Trump administration’s reform policy principle based on flawed assumptions

The Trump administration’s efforts to reform how medical care is delivered and financed in the United States is based on the dubious assumption that medical care is not much different from any other market-based consumer service. The administration’s fundamental reform policy is better quality and value can be had by creating a more competitive market by arming consumers with more information on cost and value so they can be more discerning “shoppers.” It also presumes most any type of medical care that can be scheduled in advance is “shoppable” and therefore buy side market forces can be brought to bear to act as a natural check on prices and to promote higher value care and outcomes.

There are several inherent problems with that assumption.

• Simply because medical care can often be scheduled in advance unlike emergency care, with the exception of some elective procedures, it isn’t a discretionary purchase like other consumer goods and services. No one really wants medical care unless they need it – and often tend to put it off — regardless of whether it can be scheduled in advance. Hence, few people will be diligent shoppers.

• Because medical care is for the most part not a discretionary purchase, demand for it tends to be inflexible. Inflexible demand strengthens the sell side for providers and conversely weakens buy side purchasing power for individuals and families. A competitive market requires relatively equal market power on both the sell and buy sides.

• Aside from personal services not covered by payer plans like elective cosmetic surgery, individuals and families who receive medical care do not directly select among providers and bargain for services since their medical benefit plans — and not them — bargain for the cost of procedures. Also, their ability to choose among providers is limited to increasingly narrow provider networks.

• Patients’ heavy reliance on trusted relationships with their doctors to recommend both medical care and the provider, substantially diminishing their exercise of choice.

• More costly medical procedures are performed in hospitals and surgery centers. High staffing, equipment and staffing and patient safety regulation create high cost barriers to competitor entry. Those high costs tend to incentivize provider consolidation and create oligopolistic market conditions in most areas, increasing sell side market power.

• Much of American medical care lies largely outside of competitive market forces in government programs on the payer side – Medicare and Medicaid – as well as integrated providers such as the Veterans Administration and programs for military members and their families.
  

GOP shuts out doctors, experts, Democrats — pretty much everybody — as they work on Obamacare repeal – LA Times

President Trump and House Republicans, in their rush to resuscitate a bill rolling back the Affordable Care Act, are increasingly isolating themselves from outside input and rejecting entreaties to work collaboratively, according to multiple healthcare officials who have tried to engage GOP leaders. The White House and its House GOP allies are hoping to reschedule a vote on their overhaul plan in the coming days, following last month’s embarrassing retreat when the bill was pulled shortly before a vote. But they continue to refuse to reach out to Democrats. Even Senate Republicans have been largely sidelined, though their support will be crucial to putting a measure on Trump’s desk. And senior House Republicans and White House officials have almost completely shut out doctors, hospitals, patient advocates and others who work in the healthcare system, industry officials say, despite pleas from many healthcare leaders to seek an alternative path that doesn’t threaten protections for tens of millions of Americans.

Source: GOP shuts out doctors, experts, Democrats — pretty much everybody — as they work on Obamacare repeal – LA Times

Politicians are naturally inclined to craft these reforms behind closed doors given the fact that medical care in the United States — and particularly who pays for it — is a textbook example of a wicked problem. Soliciting input from stakeholder groups is likely to lead back to square one: everyone agrees there’s a problem, but no one can agree on how to solve it and there’s little common ground. So policymakers say to themselves, “OK, we’ll decide for them.”

Given the nature of the challenge when it comes to health care reform, Hillary Clinton went behind closed doors in 1993, convening an assortment of 100 policy wonks and experts as the Task Force on National Health Care Reform to forge the Clinton administration’s ill fated Health Security Act. However meritorious the legislation was, it was dead on arrival in Congress due to the perception it was drafted in secret without sufficient stakeholder input and strong opposition from health plans and small business.

Employer group coverage stumbling block for single payer

The bill’s authors haven’t announced how the program would be funded. And that’s where the biggest obstacle lies, said Oberlander: It would largely uproot California’s present system, in which roughly half of coverage is sponsored by employers. If “you’re going to take health insurance largely out of the market, you’re going to disconnect it from employers,” he said. “Then you have to make up all the financing that you’re going to lose.”There’s no way to make up for those lost employer contributions other than to introduce “very visible taxes,” Oberlander said. And that’s not the only reason why a single payer plan would be controversial. “A lot of people are satisfied with what they have,” he said.

Source: While Washington Fiddles, California Leaders Forge Ideas For Universal Health Care | California Healthline

As this article points out, the largest obstacle to creating a single payer health care financing system is the seven decade history of employer group health coverage covering the majority of American adults and their families. The fundamental conflict boils down to how health care is paid for: as an employee benefit or as a government service.

Even though large states like California might have the fiscal and political economies of scale to make single payer pencil out — particularly if it is able to negotiate better value for health care dollars spent — rethinking the financing scheme requires a big conceptual, out of the box leap that makes U.S. health care reform a wicked problem.

