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Josh Green With Guest Stephen Kemble

The Affordable Care Act, AKA “ObamaCare” has succeeded in getting more Americans covered by health insurance. However, health insurance does not equal access to affordable health care or improved population health.

Problems with implementation of the Affordable Care Act:

  • Web site problems for Exchanges – impossible complexity
  • Payment and Delivery System Reforms
  • Cost shifting onto patients when they get sick
  • Drug prices deterring effective treatment
  • Inadequate access to cost-effective care

Everyone knows about the web site problems for the Health Insurance Exchanges under the Affordable Care Act, and Hawaii has had even more problems than most. However, most people are unaware of the “back-end” payment and delivery system reforms being pushed by the Affordable Care Act. There are also major issues with shifting more of health care costs onto patients, in the form of higher deductibles and co-pays, and with a confusing array of trade-offs between premiums, deductibles, and co-pays with often unpredictable effects on net cost if a person actually gets sick. Drug prices have also been gong through the roof, even for generics that used to be cheap, with much higher, often unaffordable, co-pays for drugs that are essential for effective treatment. There are also major problems with access due to an inadequate supply of doctors, including primary care, psychiatry, and many specialties. Many plans are now offering “ghost” and narrow networks, leaving patients stuck with huge bills when they are unwittingly and involuntarily cared for by “non-participating” doctors and hospitals.

All of these are consequences of failure to organize health care reform around efficient, cost-effective care delivery. The ACA was written by people from the health insurance industry, and it therefore organizes health care reform around perpetuating a central role for health insurance companies, plus a complete lack of any constraints on the pharmaceutical industry, both to the detriment of actual health care. We are witnessing an explosion of middle-men, health care managers, sub-contractors, and people hired to try to deal with all the complexity in our health care “system,” while we are losing doctors and patients are experiencing increasing difficulty with access to effective care.

Why don’t the health insurance exchanges work?

  • Problems for insurance plans with small markets like Hawaii’s, leading to higher prices for Exchange plans:
    • Administrative cost of running exchange
    • High risk for small plans from high-cost cases
    • Adverse selection
    • Risk adjustment
  • Must determine eligibility based on expected income
    • Medicaid for <138% FPL
    • Tiers of premium subsidies for 138-400% of FPL
    • Caps on out-of-pocket expenses for <250% FPL
  • “Churning” between Medicaid and Exchange and between tiers in the exchange
  • Complex trade-offs between premiums, deductibles, and co-pays, plus deceptive insurance practices in pricing, leave many with unexpectedly high, often unaffordable, costs if they actually get sick.
  • Calculation of subsidies based on expected income, reconciled when taxes are filed. Many experience changes in income due to job loss or job changes and may face large adjustments at tax time, as well as long delays in any refunds due.

ACA Payment and Delivery System Reforms:

  • ACA’s Rationale: high cost is due to excessive and unnecessary care
    • “Consumers” need “skin in the game” to induce them to be smarter “shoppers” for health care
    • Fee-for-Service rewards “volume” of care, not “value” of care.
  • ACA’s “Solutions”:
    • Increasing deductibles and co-pays for patients
    • Managed care/medical management  - restrict care via limited networks, prior authorizations, formulary restrictions, tiered co-pays for drugs.
    • Replace fee-for-service with reforms that shift insurance risk to doctors and hospitals so they make more money by delivering less care.
      • Bundled payments
      • Shared savings
      • Capitation
  • What’s wrong with the rationale?
    • Restricting access and erecting barriers to care does not restrict disease, which pops in uncontrolled and more expensive forms – ER & hospital care.
    • Eligibility determination and restricting access require bureaucracy that costs more than it saves.
    • US spends twice what other countries with simpler, universal health care systems spend, and the other countries cover everyone with minimal or no patient cost-sharing.
    • US Government health care spending alone, not including what businesses and individuals pay, exceeds the total health care cost per capita of every other country.
    • Our access is much worse.
    • We have fewer doctor visits and fewer in-patient hospital days than all those other countries.
    • Our population health statistics are worse.
    • The US has far higher patient cost-sharing (“skin in the game”) than all the other countries with universal systems. If patient cost-sharing worked, we would not have far higher costs. Higher cost sharing deters out-patient care and increases far more expensive ER and hospital care.
    • By far the biggest driver of excess cost in US health care compared to countries with universal systems is our astronomical administrative costs.  US doctors and hospitals spend 3-4 times as much as their counterparts in Canada on dealing with insurance and getting paid. The US went from 7 doctors for every health care administrator in 1980 to 10 administrators for every doctor now.

