Health Reform Has Passed. Now What?


So Health Reform has passed, and the world has not come to an end.  It has been a very interesting process to observe, with twists and turns, ups and downs, and all sorts of drama.  It was criticized, debated, almost written off (after Scott Brown’s election), resuscitated, transferred out of the figurative ICU and finally passed.  The manner in which it was passed was not the same as with the passage of Social Security in the 1930s, and Medicare in the 1960s.  Those both had substantial minority party participation.

In any case, passage has occurred and regardless of political inclinations, the president must be congratulated for an achievement which has stymied other capable presidents for decades.  No, the reform is not perfect, nothing is.  Considering public policy, the initial effort must be seen as a beachhead.  You get something passed and you build upon it.  Over time, the idea is that good items will be enhanced, less effective ones will be diminished, and the eventual result should be better than the initial effort. 

In terms of the social good by allowing underinsured and uninsured persons to receive care, this has been a noble effort.  The current system does not do these people justice.  But the current system acts the way it does in large part by responding to monolithic stimuli which are in large part driven by over-bureaucratized systems of care.  This new system is very likely going to add additional layers to the problem.  It will also have a predictable effect on costs; they will increase. 

Over the short term, this is not unexpected, nor necessarily a huge problem.  However, the system must undergo substantial changes in order to bring about cost control, and effective measurement of outcomes.  Here is one way in which this might occur:

  1. Widespread Hospital-Physician Integration:  With worsening pressures on reimbursement (increases lagging inflation, volume increases no longer possible), independent small practices will close.  Larger group practices will become much more common.  New physicians will not even attempt solo private practices in most cases.  Practices that close will be folded into hospital systems.  This has been occurring for a few years now and is increasing in scope. 
  2. Large Employers “Self Insuring”:  Rather than writing huge checks to purchase comprehensive insurance for their employees, large companies may find it more cost effective to use a combination of employed primary-care providers to manage routine care, and supplement this with high-deductible insurance coupled to Health Savings Accounts.  That way, employees will use the company doc for small things, with insurance being tapped for the shattered knee or burst appendix.  The HSA will force patients to be more discretionary with their use of nonemergency services.
  3. Contraction of Hospital Supply and Regional Global Payments:  This is something of a guess, but once we have the majority of providers functioning out of large institutions as employees, CMS may start replacing the fee-for-service model with periodic block payments.  These would be made to hospitals and be based on the expected service volume/acuity, indexed to the local population size.  Hospitals will then have to determine what specialties to emphasize, the makeup of each department, and most importantly, cost effective protocols for managing each clinical problem.  CMS or similar overseers will monitor outcomes and make sure that payments are realistic.  Of course, this creates a whole new sort of system of incentives which can change behavior, but using data from fully integrated systems as well as from other countries can help manage this. 

Will this be the future?  Will such changes cause the emergence of a two-tiered healthcare system?  Its impossible to know for sure, but items #1 and #2 have already been occurring.  Item #3 exists in some foreign systems, and is sort of like a fully integrated system such as Kaiser or the VA.   The emergence of a second tier healthcare system will depend to a great extent on how difficult it is for providers to leave the current system once they are more fully integrated.  It is likely that the system will be designed to make it difficult to be on the outside.

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