Concern around the Affordable Care Act has reached a fever pitch, as Republican members of the House have succeeded at shutting down the government because the law has not been defunded or delayed. Meanwhile, a handful of states continue their efforts to undermine its implementation, which begins this week. While I by no means want to downplay the urgency of this situation, I would like to offer some reassurance as to the patient’s ultimate prognosis — as long as we remain committed to funding public health prevention efforts.
From 2000 to 2006, I served as minister of health in Mexico, where I spearheaded Seguro Popular, a comprehensive national health insurance program that enrolled more than 52 million previously uninsured persons, achieving universal coverage in less than a decade. In Mexico, as in the United States, introducing such a fundamental reform meant confronting special interests, making pragmatic trade-offs, and facing seemingly insurmountable challenges.
Every health system reform in an advanced nation has gone through such valley-of-death moments. That is the nature of the political process. For a variety of reasons, the United States is coming late to the global movement for expanded health care, the only one of the world’s 25 wealthiest nations lacking some form of universal care as of last year. National reforms inevitably go through great transitions, from vision to legislation, and then from legislation to implementation.
There is always a gap between the ideal vision and the ultimate design — and there are always times of fear that the whole endeavor will collapse under the weight of competing interests. Importantly, there is also no end to the reform process as every nation’s health system continuously evolves.
I believe that the Affordable Care Act will survive this current crisis.
When the Cleveland Clinic announced job and expense reductions of 6% in 2013, the healthcare sector took notice.
Did the world-renowned hospital and healthcare research center, with 40,000 employees and a $6 billion budget, really believe it did not possess the heft to take on the increasingly turbulent sea changes in American healthcare? Or was this yet another stakeholder using Obamacare as cover to drive draconian change?
Both sides of the political aisle were quick to make hay of the announcement, with conservatives blaming reform for eliminating jobs while liberals questioned the timing of the cuts when the Cleveland Clinic was posting positive growth. The answer from Eileen Sheil, corporate communications director, was apolitically straightforward: “We know we are going to be reimbursed less.” Period.
The question of reimbursement reform and the unintended consequences of the Affordable Care Act are weighing on the minds of hospital executives nationwide as independent, regional and national healthcare systems grapple with a post-reform marketplace. The inevitable conclusion that the unsustainable trend in American healthcare consumption is now at its nadir seems to have finally hit home.
These days, America’s hospitals are scrambling to anticipate and organize around several unanswered questions:
- How adversely will Medicaid and Medicare reimbursement cuts affect us over the next five years?
- Can we continue to maintain our brand and the perception that any employer’s PPO network would be incomplete without our participation?
- Can we become a risk-bearing institution?
- Can we survive if we choose not to become an accountable care organization (ACO)?
- Will the ACO model, by definition, cannibalize our traditional inpatient revenues?
- Can we finance and service a hard turn into integrated healthcare by acquiring physician and specialty practices?
Go It Alone or Join a Convoy?
Mergers and acquisitions remain in high gear in the hospital industry—“the frothiest market we have seen in a decade,” according to one Wall Street analyst. “Doing nothing is tantamount to signing your own death certificate.”
Many insiders believe consolidation and price deflation is inevitable in healthcare. Consolidation, however, means scarcity of competition. If we operate under the assumption that scarcity drives costs higher, we may not necessarily feel good about consolidation leading to lower costs unless mergers are accompanied by expense cuts that seek to improve processes, eliminate redundancies and transform into a sleeker, more profitable version of one’s former self.
Bigger may not always be better, but bigger seems to have benefited a select group for the last decade.
Ultimately, spending less on health care is a relatively easy task: We either need to consume fewer services, or spend less on the services that we consume. But much like we teach our Kellogg students about maximizing profits, the devil is in the details.
It’s certainly tempting to ask the government to swoop in on a white stallion and solve the all our problems by fiat. For example, we could have the government simply exploit its monopsony power and set prices, but an artificially low price will lead to an inefficiently low quantity of services and future innovation (stay tuned, we will have more to say about this next week).
Similarly, we could explicitly ration quantities (as opposed to implicitly doing it through a large uninsured population). But how could we hope to determine the right level of care? Ultimately, if we ask the government to unilaterally fix this problem, instead of a white stallion we could behold a pale horse and all that it entails.
The good part, perhaps the best part, about the Affordable Care Act is that it attempts to address this problem using market forces. The question is whether we are ready for what these market forces will entail.
We will focus today on the role of market forces in the insurance market to control prices in the newly established ACA exchanges.
This month the Obama administration announced that it would allow insurers to use “reference pricing” for insurance programs in the exchanges. Under a reference pricing system, insurers set the maximum price they will pay for a specific set of services and if patients go to a facility that costs more than that amount they are required to pay the difference.
Since launching ACAView, our joint initiative between the Robert Wood Johnson Foundation (RWJF) and athenahealth, in early April, open enrollment under the Affordable Care Act (ACA) has closed for 2014 and The White House has issued final numbers: eight million people enrolled through the marketplace and five million outside the marketplace. Add another three million enrolled in Medicaid or the Children’s Health Insurance Program (CHIP) and the total number of people enrolled under the ACA’s individual mandate is close to 16 million.
