Many commentators state that the U.S. does not have a single health care system. They are correct: there are really eight different “systems.” Regardless of what happens with the legal challenges to the Affordable Care Act, I believe the U.S. healthcare system will continue to evolve in all eight in the way I describe below.
- The employer-based system will shrink, but still be a large part of the system. Those employers who continue to offer health plans will create integrated single-employer or multi-employer accountable care organizations.
Some large self-insured employers will move their employees to the newly created state and federal health exchanges. They will pay taxes or penalties to do so, but it will be better economically, in the short term, for them not to have responsibility for employee health care costs.
However, many employers will invest in the health and wellbeing of their employees, and derive competitive advantage from doing so. Why? For employers free to design an optimal healthcare system, including onsite clinics providing comprehensive primary care and developing a selective specialist provider and hospital network, the ability to design a good healthcare system gives them much more control over their employees’ health status, sense of wellbeing, and health benefits costs.
Some employers, like American Express, are even building care delivery networks outside the United States, in countries that have single-payer systems and that have government-employed doctors and government-owned hospital networks. The staff physicians for these employers provide far better care, which is very attractive for talent recruitment and retention.
What employers will opt out of offering direct health care coverage? Companies that have lost control of health care costs, such as those with exceptionally generous collective bargaining agreements, will welcome the chance to offload their entire population to health exchanges. In many companies, CEOs simply do not understand that they can manage employee health and wellbeing and deliver shareholder value. In others, corporate benefits departments do not want to assume responsibility for health care cost reduction.
Employers who retain health care coverage will develop better provider networks, and may even create multi-employer consortia. This is happening in Southeastern Wisconsin, with Quad Med, Briggs & Stratton, Miller Coors, and Northwestern Mutual Life. It is also happening with a consortium of labor unions in the New York City in the UNITE Here Health Center.
What will these employer-based health plans look like?
- They will migrate toward consumer-directed plans with high deductibles and co-pays for plan participants;
- Plan participants will be given significant incentives for making the best choices for their health, health care, and health benefit plan spending;
- Plan participants will be given continuously improving tools for self-managing health, including consumer-controlled personal health management systems like Dossia, clinical decision support tools, choices among health and wellness vendors, and good information and technology tools for continuously monitoring health; and
- Employers will put more decision power into the hands of plan participants and will force health plans to market directly and successfully to consumers to secure revenues.
These employer-based “accountable care” systems will be among the world’s best health care systems.
- The wealthiest Americans will join concierge health care systems.
The wealthiest Americans will leave the core systems of which they are a part and pay extra for concierge medicine. They will consult with physicians who accept no Medicare patients and who direct their patients to the world’s best care, wherever available. These Americans may actually be consumers of medical tourism, when that care is superior outside U.S. borders.
There is precedent for this. In the UK, the top layers of UK society initially acquired supplemental health insurance through BUPA and, more recently, seek out care wherever it can be best delivered, including India, Singapore, and the United States. Medical tourism started to meet the demand from single-payer systems abroad, but it will get bigger here.
There will even be increased medical tourism within the United States. Concierge doctors will refer patients anywhere in the country in which they can secure the best care. This system will also deliver exceptional care.
- A small part of the population will have access to exceptional, integrated health care from world-class, integrated provider-based “accountable care” organizations like Kaiser-Permanente, Intermountain Healthcare, Virginia Mason, and Geisinger.
Some Americans will receive world-class care because of the lucky accident of where they are living. Those Americans in the seven states in which Kaiser-Permanente is licensed to do business, or in Utah, where Intermountain Healthcare is based, or in Washington state, where Virginia Mason is based, or in Southeastern Pennsylvania, where Geisinger is based, will get excellent healthcare.
Other systems around the country will attempt to copy them, and some will succeed, but most will have difficulty, because, for the most part, world-class accountable care organizations will have been created in business models in which the primary care physicians are staff doctors paid a salary and in which there are tightly controlled specialist networks. These systems work because they effectively limit patient choice by steering patients into a single managed care network. They will stop seeming like a satisfactory alternative when the limitation on patient choice produces bad outcomes in a handful of high visibility cases.
There is precedent for this. Back in the 1990’s, payers were effectively controlling healthcare costs and utilization through tightly managed care networks. These systems also delivered a reasonable level of care quality. However, they were dismantled because there were a variety of high-profile cases in which it appeared that the healthcare delivered was of inferior quality because the patient could not select the provider of choice.
