New HealthCare.gov ads smartly target young, athletic types who feel invincible

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For all of the SNAFUs with the website and all of the delayed mandates, one thing that the Department of Health and Human Services has gotten right is the advertising.

New HealthCare.gov ads include retired basketball stars Earvin “Magic” Johnson and Alonzo Mourning as spokespeople to encourage young, healthy people to sign up for health coverage in the marketplace.

With new rules prohibiting insurers from discriminating on the basis of pre-existing conditions, it’s easy to get older, sicker people to sign up for health coverage because they obviously need it. But it’s harder to get young, invincible people to see the value in purchasing health insurance since they don’t use much health care. But it’s also critically important to get them into the risk pool because, without them, there is a high risk of adverse selection in the risk pools, driving up insurance premiums for everyone. That’s why the much-maligned individual mandate is so important and also entirely inadequate.

While a bunch of young men on a basketball court probably can’t relate to cancer treatment, they can often relate to sports injuries. So it’s obvious why athletes are compelling spokespeople for this cause.

But why Johnson and Mourning instead of current players who are more relevant? Without going into their stories explicitly, many basketball fans understand that these men became seriously ill during their NBA careers. Johnson famously announced his HIV diagnosis in 1991, and Mourning’s career was also cut short by a rare kidney disease that required a transplant and ended his career. Both men had an air of invincibility but were faced with life-and-death circumstances. Both are survivors, and both required expensive medical treatments that most young people don’t think about.

So these ads are a stroke of genius by HHS. Will they be enough to close the gap of young, healthy people? Probably not. But they could definitely move the needle.

Affordable Care Act is a “burning platform” for change

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If you hear the phrase “burning platform,” you probably think it has a negative connotation. Obviously it’s not particularly pleasant or comforting to envision the ground on which you’re standing catching on fire.

But in the case of health care, I think having a burning platform is a very good thing.

I first heard the phrase “burning platform” from Robert Matt, Vice President at Hancock Regional Hospital, who was teaching a graduate course I took called Lean in Healthcare. I bluntly asked him why LEAN principles which had proven to be so transformative in other industries and had even showed value in a few limited cases in health care had not really become the norm in the health industry. His response was that there had never been a “burning platform” that created a sense of urgency for the industry to change. The U.S. health industry was too comfortable (dare I say fat and happy) to change its practices.

But as plenty of research has demonstrated, things are not fine in the U.S. health care industry. We pay far too much and do not receive the requisite value in return for what we pay in terms of safety and outcomes when compared with the health systems of other nations.

Fortunately, it looks like the industry is beginning to notice some warmth under its feet as a result of the Patient Protection and Affordable Care Act, commonly known as Obamacare. In short, the decline in per-patient reimbursement expected as a result of the law is forcing hospitals and physicians to take more drastic steps toward improving efficiency, quality and safety. Indiana University Health, the largest health system in Indiana, is aiming for savings of more than $1 billion per year.

Of course, some of those savings will be the result of layoffs, and I certainly can relate to losing a job through no fault of my own. The health industry is unusually labor-intensive compared to many other industries, and so it’s impossible to cut costs significantly without cutting people.

I’m afraid that these pink slips will create skepticism toward implementing lean principles in other places, but this skepticism is unwarranted. Had it not been for the lean innovations made at IU Health to improve processes, even more people would have lost their jobs in order to reach the $1 billion goal. Lean is not about cutting people, it’s about helping people to do their jobs more efficiently and effectively. It’s about problem solving, not just (or even primarily) cost-cutting.

But think about it this way — when the industry saves, we as patients save. We save on our medical bills and even on our health insurance premiums because health insurance premiums are a function of the cost of claims. Plus, I have a feeling a lot of those people who received pink slips will land on their feet, just doing something different within the industry to accommodate the influx of new patients.

Nobody every said progress would be easy or pleasant all the time, but that doesn’t mean we shouldn’t do it. Sometimes progress forces us to light a few fires and burn a few platforms.

 

Public health is health care too

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When people normally think of health policy, the first thing that comes to mind is health insurance reform like the Affordable Care Act.

But health status isn’t just about access to insurance, doctors, drugs and hospitals, it’s also about the environment where we all live. That means factoring in the health effects of air quality, water quality, urban planning, transportation (is it safe to walk or bicycle instead of driving?), public safety, nutrition and sanitation.

Now that’s holistic medicine.

