Observation Deck

Searching for Silver Bullets in Healthcare

When it comes to 'fixing' U.S. healthcare, there is no simple cure. What will it take to make lasting, positive change?

For decades, politicians, health policymakers, payers and academics have been searching for solutions to the U.S. healthcare system’s growing cost, quality and outcome challenges. Statements such as “the U.S. healthcare system is broken” are frequently used to describe the current state. Healthcare has and remains a major platform for nearly every presidential campaign and candidate, and most others seeking a national political office. Starting in the 1960s with the creation of Medicare and Medicaid, a variety of major legislative and regulatory efforts have been introduced with a goal of “fixing” the U.S. healthcare system. Despite those efforts, arguably all have failed in some way to keep pace with the ever-changing market.

Over the history and evolution of healthcare, there have been numerous attempts to solve real or perceived problems by using a new law or regulation as a tool or, sometimes more accurately, a blunt instrument. Each time, policymakers are faced with complex, confounding variables, which over time lead to a series of unintended consequences. People want an easy solution, but there simply isn’t one. The challenge of finding a single, silver bullet solution is rooted in a very complex, multi-variate problem, where there are complicated and competing interests and incentives from a large and varied set of stakeholders.

Brief History of U.S. Healthcare: Everything New is Old

A single-payer/socialized model of healthcare is an ever-present discussion from the progressive movement but is actually a very old idea. Before World War I, there were a number of state-driven initiatives to legislate “compulsory health insurance.” In the progressive era of the early 1900s, the socialist party endorsed compulsory health insurance, based on growing socialistic health movements in Europe. In 1912, Theodore Roosevelt’s “progressive party” included compulsory health insurance as a campaign initiative.

By the 1920s, both labor unions and the American Medical Association (AMA) opposed both voluntary and compulsory health insurance, group medicine and other forms of control between the patient-physician relationship. The AMA started referring to these proposals as “socialized medicine” and used medical journals and the general press to publicly denounce and oppose it.

Modern healthcare is generally considered a product of World War II, but things were developing much earlier. In the late 1920s, Baylor Hospital offered a “health insurance” plan to public school teachers in Dallas: 50 cents per month covered all hospital visits and care. This model was arguably the first ACO and subsequently evolved into Blue Cross, expanding across the U.S. By 1935, about 1.5 percent of the population had self-paid health insurance and about 48 U.S companies paid for some type of employee health insurance.

World War II was a major catalyst for health insurance. The Stabilization Act of 1942 established the wage cap, which limited employer ability to use wages to attract and/or retain employees. This was the vehicle that introduced employer-paid health insurance, as companies starting using fringe benefits, including health insurance to subsidize wages. In 1943, IRS regulations changed to allow employer-paid health benefits to be tax-free for both employers and employees, expanding the value of this benefit over wages. By 1965, 75 percent of the U.S. population was covered by some form of health insurance – before the introduction of Medicare and Medicaid.

1965: Title XVIII & Title XIX of the Social Security Act – Medicare & Medicaid

A major element of Lyndon Johnson’s “Great Society,” Title XVIII is considered by many to be the most significant healthcare legislation. It created “Health Insurance for the Aged and Disabled,” commonly known as Medicare, which was established as a health insurance program for aged persons to complement the retirement, survivors and disability insurance benefits under Title II of the Social Security Act.

Under the same act, Medicaid became law in 1965 as a cooperative venture jointly funded by the Federal and State governments to assist States in furnishing medical assistance to eligible needy persons. In 1967, Congress predicted that the Medicare program would cost about $12 billion in 1990; the actual Medicare spending in 1990 was $110 billion. In 2018, total Medicaid spending exceeded $600 billion.

We have been on a roll since 1965:

  • HMO Act of 1973 – legal framework for prepaid health plans (HMO).
  • Tax Equity and Fiscal Responsibility Act of 1982 – Mandated the development of a prospective payment methodology for Medicare reimbursement to hospitals, including a national DRG-based hospital prospective payment system for all Medicare patients.
  • OBRA 1987- Federal Nursing Home Reform Act creates a set of national minimum set of standards of care and rights for people living in certified nursing facilities. Also introduced DME fee schedule & modality neutral oxygen payment.
  • Health Insurance Portability and Accountability Act of 1996 (HIPPA) – Protects health insurance coverage for workers and their families when they change or lose their jobs. Health Care Privacy and Data Security. Protect health data integrity, confidentiality, and availability (accountability). Electronic Data Interchange (EDI) and Code Sets.
  • Balanced Budget Act of 1997 – Cut home oxygen payment by 30 percent. Introduced RUGS patient scoring and classification system Prospective pay for Home Health Nursing and standardized reporting using the Outcome and Assessment Information Set (OASIS).
  • Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) – Created the Medicare Part D prescription drug benefit.
  • Deficit Reduction Act (DRA) 2005 – $500 million reduction in Home Oxygen Therapy reimbursement by capping rental periods to 36-months starting 2009. Reduced capped rental period on certain HME to 13 months.
  • Medicare Improvements for Patients & Providers Act of 2008 (MIPPA) – $3-4 billion (9.5 percent) reduction in HME reimbursement nationwide. Required the implementation of a Competitive Bidding program for select HME.
  • 2011 Competitive Bidding Program: Round 1 Rebid – $8.4 billion (32 percent) reduction over three years in select HME in nine metro areas starting January 2011.
  • 2013 Competitive Bidding Program: Round 2 – $12.84 billion (45 percent) reduction over three years in select HME in 100 metro areas starting July 2013.
  • 2014 Competitive Bidding Program: Round 1 Recompete – $12.9 billion (37 percent) cut over three years in select HME in nine metro areas starting January 2014.
  • 2014 Competitive Bidding Program: Nationwide Expansion – $4.4 billion reduction over five years in select HME nationwide started January 2016.
  • The Patient Protection & Affordable Care Act of 2010 – Reforms private insurance, especially for individuals and small-group purchasers. Significant expansion of Medicaid. Fundamentally change how health care is provided; HRRP, ACO, VBP, etc.

Common themes in health policy:

  • Expand and improve access to healthcare services for all stakeholders
  • Fix/improve Medicaid, Medicare A, B, C & D, SCHIP
  • Create more standards, regulations and controls around the provision of healthcare services
  • Drive care models in specific directions, too often focused on cost reduction
  • Lower the cost of care for the payer
  • Prevent fraud, abuse and over-utilization
  • Lower the cost of care for the payer
  • Prevent fraud, abuse and over-utilization
  • Lower the cost of care, period

Silver Bullets or Blanks?

Most initiatives demonstrate evidence of being both a silver bullet and a blank. Healthcare in the U.S. is extremely complex; there are so many variables that influence and impact every element of the system. This is a recipe for a series of unintended consequences, which there are so many from the aforementioned laws and regulations it would take a much longer article, more likely a book to review. A few that will stimulate hours of discussion and debate include any government funded entitlement program, diagnosis related groups (DRG), managed care, competitive bidding, readmission penalties, ACOs, and the major disconnect and competing incentives between healthcare organizations and stakeholders.

Why don’t these many complex initiatives yield the outcomes initially hypothesized? There is no simple answer, but it is clearly influenced by two important variables—medicine and human behavior. Medicine is not a pure science, it is a mix of art and applied science. Even with the continued growth of evidence-based medicine and standardized care, there are always outliers. Humans are complex organisms that don’t always respond to treatment as intended. More importantly, humans are human and don’t always follow the care plan or even generally healthy and good behaviors. Add these together and you get unintended outcomes. That said, I would argue human behavior has a disproportionate impact on outcome for most healthcare issues.

Healthcare is also a business, one with large, complicated and expensive overhead. Lowering reimbursement, along with adding excessive regulatory oversite often triggers operational/business responses that may not be ideal for healthcare consumers and other stakeholders, as many organizations are forced to look for new ways to replace the lost revenue and reduce the uncovered operating costs.

Competing, conflicting and often perverse incentives between health systems and providers, which are often the result of policy and regulation, is a major complicating factor and adds nothing but complexity and cost to the already overly complex and costly system. Although the ACO is a model of care intended to align various provider functions with common goals and incentives, this one is still in a test tube, with early data showing mixed results.

What will work? Despite the push for a single-payer/socialized model, the evidence from countries with similar models isn’t great. Most of the mature, socialized models, such as those in western Europe, are struggling financially. While they often outperform the U.S. in general, primary care services, these systems are often overburdened, underfunded and struggling with providing complex care and services, especially those considered elective.

There are no silver bullets, but there are some common sense ideas:

  • Aligning incentives across the healthcare continuum. Reduce the competing and conflicting incentives that drive activities and behavior at each level of the system.
  • Force transparency in the cost, quality and payment process. There is information “asymmetry” in healthcare; the seller knows more about the quality of the product/service than the buyer. This often results in the buyer over paying and potentially, overbuying. This is exaggerated in healthcare, when the bill comes long after the service and is partially or completely paid by a third party.
  • Free markets drive healthy competition, drive up quality and rationalize cost. Allow national competition for health insurance. The current system is an oligopoly that limits competition to within a state.
  • Develop more focus and incentives for preventive medicine & wellness. Change the paradigm from disease management and acute interventions to focus on personal health accountability, diet, exercise, and preventive medical care. Prioritize wellness over sickness.
  • Shift more responsibility and accountability to the individual. Educate and empower consumers to make informed, intelligent decisions. We should be “entitled” to make educated, informed decisions about our healthcare.

There are no easy answers. We must think differently about how we provide healthcare and stop looking for silver bullet solutions.

This article originally appeared in the Nov/Dec 2019 issue of HME Business.

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