HMO’s, Managed Care, and ACO’s:

  • Traditional HMO’s (1990’s)
    • Problem defined as over-utilizatioin
    • Shift insurance risk to competing managed care organizations (MCOs)
    • MCOs try to restrict unnecessary care
      • Restricted networks
      • Restricted formularies
      • Prior authorizations
    • Hawaii’s Medicaid Managed Care experience:
      • Converted FFS Medicaid to MCOs - 1994, 2009
      • Increased administrative hassles (and cost)
      • Declining MD participation
      • Worsening access problems
      • Accelerated cost increase – 2.7% > US average
      • Worst for mental illness – 4 yr after Medicaid managed care, > half of psychiatrists dropped out, MH ER and hospital costs increased 30%!!
  • The Affordable Care Act – Accountable Care Organizations (ACO’s)
    • “Triple Aim” goals –
      • 1) Improved quality/care experience,
      • 2) Improved population health,
      • 3) Lower cost
    • Align hospitals and doctors - shared financial incentive for “cost-effective” care
    • Shift insurance risk to ACO - then Providers
      • Bundled payments
      • Shared savings
      • Capitation
    • Patients are attributed to ACO based on utilization, don’t choose or know they are in an ACO
  • However, shifting insurance risk to providers incentivizes them to:
    • Restrict care
    • “Cherry Pick” - avoid sicker, more complex patients
    • Game diagnoses to beat risk adjustment
    • Game documentation to improve reimbursement
    • Become more focused on money at expense of patient’s welfare
  • ACA attempts to counter these perverse incentives with “Pay-for-Performance” (P4P) or “Pay-for-Quality” (P4Q)
    • The idea is to develop specific measures (metrics) for quality of care and attach financial rewards and penalties to incentivize doctors and hospitals to maintain high quality of care. Metrics and financial incentives will be increasingly targeted to “outcomes” of care.
    • Three big problems with this:
      • Outcomes depend more on patient characteristics than physician effort, and P4P based on outcomes is an incentive for doctors to avoid sicker, more complex patients.
      • Health care is too complex and requires too much individualization to allow for valid, meaningful measures of quality for more than a small portion of health care. “Streetlight effect.” (e.g. HEDIS for psychiatry)
      • Using money to motivate doctors to achieve metrics of questionable validity is a very poor strategy to improve quality of care or reduce cost.
    • P4P for hospitals and for individual doctors don’t align easily.
      • Hospitals are penalized by Medicare for excessive readmissions within 30 days. They need their high-risk patients to have access to timely, effective out-patient follow-up care.
      • Doctors with P4P based on outcomes of care have an incentive to avoid patients at high risk for readmission, who will bring down their individual “outcome” scores.
  • Motivating doctors to achieve higher quality, more cost-effective care
    • Intrinsic vs extrinsic motivation
    • A conscientious doctor always knows far more about what would improve the quality of care for their patients than a health plan or ACO and all its metrics.
    • Consequences of P4P:
      • Measures for “performance” grossly inadequate
      • Promotes physician greed (“extrinsic” motivation)
      • Gaming documentation for payment
      • Corruption of health care data
      • Fraud and abuse
    • Daniel H. Pink’s book, “Drive” on motivation and behavioral economics
      • Carrots and Sticks: The Seven Deadly Flaws
        • They can extinguish intrinsic motivation
        • They can diminish performance
        • They can crush creativity
        • They can crowd out good behavior
        • They can encourage cheating, shortcuts, and unethical behavior
        • They can become addictive
        • They can foster short-term thinking. 
      • Fostering Motivation:  
        • Autonomy (practice within scope)
        • Excellence (continuous improvement)
        • Pursuit of a goal larger than oneself.  

