Insurance carriers large and small have started submitting premium hikes for the next 12 months for approval by federal and state officials. The picture is not pretty particularly for companies that sell the new plans designed under the Affordable Care Act. Those premiums are destined to climb 40 percent or more in some states in 2016.
Health insurance companies are getting squeezed as spending goes up and not enough young, healthy people enroll and pay premiums. As result, healthcare premiums, co-pays, deductibles and out-of-pocket co-insurance costs for individuals, employers and taxpayers will continue to soar ever-higher.
Estimates are that the ACA will add between $140 billion and $500 billion to the deficit over the first decade of the law’s existence. That’s because more will be spent on Medicaid and subsidies than is found in cost savings to healthcare. All truth be told, the ACA did nothing substantive to ensure healthcare cost savings.
If we are to truly find a way to reduce healthcare costs in this country, it’s not going to come from Washington but from the states.
Five states are currently leading the way with proposals to do just that by tackling one of the leading causes of healthcare spending – defensive medicine.
Gallup reports that one in four healthcare dollars can be attributed to defensive medicine or the practice of ordering tests, procedures and medications that have no clinical value. Instead physicians order them to prevent a lawsuit. And that drives up healthcare spending – a projected $487 billion in 2015, according to the healthcare economics firm Bioscience Valuation.
For example, a patient with chest pains may be diagnosed with anxiety or a panic attack. But to protect himself, a physician may order a battery of related tests to rule out a heart attack. But many of those tests are unnecessary and costly but ordered mostly to protect a doctor from potential litigation.
Florida, Georgia, Tennessee, Maine and Montana are examining legislative proposals to eliminate defensive medicine by abolishing their state’s medical malpractice systems and replace them with a no-blame, administrative model called the Patients’ Compensation System.
Since the ACA failed to address rising healthcare costs, defensive medicine and professional liability issues, these states are stepping forward with proposals to remedy healthcare costs for consumers. Not only would PCS reduce healthcare costs, but physicians would no longer need to carry traditional medical malpractice insurance. Instead, they would pay an administrative fee which would provide them with the same protection at a significant savings under an administrative system.
For example, under the proposed PCS, a Georgia neurosurgeon who currently pays as much as $84,000 in malpractice premiums annually would instead pay $23,500 under a PCS system in administrative fees. An Atlanta-area obstetrician-gynecologist currently pays up to $60,000 annually for malpractice coverage but under the PCS solution he or she would instead pay a $19,500 administrative fee.
Since doctors would no longer be sued in court, a patient would file a claim before a panel of healthcare experts in the PCS. The panel would determine if a patient had been injured and if so, payment would be issued – faster and at a rate equal to what usually results in the legal system. No trial, no lawyers, no years of litigation, no adversarial negotiation with a doctor.
As a result, physicians would not feel compelled to practice defense medicine and would be willing to step forward to work on best-practice models for others to avoid similar errors. Less testing, procedures and medications that have limited clinical value means lower costs for all of us.
The healthcare economics firm Bioscience Valuation estimates that a PCS system would create astounding savings across the country in healthcare costs – conservatively $2 trillion over 10 years. That would create a reduction in health insurance premiums, deductibles, co-pays and coinsurance rates as well as reducing the burden on taxpayers for Medicare, Medicaid and state healthcare plans for state employees.
Nothing in the ACA comes near to saving those kinds of dollars.
With potential savings like that, no matter how the Supreme Court rules on subsidizing Obamacare’s health insurance plans, significant healthcare savings will most naturally be found in the states. It’s time to start looking there for solutions.
Oliver is executive director of the non-profit Patients for Fair Compensation, a non-profit seeking to implement the Patients’ Compensation System across the country. Segal, a neurosurgeon, is CEO of Medical Justice and a board member of Patients for Fair Compensation.