex.  These plans would definitely be available for the November 2020 open enrollment period with a go live date of January 1, 2021.

Moving Medicare’s age eligibility date up or down a year or two is also mechanically simple.

Changing Medicaid eligibility and financing so that the enhanced match rate applies to all mandatory populations or only to the new ACA populations but changing that guideline so it is now 167% FPL instead of 138% FPL is also fairly simple.  That is something that could readily go live at some point in 2020.  Creating well funded high cost reinsurance pools would also be a 2020 project.

Transition times are real.  They are not (just) attempts to push back problems past an election cycle.  There are real constraints that drive at least minimum transition periods.  The bigger and more complex the problem and change, the longer the pre-implementation period probably needs to be.