Most government-run systems outside the United States use some form of provider choice control or give patients no choice as to providers. Some have “gatekeeper” systems in which the patient cannot directly consult a specialist. In the United States, such systems can survive only if they can avoid getting legislated or regulated out of existence because of the appearance of delivering inferior care. They survive, but are highly vulnerable to being dismantled.
- The Veterans Administration and the Military Health systems will survive, but the percentage of care delivered to military personnel and to veterans through government-employed healthcare professionals will decline.
Many people have used the Veterans Administration and Military Healthcare systems as models for great healthcare at an affordable cost. They have electronic health record systems. They take advantage of broad clinical learning. They deliver convenient and low-cost care through staff physicians and nurses paid on salary, and they develop long-term relationships with their patients.
However, because premiums paid by users are so low, and raising the prices paid by veterans and military families is politically suicidal, the federal government will reduce the financial burden of this system by quietly reducing the supply of care, rather than working to reduce demand. They will shrink the size of facilities, the size of their staffs, or the hours of service, rather than increase the cost of accessing them. Although shrinking a hospital or outpatient center is politically challenging, demanding that users increase their premium payments by several thousand dollars a year would be politically suicidal. For example, the military health care system charges a 60-year-old military retiree $426 per year in premiums, a ridiculously low payment, considering that this type of retiree costs the system in excess of $10,000 per year on average. However, raising premiums to even $1,000 per year is the metaphorical “third rail” issue; politicians will not touch it.
- The lowest income, most economically challenged parts of America will get best served from a broadened network of federally qualified community health centers.
The best place for low income Americans dependent on Medicaid or other safety net health care programs is at community health centers. These centers are generally better equipped to handle the complex problems low-income Americans face, particularly those with language and cultural barriers.
The top community health centers have expert resources to assist patients in applying for government benefit programs, in managing transportation and childcare issues, in addressing related social service issues, such as domestic violence, and overcoming language and cultural barriers. They also tend to manage appointments for patients with more unpredictable schedules far better than a traditional private health practice. Finally, they develop expertise in managing the different kinds of health problems very poor people have, compared with their non-indigent counterparts.
The Medicaid legislation passed in 1965 contemplated that Medicaid and Medicare patients would be part of mainstream health care systems and that Medicaid and other safety net programs were simply ways of paying for health care for poor people. We now know, from nearly five decades’ experience, that low income people have other overwhelming life challenges. Their health care, economic and family needs are different, and are interrelated. They need expert care a community health center is better equipped to deliver.
Medicaid and other safety net programs could have paid more for health care, and enabled private practice physicians to handle Medicaid patients, but the reimbursement rates for Medicaid providers are so low that private practice physicians have increasingly stopped seeing Medicaid patients.
Therefore, the community health centers will end up handling them, and will actually do a reasonably good job delivering care.
- Medicare patients will be concentrated in fewer healthcare practices and will create the biggest headaches for them.
In trying to address budget deficit issues, the Obama administration and its successors will try to reduce what Medicare pays for health care. This will cause even more medical practices to drop Medicare patients, because these patients have more complex health challenges for which the doctors will be paid less.
We continue to see a hemorrhaging of primary care physician populations, which leaves the Medicare populations even more poorly served by private practice physicians.
Medicare patients will seek out more care at retail clinics for minor illnesses or injuries, at urgent care centers for serious conditions, at emergency rooms for acute conditions.
We will see shrinkage of the physician population with the skill and will to take on older patients with more complex health care challenges.
- Most of the remaining non-elderly civilian population will get progressively poorer care by enrolling in health exchanges and receiving care from a decreasing pool of primary care physicians and specialists.
Most Americans who work in small businesses, who freelance or are self-employed, who are unemployed, or who work for large companies that have abandoned health care coverage will end up in health exchanges. They will get a progressively poorer quality of care from private practice physicians. They will wait longer for care, have long waiting times in doctor’s offices and hospitals, have short visits with healthcare providers, get too many diagnostic tests in place of more careful physical examinations because the fee-for-service system will survive and drive dysfunctional behavior by physicians and hospitals.
They will also visit urgent care centers and emergency departments more than they should, because these parts of the healthcare system will be accessible to them.