Since some of these enrollees had previous forms of insurance coverage, it is important to estimate overall reductions in the number of uninsured. RAND estimates that 9.3 million more Americans have insurance in Q1 of 2014, compared to Q3 of 2013, but these figures exclude the surge of enrollments in the last half of March. The Congressional Budget Office (CBO) estimates 12 million net newly insured people through either the marketplace or Medicaid (including 1 million who lost insurance), but these estimates exclude enrollments outside the marketplace.
In short, “newly insured” and “enrollment numbers” are counted in different ways and can be confusing. But let’s conservatively assume that the number of net new insured individuals is roughly nine million, or 2.8% of the population. Are these new beneficiaries having a measurable impact on medical practices?Continue reading…
In further celebration of Nurses Week, it’s worth discussing this TIME article about the “Killer Burden on Nurses” under the Affordable Care Act.
The point I’m raising and highlighting here is not meant to be political or partisan, but really one about nursing workloads, management decisions, and what’s right for patients.
We’ve seen recently that American healthcare spending is UP about 10%(the biggest increase in spending since 1980) – mainly due to newly insured patients getting care. The point is to get people care and treatment, but maybe the law should have been called the “More People Getting Healthcare Act?” That’s a noble goal.
From the TIME article, an opinion piece written by a nurse from California:
“… I worry that the switch may compromise the quality of the care our patients receive.”
The nurse talks about patients who are sicker due to not getting good healthcare previously. These patients require more attention and more nursing time.
In any workplace, the staffing levels should be set based on the total workload. Using “number of patients” is not a good basis, since the acuity of patients (and the resulting workloads) aren’t equal. Not every patient is the same.
Hospitals, due to other industries, do a really poor job of “industrial engineering” work that would establish the right staffing levels based on workloads.
Despite the political angst, the doomsday predictions and a very rocky launch, the Affordable Care Act has enabled more than 8 million Americans to acquire insurance coverage through the public exchanges.
Health insurance increases the probability that patients will access the medical care they need. And my colleagues at Kaiser Permanente are already seeing some positive stories emerging as a result.
They’ve shared dozens of stories with me about patients with undiagnosed medical problems who are now receiving treatment. In particular, I enjoyed hearing about two new patients in Northern California who’ve benefited from being insured.
They came in with life-threatening cancer: One, a mother with a uterine malignancy, and the other, a young man with a testicular mass. Both had gone years without medical care because they were unable to afford it. And now – thanks to medical coverage, early diagnosis and successful treatment – both will live.
But expanding access to health insurance is only the first step. Improving health care delivery is the next step in this journey.With all the acrimony in our nation’s capital, bipartisan agreements are few and far between.
Medicare Advantage may be the one platform on which both parties can stand. Examining this program and why it has proven so successful offers us insights into where we as a nation might choose to go.
Medicare Advantage: A History Born from Necessity
Since the Medicare program was created in 1965, the federal government has been insuring citizens over the age of 65.
This original form of Medicare, called traditional Medicare, was and remains a “fee-for-service” program. That means the Centers for Medicare and Medicaid Services (CMS) – the agency that administers the Medicare program – pays individual physicians for the services they provide to Medicare beneficiaries.
Think of a service as an office visit, a test or a procedure. The price for those services is determined by the agency’s Physician Fee Schedule.
Beginning in 1978, Medicare beneficiaries had a second option. They could enroll in private Health Maintenance Organizations (HMOs) under a “risk contract” between CMS and the HMOs.
When I recently returned home after a two-week speaking tour of Canada and began catching up on news about Obamacare, I was angry and upset, and not just at politicians and special interests that benefit from deception-based PR tactics.
I was — and still am — mostly angry and upset with myself. And I know I always will be.
Over the course of a two-decade career as a health insurance executive, I spent hours and hours implementing my industry’s ongoing propaganda campaign to mislead people about the Canadian health care system.
We spread horror stories about “rationed care” and long waiting times for medically necessary care. Our anecdotes were not at all representative of most Canadians’ experiences, but we spent millions of dollars to persuade Americans that they were.
At every stop between Halifax and Vancouver last month, I explained how the United States had achieved the dubious distinction of having both the most expensive health care system on the planet and also one of the most inequitable.
While Canadian lawmakers in the 1960s were implementing a partnership between the federal and provincial governments to create the country’s publicly funded universal health insurance system — known as Medicare — our lawmakers in Washington were establishing America’s own single-payer Medicare program, but only for folks 65 and older and some younger disabled people.
Congress also created the federal and state-administered Medicaid program for the nation’s poor.
Ever since, most of the rest of us have had to deal with private insurance companies and pay whatever they felt like charging us for coverage.
Last Thursday, HHS released the final enrollment stats for health exchange enrollment for 2014. Here’s what we learned:
- 8.1 million enrolled in a plan in the Health Insurance Marketplace. 3.8 million (47% of total) since the end of February including 1.2 million in the much-watched 18-34 age cohort.
- 54% are female; 28% are between the ages of 18-34; 63% are White, 17% Black, 11% Hispanic, 8% Asian/other.
- 20% chose a bronze plan, 65% chose silver, 9% gold, 5% platinum and 2% catastrophic. Note: At the silver level, individuals who earn less than 250% of the federal poverty level — ($29,175 for an individual, or $59,625 for a family of four) — are eligible for assistance for out-of-pocket costs. 85% who picked an exchange plan qualified for a subsidy: 82% in the 14 state-run exchanges and 86% in the federally-run exchange.
- Young adults 18-34 were 83% of those applying for the catastrophic coverage.