Next goals for health care reform: Controlling costs, assuring quality

This article first appeared in The Sacramento Bee.

Five years after President Barack Obama signed the Affordable Care Act, chalk up a Mission Accomplished for one of the legislation’s three primary goals, access to insurance coverage.

Driven by health insurance exchanges, hefty federal subsidies and expanded coverage for the poor under Medicaid, the uninsured rate of U.S. adults is now 12.9 percent compared to 17.1 percent a year ago, according to the Gallup Poll.

Assuming all that is not undone by a Supreme Court decision this June on the legality of subsidies in federally run exchanges, and assuming for now that “coverage” truly means access to care, public attention may start to focus on progress for the other two goals of health care reform – controlling costs and assuring quality. And none too soon. Those provisions need popular understanding and support to withstand continued calls for repeal of the ACA.

Officials who run Medicare are pushing hard to achieve the goals, primarily by changing the way doctors and hospitals are paid. Their strategies potentially affect all consumers, from the ability to select caregivers to the length of stays in hospitals and ultimately the size of projected increases in insurance premiums and deductibles.

If the officials are successful, Medicare will lead the way in overhauling all reimbursements, since private insurance closely follows the example of the behemoth government health plan. Doctors will find their compensation increasingly linked to overall quality measurements, such as how well diabetes patients fared under their care, rather than to individual treatments and visits, which can be inflated to raise revenues. In theory, costs will stabilize for government and private insurers, and thus for consumers.

If the officials fail, America’s health care landscape will likely change anyway, but not for the better. Under one scenario, hospital mergers will accelerate and also gobble up physician practices, creating large health conglomerates that could dictate prices in their regions and keep the money faucet open.

Closing down that faucet is essential. Health care costs the nation $3 trillion annually, a number so large that only five nations have economies that are bigger. Unchecked, the current fee-for-service system threatens to bankrupt Medicare and Medicaid, the health program for the poor.

The good news is that the growth in costs is slowing, due at least in part to the early reforms of the ACA. While Medicare spending last year was $580 billion, up $14 billion from 2013, the 2014 figure was $126 billion less than a 2009 projection by the Congressional Budget Office. As a result, the projected solvency of the Medicare Hospital Insurance trust fund has been extended from 2017 to 2030.

But the costs may be at a point that further drops won’t happen without a big push. That’s why Medicare officials recently announced that they intend to have 50 percent of all 2018 payments go to so-called alternative models, such as Kaiser-like HMO plans, or systems that agree to be compensated based on their patients’ health rather than volume of services. They want another 40 percent of payments to have at least a portion based on some kind of quality measure.

They intend to accomplish the goals through a variety of methods. They will reward so-called Accountable Care Organizations, essentially integrated hospital and doctor groups, that agree to handle thousands of patients for set fees and accept losses if targets are missed.

To reduce the mind-boggling list of medical codes that can drive up reimbursements, providers will be pushed to bundle the components of a treatment – say an appendix operation – into one bottom line number that can be compared to competitors. Additional savings could come from the spread of Medicare Advantage networks that resemble HMOs.

What could go wrong? The Accountable Care groups might drop out if they don’t like the risks involved (some already have), or could grow too large and stifle competition. The bundled payments may not produce the results the Medicare planners foresee. Consumers might rebel at more narrow networks of doctors and hospitals, just like they bolted when many HMOs got out of touch with their needs in the late 1990s.

But there is no choice but to proceed. The Federal Trade Commission and the Department of Justice are watching to make sure mergers don’t undermine cost containment. Now state regulators and Medicare need to make sure the quality of American health improves even as its price tag declines.

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