Health care reform in the United States
By Kim D. Slocum
President, KDS Consulting, LLC
Three years ago, I was interviewed for an article in Texas Family Physician entitled “Payment reform—The next step toward an efficient high-quality health care system.” At that time, I said that the United States would see one of three futures for health care: one based on rapidly escalating consumer cost shifting, one making significant use of price controls, or one focused on measuring and rewarding “value.” So, where do we stand in early 2015 and what can we expect next?
At the moment, the concept of shifting costs to consumers is in high gear. The passage of the Medicare Modernization Act of 2003 created an opportunity for employers to move to high deductible health plans, which it was presumed would turn consumers into “happy economists” who would diligently study cost and quality ratings for various medical services, come to medical encounters fully prepared to argue the merits of each recommendation with their physicians, and only receive care that would optimize their clinical outcome.
As of 2014, the Kaiser Family Foundation/Health Education Research Trust annual survey of employer health care coverage shows that roughly 20 percent of all employees receiving health insurance coverage now are enrolled in such plans. That’s not the end of the story though. Even for employees enrolled in more traditional PPO or POS plans, deductibles even for in-network services routinely exceed $1,000 so the percentage of potential patients facing significant cost sharing burdens is considerably higher than the headline number.
For physicians, these plans represent a double whammy. Thirty years of health policy research has shown that patients exposed to high deductibles will cut back on their use of care. Indeed roughly two-thirds of the savings these plans produce come from care avoidance behavior. The problem is that consumers are relatively poor judges of what care is necessary and what is not. They are about as likely to stop taking medications to manage diabetes as they are to forego a non-sedating antihistamine.
The second problem is financial. Since these policies require patients to spend a considerable amount out of their own pockets before traditional insurance coverage kicks in, it is incumbent upon physicians to collect payment at the time of service or risk an explosion of bad debt.
Unfortunately, when physicians and hospitals are aggressive about collections from high-deductible-plan patients, it creates another problem—medical debt. Many consumers don’t have sufficient liquid assets to pay for medical services in cash and often resort to credit cards. As we all know, there is a short grace period in which to pay such obligations before high-interest rates are applied to outstanding balances. This happens with considerable regularity in the United States today and roughly 20 to 25 percent of all U.S. households are facing challenges of some sort in paying for health care.
In a worst case scenario, this can lead to medical bankruptcy. Roughly 40 to 60 percent of all 1 to 1.2 million personal bankruptcies in the U.S. each year are directly caused by medical debt or heavily affected by such obligations. This is not just a problem for indigent patients—most of those medical debtors filing for bankruptcy actually have insurance and are well-educated and middle class. Surprisingly, the average amount of money required to put a medical debtor into bankruptcy court is only $17,000-$18,000.
Not surprisingly, consumers are not feeling empowered by all these changes. A spring 2014 survey by Nielsen Consumer Insights North America showed that while most consumers were more or less resigned to escalating costs, those who faced significant medical expenses due to illness were depressed or even angry about the economic burdens they faced.
Disturbingly, this same survey showed an upswing in support for price caps or controls on prices charged by drug companies, hospitals and even physicians. While this finding does not suggest consumers will be going to the barricades in search of such price controls any time soon, it does represent a potential vein of populism that might be tapped at some future date. In other words, there is at least a chance that a consumer backlash against punitive cost shifting might provoke its ideological opposite—some sort of centralized price controls on the costs of medical goods and services.
The nation is also pursuing what some in the health policy community refer to as the “Berwickian nirvana” of accountable care organizations. This is a strategy with considerable support from public sector programs such as Medicare and Medicaid where the ability to shift cost to consumers is limited. Even some of the largest and most sophisticated employers have come to conclude that efforts to reform health care’s supply side must be viewed as the biggest part of reform strategy that will be viable in the long term. This approach involves an entire constellation of activities that will be at least somewhat familiar to practicing physicians most notably focused on health care information technology, so as to better understand care delivery patterns, and payment reform designed to elicit the desired behaviors from physicians and hospitals.
According to another Nielsen survey of hospitals and health systems conducted during the summer of 2014, 74 percent of all U.S. hospitals now own one or more medical groups. This buying spree has largely been tied to an organizational desire to move to accountable care. While primary care and hospital-based specialties like surgery have been the primary targets, the shopping list for these institutions now extends well down the roster of medical sub-specialties. At the same time, the federal program supporting the Meaningful Use of health care information technology has helped to drive adoption of electronic medical records and we now see the majority of U.S. physicians reporting that they have installed some form of this software in their offices. Finally, the same Nielsen survey of hospital executives shows that these institutions expect to see the source of their revenue change significantly over the next five years from predominately fee-for-service to various forms of bundled, prospective, or even capitated payments.
To be sure, the transition from traditional physician and hospital business models has not been smooth. As one health system executive put it, “It’s true that when one door closes, another one opens, but it can be hell in the hallway.” The hundreds of newly minted ACOs that have sprung up across the country since 2011 have focused most of their attention on legal and business structures—the anatomy of accountable care. In some cases they have struggled to develop the sort of integrated and aligned organizational culture where the true physiology of accountable care can be delivered. While these organizations have invested significant dollars in creating information technology platforms to measure population-level health, this still remains for most a work in progress.
What is most important for physicians to bear in mind is that while the road to accountable care has not been smooth, it represents the least worse alternative to consumer cost shifting and potential backlash this seems to be producing. Ultimately, the future of U.S. health care will not be an either/or choice between consumer cost shifting, price controls, or value-based care, but some blend of the three. It is important that physicians give some consideration to the relative weight of each alternative they believe would best serve their patients and their profession, and work to make that choice a reality.