Pessimism Reigns About Health Reform at ACHE Congress

It was indeed a momentous day to be in the company of thousands of senior healthcare (mostly hospital) executives at the American College of Healthcare Executives annual Congress, which kicked off the day after arguably the most sweeping healthcare legislation passage since Medicare was enacted more than 40 years ago.

Not surprisingly, given a smorgasbord of educational sessions from which to choose, there was a healthy helping of health reform talk.

Maureen Sullivan, senior vice president of strategic services for the Blue Cross and Blue Shield Association, had several predictions and observations about how the bill will change the insurance landscape in the coming years.

She listed a number of challenges:

• Medicaid rolls will swell from 44 million to 55 million in five years
• Tremendous implication to states in funding, especially after the stimulus money runs out. Many state medical directors are thinking of an aggressive push into Medicaid managed care to manage costs.
• Individual market will climb from 17 million on the rolls to 25 million in five years.
• Small group market will shrink to 28 million from 31 million, though some think this market will all but disappear
• Uninsured will drop from 46 million to 28 million.
• Large group market will grow from 122 million to 124 million.
• More than half of the population will see the most disruption, especially in commercial market, as rates go up for younger, healthier, and drop for the older and sicker.
• