An article by Ezekiel Emanuel and Jeffrey Liebman promises “the end of health insurance companies.”
According to these former Obama administration advisors, they
will be made obsolete by
accountable care organizations (ACOs).
The Affordable Care Act provides for
the establishment of ACOs to serve Medicare and Medicaid patients.
Essentially, a group of health care providers (doctors and/or
hospitals) form an ACO and sign a contract with the government to
provide care for a large group of patients. They receive a bundled
payment based only partially on services provided. Some part of the
payment is based on the quality of the health care they provide and
their ability to control costs.
In theory, cost control can be done by
better coordination of patient care, for example, with the help of
computerized records.
Since so much of medical care is unnecessary or harmful, a lot of money could be saved, provided the incentives
were greater than the profit to be made through overtreatment. It
should at least be possible to measure whether money is being saved
in comparison to the current fee-for-service system.
Measuring quality of care is more
difficult. But it is crucial, since without it, the incentive
structure of ACOs might encourage them to withhold necessary care
from their patients. But what are the criteria of good health, and
how could they be measured without incurring additional expense?
Health care research focuses on hospital admissions and readmissions
as an indicator that the patient is not healthy, but this is an
imprecise measure of health which only becomes apparent after the
patient's situation has deteriorated. Like other health indicators,
it can be manipulated by denying treatment.
It is possible to imagine ACOs working
well under Medicare with proper oversight from government.
Nevertheless, there are problems. If an ACO is to be responsible for
prevention as well as treatment, subscribers must remain in the
system long enough for the ACO to reap the savings that come with
prevention. This is possible in a single payer system, but not in
this country where there is a lot of client turnover. Also, to be
accountable for all their clients' health care needs, an ACO must
include specialists in all health problems, which means it must be
quite large. But large organizations have greater market share,
which discourages competition and leads to higher prices—just the
opposite of what ACOs are supposed to do.
However, Emanuel and Liebman are
suggesting that ACOs will dominate the private health care market as
well. In fact, hospitals are already buying out competitors and
hiring more doctors, and insurance companies are merging with
hospitals in anticipation of forming ACOs. This trend is evident in
the Pittsburgh area. The University of Pittsburgh Medical Center
(UPMC), the largest hospital chain, has bought out competitors and has gone into the health insurance business as well. Meanwhile
Highmark, the region's largest health insurer, has purchased West
Penn Allegheny, the only major hospital chain not owned by UPMC. Not
surprisingly, this morning's paper reports that
Pittsburgh has the highest hospital care costs of any city in the U. S.
Apparently we can look forward to a
brave new world in which, when we purchase health insurance, either
alone or through our employer, we affiliate with an ACO which
promises to keep us in good health.
But Austin Frakt, a health care policy expert who is sympathetic to ACOs, suggests that they “are
fine and good for Medicare, but somebody needs to think through the
consequences for the private side of the market.”
The dominant characteristic of today's
corporations is that they are not accountable to anyone except
perhaps their stockholders. A combined health insurance-medical care corporation will
have strong financial incentives to charge as much as possible for
health insurance while providing as little health care as possible in
return. At least under the current system, the patient is caught
between two corporations pushing in different directions. If their
insurance company is trying to deny them care, there is a good chance
that their doctor will come to their defense and insist that they
receive medically necessary treatment. If the insurance company and the doctors are all part of the same corporation, who will defend the patient's interests? Without third party
oversight, what is to keep the patients from being harmed when their
very lives may be at stake?
It is possible that a conscientious
employer might provide oversight of an ACO with which it affiliates,
since companies may want to keep their employees healthy. However,
this is certainly problematic, and, in any case, individual health
care subscribers are on their own under this system. I don't see how
the entire country can shift to ACOs without substantial government
oversight. This, of course, will be strongly resisted by hospitals
and insurance companies, in part because it would start to take on
the characteristics of a single payer system.
Many countries—Germany, Japan and Switzerland are examples—have systems in which both health care
providers and insurers are private entities. But these countries
have tight government regulation of medical services and fees. These
private entities are required to cover everyone and they are
permitted to make only modest profits, if any. And why should they
make large profits? Under a single payer system, insurance companies
are completely unnecessary, while doctors and hospitals can be
limited to a “reasonable” fee for their services. If they want
to increase their income, maybe they should be allowed to compete for
higher wages by demonstrating that they can keep their patients
healthy and, as a consequence, control costs.
Although I have serious doubts as to
whether ACOs will work in our private health care system, they may be
a good idea when embedded within a single payer system.
