One of these trends is the move toward population health management, ACOs, and bundled payments that is being driven by the Affordable Care Act. The other trend is greater consumerism that found its genesis in the internet and mirrors the 24/7 connected world we live in today. Can these trends co-exist, or will one win out?
We often hear that the states are the laboratories for public policy experimentation, and the most successful of those experiments will rise to the top and become national policy. We point to Massachusetts as the state that gave us the model for the ACA, but that’s only partly true. Massachusetts gave us a model for financing health insurance premiums and requiring individuals to obtain coverage, but it was California that gave us the model for ACOs and population health management.
California’s experimentation with population health management goes back to an earlier HMO movement that arose out of the market dominance of Kaiser Permanente. Kaiser offered a coordinated system of care delivery while, behind the scenes, financial risks were being shared by hospitals, doctors, and other providers. Sharing financial risks influenced the way doctors practiced, lowering the overall cost of care. Big medical groups embraced this model of coordinated care delivery and risk sharing in order to be competitive, and Californians accepted this model because they were accustomed to it.
The federal government took its first steps toward adopting the California model as national policy when HMO legislation was passed in the 1970s. Around the country, staff-model HMOs were established and brought to market, but nowhere did they aggregate enough market share to dominate the marketplace like Kaiser did. The primary buyers of healthcare were employers, and employers felt obligated to cut costs while minimizing the impact for employees. Forcing employees into a closed panel HMO would be disruptive, and employers could achieve the same cost savings by self-insuring, contracting for pricing discounts, and imposing managed care techniques. The PPO model made contracting easier for employers, and offered employees the choice of providers they were used to having, so PPOs became the dominant model in the marketplace.
Fast forward to 2016. The ACA has created exchanges where individual consumers can shop for the health insurance coverage they are required to purchase. The majority of people buying policies on exchanges are buying policies with high deductibles, and many employers are also shifting costs to employees through higher deductibles. Providers are forming ACOs, accepting bundled payments and sharing risks, and taking baby steps toward population health management. Today’s ACOs are essentially closed delivery systems that look like staff model HMOs. Patients access the ACO through their primary care physician, and they have little or no choice in the providers they see or the hospitals or outpatient facilities where they receive care.
Today, people can get a plethora of medical information over the internet or from smartphone apps. They can get a flu shot at Walgreen’s and pick up toothpaste and a birthday card on the same trip. Who would wait three days to get an appointment with their regular physician when they can stop at an urgent care clinic on the way home from work? In other words, people are building their own ad hoc networks of healthcare providers and they bear little resemblance to the ACOs being built by health systems. This approach works well for people who are reasonably healthy, and it makes sense for those who are paying for care out-of-pocket because they have not met their deductibles. But when someone needs more extensive medical care, he or she must see providers who are part of their insurance company’s network. And when that happens, they will discover that they have traded choice for lower premiums.
Will today’s healthcare consumers settle for a healthcare marketplace that restricts their choices? I don’t believe they will. Consumers will demand more choices, insurance companies will expand networks, and premiums will get more expensive, increasing the cost of federal subsidies and putting policies out of reach of more people. ACOs will either get too large to effectively control costs, or fail to attract enough patients to be financially viable. In short, I believe the ACO initiative championed by the ACA will be derailed by the reluctance of individual consumers to accept its limitations.
My conclusion is that the healthcare marketplace of the future will be different from what we have today under ACA. It will, by necessity, be more responsive to consumers and offer them more choices. How we achieve this deserves to be a central issue in the 2016 election.
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