If you have relied on the media to explain the need for health care reform and the provisions of the legislation that was so laboriously crafted over the last several months, we can almost guarantee that you are concerned about the effects of the legislation on your business, that you are confused about what the legislation means to you and your business, and that you are tired of the entire debate. We hope that we can cut through the static and at least help you identify the issues that will affect you and enable you to start preparing your business for the future.
The need for health care reform has been recognized for years. Presidents from Truman through Obama have tried to reform the unique American health care system. They recognized that America was spending an ever-increasing percentage of its GDP on health care and was not getting a good return on its investment. As health care costs have continued to increase more rapidly than any other sector of our economy, the health care indicators for Americans have continued to languish at the bottom of those for all industrialized nations even though it is well recognized that some of the most sophisticated care has been developed and is available in the United States. Americans are less healthy even as we have spent more on health care.
Clearly, a significant portion of our population has not had ready access to health care services because they could not afford health insurance, were not provided health insurance as a benefit of employment, or simply chose not to secure insurance. But even with that crying social need, the bottom-line truth is that this nation was rapidly approaching a point where health care costs were breaking our economy. Companies which had made a contract with their employees and retirees to provide health care benefits were finding they could not fulfill the promise. Our country’s promise to care for the poor and aged was breaking the Medicare and Medicaid banks. Our promise to our veterans to provide care in return for their service to our country was overwhelming our defense and veterans affairs budgets. Health care costs were hamstringing our economy and tearing at the social fabric of our nation.
As a country, we tried market reforms after the last great debate on health care during the Clinton Administration. Managed care was the approach. Health insurers paid providers a set amount for each insured each month. It was then up to the providers, with an insurance person looking over their shoulders as they made professional care decisions, to determine what care would be provided for the dollars allocated. The result was care that was rationed on the basis of the dollars available, not the health status that was achieved for the patient. The insured public and the providers themselves rebelled; the insured public received less personal attention to their health care needs and the providers didn’t like the payers looking over their shoulders.
Currently, providers are compensated on a fee-for-service basis; the more services that are provided, the more compensation they receive. There is nothing that equates the payment for services to the resulting health status of the patient. There is no incentive for maintaining or improving the patient’s health. And there is no governor on the amount of health care services that are provided, even if they prove to be redundant and unnecessary. Often the fear of litigation causes providers to over-test and practice defensively. All these pressures have contributed to the escalating cost of health care.
The new health reform act attempts to make health insurance coverage more available with the thought that more coverage makes services more available to all Americans. That’s the part of the act we have heard the most about from the media. But the more profound part of the legislation is its attempt to “bend the cost curve”; i.e. achieve better health status for Americans at lower cost. The health reform act attempts to control health care costs by providing incentives to achieve efficiencies and improve the health status of our citizens in the process.
The health reform act attempts to accomplish this seemingly impossible task by paying providers on health outcomes — in part — and pouring significant resources into wellness and prevention programs. The government will lead by example. The new law includes numerous reforms of the Medicare program with the promise of not reducing eligibility or benefits to its beneficiaries. A new Center for Medicare Innovation is charged with evaluating and implementing new payment models, with particular emphasis on bundled payments (a single payment for an episode of care to be divided among providers). Other federal agencies are charged with developing quality measures and promoting quality improvement initiatives.
New carrots and sticks are intended to focus providers on delivery of quality of care, not simply more care. A new shared savings program will give providers incentives to form strategic alliances to improve patient care over a continuum of services. Hospitals will face reduced payments if they fail to reduce readmissions or experience high levels of hospital-acquired conditions. Physicians will face similar consequences if they fail to meet established quality standards. Well-funded wellness and prevention programs will go on line in the near future.
Where the government goes with Medicare incentives to providers, the private health insurance industry will undoubtedly soon follow. So even as Americans start to have better access to health insurance through the reform of the health insurance system, the entire health care system will begin a migration to managed outcomes rather than managed care. What’s at stake cannot be overestimated: we must bring down the cost of health care and improve the health status of Americans or risk crippling our country economically and physically.
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