Health Care: If We’re Paying, We Expect Results

In their panic to author health care legislation, Congress left cost containment on the cloakroom floor.  If the actual premiums, provider payments, related federal and state spending and subsidies had been calmly publicized before voting in 2010, prudent legislators would have tabled the Patient Protection and Affordable Care bill (ACA).

As we approach 2014, few of the financial details are emerging, but some background factors are becoming clear.  Total spending on health care grew at 3.5% during 2009-2011, much slower than the 5.9% annual increase over the prior ten years.  This slowdown is welcomed and the CBO quickly seized upon a $382 billion reduction in estimated 10-year federal spending on Medicare and Medicaid.  Causes for the spending slowdown are:

  • Belt-tightening due to the 2009-2011 recession (1/3rd of the  2.4% drop);
  • Some employers restructured plans to shunt more cost onto employees (accounts for 1/5th of the 2.4% drop);
  • Fewer medical imaging devices and newfangled drug introductions; and,
  • Unspecified other factors.

ACA does not always encourage health coverage.  Employers are expected to reduce scheduled work hours to levels that are exempt from the obligation to offer health coverage, or to discontinue offering health coverage and pay the federally mandated fine.  The employees who lose health benefits might independently buy health insurance, or not.  Just 8% of people will be eligible for federal subsidies.  Some will elect to pay a fine and remain uninsured – knowing they will not be refused care at a local emergency room.

The amount of premiums paid, the total of subsidies, payments for uninsured care, patient morbidity and average charges by providers will determine the premium and out of pocket costs that consumers face under ACA.  These amounts are not revealed publicly yet.  Perhaps politicians are waiting for “the right budget moment” or studying the implications of Oregon.

Many of the Americans receiving subsidies for health coverage will be placed in Medicaid.  Oregon randomly assigned Medicaid or “no coverage” (the control group) to a large number of patients.  After two years, Medicaid patients did slightly better on two measures – hypertension and diabetes but not at a level considered statistically significant. The Medicaid patients were somewhat less depressed, an outcome ascribed to the reduction in financial stress.  There are health interventions that can reduce chronic illness and improve health status, but Oregon’s Medicaid patients either did not find them or did not need them.  Overall, the Medicaid patients did not achieve improvement in physical health.

The Oregon study reveals that “peace of mind” was the main yield from its Medicaid spending spree.  This must be distressing to those who stridently demand Medicaid-like plans for all.  The Oregon study is a strong argument for changing from a fee-for-service model to a fee-for-results model.  Under a fee-for-results model, the lack of any net improvement in physical health would have tightly constrained payments to providers – without limiting the medical interventions needed by those with illness.  Perhaps it is not too late to insist on fee-for-results in federal health care spending – and it is definitely not be too late to do something about “no improvement” designs that cost us hideous amounts.

Alan Daley is a retired businessman who lives in Florida and who writes for The American Consumer Institute Center for Citizen Research

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