The Health Cost Fix Obama Won't Accept
The Patient Protection and Affordable Care Act (PPACA) -- Obamacare-- is coming under new attacks as the constitutionality of the individual mandate nears the Supreme Court. In particular, there are new questions about the president’s preferred cost control mechanisms. Yet, the one possible solution for the president's health cost worries is still off the table.
The new criticism has focused on two particular mechanisms from the PPACA: the Independent Payment Advisory Board (IPAB) -- the group affectionately known as the “death panel” -- and the Accountable Care Organizations (ACO). (It’s imperative that any complex government program has an array of acronyms, preferably three letter ones, or TLA’s.)
The President has recently proposed that the IPPB be expanded and empowered to determine the payment for and nature of medical care provided to Medicare recipients. This board would have incredible and essentially unregulated power and require a supermajority of Congress to overturn its mandates.
Democrats in Congress have objected to its independence and lack of accountability to the electorate. Republicans have objected to the overwhelming likelihood that this group will be the implementers of rationing and would look to control the costs of healthcare through price controls (which never work). Moreover, the claim that this unelected group would be immune to political pressure is another example of the triumph of hope over reality.
ACOs, the other cost control proposal, are described in the health care bill as “groups of providers of services and suppliers meeting criteria specified by the Secretary [of Health and Human Services who] work together to manage and coordinate care for Medicare fee-for-service beneficiaries.” The bill’s language goes on to describe the financial hope that “ACOs that meet quality performance standards established by the Secretary are eligible to receive payments for shared savings.” Previously, the ACOs were pretty much universally praised but lately important deficiencies have become more widely noted.
First, as I recently pointed out, demonstration projects conducted as preludes to ACOs were praised by Dr. Donald Berwick head of CMS (Centers for Medicare and Medicaid Services) as proof of cost-saving success. In fact, analysis from Robert Berenson of the Urban Institute shows that there were no real savings in the entire demonstration project, merely more clever data and diagnostic coding manipulation.
Furthermore, as pointed out by Michael Millenson writing in the Kaiser Health News, the new rules CMS is imposing on the ACOs make it almost impossible that the program will succeed. Participants will be forced to report on 65 various quality measures, get approval for any marketing materials, follow highly complex risk adjustment schemes (to prove that the sick patients are really sick), and have payment plans that may require the Madoff backroom to keep track of it all. The organizational complexities imposed by the governmental bureaucracy will overwhelm the model, a problem which still undercuts many aspects of Obamacare.
ACOs have also come under attack from the right. Rita E. Numerof of the Heritage Foundation draws attention to more deficiencies: First, there’s no component that empowers consumers to be stakeholders in their own care. In fact, patients may not even know they’ve been assigned to an ACO for their care and that they may go to whichever physician or hospital they like. They certainly won’t have an economic stake in choosing one delivery group over another. It’s the lack of market discipline applied to healthcare that increases complexity and reduces the likelihood of efficiency.
Second, the current ACO model doesn’t really encourage provider accountability since it maintains the fee for service payment system. The impetus to be efficient is the possibility of a bonus later, rather than a true financial risk although risk may be incorporated into the payment system at a later date.
Finally, ACOs will require a highly sophisticated organization with costly infrastructure (for example, electronic health records). This feature will favor very large groups. Numerof fears that ACOs could actually create an unfair competitive advantage for large organizations which could lead to a consolidation of market power in these groups and hence further drive up health care costs.
In case these three observers aren’t sufficiently intellectually or politically pure, John Kastor, a professor of Medicine at the University of Maryland writing in the New England Journal of Medicine also has doubts that academic medical centers -- the dominant health care systems in many if not most urban centers -- will succeed as ACOs because of many of the issues cited above and the long-standing culture of independence that characterizes the American medical workforce. There aren’t enough economic incentives in the ACO model as envisioned by Secretary Sibelius to overcome these cultural barriers.
The secret that dare not be discussed by the administration is that current large, managed care organizations are really the enterprises that could monitor and administer ACO-like models. In fact, the staff-model HMOs like the Kaiser Permanente system have already shown that they can provide less costly, high-quality care with high patient satisfaction. Such enterprises have the systems and organizational structures to manage risk.
Rather than acknowledge this reality and anger the physicians and hospitals systems that see such organizations as the “enemy”, Obama continues to vilify the insurance companies and to demean Paul Ryan’s proposal for considering the possibility that such a managed care model could work.
The president’s demagoguery of the health insurance industry may be good election year politics but it may also result in him failing to successful implement his signature program.
Tweet