Obamacare is already reducing the number of uninsured Americans

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For all the talk about people “losing their health care” (which really just meant their plans were cancelled and they would have to switch to a different plan with richer benefits) and all the technical difficulties on the exchanges, the Patient Protection and Affordable Care Act (aka Obamacare) is already working to reduce the uninsured rate to its lowest level since 2008, according to a report by the Associated Press. This should surprise no one since that was the whole point of the law. The Affordable Care Act is far from perfect, but it does represent real progress.

Why YOU should care about health policy

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First of all, I’d like to welcome you to my new blog site devoted solely to health policy. I’m currently a graduate student in health administration, and I’ve also spent years working in the health care industry in areas ranging from revenue cycle management to health insurance to my current job in the public health / information technology world. There are a lot of people out there who know more than I do about these things, and a lot has been written over the years. But I’ve picked up a thing or two myself, and I’d like to share.

But isn’t this topic something that should be left in the halls of academia instead of subjecting poor, unsuspecting readers like you to jargon like “Quality-Adjusted Life Years” and “Adverse Selection Death Spiral?”

I mean, why should academics and graduate students be the only ones who have to be bored by this? I say, “Share the misery.”

But seriously. I’m writing about this topic because I sincerely believe you need to read about it. And it doesn’t really matter who YOU are. Because no matter what we study in school, no matter what we do for a living, we’re all a part of this system. We all will receive health care at some point in our lives. Plus, some of us vote, and there’s no more contentious political issue today than reforming our health care system.

We all have a stake in what happens, and the more we know, the better off we’ll all  be. So let’s get started.

Still think we can solve health care with free-market principles? Just go to the ER.

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I’m going to share a Fox News story that has its roots in the federal government’s intrusion in health care and how it led to a man’s death because he had to wait too long to see a doctor.

But it’s not the government intrusion into health care you’re probably thinking of. What really killed John Verrier was not the Patient Protection and Affordable Care Act of 2009 (commonly dubbed Obamacare, but I’ll shorten it to PPACA), but the Emergency Medical Treatment and Active Labor Act of 1986 (EMTALA).

You see, this is a story about how the government intruding in health care led to the tragic death of 30-year-old ER patient John Verrier. Verrier died in the waiting room at St. Barnabas Hospital in the Bronx  more than eight hours after he checked in. Apparently the hospital did not have a policy in place to check on people in the waiting room at the ER to make sure they were still present or alive — even after they called his name to be seen and he did not answer.

A little background: EMTALA requires all hospitals that participate in Medicare (which is essentially all hospitals period) to evaluate and stabilize any patient who comes to the emergency room, regardless of ability to pay. Sounds like a good idea, right? I mean, who wants hospitals to turn people with emergency ailments away or dump them onto county hospitals without being stabilized just because they can’t pay the bill? Sadly, the law had to be written because that’s exactly what was happening in the 1980s at an alarming rate. People died. There have even been plenty of cases post-EMTALA where hospitals have dumped patients due to the inability to pay.

Why would hospitals continue to dump patients after EMTALA said they couldn’t? Because, as Avik Roy of Forbes wrote, EMTALA is “one of the great unfunded mandates in American history.”

So what does this have to do with John Verrier’s death? According to a report on the case in the New York Post, a hospital employee said, “He died because [there’s] not enough staff to take care of the number of patients we see each day. We need more staff at Saint Barnabas.”

It makes sense, doesn’t it? If the federal government requires hospitals to accept all patients regardless of their ability to pay, then you can expect two outcomes:

1) A lot of people will get care and not pay for it. In fact, according to the Centers for Medicare and Medicaid Services, 55 percent of emergency room care goes uncompensated.

2) A lot of those people who need care but cannot pay for it will end up in the emergency room because, unlike at a traditional physician practice or an urgent care, the ER has to evaluate and stabilize them BY LAW even if they can’t pay. So a lot of people who end up in the ER have non-emergent conditions and would be better off if treated at a lower level of care…that is, if the primary care or urgent care practice would actually treat them since they don’t have to. A study in Health Affairs revealed that:

Americans seek a large amount of nonemergency care in emergency departments, where they often encounter long waits to be seen. (emphasis added) Urgent care centers and retail clinics have emerged as alternatives to the emergency department for nonemergency care. We estimate that 13.7–27.1 percent of all emergency department visits could take place at one of these alternative sites, with a potential cost savings of approximately $4.4 billion annually.

So, here’s the perfect storm that led to the death of John Verrier. The unfunded mandate of EMTALA has led to a lot of  uncompensated care at hospitals, so it’s not surprising that hospitals like St. Barnabas don’t dedicate enough staff to the ER — it’s a loss center for them.