New Washington regime seeks to move from managed competition to more unfettered health care markets

Republicans take the reins of the federal government next month and are generally expected to repeal or at least revamp the Patient Protection and Affordable Care Act to harness market forces and competition to achieve the triple aim of better health care outcomes and patient satisfaction while lowering costs. Instead of the managed competition of the Affordable Care Act that put in place rules on the sell and buy sides of the health insurance market to promote competition and established government run markets for small group and individual coverage, the incoming Trump administration and new Congress will favor less managed competition with fewer market rules and constraints.

Achieving such a market environment is an enormous challenge given the heavily siloed health care system, with each silo having its own complex microeconomics. Cast as a market, health care has the essential element of many sellers and many consumers. Buyers ultimately drive the economics of all markets and determine their long term viability. But consumers generally don’t deal directly with health care providers given the large role of public and commercial health plans and employers. For the most part, people don’t plan to use health care, only doing so when accident or illness strikes. That precludes time for deliberate, considered comparison of providers and costs to determine the best value. Instead, consumers must deal with difficult to decipher bills filled with multiple, incremental charges after they consume health care services.

True market competition cannot function ex post facto transaction without some intermediary to negotiate terms and conditions on behalf of consumers. It remains to be seen how the new administration and Congress will finesse the complex microeconomics of health care as they seek to harness competitive forces to lower costs without resorting to even more extensive reforms than under the Affordable Care Act.

Democrats open to replacing Obamacare – POLITICO

Senate Democrats will never vote to repeal Obamacare. But once the deed is done, a surprising number of them say they’re open to helping Republicans replace it.“If it makes sense, I think there’ll be a lot of Democrats who would be for it,” said Sen. Claire McCaskill (D-Mo.).As Republicans aim to make good on their years-long vow to quash Obamacare and replace it with their own health care vision, they’ll have to do something Democrats were never able to: Bring members of the opposing party on board. Enacting any substantive alternative will take at least eight Democratic votes in the Senate.

Source: Democrats open to replacing Obamacare – POLITICO

This item points up the political reality that while one party — the GOP — can defund the Patient Protection and Affordable Care Act via budget resolution, it will take members of both parties to replace it in order to get the necessary 60 yes votes in the Senate to head off a long filibuster. That gives minority Democrats a large degree of influence over the law’s successor.

The pressure for a deal on that legislation during the first quarter of 2017 will be intense. Both parties will hear plenty from constituents concerned they will lose their health coverage. They will also hear from health plan issuers who fear a meltdown of the individual market segment and may demand a bailout to remain in the market. Health care providers and especially hospitals will also weigh in with urgency, concerned a loss of the individual market as well as more expansive Medicaid coverage in most states under the ACA will lead to a jump in uncompensated care.

Romney says he accepts being linked to Obamacare – Yahoo! News

Speaking at a Univision forum Wednesday night, the Republican presidential nominee said that now and then Obama calls him the grandfather of Obamacare.

Romney said, “I don’t think he meant that as a compliment, but I’ll take it.” He went on to defend the Massachusetts law but says it is wrong for the federal government to take that approach.

via Romney says he accepts being linked to Obamacare – Yahoo! News.

Governor Romney was also the Godfather of former California Republican Governor Arnold Schwarzenegger’s omnibus health care reform plan in 2007-08 that was largely based on Romney’s Massachusetts reforms featuring a state health benefit exchange and an “individual mandate” that everyone have public or private health coverage.  I know because I covered “ArnoldCare” nee RomneyCare from its beginnings to inglorious collapse in the state Senate as Sacramento health care correspondent for the Bureau of National Affairs.

California could adopt own health reform plan with individual mandate if PPACA ruled unconstitutional

If the U.S. Supreme Court decides this summer that the Patient Protection and Affordable Care Act’s (PPACA) mandate that all Americans have health coverage or purchase it by 2014 is unconstitutional, California could nevertheless move forward with its own health reform plan including such a mandate.  That’s according to the state’s Health and Human Services Secretary Diana Dooley, per this excerpt from this story appearing in today’s Sacramento Bee:

If the court does rule the federal law unconstitutional, state Health and Human Services Secretary Diana Dooley said California should at least consider enacting its own universal health care legislation, including requiring every Californian to buy insurance.

“I think that we should be committed to making this system more rational than it is today, and improving the health of the people of California,” Dooley said in an interview. “If we ask the insurance plans to take everybody and insure everybody with no screens or pre-existing conditions, then we have to have everybody buying some level of health insurance to meet their responsibility to the system.”

That reciprocity was a core principle of the Health Care Security and Cost Reduction Act.  In early 2008, California lawmakers considered but rejected the legislation championed by then-Governor Arnold Schwarzenegger and top legislative leaders.  Like the PPACA, the act was modeled after Massachusetts legislation enacted in 2006 that also served as a prototype for the PPACA and included as a central feature the so-called “individual mandate” requiring adults to have some form of public or private health insurance or managed health care plan.  In turn, insurers and health plans would abandon medical underwriting and accept all applicants regardless of medical history, thereby making coverage accessible to more people.  Other key policy goals of the mandate are to alleviate “cost shifting” in which those who have coverage end up paying for health care costs of those without coverage through higher premiums and to reduce the threat of adverse selection that can rapidly render payers insolvent.

