The AHCA Fail: What winning feels like…

You may have heard that repealing and replacing Obamacare recently failed.  The analysis of what went wrong comes from many corners.  Andy Slavitt, former insurance executive and most recent director of CMS, writes that the ‘failure of Trumpcare can be seen as a rejection of policies that Americans judged would move the country backward.’  Apparently, the theory goes, moderate republicans, especially in states that expanded heavily and rely on Obamacare Medicaid expansion, were skittish of a repeal and replace plan that endangered the healthcare of millions of constituents.  The conservative David Frum writes in the Atlantic that most Democrats and Republicans have accepted the concept of universal health care coverage – and that the idea of a repeal of the right to healthcare is sheer anathema.  And if the Republicans were wavering, townhalls filled with angry constituents were sure to provide an extra dollop of pressure.

The effort to get the messaging right is clearly important to many, but I find most of it functions as a smoke screen seeking to obscure the real battles being fought over your healthcare.

It is certainly true that Obamacare insures millions of Americans.  But it is also true that having health insurance and having health care are two very different things.  To be clear, the folks attempting to preserve the status quo want to preserve the ability to force all Americans to buy health insurance that costs hundreds of dollars per month.  Put another way, the folks attempting to preserve the status quo want to force Americans to give a monthly fee to health insurance companies.  Remember, these plans have deductibles so high that most of the cost of care delivered during the year in the form of labs, copays, and imaging studies falls on the hapless patient.  The insurer, for the average healthy person, doesn’t pay a dime.

It is also, of course true, that the vast majority of folks signing up for Obamacare were not of the young, healthy kind (one of the problems with the marketplace) – they were poorer and sicker than predicted.  The kind designers of Obamacare had a built in solution – tax dollars would kick in to make up the difference so that insurance companies could keep the cost to the patient low.

It should not be hard to see through the smokescreen to realize that this is a system that serves to keep insurance companies as focal points in health care delivery.  The theory is to pay the nations dollars to insurance companies so they can be stewards of the nations health.   This would be a great idea if it weren’t for the fact that insurance companies, in the current construct, have proven to be poor stewards of our health and our money.

Consider that insurance companies are terrible negotiators that routinely pay hospital claims that are multiples of what medicare pays.  The reason hospital chargemaster schedules are as outlandish as they are is because somewhere there is an insurance company that will pay a significant portion of that price.  On average, hospitals around the country charge 550% of medicare and the commercial insurance companies provide discounts of 50% of those prices. As laid out by Dave Chase in Forbes, commercial insurers receive uniform bills (UB) from a hospital as an invoice that they typically blindly pay.

Uniform-bill

OR services cost $76,312 – what exactly this pays for is a mystery, and there is little due diligence that takes place on the part of the payer.  The claims administrator typically applies some overall discount and moves on to the next claim.  The hospital outpatient setting is no picnic either.  A friend of mine showed me a bill for an outpatient pediatric echocardiogram of $4000, and an electrocardiogram for $1000.  The facility was out of network and the insurer paid 80%, leaving an ~$1800 responsibility left to be paid.  There is no doubt hospitals are bad actors here, but its hard to blame them too much – faced with a commercial payer that will pay multiples of medicare rates, they charge what the ‘market’ will bear.

Except this is no normal market – it is a market where the actual payers (consumers) are usually blind to the actual cost at the time of service.  All the consumer knows is that premiums and deductibles rise on a yearly basis to pay for ever spiraling health care costs. Insurers predictably blame hospitals while hospitals cry of penury, all the while making acquisitions, paying EMR companies hundreds of millions of dollars for garbage products, and paying proceduralists handsomely for being the rain makers that bring patients to hospitals for procedures.

There are precious few places in healthcare that are free of third party payers, but they do exist.  One such example is coronary calcium scans.  These are low dose CT scans of the chest that demonstrate the presence of calcium in the coronary arteries.  The lack of calcium in the arteries of the heart suggests low risk, and may mean you don’t need to take the statin your cardiologist has prescribed.  The presence of calcium may alternatively suggest you would benefit from a statin when your serum lipid profile says otherwise.  Using this tool as a screening tool is a controversial topic among cardiologists, and insurance companies followed the lead of Medicare by deciding not to pay for this.  Remarkably, this did not sign the death warrant for coronary calcium scans.  Indeed, in any given city almost every hospital offers this scan, at price points most of the people walking into my office can afford (Philadelphia ~ $50 – $185).  Thus hospitals with CT scans set prices, and heed a maxim that even the caveman no doubt understood : You can’t sell what the buyer can’t buy.

The importance of reimbursement in dictating the unit cost of healthcare cannot be overstated. When I started practice in 2013, significant cuts to cardiac imaging had recently been made by CMS.  Practices with fixed cost structures that suddenly faced 50% reductions from their imaging revenue rushed to become hospital leased entities that were immune from these cuts. Knowing nothing, I figured I would take a loss to buy/lease an ultrasound machine to do echocardiograms.  Imagine my surprise when the device companies showed me tables of the current reimbursement from Medicare for echocardiograms to convince me to buy a machine from them.  Reimbursement rates are public, and this allows device companies to set prices based on these rates.  I realized then that the amount of money I would make per echocardiogram had nothing to do with what medicare in this case would pay me.  The amount I made per echocardiogram was fixed – the device makers simply varied the cost of the machine based on reimbursement rates set by medicare.

The handwringing that accompanied repeal of the ACA in large part related to eliminating the individual mandate and reducing federal subsidies to insurance companies.  If you assume health care costs are fixed and will only go up, reducing these subsidies and shrinking the pool of people buying insurance by eliminating the mandate would seem to be a sure way to make insurance unaffordable.

But what if the cost of healthcare is being driven up by the slovenly stewardship of third party commercial payers blindly paying 80% of the $1200 being charged for an electrocardiogram that costs $12?  What if the best mechanism to reduce the cost of health care is to reduce the footprint of third party payers?  Would a hospital continue to charge $4000 for an echocardiogram if patients knew this before the procedure was performed? This is an unsustainable path.  No amount of stabilization of the marketplace with tax dollars can fix this in the long term – it is simply unaffordable.

Lost in all the messaging about what the failure of the AHCA says about Americans is that the actual problem with health care today has been obfuscated.  As the philosopher Puff Daddy, puts it – It’s all about the Benjamins.  America’s health care problem is one of cost.  Focus on making healthcare more affordable and healthcare will become more accessible.  Counterintuitively, the best way to make healthcare more affordable may be to have third parties cover less – a line of reasoning bound to elicit outrage from the bleating wing of the left.  Mandate, or allow consumers to buy catastrophic insurance plans, but allow patients to use health savings accounts (HSAs) and shop for everything else.  Even better, explicitly allow HSAs to be used to pay a low monthly subscription fee to a direct primary care (DPC) physician to cover all outpatient office care (office procedures, vaccinations, basic labs, same day visits) and allow them to serve as your guide to low cost specialists and imaging centers.  An even simpler option would be to have the government set all prices by taking insurance companies out of the mix by extending Medicare to all.  Of course, given a taste of the avalanche of mandates that naturally occur when bureaucrats are given too much control, (the British NHS experience is not pretty)  I am wary of such a system.

There are many that are gleeful about the failure to significantly reform or ‘replace’ the ACA. I don’t share in their joy.  A failure to replace or significantly reform the ACA is a win for insurance companies and hospitals – an outcome that may keep more people ‘insured’ but does nothing to expand access to actual healthcare.  Americans are right to be scared of losing access to healthcare – but the danger comes not from a replacement plan that threatens the status quo, it comes from keeping the status quo.

 

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