ACA, ACOs, and Meaningful Competition

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Criticisms of the new health law, the Affordable Care Act (ACA), have come from all sides. While many of them are justified, they also miss many of the law’s positives. It doesn’t assure the reliable, cost-controlled security of a real universal health insurance program, but it will lead to coverage of tens of millions of more Americans, and will eliminate the ability of insurance companies to engage in health risk underwriting, the practice that allows them to deny coverage to those with pre-existing conditions. These are points that the President made in his recent interview on Jon Stewart’s Daily Show. "Individual mandates", i.e., forcing everyone to buy insurance, while it is a touchstone for the right and is the issue found unconstitutional by a Virginia federal judge (and which will probably go to the Supreme Court), was the price that insurance companies demanded for assuring coverage for everyone. As I have often written, you have to have all the healthy people in if you are going to cover the sick; there are many more healthy, but all of us can become sick.

Apparently, a lot of people understand this. A recent poll by Marist College and McClatchy newspapers shows a majority (51%, but still a majority) of Americans want to continue (16%) or increase (35%) the benefits of ACA, with 44% going the other direction. “Among groups with pluralities who want to expand it: women, minorities, people younger than 45, Democrats, liberals, Northeasterners and those making less than $50,000 a year. Lining up against the law, 11 percent want to amend it to rein it in; 33 percent want to repeal it. Among groups with pluralities favoring repeal: men, whites, those older than 45, those making more than $50,000 annually, conservatives, Republicans and tea party supporters.” OK, these are the “usual suspects”, except that it amazing and saddening to me that older people who are receiving Medicare can be opposed to expanding benefits to others. Maybe they are just ignorant of Medicare and the current law (as reflected in “Keep the government’s hands off my Medicare!”); this is also sad, but would explain what would otherwise be an enormously, almost immoral, selfishness. Yes, more educated Medicare recipients are concerned that the benefits for that program will be scaled back (and there are unquestionably threats to do so!) but this does not justify opposition to extending those benefits to the rest of the country.

A new set of problems is described by Robert Pear in the New York Times, on Sunday, November 21, 2010, “As health law spurs mergers, risks are seen”. The focus of his article is the planned “accountable care organization” (ACO), a relationship between one or more hospitals (or “health systems”), doctors, nursing homes, and home health care agencies. The idea behind creating ACOs is that, by coordination of care and sharing of information, people’s health can be improved and money can be saved. There is a lot of sense to this approach. If a patient is discharged from a hospital to home, or to a nursing home, and there is more sharing of information with the home health agency, or nursing home, or the primary care doctor who will be responsible for care when they leave the hospital, there is greater likelihood that there will not be lapses in the patient’s care. Similarly, if the person’s health deteriorates to the point of needing to be re-admitted, it would be best if 1) all that could have been done in the non-hospital setting to possibly prevent that from happening was done, and 2) all the information about what was done was transmitted to the hospital.

The organizations most cited by health reformers as having been successful in controlling costs and improving quality are those that are already “integrated”, where the system that owns the hospital(s) also employs the physicians and controls the nursing homes and home health care agencies, or else has very close and dependent financial relationships with them, such as Intermountain Health Care, Geisinger Health System, and Kaiser-Permanente. Information – and money, including money saved by having fewer expensive readmissions, is shared among the various participants. So ACA creates financial incentives for others to create such relationships, the ACOs. The issue raised in Pear’s article are that many forms that these ACOs might take run the risk of violating existing laws that are in place to prevent kickbacks, monopolistic practice, and other forms of corruption. For example, it is illegal for a health system for offering contingency payments a physician who is not an employee – such as for admitting patients to the hospital, keeping stays shorter, etc. This makes sense too.

So we have two conflicting things that “make sense”: greater collaboration and aligned incentives can create greater efficiency and save money, but they can also lead to oligopoly and corrupt relationships. Monopoly is more efficient, but creates the opportunity for exploitation. Modern business practices, based on the work of people such as W. Edwards Deming[1], emphasize the importance of long-term relationships with suppliers so that they can learn and better meet your needs over time, something there would be no incentive to do if doing so cost them money, and you were likely to pull your business the next year because someone else bid lower. Governments usually have policies requiring contracts given to the lowest bidder, but there is a danger that the work will be of lower quality.

Much of the criticism of ACA from the “right” has been about lack of “choice”, but as we look at implementation of the health care law, we need to be careful that ideology does not trump actual health outcomes. Two recent studies show the risks of the “law of unintended consequences” of policies that encourage consumer choice and a market approach to health coverage. In “Health care use and decision making among lower income families in high-deductible health plans”[2], Kullgren and colleagues demonstrate that, in fact, as might be anticipated, poor people who choose to spend less out-of-pocket money by enrolling in such high-deductible plans pay the price later in not accessing health care and having poorer outcomes. Millet, et al, in “Unhealthy competition: consequences of health plan choice in California Medicaid”[3], show that, perhaps less intuitively, Medicaid (Medi-Cal) patients in California counties where they have a choice of plans are less likely to be enrolled all year than where they do not have such choice, and “Potential benefits of health plan choice may be undermined by transaction costs of delayed enrollment, which may increase the probability of hospitalization for ambulatory care-sensitive conditions.”

Ideally, a single-payer, Medicare-for-all, system eliminates the risks that people will not enroll or have gaps in enrollment, that there will be people left out, that people will, for understandable and reasonable short-term financial reasons, make choices that can have long-term adverse effects on their health, and that there will be different standards for quality of care for people with different insurance. But even that does not address the system of provision of care. The ACA law seeks to encourage communication and efficiency, but critics see danger in merger and oligopoly, which could limit options for consumers and in itself create risks to health care access and quality.

What could the solution be? One might be to have cooperative relationships with open-source access to information. Thus, your health information would not be in the control of a given hospital, health care system, or doctor, but rather be controlled by you, and made available to whichever provider – hospital, doctor, nursing home, etc. -- that you chose to provide your care. The information would not be in proprietary electronic medical record format, but rather in an interoperable format that could be utilized by any provider. Incentives could exist globally, not simply within a single organization, to produce the highest quality care rather than the highest profit margin. This would be an excellent example of real competition.

[1] See Mary Walton, The Deming Management Method, Berkeley Publishing Group, New York (originally published Dodd Mead, NY, 1986).
[2] Kullgren JT et al., “Health care use and decision making among lower income families in high-deductible health plans”, Archives of Internal Medicine, 2010;170(21):1918-25. (Hyperlink is to abstract as full text not available free on line.)
[3] Millet C, Chattopadhyay A, Bindman AB, “Unhealthy competition: consequences of health plan choice in California Medicaid”, American Journal of Public Health Nov2010;100(11):2235-40. (Hyperlink is to abstract as full text not available free on line.)
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