While the quality of care delivered through this government-regulated system will decline, the cost for patients will increase significantly. There will be high deductibles and co-pays, and the risk pool in this population will get worse over time. The state-run exchanges and any other system created and managed under the Affordable Care Act or any regulations emerging from it will receive those members not wanted in other systems. For example, employers with already healthy populations will retain their health plans; employers with unhealthy populations will happily dismantle their health care coverage and drive employees to the exchanges. There will be an “adverse selection” problem.
- Despite the government’s best efforts to get everyone in an insured health care system, there will always be Americans who refuse to secure insurance and will use a combination of self-pay resources for routine care and the emergency departments for catastrophic care.
The titanic battle between proponents and opponents of the individual mandate, that is, the requirement that individuals either purchase health insurance or pay a penalty for not doing so is constitutionally and politically critical, but arguably irrelevant to whether our country will end with everyone insured.
The individual mandate design created by the Affordable Care Act, as well as the Massachusetts design, both are flawed in driving individuals to secure health insurance because the penalties an individual has to pay if he or she does not elect to secure insurance are inadequate. I have commented on this more than once: if an individual driving into New York City were to have a choice between paying $40 to park legally in a garage or paying a $20 parking ticket for parking illegally on the street, the vast majority of individuals would elect to park illegally. It’s nice to have a symbolic penalty, but such a penalty works only if the cost of noncompliance is close to, or better yet, greater than, the cost of following the law.
Because our elected officials did not have the courage of their convictions to create meaningful incentives or penalties for getting every individual covered by health insurance, a significant part of the population, many of whom will be young, healthy people who usually subsidize older, less healthy people, will remain outside the health insurance system.
They will actually have more attractive health care options available to them. They will access retail clinics for treatment of minor illnesses and injuries. They will have more retail choices for both immunizations and periodic screenings. They may even be able to access medical tourism options for surgical procedures that would otherwise be prohibitively expensive, even in an insured health care system. They will continue to access acute care at emergency departments.
They really do not need to secure health insurance until they have a condition that is both expensive and chronic, one in which emergency department care is inadequate. In the past, they would not have risked waiting to get health insurance until getting a chronic condition, but the Affordable Care Act eliminates any barriers to them securing insurance whenever they can no longer operate in the uninsured system.
Oddly enough, absent a much more punitive individual mandate, the Affordable Care Act may actually drive more individuals into the uninsured system for longer stretches of their lives.
It is very difficult to reform the multiple health care systems that, in aggregate, employ over 15 million people, most of them in middle-class jobs, that contribute almost $3 trillion per year to our economy, and that are perceived to deliver two public goods, healthcare and insurance protection against catastrophically high healthcare expenses. Change will come from a combination of evolutionary development of better care for those who can acquire it outside the systems heavily regulated by the government and increasingly complex and dysfunctional government interventions.
The goal of universal healthcare equitably available to all Americans will not happen. Those smart, rich, or resourceful enough to demand great care will get it; the remaining Americans, overwhelmed in trying to manage their daily lives or not sufficiently “street-smart” or rich will be lucky to get adequate, affordable care. The more government tries to intervene to achieve fairness or to correct fraud, waste, and abuse, the more the system will create new opportunities for fraud, waste, and abuse. Moreover, as noted above, the government’s misguided attempt to eliminate denials of coverage for preexisting conditions will provide a perverse incentive for more individuals to drop out of the health insurance system until it becomes economically untenable for them to stay out. Every government intervention will result in a new set of “gaming” opportunities.
Some people would say that we have a crisis in health, healthcare, and health insurance, and that the crisis should be a call to action. Unfortunately, the history of our representative form of government would suggest that crises are noticed and acted upon when they are triggered by highly visible events, coupled with strong leadership and large movements to take advantage of them.
Moreover, even when there is a crisis, there has to be an agreed-upon paradigm for how to think about the issue. We do not have that:
- We do not have a consensus on how to resolve the healthcare crisis.
- We want everyone to have health insurance, but are not prepared to take the hard steps to penalize those who refuse to buy it.
- We support the goals of unlimited patient provider choice, unlimited access, very limited penalties for irresponsible and destructive patient behavior, and the belief that more access to care always yields better care and better health.
- We know that unlimited access and unlimited choice yield bad economics, but do not fully understand that most of the cost of healthcare comes from preventable and controllable decisions that should be penalized more; and
- We have exceptionally little understanding of the degree to which more care often means worse care and poorer health.
Our system will simultaneously improve in certain respects and deteriorate in many others for the next decade, but I am confident that it will settle into a complex, multi-segmented system like what I have described.