Outcomes of ACOs and P4P so far:

  • Large studies and meta-analyses of all available studies to date on P4P show no net improvement in broad measures of health outcomes.
  • Medicare’s flagship “Pioneer” ACO program - outcomes after 2 years:
    • Marginal improvement in their quality metrics (which are narrow)
    • More than half the ACOs dropped out or lost money
    • Savings for the remaining ACO’s amounted to about 0.5% of Medicare spending, but when bonuses and administrative costs to run the ACOs were included (1-2% of total cost), they showed a net increased cost of 0.5-1.5%.
  • A Large multi-payer “Patient-Centered Medical Home” study, relying heavily on P4P, showed no net improvement in quality, utilization, or cost.
  • Multiple studies are showing fatal flaws in the theory and implementation of P4P and ACO’s.
    • Low validity of metrics
    • Too much of ACO specialty care obtained outside ACO
    • Most ACO bonus payments go to “free-riders” already providing cost-effective care, costing a lot more than any possible savings from reducing unnecessary care.
    • Small 1-2 MD practices do much better than larger practices and integrated systems of care (i.e. ACOs) at reducing ER usage and preventable hospital admissions.

Workforce and Access Problems:

  • Hawaii is short 700 MD’s, and our physician workforce is older than average so many are expected to retire in the next few years
  • Complexities of billing, payment, and dealing with managed care restrictions are deterring newly trained doctors from going into primary care specialties.
  • Medicaid Managed Care has made access to physicians much worse for the very population that needs effective care the most.
  • Escalating co-payments for drugs are forcing many patients not to follow through with effective treatment.
  • Payment and delivery system reforms (ACOs, P4P) are likely to aggravate problems with recruitment and retention of primary care doctors, and also psychiatrists and other shortage specialties.
  • ACOs and attempts to improve quality of care can’t possibly succeed without adequate access to out-patient care in the most cost-effective settings. This is just not in place, and especially for the highest risk, most costly Medicaid population.

What does work to achieve the “Triple Aim” goals?

Improved quality

Improved population health

Reduced cost

  • Three Step Strategy:
    • Assure access to cost-effective care for everyone
    • Simplify and streamline administration
    • Use administrative savings to bring down prices paid for health care
  • Reduce number and complexity of plans – single-payer would be ideal
  • Simplified, comprehensive benefits
  • Minimal or no cost-sharing, especially for low income
  • Pay doctors and hospitals the same regardless of source of funds for an individual patient
    • Greatly reduces access problems for Medicaid (and Medicare) patients
    • Has been shown to achieve large savings for Medicaid and Medicare
  • Physician pay should be as incentive-neutral as possible (instead of keeping perverse incentives and trying to correct them with equally perverse counter-incentives.)
    • Salary
    • Capitation (just for that doctor’s services-not for total cost of care)
    • Fee-for-service based on time (instead of CPT system and RBRVS).
    • Would lead to large reductions in physician practice overhead cost
  • Hospitals should be paid with global operating budgets
    • Eliminates incentives to over-treat
    • Eliminates administrative costs for billing and collections
    • Eliminates cost shifting among insurance plans
    • Eliminates gaming of charges for every little thing
    • Assures equal pay for all patients whether funded by Medicaid, Medicare, or commercial insurance
    • These measures could save 15-20% of total hospital budgets.
    • Administrative savings and equalization of pay for Medicaid, Medicare, and commercial patients could save the Hawaii Health Services Corporation hospital system from bankruptcy.
  • Incentive-neutral pay for both doctors and hospitals would greatly reduce opportunities and temptations for fraud and abuse, saving even more administrative cost.
  • Moving health care from Worker’s Comp, Auto Insurance, Medical Malpractice, and other kinds of liability insurance to a universal health care system would reduce the cost of all these kinds of insurance by about 2/3.
  • Use administrative savings to reduce prices without hurting providers of care.
  • Then, like every other industrialized country with a universal health care system, we could improve quality of care, improve population health, and reduce total health care spending by 40-50%.