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HOW HEALTH CARE REFORM CAN WORK: PART 2
Part 2: The Emergence of Consumer Value
Despite its deep flaws, the new health reform law, ACA, has three aspects that make me optimistic about medical entrepreneurs being able to surmount the law’s barriers to create a consumer-dominated, market-based medical care system that will deliver high-quality, affordable medical care to everyone:
1. The creation of consumer value
2. The rise of high-value local health plans
3. Effective disease prevention
This second of five installments discusses consumer value.
Medical Consumer Value
The word “value” appears more than 200 times in ACA. The law’s architects clearly liked it and felt that the bill should strive to achieve it. Too bad they never bothered to clearly define it. If they had, they could have created a much more direct approach to fixing our dysfunctional medical care system, and without all the counter-functional, top-down bureaucracies that will actually impede it and force medical costs higher than they need to be.
HOW HEALTH REFORM CAN WORK: PART 1
Part 1: Even a Blind Pig Finds an Occasional Truffle
I’ve made no secret of my disdain for the Patient Protection and Affordable Care Act (ACA), the new health reform law. It is a bad bill that focuses the wrong “solutions” on the wrong problems and promises to visit unnecessary economic distress and destruction on America’s providers, consumers, taxpayers, and insurers. Even the IRS is protesting.
Yet, rather than continue to bash it, I’ve taken my summer hiatus from writing this blog to focus on a more constructive approach. The law is a fact we have to deal with, and despite a lot of talk about a subsequent Congress overturning it, I’ve concluded such an action to be both unlikely and unwise. The opposition has nothing better on the table and the ACA situation is actually far from hopeless. The focus needs to be on repairing, not revoking it.
WHAT WILL HEALTH REFORM DO FOR (OR TO) AMERICA’S HOSPITALS? PART 3
How They Can Survive and Thrive
For America’s community hospitals, using the traditional cost-shifting revenue model is the maddening equivalent of simultaneously playing rugby, Australian-rules football, major-league baseball, and cricket—dictated by the rules of multiple third-party payers rather than by rational pricing models. Success is ultimately dependent on having enough privately insured patients to subsidize the government ones and the uninsured. In most places, this model has allowed hospitals to earn sufficient margins to support ongoing capital replacement and growth while staying abreast of technological advances. But in economically stressed locations lacking critical masses of private payers, many institutions have gone broke (including fourteen in Los Angeles, alone, in one recent year). As pressures on cost-shifting intensify under health reform (See Parts 1 & 2), community hospitals will increasingly adopt new coping strategies to survive. Two in particular, consolidation and integration, have become popular in recent years. Unfortunately, neither will fix the problem.
WHAT WILL HEALTH REFORM DO FOR (OR TO) AMERICA’S HOSPITALS? PART 2
Employers to the Rescue?
In Part 1, I explained how the only way hospitals have been able to survive their money-losing Medicare and Medicaid patients has been to charge higher rates to private payers. That’s why private insurance now costs $1,788 more per family than it would if the government paid the same provider prices as everyone else. Moreover, health reform’s promised addition of 15 million new Medicaid patients, along with billions of dollars in lower Medicare payments, will drive the demand for private subsidies even higher. Additionally, as the current 27 million individually insured begin transitioning to the insurance exchanges in 2014, their continued ability to pay higher hospital charges is doubtful. Ditto for the 17 million uninsured who are expected to sign up for exchange insurance. Indeed, under health reform, exchange insurers may need their own external financial assistance. That leaves only private, employer-based insurance to pick up the slack by paying ever higher hospital prices. That, too, is unlikely to happen.
Posted in The Health Care Crisis
Tagged employer-based insurance, health reform, hospitals, Medicaid, Medicare
5 Comments
MY NOT-SO-EXCELLENT ADVENTURE IN JOURNALISTIC INTEGRITY
A couple of weeks ago I sent a letter with supporting documentation to the publisher of a local (and mercifully low-circulation) tabloid, the Colorado Springs Business Journal, pointing out material errors in its reporting on my views and activities when I served on a local citizens commission charged with determining the fate of city-owned Memorial Hospital. I never heard back from him, but did exchange subsequent emails and phone calls with his editor, Allen Greenberg, resulting in his agreement to make limited corrections of some of the more blatant misstatements in reporter Amy Gillentine’s article. Nonetheless, the original, uncorrected article remains on the paper’s website, and my Google search of the promised language fails to find it anywhere. Unsurprisingly, I don’t read the paper itself, so missed any printed notice that may have appeared.
