As the Supreme Court considers the testimony presented at the recent hearings over the constitutionality of certain provisions of the Patient Protection and Accountable Care Act, the debate continues to escalate over the role that individuals, business and the government should play in the “commerce of health care.”

Most industry experts agree that PPACA is first about insurance reform and the expansion of coverage to some 30m Americans; yet,  detractors have criticized the legislation for failing to incorporate any elements that would serve as a catalyst for reducing costs, improving quality and restructuring a misaligned system that has been paid to treat illness rather than prevent it.

In the last two years, hundreds of millions of private and public dollars have been invested as stakeholders adjust to an uncertain but radically changing delivery system.  States are in various stages of constructing purchasing exchanges.  Physicians and specialists are choosing to consolidate, often with hospitals leading the process to create integrated delivery systems and restore the role of coordinated care through Patient Centered Medical Homes and Accountable Care Organizations.  Employers are waiting and watching — seeking greater regulatory clarity while slowly complying with a chronological time-line of new rules and expanded coverage requirements.

Municipal, state and national budget deficits continue to loom large. As Europe battles over mounting sovereign debt and the suffocating burden of  generous public pension and healthcare entitlements,  flash points are erupting across the USA as municipal, government and collectively bargained workers brace to defend retiree benefits in the face of legislative efforts to more aggressively reduce public spending. The Federal government is at a tipping point. Facing a $38T net present deficit in its funding for Medicare and $15T of public debt, PPACA was scored by the CBO as reducing $140B of public debt by 2020.  To achieve this, the government needed to drive $940B of taxes, assessments and spending cuts and fall within estimates of the number of newly insureds likely to qualify for Federal subsidies offered through public exchanges.  The promise of PPACA was to reduce the deficit, not further contribute to it.

With $3T of annual spending and an estimated $2T in tax revenues, Congress continues to renege on promises to reduce public spending.  It has committed to reducing Medicare reimbursements to hospitals and doctors but so far, seems to lack the will to enact the legislation passed as part of prior balanced budget amendments and PPACA.  Almost immediately following the passage of PPACA, an estimated $20B in annual cuts to Medicare was delayed by Congress.  The pressure to follow through with cuts was overridden by the Congressional fear that providers would begin to turn away from Medicare recipients – as they have for years with Medicaid members– citing that reimbursement is too inadequate to cover the true cost of services.  A prescription for remedying reimbursement inequities  known as “the Doc Fix” has been under consideration for some time but so far, the legislation has been continually kicked down the road and is now due to fall firmly in the lap of the next administration.

Some economists estimate that the delay in implementing Medicare cuts along with other flaws in cost projections all but ensure that PPACA will increase the public debt, not reduce it – placing further pressure on Congress to either raise taxes or moderate spending to balance the budget. Yet, for all its flaws, PPACA is a necessary albeit wobbly baby step toward addressing the complex and broken public and private systems of healthcare in the US.

Advocates for repeal and replace legislation have grudgingly admitted to the need for health and insurance reform but so far have not offered viable solutions that could address the swelling ranks of the uninsured or solve for the inflationary effects of consumer demand and an aging, chronically ill America.   Universally, most pundits and experts feel PPACA was a single stitch attempt to suture a deeper and wider wound.  Most understood  that rising costs, increasing public debt and the potential dumping of insurance by low margin, low wage employers  would force companion legislation  that would pivot the focus of reform from “regulation and expansion of coverage” to “improving health care quality and affordability”.

With the potential for core elements of the bill (individual mandate, community rating and guarantee issue) to be declared unconstitutional, employers are left wondering if this development is a favorable or ill shift in the legislative winds. Ironically, repeal of reform may cause more problems.  Many feel that deconstruction of the law could create greater chaos across a 50 state insurance market where each legislature would be compelled to retreat from, maintain or advance insurance reforms.  This means trouble for America’s insurers who fought to help craft the elements of PPACA which effectively preserved the role of private payers to help drive reforms in the health care system. Minimum Loss Ratio limits and other regulatory controls were imposed with an understanding from payers that lower profit margins might be offset by a larger influx of newly insured Americans.  Without an insurance mandate, insurers would be less enthusiastic about guaranteeing coverage and engaging in less flexible pricing through community rated pools.