From my years of graduate-level study in health administration, I have my suspicions that management best practices are to staff the ER just enough to not violate EMTALA…walk right up to the line, but don’t cross it. Here in Indianapolis, we have a county safety-net hospital called Eskenazi Health. The previous facility was called Wishard Memorial Hospital.

And, according to one of my professors who would be in a position to have firsthand knowledge, there was a common saying among staff and management at private hospitals in the area: “Tube ’em to the Wish,” which meant that the hospital’s policy was to evaluate and stabilize an indigent patient just enough to not violate EMTALA and then dump the patient at the county hospital.

So, back to the understaffed ER at St. Barnabas and John Verrier’s deadly wait, it’s certainly worth considering that EMTALA played a role in his death. He was complaining of a rash, which on its surface would not seem like a life-threatening medical condition, but he was waiting for hours and hours just to be evaluated.

But, of course, I’m not suggesting that we stop requiring hospital emergency rooms to treat everyone without regard to their ability to pay — I’m suggesting that if we mandate something, we need to pay for it. After all, I’m not sure whether John Verrier was insured or not…so simply repealing EMTALA might have killed him too.

And that’s where the other federal law in this story — PPACA — can make a real difference. By passing EMTALA in 1986, we as a country established the idea that health care is a right and not a privilege and not a commodity that can be allocated by Adam Smith’s invisible hand. We just refused to acknowledge the price of this belief because we didn’t want to pay it. But of course there is always a price — there is no free lunch. It comes up in higher hospital bills and higher health insurance premiums for the rest of us. It comes up in hospitals being declared tax exempt because of the amount of charity care they provide to indigent patients.

By addressing the problem of millions of Americans being uninsured, we can reduce the problem of uncompensated care for hospitals that leads to understaffing AND we can give people with non-emergent conditions more appropriate care alternatives where payment will not be a barrier to treatment. PPACA is certainly not a complete answer to the problem, but it’s a big step. Maybe if Ronald Reagan had extended insurance coverage to all Americans back in 1986 instead of just mandating that hospitals see everyone in the ER without regard to ability to pay, then John Verrier and so many others in his situation might have lived.

How IT Will Make the Affordable Care Act Work for Americans

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When speaking to the American Medical Association on June 15, 2009 about the need for health care reform, President Barack Obama cited an unlikely source. He said, “As Newt Gingrich has rightly pointed out — and I don’t quote Newt Gingrich that often — we do a better job tracking a FedEx package in this country than we do tracking a patient’s health records.”

Mr. Obama’s point was clear; although the debate over health care reform was intense and divisive at times along ideological lines, there was one area where almost everyone seemed to agree. In order to coordinate care, reduce costs and deliver better outcomes for patients, the United States health system needed to harness, analyze and share (within HIPAA guidelines) the data it generates. In May 2008, the non-partisan Congressional Budget Office published a report on the costs and benefits of health information technology. That report estimated an annual net savings in the healthcare sector of $80 billion. In Mr. Obama’s view, it was time for the dream of interoperable electronic health records to become a reality.

By the time of the President’s address to the American Medical Association, he had already signed the landmark Health Information Technology for Economic and Clinical Health (HITECH) Act into law as part of the American Recovery and Reinvestment Act of 2009. Among its many provisions, the HITECH Act established $20 billion in federal funding for electronic health records systems that satisfy “meaningful use” criteria. Yet, as Obama pressed Congress to pass a comprehensive health care reform bill, he made expanded use of health information technology part of his agenda.

The final healthcare reform law, the Patient Protection and Affordable Care Act, took the next step after the HITECH Act by instituting new electronic billing standards, requiring health plans to implement electronic health information exchanges, and creating new health insurance marketplaces called exchanges. It is perhaps even more critical to understand the law’s indirect impact on health information technology through its emphasis on value-based purchasing, physician quality reporting, accountable care organizations and patient-centered medical homes. If there is one common thread among the myriad changes brought about by PPACA, it is an increased dependence on health information technology.

Billing and insurance reforms

PPACA is primarily a law about expanding access to health insurance. Beginning in 2014 (with open enrollment starting October 1, 2013), individuals and small businesses will be eligible to purchase private insurance from multiple carriers through exchanges. Because health insurance is regulated at the state government level, each state will have its own marketplace. PPACA gives state governments the option to either operate their own exchanges, work in a state-federal partnership or defer to the federal government to operate their state’s exchange. Regardless of the governance structure (whether states choose to implement their own exchanges is driven largely by partisanship), exchanges will be heavily dependent on the Internet and on standardized electronic transactions to facilitate insurance purchasing.

