quinnscommentary

Keeping in mind that one of the key promises of health care reform is affordable health care (or affordable health insurance premiums, take your pick).  I recently asked the question on an employee benefit professionals blog if the experts felt that costs would be controlled as a result of PPACA.  The general consensus was they would not, but one comment I found truly on target.

The current bill will not reduce costs.  The true cost controls will not come for some time and they are not in the current legislation.  In ten years there will be very few employer sponsored plans left.  Most companies will (as the author of the legislation intends) opt to pay the fine of a few thousand dollars instead of spending ten thousand to cover each employee.   While this legislation did not create a single payer system, it will eventually create a single payer system.  Once the government-run plans are covering the majority of the people in the country, they will be able to implement the rationing, behavior modification laws (such as taxing obesity) and other controls that will bring costs (or at least the rise of costs) down. The bad news is that the benefits professional’s job as we know it will not exist, however most firms will offer supplementary plans so it’s not all gloom and doom for our profession. Many firms will use supplementary plans as an attract and retain tool much the way they did with very rich  ”Cadillac” plans.  A friend of mine in the U.K. calls these supplemental plans ”queue jumping” plans which allow people to get better and quicker care than those who are only on the government plan.

All in all the true costs will not go down simply due to the PPACA.

I agree with this assessment although it may take longer than ten years, but not by much.  I added the bold to the above comments, but I want you to focus on this scenario and ask yourself, if some form of rationing or tight control on the provision of health care are not in place, how will health care costs be controlled?

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Before, during and after the health care reform debate the President and his allies in Congress claimed that health care reform would lower health care costs. Many Americans assumed they were talking about measures that would lower their premiums and out-of-pocket costs. Many Americans were wrong.

However, in cases such as adding adult children to coverage, or mandating 100% coverage for preventive services and lifting underwriting rules, the directly affected individuals were right, but forgot that those changes raised premiums for all insured individuals.

The reality is that what the President was talking about was health costs for the federal government not you and me. Attempts at managing the cost curve within PPACA focuses on Medicare and Medicaid.

Following is a list of such measures contained in the law (prepared by Towers Watson consultants). Note that several measures likely result in cost shifting to the private sector. Also, note that “competition” among insurance companies is not the solution. More insurance companies in an area reduces each company´s ability to negotiate lower fees with health care providers because each carrier will have fewer members (patients) and therefore less leverage with doctors and hospitals.

Also, if you are among the seventy-million Americans in self-insured employer plans, there is less to benefit you within PPACA and more to raise your costs.

The ACO mentioned below is similar to the HMO concept that was roundly criticized for providing financial incentives to control costs, not that we do not need to change incentives in the system.

Read the duties and limitations on the Independent Payment Advisory Board and ask yourself, exactly what can it recommend to control costs?

Note the limitations on the much touted comparative effectiveness research for which employer plans and insurers are being charged.

Health care cost savings measures within PPACA.