However, insurers and employers are already wary of a state by state cat’s cradle of regulatory and coverage mandates that increase cost and in some cases, reduce competition through artificial price and profit controls.  In the event of a post reform collapse, employers will need to look even harder at the legislative efforts of states as they seek to mandate and managing health care.  Per capita costs to insure workers up to minimal levels of benefits could vary dramatically as states adopt myriad versions of mandated care and cost sharing.  Employers would most likely seek to avoid higher costs associated with mandates by self insuring and in doing so, deflect costly coverage increases as well as reduce revenues paid to the state by avoiding premium taxes.

The US is in between a rock and a hard place.  To repeal PPACA will mean restarting a legislative process at a time when Congress has failed to demonstrate any ability to collaborate to address complex issues that threaten our economic futures.  Most recognize that we must begin to address our public debt but it calls for austerity and measures that could slow our economic recovery and further enrage a public that is already distrusting of business and government. Managing the obligations and expectations of citizens around health care puts private sector management and elected public officials in unenviable positions.

Both sides prefer to be seen as part of the solution, yet only one side relies on public opinion to keep their jobs.   The private sector has the capacity to move rapidly to drive market based reforms. Up to this point, employers have been slow to assume their role as a payer controlling over $1T in spend on the behalf of 180m Americans.  In many instances, employers abdicate the responsibility of tougher decisions around medical necessity and consumer engagement to insurers who up to this point, have benefited from rising costs.  While they have suffered public relation hits from the Obama administration as the goverment sought to vilify private payers, they have managed to retain their role as the primary service platform to administer and manage care.  The only real risk to insurers is disintermediation as a result of a single payer or repeal of reform resulting in radical regulatory models arising out of more activist states like New York and California.  Employers must understand who works for whom and demand information on claims, population risk profiles and solutions guranteed to drive single digit medical trends.  Until employers demand these solutions, the private sector will fail to punch its weight in the healthcare market.

It comes down to skill and will.  As a society, we seem to be lacking the will to deal with a generation of citizens whose desire for immediate access and rapid resolution are at odds with the fundamental changes required to fix the problem.  It is no longer a question of should employers seize the reins and drive market based reforms, but a question of do they have the will to take the lead.  The government has limited ability to impose all the elements of health care management required to drive affordability and guaranteed access for all.  To generate the necessary savings required to finance an expansion of coverage and guarantee basic essential benefits, we will need to pull every lever — consumer engagement, population health improvement,  the restoration of primary care based models, precertification, transparency to reward quality and marginalize outlier stakeholders and personal responsibility for health.  It will mean disruption.  However, as companies seek to grow earnings in a time of difficult organic growth, one has to consider what is more disruptive: firing employees or restructuring health plans to drive lower cost and a healthier workforce.

If reform is repealed or radically altered in June, it will not be business as usual.  The question will be whether business will revert to the usual behaviors or whether it will assert itself to reduce costs and in doing so, potentially save the best parts of our healthcare system.

Michael Turpin is frequent speaker, writer and practicing benefits consultant across a 27 year career that spanned assignments in the US and in Europe. He served as the northeast regional CEO for United Healthcare and Oxford Health from 2005-2008 and is currently Executive Vice President for Benefits for the New York based broker, USI insurance Services. He writes at Usturpin’s Blog.

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6 Responses for “Be Careful What You Wish For”

  1. BobbyG says:

    “detractors have criticized the legislation for failing to incorporate any elements that would serve as a catalyst for reducing costs, improving quality and restructuring a misaligned system that has been paid to treat illness rather than prevent it.”
    __

    ANY? How about Titles III and IV for starters?

    http://regionalextensioncenter.blogspot.com/2012/03/three-days-of-ppaca-orals.html

    • BobbyG says:

      ” Without an insurance mandate, insurers would be less enthusiastic about guaranteeing coverage and engaging in less flexible pricing through community rated pools.”
      __

      Read the AHIP / BCBSA amicus brief. Strike the mandate, and they want a complete return to 2008. Individual risk rating, exclusions, denials, recissions, unrestricted MLRs…

  2. Peter1 says:

    “As a society, we seem to be lacking the will to deal with a generation of citizens whose desire for immediate access and rapid resolution are at odds with the fundamental changes required to fix the problem.”

