The 5 Myths of the Republican Health Reform Solution

By Gregg A. Masters, MPH

Let’s start here, the healthcare industry is a $2.5 trillion behemoth unlike any other in the US economy. At roughly 20% of GDP, 1 out of every 5 dollars spent in the US works it’s way into a complex, silo-ed, discontinuous, often schizophrenic and certainly misaligned series of volume vs. value incentives driving both provider and consumer behavior.

Yet, in spite of this unique complexity and underlying ‘whack-a-mole’ change resistant DNA, i.e., hey your expense is my livelihood, there is an mind numbingly hollow drive to oversimplify the nature of the beast and series of remedies likely to tame it’s rapacious appetite and inform pathways to a value based future.

On the mantle and representing the ‘trophy property’ in this simplification and disinformation agenda if not outright denial of the nature of the challenge, is the Republican version of what’s to replace the Affordable Care Act if it can be successfully repealed in the current Congress or upon the outcome of November’s elections with an assumed reconstituted Republican majority if not chief executive.

Here is the tired and hollow plan aka ‘The 5 Myths of the Republican Health Reform Solution’ now before the Congress on the 31st time the House has taken up the matter of the Affordable Care Act:

Myth 1: Expand HSAs (aka health or medical savings accounts)

The fundamental myth (though popular in the ‘consumer directed health plan’ circles) is that so-called ’empowered consumers’ with financial ‘skin in the game’ who are no longer insulated by third party payment, are more interested in the cost and value of services they receive. As such they will be a granular, and proactive army of micro negotiators who in the aggregate will set and enforce the ‘fair valuation’ of hospital, physician and other health services pricing (good luck!).

This is an appealing though very naive assumption about the range and nature of supply and demand equation in the healthcare market. The idea that an individual can more effectively and thus successfully exert market pressure on doctors and hospitals as individuals vs. a health plan or employer who knows the market and pools members or covered lives (insureds), and thus secures more favorable (wholesale) pricing will not occur in my (or your) lifetime. This is a patently naive view.

Perhaps if we started from this exchange basis, and did not march down a path of cost plus, usual, customary and reasonable charge, et sequelae, third party payment financing paradigms this assumption might have taken hold in the soil of a truly Marcus Welby, MD alternate universe. Or in other words, absent Hill Burton, cost plus reimbursement, and the rise of proprietary hospital systems along with their tax exempt breatheren, we might not see the proliferation of our costly ‘cathedrals of medicine’ frequently separated from the people they serve by moats, silos and their virtual pyramids of paternalism.

Myth 2: Tort Reform, Medical Liability and Lawsuit Abuse

This one is a closely held view which impacts though does not drive the cost of healthcare to the degree it’s proponents would have you believe. Clearly Medicine is not a profession without risk, however to lay the cards on the table and allege the systemic cost, access and quality variability problems we face are somehow tied to the medical liability angle is another myth of exaggeration and misdirection, see: Malpractice A Tiny Percentage of Health Care Costs, and the broader policy resource Medical Liability Policy Background Brief supplied by the Kaiser Family Foundation.

Myth 3: Buying Health Insurance Across State Lines

Another flawed view to appeal to the race to the bottom of who imposes the least amount of regulatory oversight on health plans, or admitted carriers to underwrite health insurance in a particular market. Think about it, can a health insurer, or health plan with little to no scale and/or market share in a community somehow manage to extract better rates than one who does? Not likely.

The key appeal here is solely on the absence of transparent, comparable, and minimum standards of covered benefits, which drives opacity, confuses choice and merely promotes an illusion of ‘coverage’ due to the proliferation of ‘junk insurance’ aka ‘mini-meds’ or ‘limited health benefit plans’, vs. truly comprehensive coverage. Whether one is really insured depends on the definition of ‘coverage.’ Absent coherent minimum benefit thresholds, you have no basis to compare, contrast and price one plan from another.

Myth 4: Association Health Plans

The theory is great. Leverage the power of group purchasing into the individual and small group market. The net gain from such a national conversion is likely to favorably impact cost and availability of real health insurance in the wild west of sticker shock retail plans pushed to this powerless purchaser.

Yet play out the what amounts to a clearly limited upside. The ‘best case’ for association health plans is they move towards the pricing and medical inflation trends of their substantially more powerful (from a wholesale purchaser perspective) large case and group market oriented players. There is no there, there, as these players are more likely than not to stay active in the health insurance marketplace by continuing to shift risk on to their members and/or insureds.

Further the more sanguine thinkers in the bunch, aka the likes of Aetna, UnitedHealth Group, etc., realize their traditional business models are the equivalent of dinosaurs and not sustainable. To simply empower association health plans as a solution is to ignore the broader ‘collective failure’ of health insurers to actually manage the clinical risk inherent in the underwriting of the delivery system.

Myth 5: State Run High Risk Pools

This is perhaps this biggest leap of faith and head in the sand component in the non solution alternative to the Affordable Care Act. At it’s core, and high deductibles notwithstanding, is the underwriting death spiral of a privately self funded plan, where the sick and high risk nature of the pool eventually takes down the economics of the premium v. medical loss ratio. Unless a high risk health insurance pool is part of a larger framework of comprehensive community based rating, there is no future where the price points can achieve anything approaching actuarial stability let alone some measure approximating an affordability index.

For those who may not be familiar, there is just such a program in the Affordable Care Act, titled: ‘Preexisting Condition Insurance Plan.‘

So there you have it, there really is no there, there. The Affordable Care Act is a start, and there is much work to do. Why not get about the business of making this happen, instead of engaging in the base posturing we’re seeing in Washington, D.C.?

As usual I welcome your comments and thoughts.