For much of the first 100 days of the new Congress and administration, the news has featured health care and the frequently rancorous debate on its future. Will the Affordable Care Act (ACA) be repealed, replaced, revised or remain essentially intact? Will funding be cut or will subsides and cost-sharing reduction payments stay the same in order to encourage insurers to stay on the health care exchanges?
At this point, we’re left with more questions than answers, but we’ve nevertheless learned much through the process. Specifically, five lessons have emerged about how to go about reforming the U.S. health care system.
1. It is easier to give than to take away
An estimated 20 million Americans are newly insured under the Affordable Care Act. If the ACA were to be repealed, but without replacement, the Congressional Budget Office last month warned that 24 million more Americans would be left without coverage a decade from now. The process to enact the law was politically charged and difficult, but taking those benefits away from people who now have them will, without doubt, prove far more problematic and painful.
Behavioral economics teaches us that the experience of loss is felt more deeply than is the joy from a comparable gain. Once we possess something, whether a physical object or a benefit like health care coverage, we value it much more than before we owned or could avail ourselves of it. Hence, over the last few weeks, constituents in town hall meetings across the country have voiced loud and emotional concerns about the possibility that new legislation might deprive them of the coverage and access they currently receive through the ACA.
The political consequences of cutbacks or defunding could be harsh. About two-thirds of people with newly acquired coverage through Medicaid expansion and health insurance exchange subsidies live in states that voted Republican in 2016, with the margin of victory in many razor-thin. Cutting funding and eliminating coverage could have a deciding influence on the upcoming midterm elections and produce a shift in the balance of power in Congress.
2. The voters who decided the 2016 election were the ones who most need health care coverage
The population currently experiencing the most rapid decline in health status in the United States is not minorities, such as African-Americans, but, rather, white, working-class Americans. According to a recent report from the Brookings Institution, they are not only in poorer health today than in the past, but are also now “dying in middle age at faster rates than minority groups.”
And based on post-election analysis, that demographic significantly impacted the last election. Cutting funding that affects their health care coverage and eliminates programs for preventing and managing their chronic conditions will make their medical problems worse, increase costs for their care and compound the affordability challenges of the future.
3. The price of health care coverage has to reflect the cost of providing care
Health care is a low-margin business, with most hospitals and insurance companies reporting margins under 5 percent. That leaves very little room for error in price calculation. And with health care costs rising by 5 percent to 6 percent on an annual basis, as reported by nearly all insurance companies, the problem is clear-cut and the future even more troubling.
Already, people are having difficulty affording health insurance premiums and paying for the associated out-of-pocket costs. From 2010 to now, the percentage of workers insured through high-deductible products has increased from 25 percent to 40 percent, and the trend is likely to continue in the future. The reason is straightforward. Companies competing in a global market can’t afford to pay premium increases that are growing faster than their company’s revenues without compromising their income and bottom line. And for close to two decades health care inflation exceeding GDP growth has been the reality.
The solution for most businesses has been to transfer part of the added expense to their employees through higher out-of-pocket costs. While some believe that higher deductibles lower expenditures because beneficiaries are motivated to make better purchasing and personal health decisions, there exists little evidence to support this view. Instead, what we know is that when people are required to pay the first $3,000 or $5,000 out of pocket, they tend not to seek the care they need, particularly for routine and preventive services.
4. Health care policy changes always produce winners and losers
Invariably, major health care reform will create winners and losers. If insurers charge older individuals five times what they charge younger enrollees, compared to the current cap of three times the rate, older individuals will bear more of the total expense. So young people win, and older people lose.
If new legislation allows medical underwriting based on preexisting conditions, those who most need access to care will be least able to secure it, and those without medical issues will pay less. If the requirement to cover the ten categories of essential health benefits is eliminated, it will allow insurance companies to sell products with less comprehensive coverage, and those who need fewer health care services will benefit, while those who are ill or have chronic, complex conditions will face greater financial exposure. Overall, as insurance products become “skinnier,” the young and the healthy win and the older individuals and the sick lose. That’s simply the mathematics of health care insurance.
Not all of the gains and losses happen to patients. As an example, drug companies increasingly are taking advantage of government-granted patent protection to drive up the price of the drugs they sell by as much as 5,000 percent. And now the limited competition among drug companies is creating similarly egregious pricing in the generic market as well. This month, Arthur Bedrosian, CEO of Lannett Company, a generic drug firm, talked about his plan to continue to push prices skyward for medications that have been on the market at low prices for years. And he is doing so without fear of reprisal, despite an antitrust inquiry from the Justice Department.
If legislation is passed to limit these types of profiteering, the cost to patients will decrease, but so will the profits of those companies that sell them, along with the very generous campaign contributions they make. In contrast, if the time pharmaceutical companies are allowed to keep drugs under patent expands and data transparency and reporting on the percentage of revenue expended on R&D remain non-existent, then the drug manufacturers’ stock prices will rise, as will the cost of health care coverage for all.
5. The coverage conundrum won’t be solved until we transform the delivery system–but that won’t be easy
The debate for the past three months has been over insurance coverage–how much, for whom and at what cost. But the most important lesson is the recognition that what is most broken and most in need of repair is the underlying delivery system itself. And improving the delivery system will be a massive challenge — specifically, a $3.2 trillion challenge.
Health care coverage for all is essential. But regardless of the specific plan, until care delivery is transformed to improve quality and flatten the inflation curve, the cost of providing that coverage will exceed the ability of individuals, companies and the government to pay. And as a result, all approaches will fail.
Policy experts recognize that if we continue to reimburse physicians on a fee-for-service basis, costs will continue to rise at unsustainable rates as the volume of “things done” increases, even when minimal or no value is added. At the same time, we can predict that efforts to move the country to a more value-based system will be resisted by providers, particularly the lower-performing doctors and hospitals.
Integrating physicians, both within specialties and across primary and specialty care, would increase collaboration and cooperation, but once again that will be opposed by many doctors who are averse to any limits imposed on their autonomy, even when patients benefit significantly. And the resistance will also come from outside the medical profession itself. Ask computer manufacturers to open their underlying application software, so third-party developers can make data easily interchangeable, and they will refuse to do so to protect their market share. And even when hospitals consolidate to maximize quality and increase efficiency, they frequently use their new market dominance to raise, rather than lower, prices.
The outlook for the next 100 days
Health care in the United States is driven by factors beyond medical care. It’s also a blend of policy, politics, and business. Despite efforts by presidents in both parties over more than a half century, little progress was made toward giving all Americans access to quality health care after the passage of Medicare and Medicaid in the 1960s. The Affordable Care Act in 2010 took another major leap forward. One hundred days ago, the new Congress began the process to repeal and replace the ACA, but three months later their efforts remain stymied, the result of deep intra- and inter-party ideological divides.
These five lessons help explain why progress has been so difficult to accomplish. Although change is certainly possible, the political, social and economic principles underlying these five lessons are similar in impact to gravity. Pretend they don’t exist — or, worse still, try to defy them — and you’re likely to fall and end up getting badly hurt.
Robert Pearl is a physician and CEO, Permanente Medical Groups. This article originally appeared in Forbes.
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