1. Create a Center for Medicare and Medicaid Innovation (CMI) to test payment and delivery models while preserving or enhancing quality of care under Medicare, Medicaid and the Children’s Health Insurance Program (CHIP). The initial emphasis will be on populations with poor clinical outcomes and high spending, and on improving coordination, quality and efficiency. The secretary of Health and Human Services (HHS) can expand these demonstration projects nationwide if the Centers for Medicare and Medicaid Services (CMS) actuary determines they can reduce spending.
2. Have Medicare recognize groups of providers and suppliers who meet certain quality criteria as accountable care organizations (ACOs). ACOs can share in cost savings they achieve for Medicare, even receiving bonuses if the savings are large enough. This program will also be available to pediatric medical groups under Medicaid.
3. Test an alternative payment methodology for Medicare nationwide in a voluntary pilot program to incent providers to coordinate patient care across the continuum and to manage all care associated with a hospitalization.
4. Similarly, create demonstration projects under Medicaid to pay bundled payments for episodes of care that include hospitalizations.
5. Establish other programs to encourage providers and plans to provide more efficient care for certain chronically ill and high-risk Medicare and Medicaid populations.
6. Establish an Independent Payment Advisory Board to submit proposals to reduce Medicare spending if projected growth rates in Medicare spending per beneficiary exceed target growth rates specified in the law. The board’s proposals take effect automatically unless Congress passes an alternative that achieves the same level of savings. But proposals cannot ration care, raise taxes or Part B premiums, or change benefits, eligibility or cost-sharing standards; and generally they cannot affect inpatient hospital and hospice care or diagnostic lab tests.
7. Reduce Medicare payments to home health providers. More significantly, Medicare payments to all providers (except physicians, who are governed by different payment rules) will be adjusted by the percentage change in the 10-year moving average of annual private nonfarm business multifactor productivity. The Medicare trustees expect a 1.1% annual reduction. The phased-in adjustment varies by type of provider from 2010 through 2019, and will apply fully and equally thereafter.
8. Reduce Medicare Advantage (MA) plan benchmarks for payment to roughly the cost of fee-for-service Medicare services — more for low-cost counties and less for high-cost counties. High-quality MA plans get a bonus in their benchmark, while rebates to plans bidding less than the benchmark are generally lowered and are further modified for plan quality and certain coding practices. Plans with low medical loss ratios must remit partial payments to Medicare, and plans with consistently low ratios will be barred entirely.
9. Shorten the period for submitting Medicare claims.
10. Physicians ordering durable medical equipment (DME) or home health services must be enrolled in Medicare, and face-to-face encounters with patients are required for such orders.
11. Adjust Medicare hospital payments based on performance under a value-based purchasing program. These incentives will be funded from the base operating diagnostic-related group payments. The law also reduces payments to acute care hospitals whose rates of hospital-acquired conditions are in the top quartile and those with high readmission rates.
12. Disproportionate share hospital payments will be reduced significantly, although hospitals dispensing significant amounts of uncompensated care will receive bonuses.
13. Pay Medicare bonuses to physicians who report quality measures and impose penalties on those who do not.
14. Reduce Medicare payments for magnetic resonance imaging and bone density tests and expand competitive bidding for DME.
15. Create an annual wellness visit benefit for Medicare beneficiaries, and eliminate cost-sharing for certain preventive services recommended by the U.S. Preventive Services Task Force (USPSTF). The law blocks payments for preventive services discouraged by the USPSTF, however, and restricts Medicare reimbursement for certain mental health services.
16. Increase the Medicaid drug rebate (to governments from drug manufacturers) percentage for brand-name drugs.
17. Require the disclosure of financial relationships between health entities, such as physicians, hospitals, pharmacists, and manufacturers of drugs and devices.
18. Support comparative effectiveness research by establishing a nonprofit Patient-Centered Outcomes Research Institute to compare the clinical effectiveness of medical treatments. Findings from this research, however, cannot be used to deny coverage or be construed as a guideline.
19. Award demonstration grants to states to develop alternatives to current medical tort litigation.
20. Simplify health insurance administration by adopting a single set of operating rules for eligibility verification and claims status, electronic fund transfers and health care payments, health claims and similar processes.
21. Increase the threshold for itemized deductions for unreimbursed medical expenses from 7.5% to 10% of adjusted gross income.
22. Limit annual contributions to a flexible spending account for medical expenses to $2,500.
23. Structure the new health insurance exchanges established by the states for the individual and small group markets to encourage competition among health plans based on price rather than on risk selection and benefit design. This will presumably occur through standardized plans negotiating lower prices from providers, new approaches to eliminate unnecessary utilization and reductions in administrative costs. The framework here, sometimes called managed competition, assumes participants will choose low-cost plans because their government subsidy (discussed below) is fixed. It also assumes competing insurers will cut costs and therefore lower prices.
24. Impose a 40% excise tax on employer-sponsored health plans to the extent the value exceeds $10,200 for individuals and $27,500 for family coverage, as indexed, effective in 2018. The threshold amounts are somewhat higher for 55- to 64-year-old retirees, and for “high-risk” professions and firms with older workforces. The tax penalty is intended to motivate employers to encourage their employees to choose high-deductible-and-co-pay health plans, such as account-based health plans (ABHPs), perhaps with limited provider choice. These plans, in turn, will encourage participants to make more cost-effective choices of health care goods and services. Alternatively, health maintenance organizations might make a comeback.

So there you have it, this is how health care reform will control health care costs. In the quest to expand coverage and stop insurance companies from their “abuses and discrimination” (the administrations words, not mine) there is a list equally long that adds to health care costs. However, most significant is the fact that this law extends and encourages the notion that health care is not a personal responsibility and that more and more expenses are to be paid by someone else, which means the insurance company and for most Americans it means their employer and their fellow workers.