Chuck Lauer: 10 Observations on the Affordable Care Act and Our Future
These are really tough questions, so I solicited input from several friends of mine who are retired CEOs of hospital systems, including Kenneth Bloem, former president and CEO of Stanford University Hospital; Gary Mecklenburg, former CEO of Northwestern Memorial HealthCare; Doug Peters, former CEO of Jefferson Healthcare System; Dennis Barry, former CEO of Moses Cone Health System; and Fred Brown, former CEO of Barnes-Jewish Hospital.
These distinguished healthcare leaders took their organizations through some big changes in the past, so who better to ask for guidance as we look into the future?
In lengthy interviews, they gave me many things to think about. Drawing on their input, I developed a list of ten observations on the impact of the PPACA on the future of healthcare. Not every leader I spoke with agreed with every point presented below, but I did my best to reflect upon their thoughts as I formulated my own conclusions.
1. The PPACA probably will just make things worse. The Affordable Care Act is a highly complex law and might be well intentioned, but it fails to address inherent problems in our healthcare system and could very easily do more harm than good.
The PPACA will continue to confuse everyone. It has not solved a thing, and has, in fact, exacerbated the problems we already have in healthcare: high costs, poor reimbursement, continued lack of access and more layers of regulation.
2. It's a tax-heavy law. The Supreme Court's decision considers the insurance mandate to be a tax, but it's not the only tax in the PPACA. Device-makers will pay a 1.3 percent tax on revenues, and hospitals will take a $155 billion cut in payments over 10 years, which is a kind of a tax. In addition, non-profit hospitals will have to file extensive reports with the IRS to hold on to their tax-exempt status. And there will be a 40 percent tax on extra coverage provided by expensive Cadillac health insurance.
3. This law can easily get out of whack. The PPACA was supposed to function like clockwork, but it is actually a very unpredictable mechanism. It can easily get out of whack when something in it is altered. For example, if the Supreme Court had removed the mandate to buy insurance, guaranteed coverage for preexisting conditions would have been well nearly impossible.
Hospitals with a high Medicaid mix weren't so lucky. They were supposed to make up for the loss of $155 billion in revenues by getting more patient volume from a state expansion of Medicaid, which was mandated under the law. But the Supreme Court shot down what was essentially a mandate. Hospitals in states that choose not to expand Medicaid will be left hanging out to dry.
4. Watch out for unintended consequences. Whoever put together this law (it would be interesting to know who these people were exactly) created incentives based on some theories about how people behave. These incentives have never been tested in reality, which means the law could lead to many unintended consequences.
For example, what happens if there aren't enough physicians to serve the millions of Americans who will suddenly become insured? Rather than expanding access to care, the law could actually choke off access. And what happens if employers decide to drop worker coverage? The fine levied against them would be less than the premium they'd have to pay.
5. Prepare for a deluge of new regulations. Healthcare is already one of the most regulated sectors there is, and now it is about to get a whole lot more regulated. This could create another unintended consequence: A law that was supposed to reduce costs may actually drive up costs, due to the unbridled regulation.
So far, the PPACA has created 13,000 pages of new regulations, and many more pages still need to be written, according to Rep. Denny Rehberg (R-Mont.). All these rules will inevitably raise costs, because hospitals and other players will need to hire more people to keep the books and to monitor compliance.
6. There's a 'one-size-fits-all' mentality. The mentality behind these new regulations seems to be that everyone needs to operate in the same way. One size fits all. The new Patient-Centered Outcomes Research Institute, for example, will develop wide-ranging standards of care that everyone will have to adopt. Eventually we will have a "paint-by-numbers" system of quality and efficiency that will make it very difficult for innovative CEOs to develop their own improvements, tailored to their own institutions and localities.
7. Will there be any savings to speak of? There are a lot of excesses in the healthcare system, but the PPACA doesn't really get at them and tends to throw money at problems. The HMOs of the 1990s were draconian and unpopular, but they produced savings. ACOs were conceived as a kinder, gentler version of HMOs, but it's hard to see how "shared savings" can really save a lot of money.
Meanwhile, a great deal of money is being spent to expand access under the PPACA. The federal government has set aside $681 billion to subsidize people buying insurance through the health insurance exchanges over the next 10 years. The average person who buys a policy on the exchange may see his costs go down, but with the subsidies, the overall cost of buying the insurance could actually go up.
8. Healthcare has become a political football. Although the PPACA was almost entirely a Democratic concoction, Republicans don't come off smelling like roses. Both parties should have worked together to come up with the best reform plan possible. Instead, GOP politicians have sought to stir up fear in the American people with warnings about "death panels" and other issues that have nothing to do with sound policy-making. The mantra has become, "Whatever you are for, I'm against it." This is no way to create lasting policy for a sector of the economy as vital as healthcare.
If Barack Obama is reelected, he would then have the opportunity to correct deep flaws in the PPACA, such as the Independent Payment Advisory Board, which should be removed. If Mitt Romney is elected, he should bridge the partisan gap by assembling leaders in the healthcare field and asking them to come up with a new and improved reform plan. This non-partisan panel could adopt sensible reforms like a no-fault malpractice system and draw the line on price increases for drugs and medical devices. The goal should be to cut costs, establish patient-centered care and uphold quality.
9. Private sector reforms will continue. Whatever happens to the ACA, integration of the healthcare market will continue. Hospitals will not stop evolving into integrated systems, using systems like Geisinger, the Cleveland Clinic and Mayo as models. Commercial payors, backed by large employers, are offering incentives to integrated systems.
The key to integration, of course, is alignment with physicians, but doctors seem to be souring on their new role as hospital employees. Many of them are demanding more independent relationships. Recognizing the importance of physicians, we may see more hospitals systems appointing physician CEOs.
10. Next: Expect the unexpected. With costs out of control, leadership lacking and access in jeopardy, we appear to be on the verge of a major change in healthcare delivery. How it would change is not clear yet, but it could be very surprising. For example, healthcare retail outlets staffed by nurses and boutique practices that don't deal with insurers could become pillars of the healthcare system, rather than interesting side issues.
The point is that the healthcare system is ready to become something completely different. And it could get a lot worse before it gets better, and evolve into something we didn't really want it to become. Healthcare could turn into a two-tiered system, with the richest 20 percent of Americans getting high-quality care while the rest of us struggle with increasingly mediocre care. That, I think, would be a tragedy.
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