Top health industry issues of 2018

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Health reform isn’t over, it’s just more complicated

Congress failed to repeal and replace the ACA through a single piece of legislation in 2017, but the Republican party likely will continue to pursue health reform in 2018 through a more fragmented approach.1 Already, the White House, administration officials and Republican lawmakers have used executive orders, rule-making, CMS waivers, federal appropriations, tax reform and the courts to roll back or transform parts of the 2010 law.2


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Craig Cleaver, PwC, US Pharma and Life Sciences Risk Assurance Leader, talks about managing risk in a resilient organization

2018 likely will bring continued efforts to reduce and cap federal Medicaid spending, expand access to lower-premium health insurance, loosen ACA consumer protections, soften the individual and employer mandates and repeal ACA taxes and fees (see Figure).

Health leaders should prepare for a year characterized by continued policy changes and ongoing uncertainty. A rise in the uninsured rate could apply more cost pressures on the industry—from providers to insurers to pharmaceutical and life sciences companies—eroding gains made through other transformation efforts. To succeed in such an environment, health organizations—especially healthcare providers and insurers—should develop greater agility, efficiency and resilience while building a sophisticated understanding of how changes to federal and state health policy might affect them.3

The health reform change with the most potential for disruption likely would be an eventual transformation in federal spending on Medicaid, including significant cuts, along with greater variability in how states administer the program, according to modeling by HRI and PwC’s strategy practice, Strategy&.4 All five of 2017’s repeal and replace bills proposed unwinding the ACA’s Medicaid expansion and restricting federal spending on the program.

While significant funding cuts are not expected in 2018, Republican congressional leaders and administration officials have indicated they are still interested in pursuing changes to the Medicaid program in 2018 through legislation and regulatory actions.5 Rolling back the Medicaid expansion and introducing a block grant system could reduce federal spending on the program by up to $800 billion over 10 years, according to analyses of repeal and replace legislation by the Congressional Budget Office and the Joint Committee on Taxation.6 In November, CMS laid out streamlined processes for applying for Section 1115 demonstration waivers, which allow states greater flexibility in administering the program.7 CMS also is encouraging states to adopt work requirements and other eligibility restrictions through these waivers.8

Key decisions will be made in state capitals. Faced with federal funding cuts, state lawmakers likely would have to weigh whether they want to focus on delivering services more efficiently, spend more state money to fill the funding gap, cut optional services, restrict eligibility requirements or some combination of these options.9 Absent cuts, state lawmakers and bureaucrats still will weigh whether they will seek program changes through waivers.

Many of the health reform changes being discussed in Washington involve giving states more freedom to shape how healthcare is funded and delivered within their borders. The US departments of Labor, Treasury, and Health and Human Services are engaged in rule-making to expand access to association health plans and short-term, limited-duration health coverage, both of which are exempt from some ACA provisions.10 The plan types available in each state would be molded locally, with implications for insurers and providers, which could eventually see patients with coverage similar to the “mini-med” plans sold before the ACA.11

A constantly shifting health policy landscape produces uncertainty. St. Louis-based Ascension, a faith-based provider that operates in 22 states, is focused on improving, said Nick Ragone, senior vice president and chief marketing and communications officer. “We’re less focused on the minutiae of different legislative proposals,” Ragone said, “and more focused on what we’re doing to integrate ourselves and help the health system to be really nimble, really flexible and really be patient- and consumer-friendly.”

These health reform challenges are an opportunity to think about making strategic investments. Progressive health systems may choose to make bold moves in this unsettled moment as their competitors freeze. Now is the right moment to engage with local regulators, communities and even competitors on public health topics such as social determinants of health, opioid abuse and disaster planning as a key part of an overall value-oriented public policy stance.


Focus on state capitals

State lawmakers and policymakers likely will make critical decisions if many health reforms are enacted. This conforms with a broader trend toward state autonomy in healthcare policy that has gained momentum over the last year. Health organizations, particularly those doing business in multiple states or with customers in multiple states, should consider beefing up compliance and local advocacy efforts.

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Scenario plan

In an unsettled policy environment, health organizations should focus on understanding how potential policies would specifically affect their business projections, and construct volatility ranges for those policies. They should work to understand fixed costs and federal and state policy decisions’ impact on margin.

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Slim down costs

Health organizations should work to understand their costs, determining what it truly costs to achieve a particular health outcome. Many health organizations struggle with allocating overheads; the more progressive ones have moved to activity-based costing. Another benefit of understanding the cost is more precise and defensible pricing in the era of increased scrutiny.

Health organizations also should attempt to standardize costs by studying the variability in the cost of delivering a health outcome and then seeking to eliminate it through evidence-based medicine, standardization and automation. Finally, health organizations should consider examining their fundamental cost structure and optimizing their portfolios to free up or fill up stranded capacity” and become more fit for growth.

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Health organizations should revisit or consider businesses that are tightly tied to the ACA repeal/replace debate. For example, for payers, this might mean considering avenues such as workers’ compensation, voluntary insurance, or provider enablement or group member advocacy.

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1 PwC Health Research Institute, “Health reform 3.0: Thriving in a permanent state of policy disruption,” November 2017.

2 PwC Health Research Institute, “President Trump sets stage for slimmer insurance plans,” HRI as we see it, Oct. 9, 2017,, accessed Oct. 18, 2017

3 Sundar Subramanian, Jeff Gitlin and Kelly Barnes, “Why healthcare companies need to focus on enterprise resilience,” Strategy+Business, Feb. 14, 2017,, accessed Oct. 18, 2017

4 PwC Health Research Institute and Strategy&, “Health reform 2.0: A guide to developing resilience amid an uncertain future for the Affordable Care Act,” July 2017,, accessed Oct. 18, 2017

5 Dan Mangan, “House Speaker Paul Ryan opposes short-term Obamacare fix proposed in Senate; Schumer says there are enough GOP senators to pass bill,” CNBC, Oct. 18, 2017,

6 House Budget Committee, “Building a Better America: A Plan for Fiscal Responsibility,” July 19, 2017,, accessed Oct. 18, 2017; Congressional Budget Office, “Cost Estimate: H.R. 1628: Obamacare Repeal Reconciliation Act of 2017,” July 19, 2017,, accessed Oct. 18, 2017; Congressional Budget Office, “Cost Estimate: H.R. 1628: American Health Care Act of 2017,” May 24, 2017,, accessed Oct. 18, 2017; Congressional Budget Office, “Cost Estimate: H.R. 1628: Better Care Reconciliation Act of 2017,” June 26, 2017,, accessed Oct. 18, 2017

7 Centers for Medicare and Medicaid Services, “CMCS Informational Bulletin: Section 1115 Demonstration Process Improvements,” Nov. 6, 2017,

8 Paige Winfield Cunningham, “States will be allowed to impose Medicaid work requirements, top federal official says,” The Washington Post, Nov. 7, 2017,

9 Congressional Budget Office, “Longer-Term Effects of the Better Care Reconciliation Act of 2017 on Medicaid Spending,” June 29, 2017,, accessed Oct. 18, 2017

10 White House, “Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States,” Oct. 12, 2017,, accessed Oct. 18, 2017

11 Timothy Jost, “Trump Executive Order Expands Opportunities For Healthier People to Exit ACA,” Health Affairs, Oct. 12, 2017, accessed Oct. 18, 2017


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Kelly Barnes

Global and US Health Industries Leader, PwC US

Benjamin Isgur

Health Research Institute Leader, PwC US

Gurpreet Singh

Health Services Leader, PwC US

Karen C. Young

US Pharmaceutical and Life Sciences Leader, PwC US

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