In their opening paragraph in a January 30 blog in the New York Times, “The End of Insurance Companies”, they assert:
“Here’s a bold prediction for the new year. By 2020, the American health insurance industry will be extinct. Insurance companies will be replaced by accountable care organizations — groups of doctors, hospitals and other health care providers who come together to provide the full range of medical care for patients.”
They presume this development will leave no room for insurers.
They continue, “A new system is on its way, one that will make insurance companies unnecessary.” The new system, they confidently predict, will consist of accountable care organizations, made up of collaborating hospitals and doctors. ACOs will offer bundled payments. Fee-for-service payments will cease to exist.
ACOs, the two Obamanites imply, will sprout, flourish, and metastasize across the land from sea to shining sea.
Their prediction may be bold, but I believe it is wrong.
The two former Obama advisors contend, “Accountable care organizations will increase coordination of patient’s care and shift the focus of medicine away from treating sickness and toward keeping people healthy, saving the federal government money on Medicare patients and producing better outcomes.”
We shall see.
The two may be whistling in the dark. What they are forecasting is a superb example of wishful thinking.
It rests on four flawed assumptions:
• Assumption 1 – Doctors and hospitals will flock to ACOs as an alternative to their present practices. This is unlikely. Only a handful (ten to be precise) of present physician organizations, which do not include the most prestigious in the land, have accepted the concept of ACOs. Indeed surveys indicate 67% of doctors are skeptical about ACOs. Ten “pioneer ACOs” began forming on January 1, 2012. They have yet to work out the kinks and wrinkles or to overcome the challenges and obstacles of forming workable, practical, and economical organizations. They will take years to get their act together.
• Assumption 2 – These organizations are not risk-free. ACOs pose hazards and raise questions in the minds of physicians and othr observers. Will physicians have any control over the Medicare populations covered? Will these ACO populations consist of their present patients? Will they have control over the patients’ behaviors or life-styles? How much of physicians’ incomes will be at risk? Will ACOs save money? How much time and bureaucracy will be involved? Can hospitals, who often compete with physicians, be trusted as business partners? What are the chances of being audited for anti-trust if an ACO dominates a market? How much will it cost to set up ACOs – to hire the lawyers and consultants that will be required?
• Assumption 3 – ACOs will succeed. In a January 19 blog, John Goodman, founder of the National Center for Policy Analysis, says all of Medicare’s 34 pilot demonstrations to date have failed to save money or decrease costs. And in a January 25 blog, Greg Scandlen of the Health Benefits Group cites a study from the UK. The UK has invested $20 billion in HIT for its 62 million citizens since 2002. It has chosen to scrap its failed program. Why,Scandlen asks in “Whistling Past the Graveyard,” should the U.S. expect its $27 billion program, expected to cover 301 billion people, succeed?
• Assumption 4 – Why would Health Insurance plans, which together had $346 billion in revenues in 2008, meekly retreat and be unable to compete with ACOs? This industry’s revenues grew by 7% in 2009. Besides, the industry manages 21% of Medicare plans and 14% of Medicaid plans. CMS may not be able to function without health plan expertise, particularly with 10,000 to 12,000 new baby boomers becoming eligible for Medicare each day and 32 million more Medicaid recipients expected in 2014. Yet Emanuel and Liebman say “ACOs will require enhanced information systems to track patients and figure out how to deliver more effective care.”
Bulking Up Rather Than Disappearing
Instead of “disappearing,” as Emanuel and Liebman predict, it is far more likely insurers, hospitals, and physicians will consolidate into larger entities to protect themselves against government. In the words of a December 12 Wall Street Journal article, “The lines are blurring between insurance companies, hospitals, and other health-care providers.” Wellpoint, United, Highmark, and Humana have already acquired or are in process of acquiring physician-owned health groups and hospital-owned health systems.
As I wrote in a December 13, 2011, Medinnovation blog, “Building, bulging, and blurring into big boundary-less behemoths seems to be health care Master Plan ‘B’” as health care participants bulk together to bring down costs and blitzkrieg markets.”
Forgive me, if you will, for the shameful alliteration and hyperactive hyperbole. But, as the poet Dylan Thomas might say, health plans are not going to go silently into that good night.
Richard L. Reece is a retired pathologist and the author of The Health Reform Maze: A Blueprint for Physician Practices. He blogs about health reform, medical innovation, and physician practices at medinnovationblog.