It remains to be seen whether California would move forward with its own reform plan if the PPACA fails to survive judicial scrutiny by the nation’s highest court.  Increasing the probability is the view among the Golden State’s health care industry leaders that health care reform has achieved critical mass and will move forward regardless of what happens at the federal level.

Also generating momentum for reform is the state’s already partially spent federally funded investment in setting up the California Health Benefit Exchange under the PPACA to create a marketplace to help individuals and small employers aggregate their purchasing power.  Then there are the state’s demographics.  California is the nation’s most populous state and has more people in the individual health insurance market than other states — about eight percent of those 65 and younger versus about five percent in the nation as a whole.  It also has a relatively large percentage of medically uninsured residents, whose numbers have increased as many people lost employer-paid coverage in the economic downturn.

The recession was just getting underway when the Health Care Security and Cost Reduction Act was before the California Legislature, prompting then-state Legislative Analyst Elizabeth Hill to question if the state could afford its tax credits, subsidies and other costs.  Four years later, the state’s finances remain under siege amid ongoing deep budget deficits. Selling the individual mandate could also prove politically challenging as it did in 2008, when California health care payers were divided over it and business and consumer interests nearly uniformly opposed.

California ballot measures to cap hospital prices, regulate health insurance rates emerge out of perennial conflict of trial bar and unions versus business groups

Even though they have not yet qualified for California’s general election in November and are still in the signature gathering stage, proposed ballot initiatives to limit hospital profits and subject health insurance and managed care plan premium rates to prior regulatory approval are already generating considerable political heat and smoke.

Both measures are playing not so much as health care reform measures designed to apply brute governmental force to hold down rapidly rising health care costs and premiums.  More accurately, they represent new battlefronts in California’s perennial conflict between plaintiffs attorneys and labor unions on one side and tort reform and business interests on the other.  Health payers and providers are aligning in the latter camp to oppose the measures.

Hospitals argue the proposed Fair Healthcare Pricing Act of 2012 that would cap hospital profit margins at 25 percent is an attempt by unions representing health care workers to gain leverage at the bargaining table.  Meanwhile, health care providers this week announced a coalition to oppose the proposed insurance rate regulation measure, the Insurance Rate Public Justification and Accountability Act.  It would add health insurance to existing law put in place by a 1988 ballot measure, Proposition 103, that subjected most property/casualty insurance rates to prior approval by the state’s elected insurance commissioner and subsidizes costs of those who intervene on behalf of the public to contest proposed rate increases.  A similar proposal stalled in the current legislative session.

Health reform seen as unstoppable in California — notwithstanding U.S. Supreme Court ruling on PPACA

While constitutional soundness of the Patient Protection and Affordable Care Act (PPACA) is to be decided this year by the U.S. Supreme Court, health care reform will continue to move along a rapid trajectory of change in California regardless of the high court’s ruling.  That’s the view of health care industry panelists at a recent symposium hosted by the Sacramento Business Journal, according to this item from the California HealthCare Foundation’s California Healthline.

Michael Taylor — senior vice president of operations for Dignity Health’s Greater Sacramento-San Joaquin area — said, “We believe we need to drive health care reform whether it’s legislated or not.” He added, “Health care costs are out of control and we need to bend the curve.”

According to the California Healthline item, the panelists agreed reforms must address a shortage of primary care physicians, the need to refocus health care on prevention instead of treatment of preventable conditions, and a transition away from employer-based health coverage to a new model where individuals dictate plan purchases instead of employers. I’ve lately read suggestions by some observers that shift could take the form of a defined contribution health plan.

PCIP unlikely to reduce ranks of medically uninsured

The Interim High Risk Pool created by the enactment of the Patient Protection and Affordable Care Act’s (PPACA) one year ago has not changed the underlying dynamics of the individual health insurance market and consequently appears to be having a negligible impact on reducing the ranks of the medically insured.

The pool, formalized as the Pre-Existing Conditions Insurance Program (PCIP), was created to provide temporary coverage for those with pre-existing conditions who don’t meet minimum medical underwriting standards of insurers and managed care plans.  It goes away on January 1, 2014, when the PPACA outlaws medical underwriting and requires payers to accept all applicants regardless of medical history.

So far, few have signed up for the plan.  As prior to the PCIP, younger people who would be eligible for PCIP enrollment pay lower rates for coverage but tend to go without.  Older folks in their 50s and early 60s who want coverage are finding PCIP rates out of reach. An added deterrent, other observers note, is the requirement that applicants for coverage be continually uninsured for at least six months.

“The PCIP is a great health plan and the out-of-pocket maximum is low,” Barry Cogdill, president of Business Choice Insurance Services in San Diego, told SignOn San Diego.  Nevertheless, he added, PCIP premiums are too expensive for many.  “That’s why health care reform happened,” Cogdill explained.  “The individual market has been the Achilles’ heel of the health insurance market. You end up with a lot of uninsured people.”

It appears many in this circumstance who aren’t covered by group or government plans will remain so.  Whether they will be able to find affordable coverage when state health benefit exchanges designed to aggregate purchasing power of individuals and small employers open for business in January 2014 remains to be seen.