Federal spending on healthcare continues to grow. The non-partisan Congressional Budget Office (CBO) estimates that federal spending on healthcare will reach 30.8% of total government spending by 2025, up from 26.4% in 2014. This cannot be sustained.
These numbers reflect the Affordable Care Act (ACA, aka Obamacare) remaining in place. However, if the ACA is repealed, the CBO reports it will cost even more money – an estimated deficit increase of an additional $137 billion to $353 billion in the next ten years. With or without the ACA, we are spending too much on healthcare.
In last week’s blog, I outlined some concepts to reduce healthcare spending: Making health insurance more like insurance; health insurance that is controlled more by individuals and less by employers; and more consumer responsibility. The approach that I’m proposing is more evolutionary than revolutionary – a five to ten year process of slowly moving health insurance and healthcare to a more market-driven system, without adding much more regulation. In this week’s blog, I’m introducing more ideas for this process.
Traditional health insurance (PPOs and HMOs) doesn’t encourage consumer responsibility. Patients usually have no idea what anything costs, seldom ask about price, and rarely haggle. Because insurance is going to pay most of the bill, there is little incentive to shop around.
The two health insurance models that I recommended last week were: High-deductible health plans (HDHP) with Health Savings Accounts (HSAs); and a Defined Contribution model. Both encourage employees to be better shoppers, because they will be spending their own money.
However, to shop effectively people need better information from the healthcare delivery system regarding providers, prices, and outcomes. This would require the collection of data that can be complied, organized and analyzed. To help achieve these goals (and others) Congress passed a law in 2009 (prior to the ACA), that all public and private healthcare providers must begin meaningful use of electronic health records (EHR) by 2014. Failure to do so would result in penalties of reduced Medicaid and Medicare reimbursement rates.
Despite these penalties, some providers have drug their feet adopting EHRs. The EHRs are unpopular with many doctors because they are time consuming to complete. Other frustrations with EHRs include a lack of national standards for data collection, and a lack of interoperability with other EHR systems. EHRs are still in their infancy, eventually these issues will get sorted out but it could take years.
In the mean time, some market-driven solutions have begun to materialize that provide some of this information. There are on-line services where consumers can get price estimates for treatments, second opinions, personalized support, and patient reviews of treatments and outcomes.
One is FAIR Health (FH), an independent not-for-profit organization, whose mission is to bring transparency to healthcare costs and insurance. FH owns the largest healthcare claims data base in the country, and uses its data to develop cost estimates for both medical and dental procedures by zip code. Users can access this information on FH’s easy-to-use web site.
Using actual insurance claims data strikes me as a good idea. This data should be relatively easy to collect, organize and analyze, while we wait for data bases of EHRs to be built.
Somewhat similar, is what UnitedHealth Group, the largest insurer in America, provides its members – a tool called myHealthcare Cost Estimator. Using contracted rates for providers and facilities, members can compare price estimates for local services based on their health plan benefits. This also seems like a good concept, and other insurance companies should do the same.
The Honeywell Corporation offers its employees a second-opinion service called Surgery Decision Support, which gives its personnel access to information and expertise to help them weigh surgical treatment options. Surprisingly, one in five employees using the service opted to not have the surgery, and 98% of employees are satisfied with the program. Perhaps something like this could evolve into a separate company offering the same services to the public.
Yelp has also recently launched online reviews covering healthcare services. Now consumers can get patient critiques covering hospitals, nursing homes, and dialysis clinics. Yelp has had some challenges in regards to the accuracy of its reviews, but the company is working to fix these problems. Until a data base of EHRs exists that can provide useful outcome information, Yelp reviews should help.
It’s expected that market-driven solutions to help consumers find meaningful healthcare information will continue to evolve and improve. As they do, it’s believed that providers slow to embrace EHRs will eventually find participation imperative to remain competitive. In the future, it’s not difficult to imagine patients negotiating prices, facilities, and payment schedules – all in advance of treatment. The days of confusing and indecipherable hospital bills may be numbered.
Some consumer behaviors will slow these trends – such as relationships and loyalties to doctors, and a reluctance to shop or even ask about price. But younger adults, who haven’t developed the same kind of relationships with their doctors that their parents have, will probably be more likely to shop by price.
Many tech savvy young people prefer to do research and shop online, and may have even purchased health coverage through an online insurance exchange. As consumer behaviors change it should help accelerate the trend towards better healthcare shopping habits, and a more competitive and consumer-friendly healthcare marketplace.
Another benefit of this trend could also be better coordination and organization in the healthcare industry and among providers. A common gripe among critics and consumers is that the healthcare system can be disorganized and inefficient, but market pressures should help improve that too.
Over the past few weeks, I reviewed several options for reducing public and private healthcare spending. Some of the other alternatives I studied were: Moving to a single-payer system; tort reform; repealing the employer mandate in the ACA, and making employer provided health insurance taxable while providing tax credits for individuals to purchase coverage through insurance exchanges; and changes to the utilization of healthcare staffing, such as allowing more use of physicians assistants and nurse practitioners for certain procedures now limited to doctors, and increasing enrollments in medical schools to boost the total number of doctors.
However, I think waiting on these bolder steps is appropriate for now. I believe the ideas that I have outlined in this blog and last week’s blog are good next steps in the process of improving the healthcare payment and delivery systems, and will help begin reducing healthcare spending.
Given the amount of turmoil and political angst caused by the ACA, I believe these ideas offer a realistic and common sense approach – without much additional regulation. Because they are market-driven and spread over the next five to ten years, it should result in a more orderly process that allows the healthcare system adequate time to digest and adjust to the changes brought on by the ACA, without creating added disruption.
Nevertheless, the ideas I have outlined won’t be enough to reduce the amount we spend on healthcare. I look at this five to ten year period as one of incremental change for now, with more needed later. This interregnum should help calm passions and make future improvements more evident. It will also provide time for the CBO to study the financial impacts of the ACA, and do cost analysis of other alternatives as they emerge.
I welcome your feedback on these topics. Feel free to leave your thoughts in the “comments“ section below. If you’d like to keep your thoughts private, please reply with an email instead.
Links to related blogs:
Controlling Healthcare Spending: http://www.commonsensecentrist.com/controlling-healthcare-spending/
We’re spending too much on Healthcare: http://www.commonsensecentrist.com/were-spending-too-much-on-healthcare/
The Political Challenges of Controlling Federal Healthcare Spending:http://www.commonsensecentrist.com/the-political-challenges-of-controlling-federal-healthcare-spending/
Medicaid and Obamacare: http://www.commonsensecentrist.com/medicaid-and-obamacare/
More on Medicaid and Obamacare: http://www.commonsensecentrist.com/more-on-medicaid-and-obamacare/
Medicare turns 50 – will it survive another 50 years: http://www.commonsensecentrist.com/medicare-turns-50-will-it-be-around-another-50-years/
Options for Fixing Medicare Spending: http://www.commonsensecentrist.com/options-for-fixing-medicare-spending/