The Affordable Care Act is approaching its fifth anniversary, and as a nation we have completed the first year of health insurance exchanges. Much ink has been spilled on what might happen to healthcare in America under the ACA, but now is a good time to take stock of its actual track record.
I was recently asked at a dinner if the Affordable Care Act been a good thing. The answer is complicated.
The Affordable Care Act did act as the catalyst for conversations about reforming healthcare in this country. Unfortunately, the specifics of this plan did little to address sustainability or cost, and ultimately the Affordable Care Act is just not affordable for the individual or for the country.
The intent of the Affordable Care Act was to provide more Americans with affordable healthcare. Simply put it was an access bill. Among the newly-eligible Medicaid population we are seeing increased insurance rates. However, we are also hearing stories of physician shortages and increased wait times. Getting real data to back this story up will be important because insurance without access to actual care would be a significant failure of the law.
When care is available, only some people are finding it affordable. The newly-eligible Medicaid population is finding they can afford the insurance, co-pays, and deductibles. But for people using the exchanges, the story is a bit different. There, people are frequently finding they can afford the premiums, but not deductibles. A recent KFF study shows that of the one third of Americans who struggle to pay medical bills, seventy percent are insured. Insurance coverage is not ensuring affordable healthcare.
We need health care reform that truly changes the cost of healthcare, not just who pays for it. We must address the underlying drivers of cost such as chronic illness; long-term nursing home and end-of-life care; irregular pricing structures; the inherent moral hazard in a third-party payer system; and the cost of regulation and administrative overhead that adds nothing to the quality of care delivered.
A New Model of Insurance
To do this, I think we have to completely transform traditional health insurance. Given the regulations that will soon apply to the size of insurance plans with the implementation of the Cadillac Tax, and the degree of waste in the insurance market, this should not be surprising.
In 2009 the Institute of Medicine put out a report showing 31% of the $2.5 trillion a year the U.S. spends on healthcare is waste. A good friend and former professor of mine, Uwe Reinhardt likes to point to this statistic and highlight the $190 billion of that $765 billion allocated to excessive administrative costs used to pay the employees needed to help a provider comply with the myriad billing rules and regulations unique to each different insurer. This is clearly an area that should be streamlined to manage costs.
The complexity and cost of insurance administration is so burdensome, some healthcare providers are already asking if they can do without the middleman entirely. Cleveland Clinic has already partnered with Lowes to deliver bundled cardiac care services. What if other large health systems marketed and delivered services directly to patients as integrated delivery systems? What happens when most health systems begin to look like Kaiser Health? And then what happens when these health systems compete with insurance companies in the exchanges?
The Risk Question
The move to a pay-for-performance model from fee-for-service, which is encouraged and in part facilitated by the sponsorship of ACOs in the ACA, is premised on shifting risk to providers. But providers do not know how to manage risk – insurance companies do. Solving this problem is where the market opportunity lies, and the solution will create the new face of the healthcare industry.
When insurance companies partner with healthcare providers to help them manage risk, they can do several things. Another friend of mine, Ezekiel Emmanuel, has suggested either selling a management package to providers —the analytics, risk management, actuarial modeling and plan administration—or becoming an “integrated delivery system” themselves by buying ACOs, hospital conglomerates and physician groups.
We are already seeing examples of these models. A recent JAMA article highlighted Anthem Blue Cross joining seven Los Angeles Health systems in a managed care contract with shared risks.
I think there is also a third option: outsourcing specialty services to control costs. I will use the example of palliative care.
Care of the chronically ill and those at the end of life is an incredible drivers of cost. These patients represent the majority of the 5% that spends 50% of healthcare dollars. Managing the risk of this population and reducing their healthcare costs actually can be done effectively and while delivering high quality care.
The way to do that is with palliative care, which can focus on quality of life while managing chronic illness in the lowest cost setting possible. Currently the reimbursement model does not support these services because palliative care is more about coordination of services to a patient and her family than delivery of a specific service as traditionally defined. However, insurance companies partnered with a palliative care provider can use these specialty services to reduce costs of caring for what are traditionally their highest cost patients.
Instead of a reactive insurance model, this is a proactive model. It seeks to identify high risk patients and offer services that will keep costs down while improving their quality of life, instead of waiting for these patients to get sicker and become frequent users of the most expensive type of healthcare: inpatient hospital services.
If nothing else, the Affordable Care Act has sparked hard conversations, and we must continue having them. How do we deliver the best care to the patients that need it in the smartest, most efficient way? That is going to require the reworking of parts of the system, but providers and insurers can shape their own futures by embracing change, thinking ahead, and designing healthcare that can thrive in our new consumer driven, cost-conscious world.
Bill Frist is both a former U.S. Senate Majority Leader and nationally recognized heart and lung transplant surgeon.