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ObamaCare: Not Promoting Quality Care As Planned
By Michael F. Cannon of Cato.
"At The Health Care Blog, Jeff Goldsmith and Bruce Henderson of Navigant Healthcare offer a grim assessment of ObamaCare’s performance that is worth quoting at length:
The historic health reform law passed by Congress and
signed by President Obama in March, 2010 was widely expected to catalyze
a shift in healthcare payment from “volume to value” through multiple
policy changes. The Affordable Care Act’s new health exchanges were
going to double or triple the individual health insurance market,
channeling tens of millions of new lives into new “narrow network”
insurance products expected to evolve rapidly into full risk contracts.
In addition, the Medicare Accountable Care Organization (ACO) program
created by ACA would succeed in reducing costs and quickly scale up to
cover the entire non-Medicare Advantage population of beneficiaries
(currently about 70% of current enrollees) and transition provider
payment from one-sided to global/population based risk. Finally, seeking
to avoid the looming “Cadillac tax” created by ACA, larger employers
would convert their group health plans to defined contribution models to
cap their health cost liability, and channel tens of millions of their
employees into private exchanges which would, in turn, push them into
at-risk narrow networks organized around specific provider systems.
Three Surprising Developments
Well, guess what? It is entirely possible that none of these things may
actually come to pass or at least not to the degree and pace predicted.
At the end of 2015, a grand total of 8.8 million people had actually
paid the premiums for public exchange products, far short of the expected 21 million lives for 2016.
As few as half this number may have been previously uninsured. It
remains to be seen how many of the 12.7 million who enrolled in 2016’s
enrollment cycle will actually pay their premiums, but the likely answer
is around ten million. Public exchange enrollment has been a
disappointment thus far, largely because the plans have been
unattractive to those not eligible for federal subsidy.
Moreover, even though insurers obtained deep discounts from
frightened providers for the new narrow network exchange products (70%
of exchange products were narrow networks), the discounts weren’t deep enough to cover the higher costs of the expensive new enrollees who signed up. Both newly launched CO-OP plans created by ACA and experienced large carriers like United and Anthem were
swamped in poor insurance risks, and lost hundreds of millions on their
exchange lives. As for the shifting of risk, it looks like 90% plus of
these new contracts were one-sided risk only, shadowing and paying
providers on the basis of fee-for-service, with bonuses for those who
cut costs below spending targets. Only 10% actually penalized providers
for overspending their targets.
The Medicare Accountable Care Organization/Medicare Shared Savings
Program, advertised as a bold departure from conventional Medicare
payment policy, has been the biggest disappointment among the raft of
CMS Innovation Center initiatives. ACO/MSSP enrollment appears to have
topped out at 8.3 million of Medicare’s 55 million beneficiaries. The
first wave, the Pioneer ACOs, lost three-fourths of their 32 original
participating organizations, including successful managed care players
like HealthCare Partners, Sharp Healthcare, and Presbyterian Healthcare of New Mexico and others. The second, much larger wave of regular MSSP ACO participants lost one third of their renewal cohort. Only
about one-quarter of ACO/MSSP participants generated bonuses, and those
bonuses were highly concentrated in a relative handful of successful
participants.
Of the 477 Medicare ACO’s, a grand total of 52, or 11%, have downside
risk, crudely analogous to capitation. As of last fall, CMS
acknowledged that factoring in the 40% of ACO/MSSP members who exceeded
their spending targets and the costs of the bonuses paid to the ACOs who
met them, the ACO/MSSP programs have yet to generate black ink for the federal budget.
And this does not count the billions care systems have spent in setting
up and running their ACOs. It is extremely unlikely that the Medicare
ACO program will be made mandatory, or voluntarily grow to replace DRGs
and the Medicare Part B fee schedule.
And the Cadillac Tax, that 40% tax imposed by ACA on high cost
employee benefit plans, a potentially transformative event in the large
group health insurance market, which was scheduled to be levied in 2018,
was “postponed” for two years (to 2020) by an overwhelming
Congressional vote. In the Senate, a 90-10 bipartisan majority actually voted to kill the tax outright,
strongly suggesting that strong opposition from unions and large
employers will prevent the tax from ever being levied. Presumptive
Democratic nominee Hillary Clinton has announced her support for killing
the tax. So the expected transformative event in the large group market
has proven too heavy a lift for the political system.
As a result, the enrollment of large group workers in private health
exchanges, the intended off-ramp for employers with Cadillac tax
problems, has arrested at about 8 million, one-fifth of a recent
forecast of 40 million lives by 2018.
Thus, the conversion of the enormous large group market members to
narrow network products seems unlikely to happen. As a recent New York Times investigation
revealed, the reports of the demise of traditional group health
insurance coverage (based on broad network PPO models) have been greatly exaggerated."
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