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What if? 2 post-election scenarios for healthcare

October 24th, 2012

by Jonathan H. Burroughs

As a political independent in a staunchly independent state (New Hampshire), I am disappointed in both political parties' attempted efforts to fix our healthcare system, which spends almost twice that of any industrialized nation and ranks 37th in the world according to many agreed upon quality metrics.

Since the recently upheld Patient Protection and Accountable Care Act is the law of the land, we can assume that if President Obama win a second term, and absent a 60 percent filibuster-free Republican majority in both houses of Congress, the law will remain largely untouched.

Thus, this article looks at the likely impact on healthcare if Gov. Romney is elected president and what a re-elected Obama must do to solve the inherent failings of the ACA to ensure continued progress towards fixing a broken healthcare system.

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Healthcare under President Romney:
Despite his support for universal healthcare as governor of Massachusetts in 2003, Romney is committed to repeal the majority of the ACA. The sections of the law he has recently vowed to retain include the prohibition of insurance carriers to deny coverage based upon a "pre-existing condition" and the opportunity to include a dependent under a parent's healthcare coverage up to the age of 26.

The sections of the law that he would seek to repeal include:

  • The obligation of individuals and employers to carry mandatory healthcare insurance or face a "tax"
  • The expansion of federally-sponsored healthcare insurance coverage for the uninsured through Medicaid
  • The continuation of Medicare and Medicaid as a "defined benefit," as opposed to a "defined contribution"
  • The maintenance of current levels of federal healthcare spending for programs such as planned parenthood, Medicaid and Medicare

The challenge with this promise is that he will need 13 more Republican-held Senate seats to achieve a filibuster-proof 60 percent majority; however, if Republicans win 4 more Senate seats and achieve a simple 51 percent majority, significant amounts of the ACA could be dismantled utilizing budget-reconciliation rules. If that occurs, Congress will have to come up with an alternative plan to save Medicare or risk insolvency of Part A of the Medicare trust fund by 2016, as there is $716 billion in Medicare savings (e.g., through an increase in the Medicare payroll deduction tax) written into the law.

Romney and Congressman Paul Ryan would like to reduce federal Medicaid spending by approximately $810 billion over 10 years by tightening eligibility requirements, lowering provider/hospital payments and reducing benefits. According to the Kaiser Commission on Medicaid and the Uninsured, this will increase the number of uninsured from 14 million to 27 million. In short, they would like to significantly shift control and oversight of Medicaid from the federal government to the states.

Romney would like to revise the federal tax code to make payment of individual health insurance premiums tax deductible, which will have little impact for individuals in low tax brackets and some benefit for others. Interestingly, he also supports the creation of the interstate sales of health insurance and caps on medical liability costs, although these have been traditionally under the control of state legislatures.

His goal to create a balanced budget is to increase defense spending, maintain social security spending and cut Medicare, Medicaid, National Institutes of Health, Centers for Disease Control and Prevention, and the Veterans Health Administration spending by 29 percent by 2016, and up to 59 percent by 2022.

Challenges for President Romney:
Increasing the rolls of uninsured and shifting rising Medicare and Medicaid costs to beneficiaries will increase the likelihood of cost-shifting for those with insurance or who attempt to pay. Paradoxically, supporting a policy of self-sufficiency for health purchasers will make it increasingly unlikely that individuals will be able to afford healthcare coverage.

Conversely, diluting the high-risk pool (sicker people tend to purchase healthcare benefits) with healthy individuals through universal healthcare coverage for basic and preventive care decreases the healthcare costs per capita and increases the likelihood that an individual will purchase healthcare coverage.

There is no question Medicare and Medicaid need to be reformed through lower spending and greater accountability for both to be sustainable; however, the approach of cutting coverage for those in greatest need may backfire on those who can afford to pay.

Healthcare under President Obama:
Following the U.S. Supreme Court decision to largely uphold the ACA in June, most of the law will remain intact except for the requirement of states to expand Medicaid coverage for individuals up to 138 percent of the federal poverty level. Paradoxically, many of the poorest states with the lowest healthcare outcomes (e.g. , Mississippi) have declined to expand their Medicaid coverage, thus transferring the cost of indigent care to hospitals, physicians and federal/state-sponsored healthcare facilities, and threatening their own tax base.

The penalty for not purchasing mandatory healthcare coverage for individuals and employers under the ACA is small and not enforceable and so many healthy individuals will continue to not purchase healthcare until the need is there or the penalties become substantial.

Adding more insured individuals will decrease the number of uninsured to less than 5 percent at a time when physician shortages will climb towards 100,000 and nursing shortages already exceed 350,000. Creating a viable infrastructure to support these new beneficiaries will be essential to ensure they have access to cost-effective healthcare services.

The biggest challenge will be dismantling the fee-for-service Medicare payment structure that is a hallmark of healthcare as a cottage industry and rewards higher numbers of patient encounters, tests and procedures rather than those that meet evidence-based medical necessity criteria and other quality standards.

This reimbursement model does little to reward preventive services, reduce the number of medically unnecessary encounters/tests/procedures or encourage high-quality service at lower costs. The current pay-for-value initiatives within the ACA, will incentivize up to 12 percent of Medicare reimbursement by 2018 for quality, service, preventable readmissions, hospital-acquired conditions and Meaningful Use criteria. However, many may choose to "work around" these incentives by increasing their volumes and disregarding incentives they perceive as under someone else's control.

Finally, Medicare reimbursement has not kept pace with inflation and many physicians no longer accept Medicare beneficiaries. Medicare actuaries predict 15 percent of healthcare organizations will lose money on Medicare by 2019, and this will increase to 25 percent by 2030.

Challenges for President Obama:
The current healthcare cost structure and reimbursement methodology is unsustainable. Healthcare incentives reward the provision of volumes of encounters/tests/procedures and not the maintenance of health or the provision of high-quality services. Healthcare organizations must be incentivized to reduce their costs through process innovation and limit services to those with a proven benefit. Patients will need to assume increasing accountability for healthcare decisions through the modulation of healthcare premiums/co-payments/deductibles to ensure they can effectively partner with physicians and healthcare organizations to optimize quality outcomes.

We must eventually provide low-cost, universal healthcare coverage to everyone for basic preventive services to ensure healthcare is affordable for individuals and employers, alike. End-of-life issues must be addressed in a humane and sustainable way, and healthcare will need to be treated as a finite resource that must be judiciously managed.

Conclusions:
Although the candidates differ significantly on how they would reform healthcare, both will have to face increasing deficits, an increasingly frustrated electorate and healthcare industry, and a global economy in which the United States will compete with the world for healthcare services. Taking a lesson from other industrialized nations that have achieved higher quality for lower costs will be essential to creating a healthcare system that is sustainable and provides the care we deserve.

Jonathan H. Burroughs, MD, MBA, FACHE, FACPE is a certified physician executive and a fellow of the American College of Physician Executives. He is president and CEO of The Burroughs Healthcare Consulting Network and works with some of the nation's top healthcare consulting organizations to provide "best practice" solutions and training to healthcare organizations.

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