The Business of Health Care

Why the Supreme Court’s Healthcare Decision Will Mean a lot … and Not so Much

Like waiting outside the Vatican for the puff of white smoke, the nation sits on edge awaiting the Supreme Court’s ruling on the Affordable Care Act. The ruling, which is likely to be announced next week, could toss out the entire healthcare reform bill, chop off one of its limbs (probably the so-called individual mandate), or leave the ACA intact. Whatever the ruling, it will be chum for the blogosophere, particularly in the heat of presidential silly season.

The two fundamental challenges to American healthcare today are how to improve value (quality divided by cost) and how to improve access (primarily by insuring the tens of millions of uninsured people). The bill sought to address these twin challenges in ways that were complex and intertwined. I’ll argue that a decision by the Court to throw out all or part of the ACA will have a profoundly negative effect on the access agenda, but surprisingly little impact on the value agenda. To understand why requires that we focus less on the bewildering details (mandates, insurance exchanges, PCORI, CMMI, IPAB, etc.) and more on some big picture truths and tradeoffs.

The job of any healthcare system is to deliver high quality, safe, satisfying care to patients at the lowest possible cost. Although America certainly does specialty and high tech care like nobody’s business, on all of the key dimensions of value we aren’t very good. The numbers tell the sorry tale: we provide evidence-based care about half the time, there are huge variations in how care is delivered, we kill 44,000-98,000 patients per year from medical errors, and we spend 18% of our gross domestic product on medical care, far more than any other country.

While quality and safety were our focus for the past decade, in the past few years the center of gravity has shifted to the denominator of the value equation: costs. Employers, who foot the bill for about half of all the money spent on care, complain about the backbreaking expenses. (Famously, GM spends more money on healthcare than steel, and has a hard time competing against Toyota because of it.) Workers with health insurance see stagnant wages, partly because a larger share of their reimbursement comes as employer-provided health benefits. They also experience growing out-of-pocket costs – both in the form of co-pays at the point of care and paying a larger proportion of their insurance premiums.

And government, the other dominant payer, has much the same problem as business: with larger and larger slices of its budgetary pie going to healthcare, little is left for everything else, including schools, armies, National Parks, Social Security benefits, even medical research. Just as businesses can’t easily raise their prices to cover the increased costs (lest they become uncompetitive), government can’t raise its taxes, lest the offending politicians get voted out of office (see Bush, George H.W.).

Put all these stakeholders in a pot, turn on the heat, and you have the makings of a solution to the value crisis. First, create a compelling mandate for safety (“A jumbo jet a day”), quality (Crossing the Quality Chasm), and “bending the cost curve” (McAllen, Texas). Encourage social networks and collaboratives (100,000 Lives Campaign; Choosing Wisely). Advance improvement through transparency (Hospital Compare, Leapfrog). Enhance accreditation standards for hospitals (Joint Commission’s unannounced visits and National Patient Safety Goals), doctors (Maintenance of Certification), and trainees (ACGME’s duty hours and supervision regulations). Build capacity by supporting the diffusion of information technology (Meaningful Use incentives). Then, slowly, gently, turn up the burner by beginning to tweak the payment system – by penalizing hospitals for serious mistakes (No Pay for Errors”) and readmissions, and experimenting with new payment and delivery models to encourage value improvement (bundling, ACOs, medical homes).

Note that while several of these initiatives are promoted by the ACA – with new funding or legislative changes designed to grease their paths – all of them predate the ACA, and all of them will go on if the ACA is thrown out. The Value Train has truly left the station, and it’s not coming back.

How did the ACA attempt to connect the value and access agendas? Remember the Peace Dividend? I think we are now facing the prospect of a “value dividend”: if all of these interventions I cited above lead to significant cost savings (and they are already flattening the cost curve), where should the new money go? Lowering premiums for businesses? Helping Medicare remain solvent for a few more years? Cutting the deficit? Lowering taxes?

Or insuring the uninsured?

Therein lies the problem: convincing the 85% of the US population with health insurance – and the businesses and government agencies that pay for it – that any value dividend should be used to insure the uninsured requires a level of concern for their fellow Americans that our vast, heterogeneous populace has not demonstrated. That fact that we allow 50 million people to go uninsured (and tolerate the other insanities of our patchwork system, such as allowing insurance companies to deny coverage because of pre-existing conditions and discontinue insurance when people get sick) is a national disgrace. Yet we have not yet succeeded in convincing the majority of Americans that insuring the uninsured is a problem that must be fixed. Sadly, the moral argument – that it’s simply the right thing to do – doesn’t work very well, so we fall back on personal appeals (you too could lose your health insurance, the uninsured are crowding your emergency room, that uninsured guy coughing next to you on the bus might have untreated TB) that aren’t entirely disingenuous, but aren’t quite on point.