On the surface, a health insurance exchange website may seem analogous to a travel booking website like Expedia.com. Different private insurers could simply list and explain their offerings and let consumers choose. However, because PPACA includes means-tested subsidies for private insurance and a lengthy list of eligibility requirements for government programs (specifically Medicaid and CHIP), the data collected from insurance applicants is far more extensive.

Also, insurers that participate in the exchanges will be required to report to the government on quality measures, provider network adequacy, essential health benefits, claims payment, medical loss ratios, individual mandate compliance and many other details. That is why the law mandates standardized, secure electronic transactions (including financial transactions) maintained by the Department of Health and Human Services to facilitate these reporting requirements and simplify administrative tasks.

The task of setting up the exchanges is mammoth, and the Department of Health and Human Services has been working closely with states to make sure that residents of every state have access to a functioning exchange when open enrollment begins. However, deadlines continue to be pushed back to account for a lack of readiness by the states that have opted to operate their own exchanges. (This does not even account for the states where Republican governors who oppose PPACA are actively trying to derail its implementation.) Because PPACA was challenged in federal court (and ultimately at the US Supreme Court) and because candidate Mitt Romney vowed to repeal PPACA, a common attitude among governors was to wait until after the election to make any major decisions.

Health IT for clinical data

In order to minimize the cost impact of expanding health coverage to millions of Americans, PPACA also includes provisions designed to “bend the cost curve” by measuring and improving the quality of health care. PPACA depends heavily on expanded health information technology to collect, disseminate and analyze clinical data in the hopes of improving outcomes and reducing costs.

Just as third-party health payers will have new reporting requirements through the insurance exchanges, PPACA also includes provisions to expand health information exchanges for clinical data from the health care delivery system. Where the HITECH Act included grants to finance the health information technology infrastructure for electronic medical records, PPACA established quality reporting and public health data collection requirements that will employ the new infrastructure to measure quality and track population health. In the spirit of the HITECH Act, PPACA also provided additional funding for long-term care facilities to implement electronic medical records systems.

Indirect health IT impacts

Some of the most significant health IT impacts of PPACA are indirect — that is, provisions that do not explicitly cover health IT nonetheless incentivize investments in information systems.

Two of the more significant provisions of PPACA are the creation of two new voluntary health care delivery models for Medicare: accountable care organizations and patient-centered medical homes. Although the rules governing these new models are extensive, the concept behind them is essentially shifting reimbursement away from a fee-for-service structure toward a structure of bundled payments that reward providers for managing patients’ health across the whole continuum of care.

Accountable care organizations (established through the new Medicare Shared Savings Program) are required to use health information technology for electronic health records, disease registries, eHealth solutions, health information exchanges and advanced data analytics. Naturally when an accountable care organization is charged with keeping a population of patients healthy (regardless of where they go for their health care), it will have an incentive to participate in a health information exchange so the patient can be tracked. This can be particularly useful in the case of disease registries for chronic conditions such as diabetes.

Because PPACA requires healthcare providers to report their quality measures to the Department of Health and Human Services and bases reimbursement levels on performance against these measures, health information technology adoption will become more critical. PPACA extended the Medicare Physician Quality Reporting Initiative, which provides additional compensation to physicians who report quality measures and meet or exceed quality benchmarks (an example of value-based purchasing). Failure to report on these quality measures will result in penalties (reductions in Medicare reimbursement) beginning in 2015.

Not only can health IT enable providers to meet their reporting requirements, it can also help them improve their quality scores so that they can achieve higher reimbursement levels. Electronic health records systems often include decision support tools for physicians to help them practice evidence-based medicine. With the expanded reporting requirements from PPACA, the Department of Health and Human Services can use the data collected to continually improve decision support systems as new evidence and analytics become available. EHR systems also frequently include e-prescribing tools, which can substantially reduce prescription drug errors. Research has shown that handwritten prescriptions have a 37 percent error rate vs. a 7 percent error rate for electronic prescriptions.

Where are we now?

Nearly three years after Mr. Obama signed PPACA and nearly four years after the HITECH Act, health IT adoption in the United States is substantially higher than before, but still very low when compared to other developed nations. A 2012 survey of U.S. primary care doctors by the Commonwealth Fund found that 69 percent reported using an electronic health records system compared with 46 percent in 2009. By contrast, the United Kingdom has an adoption rate above 90 percent. Only 27 percent of U.S. primary care providers reported having access to electronic health records with “multifunctional” capabilities.*

As health IT adoption continues to increase over time, the United States should expect to see positive impacts on cost and quality, but how effective PPACA will be at controlling costs is a matter of intense debate. With health insurance exchanges set to go live for open enrollment on October 1, 2013, an enormous of amount of information technology work must be completed in a short timeframe. How successful the exchanges will be depends in large part about how effectively the technology is implemented — especially in terms of usability by people looking to enroll in health coverage.

