Politics. Long ago – around 2008 – as America’s collision with demographics was nigh, the magical thinking of the political class took a hold of health care. Informed by academics like Peter Orszag, former Director of the Congressional Budget Office, the original notion was that America was spending too much on health care and that presented a large fiscal problem.
The answer, in the form of the Affordable Care Act and, more recently the CARES Act and the American Recovery Act, was to spend even more on health care.
Yes, seriously.
It would all be OK, the political class argued, because we have here this thing called VALUE-BASED PURCHASING! Informed by Dartmouth Atlas project, then candidate Barack Obama claimed that billions would be saved if we merely reduced regional differences and eliminated unnecessary care. Viola! Behold billions in savings.
It sounded too easy.
It also didn’t have a chance. The minimum medical loss ratios in Medicare Advantage plans, Medicaid Managed Care (in some states) and in the ACA exchange plans ensured that all but 15% or so of money available would be spent. And it was.
Value-based Purchasing also ignored the reality no matter how marginal the purpose, the vast capacity of the health care system would be filled.
In the end, the ACA will be remembered as another example of how Congress’ penchant for “going big” mostly produces overly complex solutions to fairly simple problems. In the case of health care, the problem is today what it has always been. Almost no one with a checkbook understands how much and at what price they pay for care.
Policy. To the credit of the Obama administration there were at least a few people that understood price transparency was a necessary part of reforming a bloated system. Buried in the legislative leviathan that is the Affordable Care Act was a provision requiring hospitals to post their prices.
It was never enforced as some of the post-ACA years were marked by reduced Medicare reimbursement. President Obama decided price transparency was a fight he was not taking on.
The Trump administration resurrected the provision and, through rulemaking ordered hospitals to present their prices in machine readable form. Later, insurance companies were mandated to do something similar. The result was pretty ludicrous with a variety of layouts and fields. Enforcement has been lax, although the Biden administration has stepped up the penalties.
Last week, the Energy and Commerce Committee reported out several bills, one of which raises the penalties and establishes more uniformity and useability of the layout.
Predictably, the hospital associations are opposed. With demographics shifting away from the high utilizing postwar generation toward the late century cohort, financial performance will be about price like never before.
Power. With the arrival of price shopping in health care – not by you but probably but definitely by your employer – comes the next leg of consolidation. It is the only way to retain pricing power in a competitive industry.
Kaiser Permanente and Geisinger have announced a cross-country merger. BJC Healthcare and St. Luke’s Health System in Missouri are entering into a $10B combination. There will be more. Financial performance at nonprofits has been lackluster now that the COVID money has run out.
Insurers are also out shopping, especially now that the Blue Cross/Blue Shield antitrust settlement is kicking in. In the name of “value-based purchasing” insurers are imposing prior authorizations and other utilization management techniques unless, of course, a provider agrees to be acquired.
The battle is setting up to be epic.
Have a great rest of your weekend.
Emily Evans
Managing Director – Health Policy
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