When the Affordable Care Act (ACA) was being developed, much
emphasis was put on the effectiveness of integrated health systems as a way to
save money but still deliver quality health care. Many studies from various
research centers had looked at cost to Medicare and found that places – usually
smaller cities – with large integrated health systems spent less on Medicare
without noticeable decrements to quality. These systems can have a single
provider of both inpatient and outpatient care (such as the Mayo Clinic) or
close collaborations, including shared electronic medical records (as in Grand
Junction, CO). The presumption of policy makers creating ACA was that Medicare
spending, which is much easier to track, would reflect overall spending.
However, a recent article from the National Bureau of Economic Research by Zack
Cooper, Stuart Craig, Martin Gaynor and John Van Reenen, The
Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured,
demonstrates that this assumption was incorrect. Reviewing overall costs in the
306 Hospital Referral Regions (HRRs, developed by the Dartmouth Atlas of Health
Care) in the US, they discovered wide discordance between Medicare costs and
overall healthcare costs. Indeed, many of the places that were highly-touted
for lower-Medicare-costs-but-still-high-quality, notably Grand Junction, CO
(which was, for example, cited as a success story by Atul Gawande in his June,
2009 New Yorker article “The Cost
Conundrum”) have far higher than average costs overall. (Dr. Gawande has
just had a new
piece in the New Yorker
discussing the implications of this new article.)
The New York Times coverage
of this study, by Kevin Quealy and Margot Sanger-Katz, The
Experts Were Wrong About the Best Places for Better and Cheaper Health Care
(December 15, 2015), includes a terrific feature that allows interactive access
to the data collected by Cooper and his colleagues. You can put in a town
(really, HRR) and find out where it ranks in terms of both Medicare and private
costs. Grand Junction, for example, while ranking 3rd lowest of the
306 HRRs for per-capita Medicare spending, was the 42nd most
expensive for private insurance spending. Rochester, MN, home of the Mayo
Clinic, is another city lauded for its low Medicare costs (14th
lowest), but its private spending is 10th highest! McAllen, TX, cited
by Gawande in 2009 for being #1 in Medicare spending (and now still #4) is only
140th in private insurance spending. Tucson, AZ, on the other hand,
while only in the lower middle (82nd from the bottom) in Medicare
spending, is 7th lowest for overall costs. The Kansas City region,
where I live, was atypically near the middle for both, 142nd lowest
for Medicare and 82nd lowest
for private costs. New York City is high in both, but it is 2nd for
Medicare and 34th (quite a bit lower) for private insurance. The map
in the article depicts HRRs as low, middle or high for both Medicare and
private insurance.
‘“Price has been ignored in public policy,” said Dr. Robert
Berenson, a fellow at the Urban Institute, who was unconnected with the
research’, in the Times article.
Other health policy experts, such as Princeton’s Uwe Reinhardt, have been
warning about this for decades. In the effort to pass the ACA, and please both
providers and insurers, this point was in fact ignored, and it is the source of
most of the common legitimate criticism of the ACA – that in many places decent
health insurance policies bought through the health exchanges are unaffordable.
With higher prices in these regions, insurers pass on the cost to their
customers. This is illustrated in the
NPR story “Obamacare
Deadline Extended As Demand For Health Insurance Rises” on December 18,
2015, which documents both the success of ACA measured by the large increase in
the number of people signing up for coverage and their frustration at the
frequently-high cost of this coverage. Of course, this is completely unrelated
to the criticisms leveled at ACA by the Republican candidates for President and
their allies in Congress, whose “solution” – abolish ACA – is Marie
Antoinette-like. While the French queen is reputed to have said, in response to
being told that the peasants had no bread, “then let them eat cake!”,
Republicans, hearing that many people cannot afford health insurance on the
exchanges even with subsidies, or get Medicaid in states (that they control)
which have not expanded it, respond “let them pay out of their own pocket!”
The issues and solutions are clearly laid out by the reliably insightful Dr. Don McCanne is his “Quote of the Day” on this topic. A solution cannot come from a jerry-rigged program that allows either insurers or health systems or both to maximize their profit. It needs to come from a system that starts with price controls, most effectively by a single-payer system such as Medicare. There are, as he notes, still risks – mainly that health systems may under-utilize services when they cannot make profit, leading to lower quality of care. But we can guard against this both on the regulatory end, by measuring quality outcomes and holding providers responsible, and through the market because the incentive to not provide services to Medicare patients because they can be more profitably provided to the privately -insured (the “opportunity cost”) goes away.
The infatuation of
both policy makers and providers for integrated health systems is not entirely
misplaced. The potential savings from shared data and not repeating tests, and
more importantly for caring for people in the most clinically appropriate
setting (inpatient, ER, outpatient surgery center, primary care, long-term care)
is a real positive feature of these systems. But to the extent that these
providers are allowed to use their market muscle to raise prices to insurers
which are passed on to beneficiaries, it becomes a real negative.
The key feature of
a good health system is that it is not focused on balancing the financial
interests of big insurers and big providers, but that it puts the benefits to
patients, to the people’s health, first.
