Check out the latest edition of the Health Wonk Review at InsureBlog, where Hank Stern is our able host.
Wright on Health has posted the Repeal Fatigue Edition of the Health Wonk Review. You’ll find there a roundup of fine posts there, and thankfully they aren’t all about the implosion of repeal and replace. Topics include: vulnerable populations, opioids, workers comp and more.
Check it out.
In this month’s #CareTalk, John Driscoll and I discuss the protection of vulnerable populations, a particularly timely topic as hurricane season rages on.
It’s been an active time for healthcare policy proposals on Capitol Hill. Today’s Health Wonk Review curator, Colorado Health Insurance Insider has posted the never-ending summer of healthcare legislation edition.
It’s chockfull of insightful and inspiring posts by the leading health wonks of our day. Check it out.
The Affordable Care Act (aka Obamacare) was a sincere attempt by Democrats to write a bipartisan bill that would attract the support of moderate Republicans. It preserved the employer-based system of private insurance, added market-based approaches such as the insurance exchanges, and enforced personal responsibility through the individual mandate. The Republican leadership made a political decision to attack the bill rather than to support it, and the GOP-led Congress and now a GOP-led Administration have tried their best to undermine the law by spreading misinformation (death panels, government takeovers), defunding key aspects such as the risk corridors, and creating uncertainty (e.g., not committing to funding cost-sharing reductions). States have done their part by suing over the law’s constitutionality.
I’ve warned since 2014 that if Obamacare fails or is repealed it will make single payer more likely. (See If Obamacare fails are we on to single payer? and One more way Obamacare may lead to single payer and Goodbye Obamacare? More like hello single payer!)
Suddenly the political ground is shifting as leading Democrats embrace single payer. The Washington Post (The dam is breaking on Democrats’ embrace of single-payer) reports that there are four co-sponsors of a single-payer bill in the Senate. Max Baucus, former chairman of the Senate Finance Committee and an Obamacare architect, has also come out in favor –something that was unfathomable until recently.
There a few reasons this is happening right now:
- After seven years of shouting “repeal and replace” Republicans have revealed that they actually don’t have a plan for addressing problems in the healthcare system and that their real intention is to cut Medicaid and throw millions off of coverage
- President Trump has called Republicans on their subterfuge, so now everyone is aware that there never was a plan
- Experience with the Affordable Care Act has changed the conversation. For example, no one wants to go back to worrying about whether pre-existing conditions will keep them from getting coverage or that they’ll hit an annual or lifetime cap on benefits
Most importantly from a political standpoint, Democrats realize that the complexity of the ACA –which was needed in order to keep it a moderate bill that built on the complexity of the existing system– has worked against them. I’m a healthcare expert and I don’t understand every aspect of Obamacare. How can the average citizen be expected to do so?
“Medicare for All” is a simple and powerful rallying cry. Everyone knows what Medicare is. Those who have Medicare like it and want to keep it. There is no stigma attached to it. Unlike the ACA, a Medicare for All bill could be simple and elegant. And it wouldn’t require an individual mandate to function.
The health wonk in me says that Medicaid would actually be a much better vehicle for universal coverage than Medicare. (See Could Medicaid for all be the answer?) It would do a better job of bending the cost curve and addressing drug pricing, and would give the states more freedom to innovate. But it might be less appealing politically.
Those who want to preserve capitalism and private innovation in healthcare –and I put myself in that category– should embrace the Affordable Care Act and look for ways to improve it. The alternative is to fight a rear guard action against single payer.
The Summer Lull edition of the Health Wonk Review is posted at Health System Ed. Here you’ll find a leisurely edition with plenty of explanation and context for a summer read.
Host Peggy Salvatore has featured my post on free markets in healthcare, and for that I thank her.
As an economics graduate, MBA, and entrepreneur I’m a fan of the free market system. The invisible hand is a beautiful thing, and it’s certainly been good for me. A healthcare management consultant and board member, I make my living from the business of health.
Capitalism has a place in healthcare, but in developing policies we should also recognize the limits of free market approaches and be open to the benefits of socialist ideas. For example, before the Affordable Care Act, people with pre-existing conditions or high healthcare costs would experience “job lock.” They couldn’t afford to leave their employers’ group insurance plans even if they wanted to start their own small business. Would-be entrepreneurs used to call me asking for advice –not about business plans, raising money, hiring, or product development– but about how I handled health insurance. Fortunately in Massachusetts this was not a problem, even before the ACA, because we had guaranteed issue (could not be denied coverage for pre-existing conditions) and community rating (premium based on larger group, not individual risk). In most parts of the country, though, it was a problem, and if the ACA is repealed it may become a problem again.
A recent New York Times article (The Company Behind Many Surprise Emergency Room Bills) provides another example of the limitations of a free market approach. It’s worthwhile for free market ideologues to understand this before setting policy. To recap:
- Some hospitals hire outside companies like EmCare to staff their emergency rooms. To maximize profits, those companies sometimes decide not to negotiate contracts with insurance companies. Hence they are “out of network” on purpose
- When patients come in to the emergency department –suffering a heart attack, stab wound or whatever– they are treated by these out of network doctors, who then bill the insurance company at a rate that may be a multiple of in-network rates. This is true even if the hospital itself, and most of its doctors, are in network
- The insurance company may pass along some or all of the expense to the patient, especially if the patient has a high deductible plan
- Patients get angry, and a story appears in the New York Times
The Times story ends there, and it’s bad enough. I guess you could argue that the free market is sort of working here. After all, physicians are setting their own rates, and in theory patients could decide to go elsewhere. The consumer making noises helps to bring the market into equilibrium. And maybe the problem is not enough capitalism. Maybe EDs shouldn’t be required to take patients who can’t pay…
What the Times doesn’t say –probably because they don’t know about it– is that there’s an additional capitalist ecosystem that comes into play here. Let’s say a physician charges the insurance company $100,000 for something that would be reimbursed at $10,000 under a network contract. In case you think I’m exaggerating, this kind of thing actually happens –if not with emergency physicians then with ambulatory surgery centers and behavioral health.
The insurance company or third party administrator may then hire a cost containment vendor to ‘re-price’ or negotiate the claim. The cost containment vendor negotiates with a separate “revenue cycle management” company hired by the physician group.
Let’s say for the sake of argument that they agree to a reduced payment of $15,000 instead of $100,000. The cost containment company might take 20% of the savings (20%*$85,000=$17,000) as a commission and the revenue cycle management company might make $1500 or so for their efforts. So everyone in this scheme is happy:
- The physician still collects $13,500 compared to $10,000 in a network deal. (And in some circumstances if the insurer isn’t paying attention they’ll get the full $100,000.)
- The revenue cycle management company takes its cut, even if it’s less than the others
- The cost containment companies makes more than the physician ($17,000 v $13,500). It doesn’t usually work that way but sometimes it does. [Note that I had these numbers wrong until I was corrected in the comments.]
- And the health plan pays $15,000 rather than $100,000. If the payer is acting as a TPA or ASO rather than bearing risk, they may even get a fee from their employer customer for the cost containment service
While it’s great that so many new jobs and business opportunities are created, this is not exactly the way to hold down the cost of healthcare and improve affordability.
Contrast this scenario with one where the patient is covered by a government program: Medicare or Medicaid. The government determines the fee for services rendered and pays it to the physician. The patient contributes at most a $50 co-pay. The physician may or may not like what he’s being paid, but there are no shenanigans.
If you adore the free market and abhor government interference, maybe the first scenario is best. Having seen it up close, I have a hard time arguing for it.