WHAT WILL HEALTH REFORM DO FOR (OR TO) AMERICA’S HOSPITALS? PART 1
MEDICAID, MEDICARE, AND THE INSURANCE EXCHANGES
The new health reform law’s central message to America’s hospitals is a classic good news/bad news story. First, the good news. Hospital exposure to 46 million uninsured Americans showing up in their ERs is about to drop by two-thirds over the next several years. Medicaid alone is predicted to take on 15 million of them, as the states—with temporarily enhanced federal assistance—expand eligibility to cover all non-seniors who fall below 133 percent of the federal poverty level ($24,350 for a family of three). And assuming the individual insurance mandate survives likely court challenges, another 17 million uninsured will be required to buy subsidized private health insurance through new state health insurance exchanges beginning in 2014. This adds up to 32 million people who hospitals will no longer have to treat for free under the federal EMTALA law and their own charity-care policies.
Posted in Health Insurance
Tagged health reform, hospitals, Insurance exchanges, Medicaid, Medicare
6 Comments
WHICH WAY WILL OBAMACARE BEND THE MEDICAL COST CURVE?
We know that more than half of all medical cost is wasted, adding no value to the patient. We also know that the total costs of medical provider billing, collection, and payment consume as much as 30% of every health care dollar—about ten times the transaction costs in every other industry. If medical care were as efficient as, say, our economy’s food sector, it would provide higher quality for a third of today’s $2.6 trillion cost and free up $1.7 trillion every year for higher wages, lower federal deficits, and a major boost in job-creating private-sector investment.
Moreover, 75% of all medical spending now goes to treat preventable chronic diseases. If we could figure out how to get people to stop eating, drinking, and smoking themselves to death, and cut out the wasteful spending, our total medical bill would plummet to only 10-20% of today’s level.
I NEED YOUR HELP–THE STATE LAWSUITS AGAINST THE INSURANCE MANDATE
Dear Readers,
I need your help (and no, it’s not a request for money).
The attorneys general (AGs) in at least 14 states (Colorado, Louisiana, Florida, South Carolina, Alabama, Nebraska, Texas, Pennsylvania, Washington, Utah, North Dakota, South Dakota,Idaho, and Indiana) have joined together to challenge the constitutionality of the just-passed federal mandate that will require all documented American residents to purchase health insurance beginning in 2014. As a former health insurance actuary, I support this challenge on the basis of my extensive analysis and conclusion that there are voluntary alternatives to mandates that will be even more effective at providing universal health insurance access while preventing the adverse selection (i.e., free-riding) that would otherwise destroy any universally available health insurance exchange like that specified by the federal law.
HEALTH REFORM’S “IMMEDIATE BENEFITS”
About the same time I saw a picture of the man I voted for signing the new health reform bill, I received an email with a picture of George Bush (The Younger) waving at the camera with one of his goofier grins and the caption, “Miss me yet?” I’m hardly a Bush fan, but at the moment—God help me—I’m even missing Nixon.
One of the annoyances from having spent forty years inside the health care beast is having to endure the blatant half-truths and patent falsehoods coming from our President and his legions of economics-challenged health reform advisors and supporters. Particularly abrading are his statements about the “immediate benefits” of the new law, with no mention of the equally immediate costs that will accompany them.
Here are some of the more bothersome ones:
- Free preventive care. The journal Health Affairs and others have authoritatively concluded that preventive services almost always increase medical costs rather than reduce them. Thus, our premiums will go even higher with no net savings now or ever.
IS EMPLOYER HEALTH INSURANCE DYING?
One of President Obama’s most frequent health reform mantras is, “If you like your health care plan, you can keep your health care plan.” This is consistent with his belief that we “must build on the current employer-based system” that insures 158 million people who comprise the vast bulk of all privately insured Americans. There is just one problem with this approach: employer-provided group insurance is dying and cannot be saved. Despite its longstanding dominance, group insurance, whether self-funded or provided by outside insurers, suffers from major flaws that are increasingly exposing its fundamental unsuitability as an even partial solution for effective health care reform. This is true for all employers, no matter what size. Here are group insurance’s more pronounced shortcomings:
1. Lack of Portability: Group insurance ties the individual to his or her job, an anachronism in an era when people change their jobs as often as their cars. And if you lose your job through layoffs or illness, you soon lose your insurance as well. If you can’t find affordable individual coverage, then welcome to the ranks of the uninsured.