Tea Leaves

It’s Not Just Politics

The newly elected members of the upcoming 112th US Congress have vowed to dismantle (or halt) the Patient Protection and Affordable Care Act (PPACA).   Mr. John A. Boehner (R. Ohio), the new House Majority Leader, promises to replace it with “a common-sense approach to health care reform” (Boehner, 10/15/10).  Many news analysts predict that the White House will counter with a generous application of the Presidential veto.

So, once again we are encouraged to take a “wait and see” attitude about health reform.  After all, with or without compromise, big policy change takes time and government always has the advantage of time.   However I remind you that while health care reform is a political issue —  it is not limited to politics.    Ideas are the ultimate durable good and the market is already adopting ideas that are contained in the PPACA.  This week’s lead article on Accountability Care Organizations is an example.   Verity Reports has also previously noted how insurance companies are negotiating cost bundling agreements with providers.

My firmed looked at the US Chamber of Commerce list of health reform priorities to give you a hint of which other components of the PPACA may have traction outside the public policy arena.  The Chamber outlines a three-prong approach to health reform: 1) get costs under control, 2) reform the insurance system, and3) create a vibrant market place.  This approach supports the development of health information technology and comparative effectiveness research.  It emphasizes the importance of health wellness and preventive care.  It supports pay-for-performance, consumer-driven health options and long-term care reform.  The Chamber also supports eliminating the use of pre-existing conditions or health status in insuring individuals, obligating individuals to obtain health insurance coverage, and creating subsidies for individuals who cannot afford coverage.

To be sure the Chamber takes real issue with the refusal  of the Congress to move forward with other issues that are critical to its members such as tort reform.  Neither is the Chamber satisfied with how businesses may be effected by policies such as state insurance risk pools.   But on the surface their agenda has a good deal in common with PPACA.    The devil may be in the details but it appears that you can’t keep a good idea down.

Tea Leaves is an opinion column written by Colette Knuth.  Dr. Knuth is a doctorate-level trained health policy analyst and CEO of The Colette Steward Group.  The Colette Steward Group provides health policy research and organizational development services to the health care sector.  Visit us at: www.thestewardgroup.com.

Tea Leaves

Everybody Likes a Healthy Wallet

Tea Leaves is the first of an opinion column that will occasionally appear in Verity Reports.

An old insight was confirmed while I was in the process of researching today’s feature article on bundled payments.  I f you want to predict the future of health care policy then simply apply the tenet:  everybody likes a healthy wallet.

One of the goals of Verity Reports is to give readers an edge about how health reform is changing the medical care environment.   Verity Reports targets activities that will create big changes.   Hopefully, our posts will give you the time to prepare for these changes.  Bundling is a perfect topic to illustrate how we are trying to meet this goal. Bundling is a sleeper issue.   There’s not much about it in the news but there is a lot of activity around this concept.   Therefore, bundling may create a lot of change.  It may be the leading factor in driving down  medical costs …..  and solidly securing health reform.

I know that I am making some pretty powerful predictions”.

Bundling is defined by RAND as a payment system that “ would make a single payment for all services related to a treatment or condition, possibly spanning multiple providers in multiple settings”.  (RAND, Overview of Bundled Payment).   The strategy is currently being tested by CMS in a multi-site demonstration study (CMS’ Medicare Acute Care Episode (ACE) study).    I think that bundling is here to stay because, as it is currently defined, it will transform the current model of medical cost accountability.

In the ACE  study, both hospitals and patients will be monetarily compensated for cutting costs.   In effect, bundling creates a dramatic shift in who carries the burden of creating the cost savings.  The burden is shifted away from hospitals and patients to physicians, medical device/supply manufacturers, and pharmaceutical companies.  This gives hospitals and patients more influence than they have ever had on medical cost.   It also strengthens the staying power of health care reform.

Yes, I know that I am making some pretty big predictions.   Bundling is only now being tested as a cost savings strategy.   Even if the results of the ACE study confirms it as valuable, the practice of bundling will not come into full effect until 2018.   In addition, there is no doubt that the campaign against health reform is real.  Next month’s elections could put avowed health reform opponents into power.   Also, putting physicians, medical device/supply manufacturers, and pharmaceutical companies  on the defensive with bundling — three groups with tremendous political power — could create even greater political push-back on current health care reform policy.

Health care reform, however, is not limited to the political arena.   Health care reform will always be tightly bound by a goal that is fundamental to market economics.   That goal is  revenue generation and everybody likes a healthy wallet. Bundling has the potential of saving money.  Insurance companies are already securing bundling agreements with hospitals.   These agreements will be in place regardless of the future of health care reform.   So stop waiting for change to happen.   It’s already here.