All of this new data infrastructure brings with it new challenges for privacy and security. In addition to the requirements set forth in the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the Department of Health and Human Services is building new capacity to enhance — and enforce — information security beyond the original HIPAA provisions. According to the National Coordinator for Health Information Technology, These added privacy and security protections are an integral piece of the government’s increased efforts to broaden the use of IT in health care.”

Efforts by the U.S. government to expand health information technology are very much in their infancy. Although some significant progress has been made, most of the work lies ahead. Whether all of this effort and cost will be worthwhile remains to be seen, but early signs of bending the cost curve are positive.

References

Obama, B. Remarks to American Medical Association, Chicago, 6/15/2009. Available:www.politico.com/politico44/perm/0609/obamas_ama_speech_d856ddc1-eaeb-44f4-9010-2fd4b8473d99.html

Congressional Budget Office. “Evidence on the Costs and Benefits of Health Information Technology,” May 2008. Available:www.cbo.gov/sites/default/files/cbofiles/ftpdocs/91xx/doc9168/05-20-healthit.pdf

The White House. “Deficit-Reducing Health Care Reform.” Available:www.whitehouse.gov/economy/reform/deficit-reducing-health-care-reform

U.S. Department of Health and Human Services. “Key Features of the Affordable Care Act, By Year.” Available:www.healthcare.gov/law/timeline/full.html.

Kaiser Family Foundation. “Explaining Health Care Reform: Questions about Health Insurance Exchanges.” April 2010. Available:www.kff.org/healthreform/upload/7908-02.pdf

National Association of Insurance Commissioners. “Patient Protection and Affordable Care Act of 2009: Health Insurance Exchanges.” April 2010. Available: www.naic.org/documents/committees_b_Exchanges.pdf

Angle, J. “Administration scrambling to set up ObamaCare exchanges.” Fox News, 1/30/2013. Available:www.foxnews.com/politics/2013/01/30/administration-scrambling-to-set-up-obamacare-exchanges

Goodnough, A. and Pear. R. “With Obama Re-Elected, States Scramble Over Health Law.” The New York Times, 11/8/2012. Available:www.nytimes.com/2012/11/09/health/states-face-tight-health-care-deadlines.html?pagewanted=all&_r=0

Ungar, R. “New Data Suggests Obamacare is Actually Bending the Healthcare Cost Curve.” Forbes, 2/12/2013. Available:www.forbes.com/sites/rickungar/2013/02/12/new-data-suggests-obamacare-is-actually-bending-the-healthcare-cost-curve

Healthcare Information and Management Systems (HIMSS). “The Patient Protection and Affordable Care Act: Summary of Key Health Information Technology Provisions.” Available:www.himss.org/content/files/ppaca_summary.pdf.

Impact Advisors. “The Role of Health Information Technology in Accountable Care,” January 2012. Available:www.himss.org/content/files/ImpactAdvisorsWhitePaper_ITImplicationsofACOs.pdf

Schmittdiel J et al. “BRIEF REPORT: The Prevalence and Use of Chronic Disease Registries in Physician Organizations.” J Gen Intern Med. 2005 September; 20(9): 855–858. Available: www.ncbi.nlm.nih.gov/pmc/articles/PMC1490197

Mather, R.C. et al. “Penalties coming under PPACA, PQRI,” from American Academy of Orthopaedic Surgeons. Available:www.aaos.org/news/aaosnow/jan11/advocacy2.asp

Stross, R. “Chicken scratches vs. electronic prescriptions.” The New York Times, 4/28/2012. Available: www.nytimes.com/2012/04/29/business/e-prescriptions-reduce-errors-but-their-adoption-is-slow.html

Terry, K. “EHR Adoption: U.S. Remains the Slow Poke.” InformationWeek,11/15/2012. Available: www.informationweek.com/healthcare/electronic-medical-records/ehr-adoption-us-remains-the-slow-poke/240142152

Office of the National Coordinator for Health Information Technology. “Federal Health Information Technology Strategic Plan: 2011 – 2015.” Available:www.healthit.gov/sites/default/files/utility/final-federal-health-it-strategic-plan-0911.pdf

*The generation of patient information, such as lists of patients’ medications; the generation of patient registry and panel information, such as a list of patients due for preventive care; order entry management, such as electronic prescribing; and decision support, such as alerts about potential adverse drug interactions. To be counted as a user of a multifunctional EHR, a practice had to report that its system had at least two functions in each of these four domains.

