All of us in health care are holding our breath — until late June. Three days of oral arguments before the Supreme Court concluded last week. The nine justices will now decide whether or not the Patient Protection and Affordable Care Act (ACA), or Obamacare as some have called it, is constitutional.
Numerous issues are being considered. First, is the requirement for everyone to buy health insurance, “the mandate”, constitutional, or did Congress overstep its bounds? Second, if the mandate is unconstitutional, does the whole law need to be thrown out, or can some or all of the remainder be salvaged? Lastly, is the huge expansion of Medicaid constitutional, or does it constitute coercion of the states by the federal government? The divided court will now consider the written and oral arguments and make a decision before the end if its term in late June.
Regardless of one’s political beliefs, there is much good in the ACA. Guaranteed insurability regardless of preexisting medical conditions, extension of coverage to adult children under the age of 26, no lifetime coverage limits and other provisions of the law are generally considered desirable by most Americans. When and if it is fully implemented in 2014, the law will also change the way insurance companies determine premiums, ensuring that underwriting is done using community rating and only tiering premiums by age, rather than medical history. Having millions of newly insured, younger and healthier people in the insurance pool will allow that to be economically sustainable and should keep premiums down.
Supporters of the law argue, and rightly so, that if the mandate is struck down, insurers will be forced to raise premiums significantly in order to satisfy those new requirements. Of course, if the whole law is struck down, it’s a moot point. Alternatively, the court may strike down the mandate and associated components of the law that depend on the mandate, and leave the remainder intact. Time will tell.
Personally, I hope the court upholds the law in its entirety, although that is an unlikely outcome. We must deal with the more than 50 million uninsured Americans. People without health insurance still seek health care. They do it when they are sicker and in more expensive settings like hospitals and emergency rooms. Someone (meaning the insured and the taxpayer) pays for that care. It is a classic example of cost shifting and is economically inefficient. It is estimated that this cost shifting adds $1,000 per year to an individual’s or a family’s health insurance premiums.
What is interesting to me is that the states already require anyone with a car to have auto insurance. This protects you and me from having to pay for someone else’s mistakes. No one objects to that. Yet a requirement to have insurance for something that virtually everyone will need during their lifetime and will do so in an unpredictable manner seems more onerous. Well, I guess that’s politics.
Politics aside, the conversations started by the passage of the ACA will not go away, however the Supreme Court ultimately rules. The Centers for Medicare and Medicaid Services (CMS) has begun the journey toward paying for value instead of volume of health care services. Private insurers are moving in that direction as well. We are beginning to see bundled payments, where hospitals and doctors are paid for an entire episode of care rather than the current fragmented system. Large employers are contracting for certain services with what they feel are high quality low cost providers. For example, Lowe’s now sends all of their employees who need heart surgery to the Cleveland Clinic. The Clinic has been recognized for years as one of the highest performing centers in cardiovascular care, delivering superior outcomes at lower cost.
Consolidation among health care providers continues, in an effort to become more efficient and realize economies of scale. The line between payers and providers is blurring. Highmark, a huge insurer in Pennsylvania, has essentially acquired West Penn Allegheny, a financially struggling health system. Private equity has entered the provider market, with Cerberus Private Equity acquiring not-for-profit Caritas Christi Health, renaming it Steward Health and building a network that contains community hospitals, physicians and an insurance plan. Their CEO, a heart surgeon by training, has been quoted as saying Steward wishes to be the Southwest Airlines of health care, providing high quality at low cost. Their chief medical officer is a nationally recognized authority on safety and quality in health care. I expect they will succeed.
Whatever happens to the ACA, change in health care is here to stay. Forces have been unleashed that will continue to drive innovation in care delivery and payment models. Health care organizations need to keep moving forward, as our current way of doing business is unsustainable.
As the great Wayne Gretzky said, “a good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” Here at FMH, we’re skating to where the puck is going to be.