Renewed ACA debate shines spotlight On cost-control provisions

April 6, 2017

 

To call the Patient Protection and Affordable Care Act (PPACA or ACA) a comprehensive bill would be a gross understatement. The 2010 health reform law exceeds 900 pages in PDF form, and affects nearly every facet of the American healthcare system, ranging from Medicare payment structures to contraceptive coverage. But the lion’s share of media attention has always gone to the healthcare exchanges, the individual mandate and Medicaid expansion. The debate on the failed American Healthcare Act, a hastily conceived replacement for the ACA, reminded observers and the public alike that the bill had other important provisions. Conceived at a time when America’s health sector was swallowing up more and more of the economy with few improvements to show for i, Obamacare was also intended to address the root causes of skyrocketing healthcare costs and stagnant health outcomes, bending the ‘cost curve’ of growth.

 

The most important of these may be the ACA’s reforms to payment structures. Ever since its founding, medicine in the United States has been dominated by the fee-for-service model, in which doctors receive compensation based on the price of the service they provide. But in recent years, fee-for-service has come under scrutiny. Because health benefits are taxed at a substantially lower rate than salaries, firms have long lured prospective employees in with lavish healthcare packages. As a result, doctors can entice their patients to order expensive procedures and treatments, the cost of which is passed on to insurance plans. Occasionally,  Last year’s Epi-Pen controversy, for instance, showed how patients can feel the pain of top-line procedures and devices. But the burden shouldered by taxpayers through Medicare and Medicaid, and insurance companies, is much heavier. When Mylan announced a series of reforms to Epi-Pen pricing, it primarily addressed the device’s high copays, which had provoked much of the public outrage. The true cost of the Epi-Pen to insurers barely changed. Repeated across an industry’s worth of medications, medical devices and tests, this demonstrates how the cost curve of health spending growth has become so steep.

 

Bending the cost curve was a primary goal for the ACA’s architects. The size of federally funded healthcare programs such as Medicare enables Congress and the Department of Health and Human Services to exert considerable influence over payment structures and standards for a significant portion of the population. Under the Affordable Care Act, hospitals with high rates of preventable readmission can face significant financial penalties. Readmission rates have fallen since the law was passed in 2010, a change that analysts have attributed to the new regulations. Shared savings, an approach in which existing networks of providers known as accountable care organizations (ACOs) are allowed to keep part of the money recouped by reducing excess costs, proved somewhat less successful. Only a quarter of ACOs are currently performing well enough to receive the carrot of shared savings. Of course, other methods of cost control may emerge in the future. The ACA also contains provisions designed to ensure long-term reductions in cost growth; it established multiple small agencies, including the Center for Medicare and Medicaid Innovation and the Patient-Centered Outcomes Research Institute, intended to coordinate and issue grants for efficacy studies across the healthcare sector.

 

Patients who receive their insurance through their employers--a majority of Americans under the age of 65--are also affected by the ACA. Prior to 2010, health insurers were allowed to impose lifetime caps on any plan sold, leaving high-cost patients out in the cold if they developed chronic conditions. A majority of Americans enrolled in employer-based insurance were subject to such caps. Many of the ACA’s smaller provisions have faced fierce criticism. The doctors’ lobby has traditionally opposed cost control measures such as ACOs, and insurers have frequently objected to the loss of lifetime limits. But in the end, it may be these components that kept the ACA going. A recent Washington Post op-ed noted that as the public has learned more about the law’s content, support for Obamacare has increased to an all-time high. Healthcare reform may still be on the table, as talk of an AHCA successor has begun to swirl around Capitol Hill. To make it a success, Republicans will need to ensure that any such bill can take the baton of cost control and accountability from the law it is meant to replace.

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