I recently referred to Investor's Business Daily reporter Jed Graham's coverage of the ACA as "adversarial." He objected. I responded, "I don't ignore or minimize ACA flaws but would not object to a characterization of my writing on it as "sympathetic."
That set me thinking about everything that troubles me about the ACA -- or, more accurately, things that trouble me about the US healthcare system that the ACA is unlikely to fix -- though it may help catalyze reform on several of these fronts. Here's the list:
1. All private health insurance in the U.S. is inadequate -- thanks to the shameful out-of-network billing, balance billing, and creative billing by hospitals, physicians and other providers documented in sickening detail by Elisabeth Rosenthal in her Paying Till it Hurts series. We are in the grip of a depraved system in which hospitals often operate as free billing zones and payers' attempts to control costs just generate new loopholes.
2. For the unsubsidized and lightly subsidized, private insurance on the ACA exchanges is too expensive. Or rather, medical care obtained under the insurance is too expensive. One of the law's strengths is the Cost Sharing Reduction (CSR) that reduces deductibles and out-of-pocket costs for buyers with incomes below 200% of the Federal Poverty Level to levels comparable to those offered in top-grade employer-sponsored insurance (much more modest CSR is offered to those between 200% and 250% FPL). Those cost control come into play if low income buyers choose silver plans (fortunately, most do) and if they are not hit by the kind of out-of-network and balance billing that Rosenthal documents. Those above 200% FPL, however, have to choose between high monthly premiums and often sky-high deductibles, average over $5,000 for bronze plans (which may be tempting to many at the upper range of subsidy eligibility).
The insurance is too expensive because healthcare in the US is too expensive. Americans pay twice, thrice, and often higher multiples per procedure or medication than people in other wealthy countries. The country with the next-highest per capita and per-procedure medical costs (behind the US), Switzerland, has a system that in some respects served as a model for the ACA: mandatory private insurance, with government subsidizing premiums on a sliding income scale. In Switzerland, though, as of 2012, citizens' annual out-of-pocket costs (OOP) were capped at $580 per adult, a bit less than 10% of the $6350 OOP maximum in the ACA. Coinsurance was 10% after a low deductible, compared to 30-50% in many ACA silver plans. The Swiss can afford to subsidize to that level because fee schedules for medical procedures are standardized. For physicians, the federal government sets a national fee-for-service schedule. For hospitals, all the insurers in each canton negotiate uniform rates, which must be approved by the cantonal government. Moreover, only nonprofit insurers provide the mandatory basic health insurance, though supplemental insurance can be sold on a for-profit basis.
In short, government in Switzerland imposes the pricing uniformity and discipline that government in the US fails to provide. Because of that failure, more and more of the unsustainable cost of healthcare is being offloaded on U.S. consumers, mainly through rapidly rising deductibles in employer-sponsored insurance.
3. The ACA places great stock in pilot programs that partially replace fee-for-service in Medicare with bundled payments or pay-for-performance. ACOs share in any savings per patient that their efforts to impose "coordinated care" generate, or appear to generate. Some incentives and disincentives, such as penalties for hospitals if their infection rates or readmission rates exceed a norm, may prove effective. But I strongly suspect that performance incentives more broadly will be gamed, as performance incentives generally are. The move toward coordinated care is meanwhile turbo-charging hospital consolidation and hospital purchase of physician groups, which increase their already-outsized pricing power -- and probably the kind of creative billing that Rosenthal documents.
4. In sum, US healthcare providers retain outsized and egregiously abused pricing power. The U.S. is plainly the subject of the implicit cautionary laid out below by an architect of Singapore's highly cost-effective healthcare system:
The ACA may spur some changes that will chip away at the outsized power of healthcare providers. States may experiment with imposing uniform hospital rates, as Maryland does. New pricing transparency mandates and innovations may empower insured Americans to price-shop more effectively in the face of ever-higher deductibles and co-pays. Narrow networks, if they come with adequate quality controls, may wrest some pricing power from providers. Some of the ACA's coordinated care incentives may even work a little. That set me thinking about everything that troubles me about the ACA -- or, more accurately, things that trouble me about the US healthcare system that the ACA is unlikely to fix -- though it may help catalyze reform on several of these fronts. Here's the list:
1. All private health insurance in the U.S. is inadequate -- thanks to the shameful out-of-network billing, balance billing, and creative billing by hospitals, physicians and other providers documented in sickening detail by Elisabeth Rosenthal in her Paying Till it Hurts series. We are in the grip of a depraved system in which hospitals often operate as free billing zones and payers' attempts to control costs just generate new loopholes.
2. For the unsubsidized and lightly subsidized, private insurance on the ACA exchanges is too expensive. Or rather, medical care obtained under the insurance is too expensive. One of the law's strengths is the Cost Sharing Reduction (CSR) that reduces deductibles and out-of-pocket costs for buyers with incomes below 200% of the Federal Poverty Level to levels comparable to those offered in top-grade employer-sponsored insurance (much more modest CSR is offered to those between 200% and 250% FPL). Those cost control come into play if low income buyers choose silver plans (fortunately, most do) and if they are not hit by the kind of out-of-network and balance billing that Rosenthal documents. Those above 200% FPL, however, have to choose between high monthly premiums and often sky-high deductibles, average over $5,000 for bronze plans (which may be tempting to many at the upper range of subsidy eligibility).
