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Dr. Pate’s Prescription for Change

St. Luke’s Health System’s Journey to Transform Health Care

St. Luke’s Dr. David Pate Fact-checks the President on the ACA

By Dr. David C. Pate, News and Community
August 2, 2016

On July 11, President Obama took the unusual step of writing about the Affordable Care Act for the Journal of the American Medical Association, outlining “progress to date and next steps.”

Nearing the end of his second term in office, President Obama reflected on what many would argue has been the crowning achievement and legacy of his presidency.

He began by considering the “impetus for health reform,” and was spot-on about the then state of the healthcare delivery system, characterized by:

  • High spending relative to GDP (16 percent) compared with other industrialized nations,
  • no better outcomes (and in some cases, worse) than those other countries to justify our higher spending,
  • gaps in the quality of care and patient safety,
  • a payment system that incentivizes ill care instead of preventive care,
  • a reimbursement methodology that creates fragmented and poorly coordinated care, and
  • more than one in seven Americans uninsured.

He went on to analyze the results of the Affordable Care Act. Here are his assessments, and what I think.

“The ACA has succeeded in sharply increasing insurance coverage. Since the ACA became law, the uninsured rate has declined by 43%, from 16% in 2010 to 9.1% in 2015, with most of that decline occurring after the law’s main coverage provisions took place in 2014.”

True. We pointed out in 2010 that this law was much more insurance reform than healthcare reform. Reforms were badly needed (e.g., guaranteed issue despite pre-existing conditions, the ability of adult children to stay on their parents’ health plan until age 26, and the end of annual and lifetime caps), but the ways these reforms were put in place significantly harmed insurance companies.

St. Luke’s major concern about the law was our belief that if you significantly increase the number of people with coverage without addressing the underlying, broken healthcare delivery system, one cannot reasonably expect healthcare costs to go down. That concern remains.

“States that decided to expand their Medicaid programs saw larger reductions in their uninsured rates from 2013 to 2015, especially when those states had large uninsured populations to start with.”

Again, true.

“Early evidence indicates that expanded coverage is improving access to treatment, financial security, and health for the newly insured.”

I believe that this is true. These newly insured are more likely to have a primary care physician and access to medicine.

The greatest financial security has been for a subgroup of the general population – those below 400 percent of the federal poverty level, and especially those below 250 percent – since this is the portion of the population that was most likely to qualify for Medicaid, premium assistance in terms of tax credits or subsidies to help pay the cost-sharing parts of their insurance costs (deductibles, co-insurance and co-pays).

Premiums and deductibles have increased significantly for those above 400 percent of the federal poverty level, whether they purchased insurance as an individual or part of a small group or large group policy.

As for the health of the newly insured, this population has been shown to be less healthy, have higher rates of chronic diseases and to have high pent-up demands for health care. While less healthy than similar populations in individual and group policies outside of the exchange, it is believed that their health will be significantly and positively impacted through having healthcare coverage.

“The law has … greatly improved health insurance coverage for people who already had it. Coverage offered on the individual market or to small businesses must now include a core set of health care services, including maternity care and treatment for mental health and substance abuse disorders, services that were sometimes not covered at all previously. Most private insurance plans must now cover recommended preventive services without cost-sharing.”

True, but I don’t see this as an entirely positive development. This “core set of health care services” has meant providing many people with greater coverage than they need. Not everyone needs maternity care coverage, yet they are paying for it.

On the other hand, preventive care services are beneficial for everyone, but requiring them to be provided to insureds at no cost to them increases the cost of the insurance. Both of these factors have contributed to higher insurance premiums.

“Lifetime limits on coverage are now illegal and annual limits typically are as well. Instead, most plans must cap enrollees’ annual out-of-pocket spending, a provision that has helped substantially reduce the share of people with employer-provided coverage lacking real protection against catastrophic costs.”

This is also true, but both the elimination of caps and the limitation on out-of- pocket spending have contributed to increased insurance premiums. Further, unless one qualifies financially for the cost-sharing subsidies, most Americans have seen a significant increase in the amount of out-of-pocket costs (deductibles, co-insurance and co-payments) compared with policies they had pre-ACA.

“Before the ACA, the health care system was dominated by “fee-for-service” payment systems, which often penalized health care organizations and health care professionals who find ways to deliver care more efficiently, while failing to reward those who improve the quality of care. The ACA has changed the health care payment system in several important ways. The law modified rates paid to many that provide Medicare services and Medicare Advantage plans to better align them with the actual costs of providing care … The ACA has also widely deployed ‘value-based payment’ systems in Medicare that tie fee-for-service payments to quality and efficiency of the care delivered by health care organizations and health care professionals.”

 The latter part of this quote is only partly true.

First of all, the healthcare system is still dominated by “fee-for-service” payment systems, even in the Medicare program. CMS announced this year that it had achieved 30 percent of its payments under the Medicare program being tied to quality or value through alternative payment models.

