ACA permits people to sign up even if they are already sick. Real insurance cannot work that way.
Imagine an Accountable Fire Insurance Act that required insurers to sell you fire insurance after your home had burned. Homeowner insurance rates would skyrocket. Anyone who carefully read the ACA would see that coming.
The big insurers knew this would happen but played along in the beginning to avoid attracting political fire.
“Value” is the most important concept in healthcare today. But it’s problematic.
Futurists say our system is transitioning from volume to value. Device and drug manufacturers tout the value of their products. It even found its way into Wednesday night’s Presidential debate when frontrunner Hillary Clinton answered Chris Wallace’s query Medicare’s long-term viability with the following reply: “We’ve got to get costs down, increase value, emphasize wellness. I have a plan for doing that.”
Value is defined as “a fair exchange in return for a thing” (Dictionary.com). Per Webster’s, it is a “fair return in goods, services, or money for something exchanged; worth in money; usefulness, or importance in comparison with something else.” In essence, it is the relationship between what something costs and the benefits that accrue to its purchaser. Transactions between buyers and sellers based on the purchaser’s deduction of what something costs and the benefits derived are the basis for value-based economics. They’re aided by rating services like Consumer Reports that provide useful methods for making selections: the current issue covers SUVs, coffee makers, nut butters and gas/electric ranges. Very straightforward. Side by side.
One of the main goals of the Affordable Care Act (ACA), perhaps second only to improving access, was to improve the quality of care in our health system. Now several years out, we are at a point where we can ask some difficult questions as they relate to value and equity. Did the ACA improve quality of care in the ways it intended to? Did it do so for some people, or hospitals, more than others?
How did the ACA Attempt to Improve Quality?
Three particular programs created by the ACA are worthy to note in this regard. The Hospital Acquired Condition Reduction Program (HACRP) took effect on October 1, 2014 and was created to penalize hospitals scoring in the worst quartile for rates of hospital-acquired conditions outlined by the CMS. The Hospital Readmissions Reduction Program (HRRP), which began for patients discharged on October 1, 2012, required CMS to reduce payments to short-term, acute-care hospitals for readmissions within 30 days for specific conditions, including acute myocardial infarction, pneumonia, and heart failure.The Medicare Hospital Value-Based Purchasing Program (HVBP) started in FY2013, was built to improve quality of care for Medicare patients by rewarding acute-care hospitals with incentive payments for improvements on a number of established quality measures related to clinical processes and outcomes, efficiency, safety, and patient experience.
I can recall it like yesterday. It was 2004, and I had become the CEO of Blue Cross & Blue Shield of Rhode Island. I was in the middle of my annual physical with my long-standing primary care physician, Dr. Richard Reiter (true). Dick Reiter is my age and is an old school doc. He caught my cancer before it got too serious, and had been yelling at me about things like cholesterol, stress, and exercise for years.
During a lull in the exam, I turned to him and asked, “Dick, I’m the CEO of Blue Cross. What do I need to know?” He paused, looking down. Then his cheek started to twitch. I actually saw him lose his temper for the first time in 25 plus years. “Jim, you want straight? What the bleep are you doing to us? A monkey can do a colonoscopy and yet they make four times what we primary care doctors make. What you are doing is a disgrace.” He was some pissed!!
I then had lunch with Dr. Al Puerini, a highly regarded PCP of 30 years with a full practice. I asked him how much he netted before taxes, and when he told me, I was appalled. He made some aside about it not being about the money, but it IS in part about the money. He also told me about how difficult it was to recruit new PCPs in RI.
Those two encounters started me down my path of alarm about the future of primary care. Rhode Island is a small (40×30 mile, one million population) microcosm of the country. While we have our accents and quirks, and people still think we’re overrun by the mafia, we’re not all that much different. Just wicked smaller. Our PCP population was aging and shrinking rapidly. The best and brightest from Brown Med School and others of its ilk were decidedly not swarming into primary care. Practices could not recruit new members. We were, and still are, in a crisis that is nation-wide.
And it didn’t stop with just the poor PCP reimbursement. PCPs cannot survive financially without untoward volume. This has all sorts of negative consequences. Moreover, on the totem pole of respect, PCPs do not seem to rank high for reasons that I simply cannot fathom. It seems that the more “miracle machines” a physician uses, the more respect he or she gets. While the poor PCP does what we in the billing world refer to as “E&M” (Evaluative and Maintenance). The look-you-in-the-eye, known-you-for-years sort of thing. In other words, taking basic tests and extrapolating health trajectories. Wading into gray areas. Knowing the patient and her family, and making informed prognoses. All difficult stuff. Not something that shows up on an LED screen. Ahhhh….judgment and perspective.
The Affordable Care Act was intended to usher in a new era of competition and choice in health insurance, and at first it succeeded. But increasingly, provisions in the law are undermining competition and wiping out start-up after start-up. If something isn’t done soon, the vast majority of new insurers formed in the wake of the ACA will fail, and many old-line insurers that took the opportunity to expand and compete in the new markets will leave. It’s a classic story of unintended consequences and the difficulties of regulation.
Flush with optimism after the ACA passed, dozens of new insurers formed to take advantage of the environment created by the law. Twenty three of these were co-ops given start-up funding by the ACA. In most states the new plans only grabbed a small share of the market, but enough to put pricing pressure on larger incumbent plans. In a few states, like New York, the start-ups and other new entrants grabbed over half of the business on the exchanges.
To the surprise of many, price increases in health insurance remained low by US historical standards even as the recovery continued and people who had been without insurance were finally able to get it. How much of that modest cost trend is due to an improved competitive marketplace on the exchanges is speculation, but what is clear is that the doomsayers about the ACA were wrong. Costs did not explode, and even with higher 2016 rate increases we are not back to the bad old days (yet).
