October 11, 2015

Challenges in Reducing Costs Under the New Health Insurance Reform Legislation

Recently, I published a lengthy blog responding to Congressman Chris Murphy, a blog in which I took the position that the national health insurance reform legislation was flawed because it simultaneously increased the guaranteed access to health insurance nationally, but left critical cost management components to future actions by the Secretary of Health and Human Services and to states and localities. To me, that was exceptionally risky for two reasons:

  • It’s no different from any other situation in which you commit to spend money before you have it, and when you have confidence that you can get it, which, by the way, is why Bear Stearns and Lehman Brothers went bankrupt: they had fixed debt and contractual commitments, but found the short-term markets for getting cash temporarily closed to them.
  • The obstacles to the cost reductions that could take health care spending down are formidable and, perhaps, unconquerable.

Atul Gawande, a brilliant professor at Harvard Medical School, made both of these arguments in a short comment in the April 5, 2010, issue of The New Yorker , in an article entitled “Now What?”

Relative to the first argument, he states that, whereas opponents of the legislation portrayed it as a “government takeover,” the legislation, in his words, “counts on local communities and clinicians for success.” He uses many examples to point out how local communities will have to function differently in the future from what they have in the past to make health care costs come down.

His specific example addresses exactly what concerned me when I wrote my original commentary on the legislation and later when I responded to Congressman Murphy. He described a very effective prevention strategy adopted by Children’s Hospital in Boston to reduce the rate of readmissions for children’s asthma by 80%. This strategy included not only post-discharge monitoring, but also home audits to find sources of pollutants that triggered asthmatic attacks and even the provision of vacuum cleaners to families.

However, Gawande pointed out that admissions for asthma attacks were one of the leading sources of revenue for the hospital and that the hospital would have many more unoccupied beds. As he points out, “So far, neither the government nor the insurance companies have come up with a solution.”

Gawande correctly points out that the health reform process has just started, and that these kinds of problems make the future “scary” because there is no obvious and simple path to driving thousands of communities to make decisions like these which are necessary for the promise of this legislation to be fulfilled.

From Congressman Murphy’s standpoint, as well as the standpoint of those who voted for the legislation, their view has to be that, at least, this legislation got things started, and, for that, we should be grateful.

I agree that it was better to enact imperfect legislation than to do nothing, but this legislation creates such an imbalance between inevitable spending on a currently flawed system and highly uncertain, but necessary, reforms to that system. I believe we could have done better.

Nevertheless, our lawmakers have acted and we now have to move on and figure out how to stimulate those thousands of state and local reform actions that will mitigate the cost this legislation will create.