Perverse incentives and unintended consequences everywhere

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I’m a big fan of the books Freakonomics and SuperFreakonomics, co-authored by economist Steven Levitt and journalist Stephen Dubner. I especially like them in audiobook form because the reader, Dubner, throws his voice into a high shrill to demarcate when he is quoting someone else. But I digress.

The books consist of a series of anecdotes that are shocking, bizarre and occasionally inspiring. In the prologue to SuperFreakonomics, the authors tie all of the stories together with this theme. “People respond to incentives, although not necessarily in ways that are predictable or manifest. Therefore, one of the most powerful laws in the universe is the law of unintended consequences.”

I firmly believe that government has an important role to play in making society more just, equitable and civil than it would otherwise be. Whether it’s a police force protecting citizens from the threat of crime or Social Security protecting the elderly and disabled from the threat of poverty, the government is in a unique position to solve certain problems that might otherwise go unsolved.

Yet both of these books include story after story of well-intentioned government policies that went terribly awry because their authors did not predict how they would play out in the real world. In a scathing indictment of government intervention, the authors point out that Franklin Roosevelt — the progressive hero who brought us Social Security — chose to donate his personal funds to the private sector research on curing polio while he was sitting in the Oval Office instead of relying on Uncle Sam. Roosevelt suffered from polio himself, so his contributions to the organization that ultimately became the March of Dimes were the ultimate example of his personal health incentives outweighing his incentives for political gain. Even though he did not live to see it happen, Roosevelt bet on the right horse because it was a private sector team led by Jonas Salk that ultimately invented the polio vaccine.

If you’ve spent any time with me at all in recent years (or if you have read some of my other blog entries), you will know that I am particularly passionate about health care reform. Indeed I was quite pleased when the Supreme Court decided to uphold the Patient Protection and Affordable Care Act, albeit by the narrowest of margins. I see this as an issue of justice since more than 50 million Americans have no health insurance, and millions more are underinsured.

Yet I am a person who tries to listen to the ideas of those who do not share my views. And I have heard a lot of objections to the law. The strongest one that I have heard, though, was the law of unintended consequences. Levitt and Dubner made the best case for this when sharing stories of other government policies gone wrong in decades past. For example, the authors demonstrated how the Americans with Disabilities Act actually discouraged employers from hiring disabled people because they feared lawsuits if they were to ever discipline or fire a bad employee who happened to be disabled.

So, if government is not the answer, what is one to do when faced with a difficult societal problem — especially one as complex and emotional as health care? Simply accept the problem as inevitable?

PPACA is undoubtedly fraught with problems. One unintended consequence of the law has already cropped up: some insurers have responded to the law’s prohibition against denying coverage to children for pre-existing conditions by not offering child-only policies at all. (This is a temporary problem since the law prohibits this practice for all ages starting in 2014 — insurers surely cannot stop selling policies altogether.)

But why would insurers make this tradeoff, even in the short term? Why would they stop selling policies to the parents of healthy kids just because they will have to cover sick kids too? Because health care itself is expensive, and the sick children who can now qualify for insurance are really expensive to cover.

This turn of events should not have come as any surprise to smart policymakers because when there is a lot of money on the line, rational humans invariably will game any system. This goes for insurers, hospitals, doctors, pharmaceutical companies, medical device manufacturers and patients. There is no way to make everybody happy. Any meaningful reform will have big winners and big losers.

Many smart patients will likely choose to pay the individual mandate penalty and go without health insurance until they get sick because the penalty is less than the cost of insurance and the insurance companies will be required to accept them regardless of health status. The higher premiums these gamers will create for everyone else will become what economists call anegative externality — a consequence of one person’s actions that is borne by another person. At least the penalty provides some counterweight to that natural inclination.

So why doesn’t the law go harder after making health care itself cheaper so insurers won’t have such a strong incentive to deny coverage to sick children? Sure, there are some provisions in the law like comparative effectiveness research, accountable care organizations, and health information technology investments, but I suspect the real reason for the kid-gloves approach to costs in the system is because politicians respond to incentives too.

When President Obama and congressional Democrats started working on this law in 2009, they knew that they would face a tough political fight. It was made tougher by Republicans who decided it was in their best political interests to oppose the law unanimously, no matter what provisions it contained. Plus, as politicians who run for re-election, everyone owed a sort of legislative debt to whoever contributed to their campaign funds if they hoped to continue raising said funds.

