The Reform Legislation:
The access expansions are a significant step forward for providing universal “access”, but this legislation will exacerbate the “cost of health care” crisis. There are a number of provisions in the legislation will make health care coverage even more expensive for families and small businesses. Ultimately, the success of health care reform will depend on whether or not health care costs are brought under control. My best guess – that will require a combination of “rationing” for high cost services (specific drugs, end of life heroic efforts, etc) and new taxes for all us to cover the bill.
Many of the most significant insurance market reforms, coverage expansions, and reforms aimed at promoting affordability do not go into effect until 2014. Several provisions that go into effect before 2014 could have the unintended consequences for millions families and small businesses.
For example:
- Many of our country’s best primary care physicians will likely discontinue their participation in insurance programs and will only accept Cash, AmEX, Visa, MasterCard, etc. I don’t blame them. When you consider how significant payment cuts will be to doctors, the shortage of MDs, and the Millions of new people flooding the system – what would you do if you were the MD? I know dozens of medical practices that have already gone to a “cash only” policy – I expect that to become the norm.
- Many of the immediate reforms require government regulations, state law changes, state insurance department approval and/or guidance from the Department of Health and Human Services before they can be implemented. That means, some government staffer will need to write the policy and procedure…. Sound fun?
- Health plans and employers will have to make policy and contract revisions, IT system upgrades and modifications to employee benefits. Don’t expect benefits to get better…
- Enacting arbitrary administrative caps next year before the insurance market reforms go into effect in 2014 will cause unintended consequences that could diminish competition and choices in the individual market. I expect something just short of organized chaos for the first 6-12 months.
- The proposed “Medical Loss Ratio” standards do not reflect the reality of today’s voluntary individual insurance market and will likely be difficult to meet. In today’s individual market, many people purchase health insurance when they anticipate needing it and advisors play an essential role in assisting people in securing coverage that best meets their needs and budgets. As a result, today’s individual insurance market experiences significantly higher structural administrative costs than group insurance markets.
Specific Concerns:
My specific concerns are:
- Lack of Cost Containment: The new law Does Not Bend the Cost Curve – Health reform legislation that does not address underlying medical costs cannot be sustained. Unfortunately, this legislation lacks a system-wide approach that would actually bend the cost curve downward.
- Pilot Programs – The legislation takes a very timid and limited approach to addressing ways to control costs and improve quality. The legislation needs to take bolder steps by implementing throughout the entire health care system innovative payment and delivery system models that will help move the nation away from reliance on a fee-for-service payment structure and incentivize performance improvement across the board. This includes bundling the post-acute continuum, etc.
- Medical Malpractice Reform – The legislation fails to protect doctors who follow established best practices and implement safe, accountable care models based on the latest scientific evidence. Lawsuits will continue to drive up costs.
- Comparative Effectiveness – Comparative effectiveness research needs to look at the safety, clinical effectiveness and cost effectiveness of tests, treatments, procedures, and prescription drugs so that patients and their doctors can make the most informed health care decisions. To do so requires funding…
- Premium Tax: The legislation imposes a new $70 billion premium tax that the Congressional Budget Office (CBO) has said will be passed on directly to patients. This will raise the cost of coverage for individuals, families, and employers.
- Weak Coverage Requirement – The legislation will encourage people to wait to purchase coverage until they are sick, which unfairly penalize those who currently have coverage. According to CBO, 23 million Americans will remain uninsured once this bill is fully implemented.
- With the removal of waiting periods, pre-existing condition clauses, no annual and no life time limits and freedom to enroll at any time, how will states ensure that insurers have adequate cash reserves for future liabilities? Will we see another major government “bail out program” to prop up failing insurers because of unfunded liabilities that cannot possibly be estimated?
- Age Rating – The new age rating requirements will cause premiums to increase by more than 50 percent for many people under the age of 30.
- Massive Medicare Advantage Cuts – The legislation imposes $200 billion in cuts to Medicare Advantage that will cause massive disruption for the 11 million seniors enrolled in the program. If these cuts are enacted, millions of seniors in Medicare Advantage will lose their current coverage, and millions more will face higher premiums and reduced benefits.
Summary:
The legislation creates a new long-term care entitlement program that is based on a premium structure that is not adequate and promises benefits that cannot be maintained. The plan (in my view) is not financially viable and will create significant liabilities for the federal budget.
As a business owner / investor, it’s hard to find a reason that employers will continue to offer insurance – seems so much easier just to pay the modest penalty, eliminate healthcare from the workplace, and encourage employees to join their local government risk pool and get their healthcare coverage from these new social structures.
I had the opportunity to visit London last month for an “up close” look at their 2 tier health system – the government program for the masses and the private system that exists for the top 1-3% of wage earners who can afford to buy a private option. It was an amazing visit and a view into what the US system will look like in time to come.
The good news is that all this change creates great new entrepreneurial opportunities. After reading through the entire legislation, it seems to me that those who will benefit the most from the new healthcare law are the entrepreneurs who will take time to study the changes and begin to build new businesses, processes and services to support this massive change to our healthcare system. Now that sounds like a fun ride!!!
….that’s my opinion, love to hear yours!