It seems a stretch to indicate that ‘value-based payment systems’ are “widely deployed.” CMS has set out the goal of having 50 percent of its payments made to alternative payment models by 2018, but also clarified that many of the models that today qualify as alternative payment models would not be eligible alternative payment models under the new compensation program created by the Medicare Access & CHIP Reauthorization Act, or MACRA.

“From 2010 through 2014, mean annual growth in real per-enrollee Medicare spending has actually been negative, down from a mean of 4.7% per year from 2000 through 2005 and 2.4% per year from 2006 to 2010 … Similarly, mean real per-enrollee growth in private insurance spending has been 1.1% per year since 2010, compared with a mean of 6.5% from 2000 through 2005 and 3.4% from 2005 to 2010.”

True, but misleading. The rate of increase in healthcare spending has slowed and this is fantastic news. However, the slowdown in the rate of spending actually began prior to the enactment of the ACA, so while the ACA may have contributed to the slowdown, it cannot be wholly credited with it. Based upon past recessions and consumer behavior, leading economists believe that the recession of 2008 played a role in slowing healthcare spending.

With respect to private insurance spending, it is clear that the increases in cost-sharing obligations on the part of beneficiaries (deductibles, co-payments and co-insurance) and narrow networks have played a greater role in reducing the rate of spending increases than the ACA has.

And significantly, though the rate of healthcare spending increases has been slowed, healthcare spending has increased significantly under the ACA, and now accounts for 18 percent of the GDP, up from 16 percent in 2008.

President Obama then goes on to offer his suggestions for “building on progress to date.”

“As of July 1, 2016, 19 states have yet to expand their Medicaid programs. I hope that all 50 states take this option to expand their Medicaid programs.”

Idaho is one of those 19 states, and we leave tens of thousands of people in the “gap” of making too much money to qualify for Medicaid but not enough to qualify for federal subsidies. This means that these people have less access to care, more health risks and poorer health care, even though most are very hard-working Idahoans. They deserve better.

“… At least half of traditional Medicare payments flowing through alternative payment models by the end of 2018.”

St. Luke’s has spoken clearly and consistently of the problems caused by the fee-for-service reimbursement system, and has led the way in Idaho towards value-based care. St. Luke’s was Idaho’s first federally designated Accountable Care Organization. By 2017, 25 percent of our revenue will be through risk-based contracts.

We believe that providers have to assume accountability for the costs and outcomes of care if we are going to further slow the rate of healthcare spending and provide more value to the people we are so privileged to care for.

“Increased financial assistance could make coverage even more affordable.”

Lowering the cost of health care depends upon transforming the delivery of care, not just enrolling more people in insurance plans.

“…Enhance competition in the Marketplaces … I think Congress should revisit a public plan to compete alongside private insurers in areas of the country where competition is limited.”

St. Luke’s is all for increased competition and has contributed to just that by partnering with SelectHealth and with the only insurance co-op company doing business in Idaho.

As for the “public plan” or so-called public option, it is difficult to imagine its political feasibility in most scenarios. Part of the political resistance comes from the suspicion that the ACA was the first step in a plot to drive health care to a single payer, government program.

Offering Medicare as a competitive option to commercial insurance for people below Medicare eligibility age will be a threat to insurance companies, physicians and hospitals, and there would likely be significant pushback from their respective lobbies.

Finally, even if it were possible to get past the political resistance, it is difficult to understand how it would work in the manner proposed by President Obama, where the public option would only be offered in certain communities with a small number of plans to choose from.

“… Address prescription drug costs … Legislative action is needed.”

I could not agree more. Prescription drug costs have gotten out of control, and we have seen examples of predatory pricing. It’s also clear that Americans subsidize the costs of prescription drugs for the rest of the world, while many countries negotiate for and set prices that result in tremendous savings to their citizens at our expense.

There are many suggestions as to how to regulate the pharmaceutical companies. I would favor setting a “medical loss ratio” type of limit on profits for pharmaceutical companies, much like that imposed on insurance companies.

Conclusion

Those who argue that the ACA is all bad and has been a disaster are wrong. The ACA has implemented many needed insurance reforms.

Those who argue that the ACA has been wildly successful also are wrong. Approximately 30 million people remain uninsured, and healthcare spending is up to 18 percent of GDP.

The ACA was an important step and it has helped fuel the discussion regarding how to truly reform and transform the American healthcare delivery system.

Instead of waiting for Congress to tell us how to transform the delivery system, health systems like St. Luke’s have led the way and will continue to do so. We are sharing our experiences and learnings with other organizations, and we are learning from them.

This healthcare reform law was mostly insurance reform, and if we are to learn from the history of the rest of the world, where reforms have been implemented decades earlier, the next step will likely be healthcare delivery reform. Let’s hope that we can figure it out before Congress imposes a solution. 

About The Author

David C. Pate, M.D., J.D., is president and CEO of St. Luke's Health System, based in Boise, Idaho. Dr. Pate joined the System in 2009. He received his medical degree from Baylor College of Medicine in Houston and his law degree from the University of Houston Law Center.