Wharton's Mark Pauly and Drexel's Robert Field discuss what's ahead for U.S. health care in 2018.

The debate over U.S. health care reform and the future of the Affordable Care Act dominated headlines in 2017, but that subject could take a backseat this year as the Trump administration faces other challenges, according to Robert I. Field, professor of law and health care management at Drexel University, who is also a lecturer at Wharton. “They’ve got to keep the government funded; they’ve got to deal with Children’s Health Insurance Program (CHIP); they’ve got to deal with the cost sharing reductions under Obamacare,” he said, listing some of the issues legislators would face in the year ahead.

Field and Wharton health care management professor Mark Pauly recently appeared on the Knowledge at Wharton show on Wharton Business Radio on SiriusXM channel 111 to discuss the key issues facing U.S. health care in 2018.  Here are the key points from their conversation. (Listen to the podcast at the top of this page.)

Life after the Individual Mandate: The “individual mandate” under the 2010 Affordable Care Act will end next year, per the Tax Cuts and Jobs Act passed by Congress and signed into law by President Trump shortly before Christmas. The mandate requires Americans to buy their own health insurance or face a penalty if they are not already covered by their employer or by a government program such as Medicaid or Medicare. The new tax law eliminates the penalty beginning in 2019.

Some 8.8 million Americans signed up for 2018 coverage via the federal health insurance exchanges created by the ACA, despite a shortened registration window that ended on December 15. The volume of sign-ups showed that “there’s a real demand” for such coverage, said Field. “A lot of people in the gig economy don’t have employer health insurance.” According to Pauly, those who signed up for coverage for this year may well be the “core portion of the population that finds getting their health insurance through the exchanges a good deal because the great bulk of them get subsidies.”

Heavy federal subsidies are designed to offset premium increases by insurers in the health care marketplace, or the health exchanges that individual states operate. As much as 80% of the Obamacare-insured population benefits from such subsidies, said Field. Added Pauly: “As long as there are subsidies in place there will be people who will show up to claim them. That’s sort of an iron law of economics.”

“As long as there are subsidies in place there will be people who will show up to claim them.”–Mark Pauly

All said, the removal of the individual mandate may not lead large numbers of people to drop out of the exchanges, as many had predicted. “Taking it away is probably not going to cause the sky to fall,” said Pauly. He expected about two million people who do not qualify for the subsidies to discontinue buying coverage from the exchanges now that they no longer face a penalty for having no health insurance. In order to gain a clearer idea of the size of the demand for the federal exchanges, “the test will be next year, when there’s no mandate,” said Field.

Are Changes Ahead for Medicaid and Medicare? The end of the individual mandate is likely not the only administrative change that the health care sector will see in the coming year, according to Pauly. Republicans in Congress have said they want to follow up the tax bill success with reforming entitlement programs such as Medicaid and Medicare “to make them look more market-like,” Pauly said. Attempts to rework Medicaid could include instituting premiums for Medicaid beneficiaries, tightening standards for eligibility, and having some part of the Medicaid population purchasing coverage on exchanges, he explained.

Noting that House Speaker Paul Ryan has been vocal about his support for changing Medicaid and Medicare, Field pointed out that 2018  “is going to be his chance … to bring that up … before the elections, while he still is in command.” The Republican Party has a narrow majority in the Senate and a more sizable one in the House of Representatives – but that could change in November, when all 435 House seats and a third of the 100 seats in the Senate will be up for reelection. “You’re looking at about a six-month window to get stuff done,” said Field.

Addressing the Opioid Crisis: Efforts to combat the opioid crisis will get heightened attention in 2018, according to Field. He expected tussles within Congress to secure funding for those programs. “There’s going to be intense pressure to do something about opioids, and there’s going to be a dollar figure attached.” As Pauly saw it, the debate over the opioid containment programs would focus on how the outcomes justify the spending on them. Field said the U.S. Food and Drug Administration (FDA) would have a role in reining in doctors to address the problem of “over prescribing” opioid medications.

Drug Prices: Pauly noted that 2017 saw 46 new drugs brought to market, the most in a year since 1996, but that they carried high prices. “There’s the prediction that the rate of introduction of good new drugs will fall dramatically in 2018,” he said. “Is that good news or bad news? Well, there’s not going to be as many great new drugs, but they won’t be driving total drug spending, either.”

“There’s going to be intense pressure to do something about opioids, and there’s going to be a dollar figure attached.”–Robert I. Field

Pauly pointed out that other forces are also at work here. Insurers will try to negotiate more aggressive deals for drugs, and M&A deals within the sector, such as the recently announced deal between CVS and Aetna, could aim to extract more market power to get lower prices. “The other shoe to drop is what the federal government might do for Medicare … to try to get lower prices,” he said. “To get lower prices by negotiating, you have to be willing to walk away from making certain products available [to beneficiaries].” According to Pauly, health care in the U.S. is costlier than it is in many other countries because of higher wages paid to hospital employees.

Pauly expected FDA chief Scott Gottlieb to make it easier for generics to enter the market quickly. “The one way we know to get prices down is to have generic entry or more generally the availability of alternatives,” he said. “That sounds less exciting than doing battle with [large pharma companies]. But it may actually be more congenial to Republicans as a way of getting prices down — and if it can happen, it will be effective.” Field pointed out that in some instances, even when some drugs go off patent, the economics of manufacturing and distribution deter other manufacturers.

CHIP Funding: Field described the Children’s Health Insurance Program as “incredibly successful” and one that enjoys strong bipartisan support. However, the program still needs to make its case for funding at the cost of other competing initiatives, he noted. “I don’t think it’s a slam dunk that it’s going to get funded,” he said. Pauly agreed with Field: “There could be a standoff where the Feds say to the states, ‘If you love your children so much, why don’t you pay for it, rather than have the more generous federal funding for CHIP? Why don’t we have cost-sharing?’”

Health and Human Services: Field said many experiments were launched with the Medicare program under the Affordable Care Act, aimed at reducing costs and spurring innovation. Among the areas they have focused on are how hospitals function and get paid, and how doctors get paid, he added. “The head of the department of Health and Human Services is going to have a lot of say over whether those experiments continue.” Trump has nominated former pharmaceutical executive Alex Azar to be the next Secretary of Health and Human Services, replacing Tom Price who resigned in September.

Health Care as a Jobs Creator: “We’re seeing unbelievable growth in health care in terms of jobs,” said Pauly. “That means there’s more money being generated in that industry than ever before.” He noted that during the recent recession, health care was “the bright spot in terms of hiring.” Added Field: “Health care in this country is a giant jobs program, and it’s immune to recessions.”