Economics Alone Drives Healthcare Reform

The public should be excused if, drawn into the endless news coverage of last week's U.S. Supreme Court arguments on the constitutionality of the individual mandate, they mistakenly think that healthcare reform centers around legal issues.

And the fierce debate on the presidential campaign trail over the merits and faults of the Affordable Care Act, and the often superficial media reporting on that debate, could also lead the public to mistakenly view healthcare reform as primarily a political issue that hinges upon who wins in November.

However, neither politics nor constitutional challenges are driving healthcare reform. In fact, delivering better healthcare, while certainly desirable , isn't even the main driver of healthcare reform.

What's driving healthcare reform? Follow the money. It's all about what we can and—increasingly what we can no longer—afford.

Regardless of how the Supreme Court rules, or who wins the White House this fall, or which party controls Congress in 2013, or whether it's "ObamaCare" or some improbable Medicare voucher scheme, or some form of muddled political inertia, the economic pressures forcing the issue now will still be there in the coming months and years. 

The stats on healthcare costs are familiar. The rate of growth in healthcare spending in this country is unsustainable. According to the Kaiser Family Foundation, healthcare costs grew from $256 billion in 1980 to $2.6 trillion in 2010, and healthcare spending now consumes about 18% of the nation's gross domestic product. Although healthcare spending growth has slowed of late, thanks largely to reduced utilization during the economic downturn,  that growth still easily outstrips general inflation.

For three decades we have been living in an era where healthcare "cost containment" has been a euphemism for passing the buck to healthcare consumers. Kaiser Family Foundation reports that since 2001, employer-sponsored health insurance premiums have grown 113%.

It's not hard to see why wage growth is stagnant. Payers are stressed and tired by this arrangement, and they are demanding reforms. That's not going to change if the Affordable Care Act is overturned.

Rather than hypothesize about what may change if the individual mandate is struck down, or if a Republican or a Democrat is in the White House, we should focus instead on the constants of healthcare that will still be in place in the coming years regardless of what happens between now and November.

"The constant is going to be the focus on the federal budget deficit and the continued increase in healthcare costs," says Dean Diaz, vice president and senior credit officer at Moody's Investors Service. "Regardless of what happens in the Supreme Court now there will be continued debate on how to rein in the growth in healthcare costs."

In other words, don't expect your Medicare reimbursements to keep pace.

Diaz says the strategies in place now in the for-profit hospital sector won't change much regardless of what happens in legal or political arenas. "There may be some tweaking of strategies here and there. But the focus on trying to operate more efficiently, having strong market position, those strategies will play either way," Diaz says.

"It will still be important to have a strong market position because you want to be in a position of strength in negotiations with commercial insurers," he says. "So at a local basis, market position is still going to be very important, and maybe even more important given the continued pressure on the growth in the commercial reimbursement."

Diaz says providers understand that they're going to be asked to do more and for less money. "Any efforts to continue to trim costs and operate more efficiently but still effectively clinically are going to remain a focus again no matter what happens in Washington. Especially on the government payers, the focus on the deficit and the spending levels for healthcare are absolutely going to pressure reimbursement from government payers," he says.

"It's already resulted in slower growth in recent periods and it's only going to become a bigger discussion as some of these proposals to trim the deficit come back to life."

Patricia Webb, senior vice president and CHRO at Catholic Health Initiatives, says the Denver-based health system remains focused on the use of primary care physicians and allied care professionals, such as nurse practitioners to improve population health and promote wellness.  

"At the rate healthcare costs are growing we had to modify how we take care of patients and focus more on population health and preventive care that is going to happen and that is what needs to happen from our perspective," Webb says.

"It is driven more by the economics of it and if for some reason the Affordable Care Act is not passed and whatever happens the population is still going to need to access healthcare and we have to be in a position to provide it. The best way to do that is to do it in a way that provides the quality that needs to be provided, with appropriate access in a cost effective way," she says.

Webb says CHI isn't "putting anything on hold" as the system and its 70,000 employees look to the future.

"We know that even today and projected into the near future we are going to have continued shortages with primary care physicians, nurses, and other allied health professions," she says. "We are not going to stop recruiting those professionals or looking forward to address those issues. That's the direction we're moving in, and I think that is true for healthcare in general. If we stay focused, I think we'll be fine."