Since we have already established that health care is expensive, any attempt to reduce costs is invariably going to lead to some belt tightening. And, as humans who respond to incentives, everybody wants somebody else to do the most belt tightening. Are health insurance companies earning too much profit? Are pharmaceutical and medical device companies to blame? What about those high-paid doctors and huge hospital bills? Naturally, with that much money at stake, the biggest players were willing to sink millions of dollars into lobbyists and advertising campaigns to protect their interests.

So, President Obama struck deals — some might say dirty, backroom deals — with PhRMA, the American Medical Association and the American Hospital Association by shielding them from deep cost cutting provisions in exchange for their political allegiance. The Republicans were no better — they partnered with America’s Health Insurance Plans, the U.S. Chamber of Commerce and the Medical Device Manufacturers Association to campaign against the law since these players had so much to lose and the Republicans. Rather than making deals across the aisle, both sides drew lines in the sand and built up their arsenals for an ugly, televised fight that included phrases like “death panels” and “pull the plug on Grandma.” No matter what your ideology, the second half of 2009 was a low point in American politics.

This is another important concern — is it possible for anyone on either side of the aisle to do honest policymaking anymore? Won’t even the most well-intentioned bill authored by the most honest legislator ultimately be corrupted by the time it reaches the President by lobbyists who have become so endemic to the political process?

Perhaps the federal government has a role to play after all, but it is not the role that anybody on the left or right expects. It is neither a role of command and control and micromanagement nor a role of laissez faire, but a role of creating the right incentives for people to do the right thing.

Maybe we should offer big incentives for health insurance companies to cover people with pre-existing conditions instead of penalizing them for denying it. Maybe the pharmaceutical industry should be required to prove the cost-effectiveness of their drugs before the FDA along with safety and efficacy data. Maybe the government can issue huge award checks for the best ideas to solve the health care cost problem.

Maybe the federal government can dispense money to each state government (proportionate to their populations), give a few simple constraints on the results they must achieve (like covering 95 percent of their residents and not denying people for pre-existing conditions) and then create 50 laboratories for health reform plus regular workshops so that state lawmakers can learn from each other’s successes and failures. If one state can achieve the results at a lower cost than what has been allocated, they get to refund taxpayers the difference. And if you don’t like what your state is doing, you can easily move to another state.

I don’t have all the answers. Whatever the government does — or doesn’t do — there will certainly be some unintended consequences.

Health care reform really is a big @$%!ing deal

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If there is a single issue that has defined the Obama presidency, it has been the Patient Protection and Affordable Care Act…also known as health care reform or derisively as Obamacare. On the night President Obama signed PPACA into law, a microphone picked up Vice President Biden saying that “this is a”big @$%!ing deal.”

Every Republican candidate for president — even former Massachusetts Gov. Mitt Romney — has vowed to repeal it immediately if he or she is elected. Many Democrats have downplayed their votes in favor of it. I think the backlash against the law is due less to objections in the actual law and more to mistrust of Washington and misconception about what the law actually does.

As an employee of the nation’s largest health insurance company and a graduate student in health administration, I feel I have enough knowledge of this law to be dangerous and also a duty to address some of the common misconceptions about the law. If you still object to it, that’s fine, but object to it based on facts and not misinformation.

Objections based on misconceptions

Misconception #1: Death panels. Former Alaska Gov. Sarah Palin took toFacebook on August 7, 2009 to attack health care reform legislation that was, as of that time, unwritten. She wrote:

The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama’s “death panel” so his bureaucrats can decide, based on a subjective judgment of their “level of productivity in society,” whether they are worthy of health care. Such a system is downright evil.

This accusation is totally without merit. The law does not allow anything even remotely resembling a death panel. To overcompensate for Gov. Palin’s lie (dubbed the biggest lie of 2009 by the non-partisan Politifact.com), an important, cost-saving provision was removed from the law: reimbursing physicians for counseling their Medicare patients on advance directives and other end-of-life issues.

In fact, private insurers already ration care through utilization management programs. Ever heard of “precertification?” In many cases, utilization management is a very necessary and important form of rationing. And the appeals panels that insurance companies set up frequently uphold denials.

Misconception #2: Government takeover. PPACA enables the government to do many things, but one thing it does not do is take over our nation’s health care system. PPACA is, at its very core, a set of regulations for private insurance companies, guidelines for states to set up insurance exchanges as marketplaces, subsidies to help people purchase private insurance and looser eligibility guidelines for Medicaid. It is actually quite similar to the law Romney signed into Massachusetts law when he was governor.

In early versions of the legislation, including the Affordable Health Care for America Act that passed the House but died in the Senate, there was a provision for a “public option,” but that did not end up in the final version of the law. There is also no trigger for a public option in the law either, although that was proposed.

