Trump's Medicare chief oversees a budget of $1 trillion. We spoke with her about what she wants to see from the private healthcare industry

• The US government is the single biggest buyer of healthcare, from Medicare for the elderly to Medicaid for some people with disabilities and those with low incomes.
• We spoke to Seema Verma, the head of the Centers for Medicare and Medicaid Services, on the sidelines of the 2019 HLTH conference in Las Vegas about how she views the role of government in the industry.
• Verma wants to see more competitive markets for private insurers. She also had a big warning for the healthcare industry about 'Medicare for All.'
• Visit BI Prime for more stories.

From where Seema Verma, the head of the Centers for Medicare and Medicaid Services, sits, the agency she oversees has a couple big roles to play in healthcare.

The first is to be the safety net, there to care for the country's low-income and aging Americans. That has to be carried out sustainably, she said. At the same time, Verma said her role is to foster a competitive market for private insurers.

Already, competition is fierce in Medicare Advantage, the program within the federal Medicare program in which coverage is provided by private insurers.

Venture-backed startups Oscar Health, Devoted Health, Bright Health, and Clover Health have raised a combined $3 billion to use technology to build new kinds of health-insurance plans and go after Medicare Advantage members. Insurers like UnitedHealth, Aetna and Humana are battling for the 22 million Americans enrolled in Medicare Advantage plans, and the thousands signing up daily as they turn 65.

The program is expected to grow from accounting for 34% of the Medicare program to 47% by 2029.

Startups like Bright and Oscar have also made a big business on the individual exchanges created as part of the Affordable Care Act, often known as Obamacare.

In an interview, Verma praised the success of the Medicare Advantage market, citing the addition of supplemental benefits and the ability to do virtual visits. She criticized Medicaid for its high spending, and the individual market for a lack of flexibility.

On average, the government spends about $11,500 on each Medicare Advantage beneficiary, according to the Kaiser Family Foundation. Per-person costs for Medicaid coverage varies widely, but are generally somewhat lower.

As the head of CMS, Verma is responsible for Medicare, Medicaid, and the individual insurance markets, though states play a role as well. In a speech at the HLTH conference in Las Vegas, Verma noted that her agency oversees roughly $1 trillion in annual spending.

Verma said there's a need for more government flexibility in Medicaid and in the individual market.

"I think a lot of times we're so top-down that it doesn't encourage innovation in that space," Verma told Business Insider on the sidelines of the HLTH conference.

Getting a more competitive Medicaid market

The Medicaid program provides coverage for some disabled and low-income individuals, as well as many mothers. Each state runs its own Medicaid program, and the costs are shared between the state and federal governments.

Verma criticized the rising cost of Medicaid, and said action is need to control it. She said in a speech Sunday that the cost of providing long-term care in Medicaid is expected to grow from $68 billion in 2014 to $401 billion in 2050.

"I think Medicaid hasn't quite delivered," Verma said.

Medicaid is one of the top budget items for states, and nationally it's the third largest domestic program in the budget after social security and Medicare, accounting for 9.5% of federal spending as of 2017, according to the Kaiser Family Foundation.

To be sure, Medicaid has a lot of support from the public. To date, 37 states and Washington, DC have decided to expand their Medicaid programs under the Affordable Care Act. A recent study showed that Medicaid expansion resulted in fewer deaths.

But while the Medicare Advantage program has ways of measuring how well plans are keeping people healthy, Medicaid doesn't have the same metrics in place, she said. Verma said her agency plans to put out new scoring metrics, make sure Medicaid programs are functioning as they should, and give states more flexibility with their programs.

The future of the ACA

When it comes to making the individual exchanges as successful as the Medicare Advantage market, Verma pointed to the Affordable Care Act as a barrier to getting that done.

"The law's so restrictive that it's not going to allow that," Verma said. "I think unless there's changes made to the law, our ability to really, ensure more affordability's thwarted."

Verma pointed to those forgoing insurance because of cost. In 2018, the uninsured rate rose to 8.5% of Americans, up from 7.9% the year prior.

To provide cheaper coverage, the administration has loosened the rules for short-term health plans, controversial health insurance coverage that's meant to be used for a few months at a time. The plans don't necessarily have the same level of coverage as plans offered on the individual exchanges, however.

Verma was appointed by President Donald Trump, a Republican who campaigned heavily on the promise of repealing the ACA. The health law was signed in 2010 by then-President Barack Obama, a Democrat.

The future of the ACA and the individual exchanges it created are up in the air. A federal court in New Orleans is expected to rule on the legality of the law, and the administration hasn't said what contingency plans it has ready if the ACA were to be struck down.

"We've prepared for a number of different scenarios," Verma said, echoing comments she made in a congressional hearing on Thursday. Verma declined to elaborate on the specifics of those scenarios.

"I think the president's been very clear that we want to make sure that Americans have access to affordable coverage, and so there'll be a plan in place, she said"

To her, the end of the ACA could provide a chance to fix some of the issues that still affect the individual exchanges, such as affordability for those who don't qualify for subsidized premiums. Premium subsidies are based on individual and family's incomes, with those who earn less receiving more subsidies.

"I think it could be an opportunity, quite frankly, to address some of the problems in Obamacare," she said.

Verma's warning to the healthcare industry

Nationally, support has been growing for "Medicare for All" or the idea of single-payer healthcare in the US. It's been a key issue in the Democratic presidential primary race. Verma for her part has been critical.

Verma said the healthcare industry needs to make changes, so that consumers don't feel like they need the government to be in charge of their healthcare.

"We are where we are because people are very frustrated, and to not listen to that I think is derelict on the healthcare industry's part," Verma said.

"The status quo is not working for the American people and they're demanding change," she said. "And if we don't, provide those solutions, people are calling for the government. I don't think the government can solve the problem. I think they will make it worse."