With no apology offered, I will be venturing into a very subjective realm, namely, a characterization of today’s healthcare dialogue and what, in my opinion, might be an improvement.
I would suggest we have fallen into the trap that was partly enhanced by email and blogs, namely, that we can say outrageous things impolitely and without consequence. With email we tend to be much blunter and impolite than we would be face to face. On blogs, we can be positively toxic. It’s like driving in a car with a tinted windshield that no one can see through. You are anonymous and therefore can act less responsibly.
Another vignette. I grew up in a very small upstate New York town where everyone knew everyone else. You used your car horn to beep “hi” or to warn, and not in anger, ever. When you waved at someone, it was with all five fingers. And so on. I think you get my point.
The healthcare debate always has stoked emotions like almost no other. It is intensely personal, and the stakes are high. We’re all involved and engaged.
As I’ve written in the past, I first earned my stripes as a lawyer representing my local Blue Cross plan in rate hearings. These rate hearings always started with “public comment.” The comment ranged from pure outrage to controlled anger to discontent coupled with suggestions. What did we pay the most attention to? Of course, the latter.
A congressional subcommittee held a hearing Thursday to examine the health insurance co-op loan program established by the Affordable Care Act. The program provided $2.4 billion in taxpayer-backed loans as seed money for the co-ops, which are private companies that were originally intended to bring competition, choice, and innovation to the health insurance market. In spite of this seed money, co-ops are off to a rough start. Since their inception just over two years ago, 12 of the original 23 co-ops have closed due to financial concerns. Taxpayers aren’t the only ones at risk of getting left with the tab for the co-ops.
A co-op left doctors and hospitals in Iowa and Nebraska holding over $80 million in unpaid claims when it closed. Worse still, consider that unpaid claims left behind by failed insurance companies are often allocated by state guaranty funds to the surviving insurance companies, who ultimately pass them on to consumers. One way or another, you’re likely to pay for any obligations the co-ops can’t meet. The co-ops’ leaders don’t offer much comfort, either. One co-op CEO recently offered this assessment of the co-ops’ prospects for re-paying their loans: “Will there be a little money left? Yeah, maybe.” Fortunately, the surviving co-ops have an often-overlooked asset they can tap to stay in business and meet their obligations: the recovery rights to their overpayments.
Beginning in 2018, high-cost, private sector health plans will be subject to a special levy, popularly known as the “Cadillac plan” tax. Under a provision of the Affordable Care Act, health plans must pay a tax equal to 40 percent of each employee’s health benefits to the extent they exceed $10,200 for individual coverage and $27,500 for family coverage
In many ways, the Cadillac Plan tax is a stealth tax. It doesn’t even become effective until eight years after the Affordable Care Act passed Congress. And back in 2008, the thresholds were so high that it must have seemed like the tax would apply only to a handful of employers. But health care inflation has a way of escalating base line costs through time.
So much so that a Kaiser Family Foundation study estimates that the first year it is applicable, one in four employers will be subject to the Cadillac plan tax unless they change their benefits. Going forward, the thresholds are indexed to the rate of general inflation – which historically is well below the rate of medical cost inflation. As a result, the study estimates that the share of employers potentially affected could grow to 30 percent by 2023 and 42 percent by 2028.
A while back Michael Lujan, who was one of the originals working at Covered California, came to see me at the Health 2.0 office. He and his colleagues realized that the workflow for small business health insurance quotations between the carriers and the agents was broken. Yet, despite the ACA (or maybe because of it!) agents are responsible for 90% of small business health quotes.
Any small business who’s ever got a health insurance quote from an agent has likely seen a relatively incomprehensible series of prices and benefits on a PDF. And if they want to see a change, the broker has to go back to the carrier/insurer and start again.
For the past year or so LimeLight Health (working at incubator Launchpad Health) has been trying to make that an interactive process, and the result is their product Quotepad. Another really interesting niche product in our convoluted health care mess.
There are dozens of ways to take stock of the Affordable Care Act as it turns 5 years old today. According to HHS statistics:
16.4 million more people with health insurance, lowering the uninsured rate by 35 percent.
$9 billion saved because of the law’s requirement that insurance companies spend at least 80 cents of every dollar on actual care instead of overhead, marketing, and profits
$15 billion less spent on prescription drugs by some 10 million Medicare beneficiaries because of expanded drug coverage under Medicare Part D
Significantly more labor market flexibility as consumers gained access to good coverage outside the workplace
Impressive. But the real surprise after five years is that the ACA may actually be helping to substantially lower the trajectory of healthcare spending. That was far from a certain outcome. Dubbed the Patient Protection and Affordable Care Act for public relations purposes, there were, in fact, no iron clad, accountable provisions that would in the long run assure that health insurance or care overall would become “affordable.”
ACA supporters appear to have lucked out—so far. Or maybe, just maybe, it wasn’t luck at all but a well-placed faith that the balance of regulation and marketplace competition that the law wove together was the right way to go.
To be sure, other forces such as the recession were in play—accounting for as much as half of the reduction in spending growth since 2010. But as the ACA is once again under threat in the Supreme Court and as relentless Republican opposition continues, it’s worth paying close attention to new forecasts from the likes of the Congressional Budget Office (CBO) and the actuaries at the Centers for Medicare and Medicare Services (CMS).
The ACA is driving changes in 17 percent of the U.S. economy that, if reversed or interrupted, would have profound impact on federal, state, business, and family budgets. A quick look at some important numbers follows: