25 September 2015

America's Affordable Care Act Problem

If you are perplexed by Donald Trump’s continuing rise in the polls, just read one chapter of Steven Brill’s fascinating “Bitter Pill.”  The book chronicles the back door politics leading to the passage of the Affordable Care Act that would even make DC lobbyists cringe.  The frustration of government is real, and the ACA is a classic example of Washington's seemingly lack of understanding of reality.  The bureaucrats got the bad actors wrong, did little to bend the cost curve, and largely kept the deep profits in the broken system secure.  Years after passage,  is there anything we can do to improve health care in the US?

First, the bad.  Brill discusses at length the negotiations and ultimately concessions given by the government to, among others,  medical device companies, Big Pharm, and large hospital systems, None of these groups were targeted during Obama’s road to passage.  The insurance carriers were an easier target politically as the government publicly boasted medical loss ratio caps which maximized the percent of dollars payers could use for administration and profit.  But the ACA does little to actually lower the "medical losses."  As Brill points out, insurance companies are actually the only constituent besides consumers incentivized to contain costs.  Everyone else gets paid more for more products and services they provide.  Unfortunately, not only did the legislation perpetuate the same payment structure that has driven the system to the brink, but also exacerbated the situation by adding more people into the mix.  Sounds sustainable, right?

I’m not suggesting the managed care companies are victims by any stretch.  But when you see the outrageous tax breaks for “non-profit” hospitals, non-negotiable prices for prescription drugs, and CEO salaries that rival NFL superstars, it makes you sick to your stomach.  The insurance companies are a problem, but there are bigger fish to fry.  Squeezing carriers alone will not fundamentally change the cost structure - just look at any Chargemaster bill.

So where do we go from here?   The optimists are suggesting that the ACA was a start to real reform and the much needed changes will come later (have we heard that before?).  The holy grail of healthcare is the integrated ACO approach according to Brill, but as I have written in the past, I don't think these generally small and disparate efforts are scalable on a national basis.   Government programs such as Medicare will continue to gain power post-ACA and their continued moves towards pay for performance will lift all tides.

But like most broken societal issues, entrepreneurship is the quickest path to improve care and lower costs.  Great innovation and trends such as Telemedicine, better diagnostic technology, and preventative efforts will compel the oligarchs of health care to remain competitive.  Private investment in this space has not slowed, and I even think the megamergers in the payer space will help to bring costs down overall.   Let's hope market based innovation and continued pressure on the cost side of the equation bring consumers closer to much needed affordable, quality care.  Or we could just rely on Congress to fix the problems since they are so adept at it.  Enter the Donald.