Friday, May 29, 2015

A Framework for Fixing Obamacare

We are 7 months into the implementation of the Affordable Care Act, "Obamacare". Several things are clear. Obamacare is not likely to be repealed. More than 35 million US residents remain uninsured. The cost of the insurance on the "exchanges" is higher than projected and is expected to rise dramatically in 2015. There are great concerns for disruption in the relationship between patients and their doctors.

A Framework for Fixing Obamacare

President Barack Obama speaks at the League of Conservation Voters Capitol Dinner at the Ronald Reagan Building on Wednesday, June 25, 2014, in Washington. (AP Photo/Jacquelyn Martin)
President Barack Obama speaks at the League of Conservation Voters Capitol Dinner at the Ronald Reagan Building on Wednesday, June 25, 2014, in Washington. (AP Photo/Jacquelyn Martin) AP

We are 7 months into the implementation of the Affordable Care Act, “Obamacare”. Several things are clear. Obamacare is not likely to be repealed. More than 35 million US residents remain uninsured. The cost of the insurance on the “exchanges” is higher than projected and is expected to rise dramatically in 2015. There are great concerns for disruption in the relationship between patients and their doctors.

Obamacare won’t be replaced but it must be fixed. So, the question is who will fix it and how will it be fixed? Let me offer my suggestion for the proper roles of government, the insurance industry and healthcare providers. My proposition is that, ultimately, healthcare providers (hospitals, physicians and nurses) are best prepared to lead the organization and delivery of care and to assure low cost and high quality.

The Federal government should not control patient care delivery. The recent revelations of the Veterans Administration should be sufficient evidence that a single payer system controlled by the government would be a disaster. However, the government does have a critical role. It should establish programs for vulnerable populations (e.g., Medicaid). It should set policy (e.g., no denial of coverage for preexisting condition, define minimal essential benefits, require insurer rate transparency, etc.). It should establish programs to migrate the consequences of catastrophic costs for families. It should establish mechanisms to oversee quality. Most importantly, the government should reduce unnecessary or redundant regulations (e.g., certificate of need).

Contrary to general beliefs, the insurance industry is not an expert in patient care. Insurer’s principal capabilities are estimating actuarial risks, designing benefits, structuring rates and marketing. The proper role of insurance entities should be consistent with their capabilities; designing and pricing benefit programs, assessing actuarial risks, paying claims, marketing insurance plans and providing reinsurance.

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Only healthcare providers understand the intricacies of direct patient care and the effect of patient care choices on patient outcomes and patient satisfaction. If the government establishes an effective body of policy, and if the providers can have clear and reliable understanding of the funds available to them to care for patients they are best positioned to design the patient care system. Also, by maintaining a competitive dynamic between healthcare provider organizations, they will continually innovate, reduce costs and improve quality. The objective evidence of this was the 1987 Prospective Payment Program. The Federal government through Medicare set fixed payments for hospital services and restricted the annual growth of payments to the rate of inflation. Remarkably, hospitals managed within these costs, improved their quality performance and increased their profits. However, when the government saw more profitable hospitals it ended the program and reduced the payment levels. If Prospective Payment had been continued as planned, Medicare costs today would be many tens of billions of dollars lower and care would be better.

If the government and insurance industry assume their proper roles and healthcare providers are given clear and reliable framework within which to operate we have the greatest chance for good outcomes with respect to cost, quality and patient service.

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Managing Partner of TRG Healthcare, a national healthcare consulting firm
About this blog

The Field Clinic reports and analyzes health care laws, government policies, and political trends that are transforming the care we receive and the way we pay for it. Read more about our panel of bloggers here.

This blog is produced in partnership with Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health-policy research and communication organization not affiliated with Kaiser Permanente. Portions of this blog may also be found on Inquirer.com and in the Inquirer's Sunday Health Section.

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Howard J. Peterson, MHA Managing Partner of TRG Healthcare, a national healthcare consulting firm
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