The insurance is too expensive because healthcare in the US is too expensive. Americans pay twice, thrice, and often higher multiples per procedure or medication than people in other wealthy countries. The country with the next-highest per capita and per-procedure medical costs (behind the US), Switzerland, has a system that in some respects served as a model for the ACA: mandatory private insurance, with government subsidizing premiums on a sliding income scale. In Switzerland, though, as of 2012, citizens' annual out-of-pocket costs (OOP) were capped at $580 per adult, a bit less than 10% of the $6350 OOP maximum in the ACA. Coinsurance was 10% after a low deductible, compared to 30-50% in many ACA silver plans. The Swiss can afford to subsidize to that level because fee schedules for medical procedures are standardized. For physicians, the federal government sets a national fee-for-service schedule. For hospitals, all the insurers in each canton negotiate uniform rates, which must be approved by the cantonal government. Moreover, only nonprofit insurers provide the mandatory basic health insurance, though supplemental insurance can be sold on a for-profit basis.
In short, government in Switzerland imposes the pricing uniformity and discipline that government in the US fails to provide. Because of that failure, more and more of the unsustainable cost of healthcare is being offloaded on U.S. consumers, mainly through rapidly rising deductibles in employer-sponsored insurance.
3. The ACA places great stock in pilot programs that partially replace fee-for-service in Medicare with bundled payments or pay-for-performance. ACOs share in any savings per patient that their efforts to impose "coordinated care" generate, or appear to generate. Some incentives and disincentives, such as penalties for hospitals if their infection rates or readmission rates exceed a norm, may prove effective. But I strongly suspect that performance incentives more broadly will be gamed, as performance incentives generally are. The move toward coordinated care is meanwhile turbo-charging hospital consolidation and hospital purchase of physician groups, which increase their already-outsized pricing power -- and probably the kind of creative billing that Rosenthal documents.
4. In sum, US healthcare providers retain outsized and egregiously abused pricing power. The U.S. is plainly the subject of the implicit cautionary laid out below by an architect of Singapore's highly cost-effective healthcare system:
Former Health Minister Khaw Boon Wan has said that the public sector should always play the dominant role in providing care services, but there needs to be a private healthcare system to challenge it. In his view, the public sector is necessary to set the ethos for the entire system— which should not only be about maximization of profits, a primary focus of the private sector. It is the public side that tends to set boundaries and standards for ethics within the system. services, but there needs to be a private healthcare system to challenge it. In his view, the public sector is necessary to set the ethos for the entire system— which should not only be about maximization of profits, a primary focus of the private sector. It is the public side that tends to set boundaries and standards for ethics within the system.
Khaw takes the view that where the private sector does dominate, it will inevitably influence the government and public policy to serve its own interests. If the public healthcare system is too small, it becomes the “tail that tries to wag the dog.” Once a private healthcare system becomes the dominant entrenched player, it is very difficult to unwind it— there are many vested interests and many pockets will be hurt. (Wiilam Haseltine, Affordable Excellence: The Singapore Health System (Brookings, 2013, free on Kindle), Location 998--1007).
Ultimately, though, I suspect that the U.S. will have to follow every other wealthy country in finding some way to impose uniform billing rates on healthcare providers.
So to skittish Democrats who claim they want to "fix" the ACA, my suggestion is: put us on the road to uniform pricing for medical procedures. I know that won't solve anyone's political problems just now. But that's what we need.*
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* A meaningful step in this direction, on a state level, would be to work for stronger versions of New York's new law partially protecting hospital patients from drive-by out-of-network billers. Here's Rosenthal's summary:
A New York State law that will take effect in March — one of a few nationally — will offer some protection against many surprise charges and require more advance disclosure from doctors and hospitals on whether their services are covered by insurance. It states, for example, that patients are not responsible for unforeseen out-of-network charges beyond what they would have paid in-network. It directs insurers and hospitals to negotiate any further payment or enter mediation.Update, 10/27: A point I forgot to add, then almost added and never got to, is that the choices presented in the health insurance exchange are too complex. Not only does one have to master the deductible and the maximum out-of-pocket costs, but a half-dozen or more separate co-pay formulas -- for generic drugs, name-brand drugs (sometimes in multiple tiers), primary care visits, specialist visits, ER visits, outpatient surgery, etc. etc. Determining which doctors and hospitals are within network, or how adequate the network is, is notoriously difficult. Evidence suggests, meanwhile, that most uninsured Americans don't know what a deductible or co-pay is; market vets I spoke agreed that lots of people have no idea what a subsidy is. Somewhat mitigating this complexity is the fact, noted above, that most buyers who qualified for Cost Sharing Reduction did at least buy silver plans, enabling them to access those subsidies. And in practice, for most of the subsidized -- i.e., for most exchange buyers -- price probably narrows the choice to a handful of plans by price.
I was reminded of my failure to get this point written by Austin Frakt's Upshot column published this evening, confessing his own difficulties picking a plan -- starting with balancing the basic tradeoff between premium and deductible. As it turned out, Frakt had previewed that column nowhere else but here on xpostfactoid: How to choose a health plan? Even Austin Frakt needed help.
My own favorite analogue for the choices that confront one in the health insurance marketplace, meanwhile, is the toilet paper aisle.
I always seem to have to post things twiice, not sure why.
ReplyDeleteRegarding the plague of balance billings:
This almost never happens in the Kaiser system. It almost never happens in the largest Blue Cross systems. It never happens in Medicare. I don't think it even happens much in car insurance.
So insurance itself is not the problem.
We need not only laws like New York's. We need health courts, where medical debts can be challenged by patients, and submitted to binding arbitration.