Tag Archives: health reform
I like the state health insurance exchange concept. It offers a necessary corrective to our failed employer/government-dominated group insurance system by giving American consumers the direct power to hold their insurers’ feet to the fire to deliver value. Letting exchanges operate at the state level also allows 50 different experiments to discover what works best, something we’re already beginning to learn from Utah’s promising marketplace and Massachusetts’ deeply troubled one.
The problem is that the Affordable Care Act’s version of insurance exchanges is to this consumer-market ideal what Victor Frankenstein’s creation was to humanity—a good idea gone so very wrong. But unlike the good doctor’s bad doppelganger, ACA is reparable. The fix requires major surgery to excise the Abbie Normal parts of ACA’s monster, replacing them with features that enable consumer purchasing power to transform health care into just another, normally affordable necessity of modern life.
Here are the essentials for fixing the exchanges:
Metaphorically (if Scatologically) Speaking
It has been said that Michelangelo’s task of creating his magnificent “David” was actually quite simple. Just take a huge block of marble and chip away the parts that don’t look like David. In fixing the Affordable Care Act, a similar approach is needed. Just start with the huge manure pile that is the Affordable Care Act (ACA) and hose off the parts that don’t look like a pony. As hard as it may have been to see either David or the pony imbedded in its original matrix, both are there.
In the case of ACA, the hosing off consists of four essential tasks:
- Repeal and replace the individual mandate.
- Expand and simplify the individual health insurance exchanges.
- Expand the prevention incentives.
- Fix the safety-net entitlement.
This article deals with number one, the mandate issue.
Flawed Arguments Pro and Con
There are two things the newly ascendant House Republicans need to know about fixing the new health reform law. First, their mantra of “repeal and replace” (besides being moot) ignores the fact that, buried in the manure pile of the Affordable Care Act (ACA) is a real pony in the form of individual insurance exchanges that need to be dug out, hosed off, and nurtured by a combination of empowered consumers and enlightened, lightened regulatory oversight. Second, the GOP’s oft-voiced preference for incremental health reform—tort reform, interstate insurance purchases, and tax credits—won’t do anything to fix the fundamental problems in health insurance and medical care.
So I’d like to offer a guide to both parties on what we know and what they must do to fix not just the ACA, but the entire problem of unaffordable, mediocre quality medical care.
What We Know
There are four basic problems to fix.
Despite deep flaws that will have to be corrected, the Patient Protection and Affordable Care Act (ACA) has three aspects that make me optimistic about medical entrepreneurs being able to surmount the law’s barriers and create a consumer-dominated, market-based system of medical care and health insurance that will ultimately deliver high-quality, affordable medical care to everyone:
1. The creation of consumer value
2. The rise of high-value local health plans
3. The achievement of effective disease prevention
In Part 2, I discussed the creation of consumer value as an unplanned result of ACA’s forcing individuals—and not their insurers—to pay for their normally consumed medical services. In Part 3, I described how new local health plans built around these providers will be able to displace national PPO-based carriers by creating a virtual cycle of ever higher medical quality and constantly improving affordability. In Part 4, I addressed how these innovative health plans can dramatically move the needle on effective disease prevention. In this concluding installment, I’ll talk about the challenges facing the innovators who will be responsible for achieving these benefits.
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.
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.
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.
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.
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.
As we approach Thursday’s bipartisan health summit, no one has yet successfully challenged the comprehensive health reform proposal I describe in my book, speeches, media interviews, and this blog. It has withstood all technical, actuarial, financial, behavioral, and economic challenges to date. This would be gratifying if it weren’t for one annoying loose end—the political issue.
Almost everybody tells me that my approach’s lack of sound-bite simplicity renders it DOA as a workable legislative agenda. They have a point. As bad as our health care system is, it’s not yet bad enough to engender the kind of political will necessary to put American consumers fully in charge of buying their own health insurance and medical care. Until we get there, let me offer a simpler, interim proposal that will immediately offer relief from out-of-control medical costs: we should make everyone financially responsible for his own preventable illnesses.