Even if those things had made it into the law, there would still be private health insurance, and of course privately owned health care providers. Nothing in this law would constitute the government telling you which doctor to see or rationing care.

Misconception #3: Only good for the poorest. While it is true that the law expands Medicaid eligibility guidelines to 133% of the federal poverty level for men and women, many of the most important benefits will be for middle-income families purchasing subsidized private insurance through state-based exchanges. A family of four with adjusted gross income of $88,000 per year could qualify for a subsidy if they have to purchase individual coverage.

They’ll need it too — with new guaranteed issue (no denials for pre-existing conditions), community rating (no rating based on health) and 3-to-1 age banding (the oldest people will only pay three times as much as the youngest people), healthy people will be charged more for insurance to compensate for the sickest people who will be paying less or even newly eligible for private insurance in 2014.

Earlier in 2011, Rep. Paul Ryan (R-WI) proposed a voucher program for Medicare that would use the Medicare tax to provide subsidies for Medicare beneficiaries to purchase private health insurance. This was viewed as a potential solution to the red ink facing the Medicare program. Considering Medicare beneficiaries are, by definition elderly and/or in poor health, they are often bad risk candidates for private health insurance…but only the rating rules under PPACA actually could have made such a program workable for seniors. I, for one, hope Congressman Ryan’s proposal resurfaces.

A few legitimate objections to health care reform

Objection #1: The individual mandate. The issues of guaranteed issue and community rating raise an important point about the real hot-button issue in the law: the individual and employer mandates to purchase health insurance.

Working in the health insurance industry has taught me about the problem of adverse selection, namely the projected rise in costs when more unhealthy people purchase insurance. The higher the cost, the more likely people are to wait until they get sick to purchase insurance…and that, in turn, raises the cost even more. Insurers have dealt with this problem up until now by denying coverage for pre-existing conditions, but a whopping 82 percent of Americans surveyed by the Pew Research Center say that the government should ban this practice.

So the insurance industry proposed an alternative: a mandate that requires people to buy health insurance. If you own a business or are in sales, wouldn’t it help your bottom line if the government required people to buy your product or pay a penalty?

Unlike death panels and the public option, this mandate actually is in the health care reform law, and it will face the ultimate constitutional test in front of the U.S. Supreme Court in 2012.

We Americans are a conflicted bunch. We support a ban on denials for pre-existing conditions but then most of us oppose the mechanism for making such a ban workable: the individual mandate. Unfortunately this very popular ban costs something, and since there is no free lunch, the individual mandate is that cost.

Objection #2: The federal deficit. The non-partisan Congressional Budget Office projected that, through 2019, the Patient Protection and Affordable Care Act would yield a net reduction in the federal deficit of $130 billion. Of course, the government’s budget projections have been wrong — very wrong — before.

When Medicare began in 1966, the cost was $3 billion, and the House Ways and Means Committee projected (conservatively mind you) that the cost would be $12 billion by 1990. In fact the cost of Medicare was $107 billion by 1990 and $468  billion for FY 2012. Considering that we are talking about health care with its extremely rapid inflation rates, CBO’s projections may need to be taken with a grain of salt.

Objection #3: It’s socialism. One of the definitions of socialism in The Merriam-Webster Dictionary reads, “a stage of society in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods and pay according to work done.”

By that definition, all social programs ranging from Medicare to food stamps to Social Security to unemployment insurance are forms of socialism. Yet people usually like these programs. As Paul Ryan was reminded, Medicare and Social Security are often sacred cows in American politics, and any suggestion of reforming them is certain to draw ire from seniors.

PPACA is on the same plane with Medicare and Social Security. There really is not an ideological distinction between one and the others. The question we should be asking ourselves is not, “Is this socialism?” but “Is socialism a good solution to this problem?” There are some who would never say yes, but most Americans support social programs to some degree whether or not they are willing to describe them as socialism.

While we cannot pretend that PPACA is cost-free, we must also consider the current system as an alternative: a system that shifts the debt from the government to individuals. In 2007, a study by the American Journal of Medicinefound that 62 percent of all bankruptcies filed were related to medical expenses, and 3/4 of medical debtors had health insurance. What’s worse, approximately 50 million Americans have no health coverage. When private citizens go bankrupt and cannot pay their medical bills, those costs get shifted to someone who can pay and usually does pay more…and isn’t that a form of socialism too?

The fact is that the spiraling cost of health care itself underlies both the need for health care reform and the opposition to it. I, for one, am tired of hearing Republicans talk just about repealing PPACA and instead want to hear what they propose as an alternative solution.