If the Supreme Court strikes down the ACA or its core provisions, it will be a disaster for tens of millions of uninsured people in the United States, and there’s no way that risk-averse politicians will touch this particular Third Rail for at least a decade. That will be a crying shame, a cause of many preventable deaths, and a tangible marker of our nation’s inability to solve big problems anymore.

But healthcare reform is far more than the ACA, and the value agenda will remain alive and well, whatever the Supremes decide. You can bet on it.

Robert Wachter, MD, professor of medicine at UCSF, is widely regarded as a leading figure in the patient safety and quality movements. He edits the federal government’s two leading safety websites, and the second edition of his book, “Understanding Patient Safety,” was recently published by McGraw-Hill. In addition, he coined the term “hospitalist” in an influential 1996 essay in The New England Journal of Medicine and is chair-elect of the American Board of Internal Medicine.  His posts appear semi-regularly on THCB and on his own blog, Wachter’s World.

4 replies »

  1. I’ve talked with a number of different “categories” of young people: blue collar laborers to professionals, graduate degrees to high school grads. When they hear health insurance will cost them around $5,000 or more a year they are right to question the value. If their employer didn’t cover it, they wouldn’t buy it. If their employer doesn’t cover it, they don’t buy it.

    The problem with the value equation is that the denominator: cost is a tangible…and yes costly number. The numerator: quality is difficult to grasp.

    I think the efforts of Dr. Wachter and the growing legions of US healthcare providers who want to improve quality need help and maybe the Federal gov’t can help (although the recent awards from the CMMI were so pork barrell I don’t know).

    My question is how do you make insurance affordable to the 30 million making less than $50,000 a year so that they choose the value of being insured? As a business owner, I know what my premiums are (about 12% of gross annual income) and I question the value in it! I’m too afraid to “go bare” because I see what a financial disaster it can be to enter the frightening world of US healthcare.

    So I think that the value and access agendas are intertwined.

  2. With 18% of our GDP being used for medical care, it’s always striking to learn about new statistics of uninsured citizens. The Supreme Court’s ruling on the case is undeniably going to be a landmark decision either way, but as a doctor in Southern California, it looks as if California is set to lose the biggest if the Affordable Care Act is cut, which concerns me.

  3. I think the author of this post at posted today sums up what moderates and independents like me are so tired of hearing and just looking forward to the absurdity the Democraps will spew should the ruling be made as anticipated by me. Below is what was written (I find linking TMV to be annoying with their lame links attached):

    “Posted by LOGAN PENZA in At TMV.
    Jun 18th, 2012 | no responses Commentator Juan Williams argues that overturning the Affordable Care Act on a 5-4 decision would undermine the legitimacy of the Supreme Court.

    Most of those responding to Williams point out that his is a weird argument — arguing that overturning a generally unpopular government mandate would damage the Supreme Court doesn’t really make sense. But my take is that Williams and others who share his opinion have a weird double standard: 5-4 decisions like Lawrence v. Texas that promote progressive policy preferences are not a problem, but 5-4 decisions that defy those preferences like Citizens United and, potentially, the forthcoming ACA decision are.

    What really seems to be going on here is that fans of the ACA have given up on the substantive argument. Their attempts to convince Americans that the individual mandate lies within the near-infinite power of Congress under the Commerce Clause are both legally and politically unsustainable. So they have reverted to a more primitive technique of trying to say that disagreeing with them is simply disallowed, no debate needed.

    They would be better off looking to the future — if the ACA is struck down, conservatives will have won a victory, yes, but we will still be left with a dysfunctional health care system desperately in need of reform. And it would be easily possible to resurrect many of the policy options in the ACA without tripping over the Constitution again. For example, the problem with the individual mandate largely arose because of Congress’ contortions to avoid the accusation that they were raising taxes. Simply being honest about what their preferred policies were and what they would cost would clean up the debate and avoid the constitutional conundrum.

    Then again, maybe that’s the problem. Single-payer health care has many virtues, but also many flaws. And as many critics noted two years ago, progressive advocates of health care reform tended to avoid persuading anyone in favor of simply bullying everyone.

    Perhaps if the ACA goes down, it will be a good thing in that it forces a reconsideration of both the substantive policies for health care and the rhetoric means for promoting them.”

    Right on the money about “the primitive techniques” that both parties stoop to in just basically telling us “we know better than you, so just shut up and deal with it” is why you as voters need to reevaluate who and why you vote these days!

    I would not be surprised, after witnessing the latest hypocritical act by the Demander in Chief on Friday, he would try to pull some stunt he thinks superceedes the Court and declare their decision null and void. Should that happen, well, these are getting to be desparate times, what will the public decide is right, allow a budding tyrant/monarch to act out, or, demand our Constitution be applied.

    Wow, we might actually see a sitting President be impeached and removed from office. What a revelation that would be for the Democraps! Not that I have any hope for the Republocants either!!!

  4. The over under on the death by medical error is remarkable. The problem is that HITECH and PPACA mandated use of EHR and CPOE devices chock full of meaningful use, meaningfully increases the death rate and certainly reduces all components, of physician productivity.