    Which generation would that be, WWII, baby-boomers, X’ers? Tell me one generation that would agree to a long term fix for which they would be willing to sacrifice now for future beneficiaries?

    Better yet, tell me an income group that is willing to contribute part of their disposable income to help out.

  3. Nate Ogden says:

    “Employers must understand who works for whom and demand information on claims, population risk profiles and solutions guranteed to drive single digit medical trends. Until employers demand these solutions, the private sector will fail to punch its weight in the healthcare market.”

    This comment requires an entire post of its own. Yes groups need to do this, and it would be considerably easier if government stopped making it so hard. Self Funding is a quick way to achieve this, when the government fines you $100 or $1000 per day for honest clerical errors the savings is not worth the risk. When they pass laws like COBRA but leave it up to the courts to set compliance it’s not worth the risk. When Medicare comes after you three years after your reinsurance contract expires and says you owe $500,000 for a claim you never saw it’s not worth the risk. More self funding, especially in the small group market, would solve many of our problems, The Federal and State government are hell bent on making it dangerous to do.

    “Advocates for repeal and replace legislation have grudgingly admitted to the need for health and insurance reform but so far have not offered viable solutions that could address the swelling ranks of the uninsured”

    This is inaccurate, there has been endless proposals to address cost which would decrease the number of uninsured. They are not government driven solutions so they are dismissed and not given any coverage. They are out there though.

    AHPs have been on the table for 20 years and would have resulted in millions more being insured.

    LLARA/Captive regs have been proposed that would cover millions more people.

    The problem is not lack of viable options, its a closed minded political class that will only consider government solutions.

    “This means trouble for America’s insurers who fought to help craft the elements of PPACA which effectively preserved the role of private payers to help drive reforms in the health care system.”

    Your mixing terms, insurers is not the same as private payors, they are two very distinct groups with a margin of overlap. Insurers represent a very small segment of the market, where they to disappear tomorrow the effect would be minimal and long term arguably for the better.

    Community rating is a failed concept, it cannot work on a large scale. We already suffer a moral hazard or lack of personal responsibility, community rating protects individuals from their poor decisions. If people are not held accountable for their decisions they tend to make more of and more costly bad decisions. We have already been through this with welfare and public housing, why are some so intent to repeat it with healthcare?

    “The Federal government is at a tipping point. Facing a $38T net present deficit in its funding for Medicare”

    In hind sight would we not have been better off had Medicare failed or been struck down and Congress forced to pass a more affordable bill that actually addressed what was needed. Medicare was suppose to be and we needed a catastrophic plan, instead we got an overpriced first dollar plan that didn’t cover catastrophes. PPACA has all the makings of another 38 TRILLION DOLLAR screw up. Anything short of scraping it will be a failure.

    “Employers must understand who works for whom and demand information on claims, population risk profiles and solutions guranteed to drive single digit medical trends. Until employers demand these solutions, the private sector will fail to punch its weight in the healthcare market.”

    This comment requires an entire post of its own. Yes groups need to do this, and it would be considerably easier if government stopped making it so hard. Self Funding is a quick way to achieve this, when the government fines you $100 or $1000 per day for honest clerical errors the savings is not worth the risk. When they pass laws like COBRA but leave it up to the courts to set compliance it’s not worth the risk. When Medicare comes after you three years after your reinsurance contract expires and says you owe $500,000 for a claim you never saw it’s not worth the risk. More self funding especially in the small group market would solve many of our problems, The Federal and State government is hell bent on making it dangerous to do.

  4. Nate Ogden says:

    LLARA/Captive

    should be LRRA in case anyone tries to look it up and captives should really say RRGs to be percise

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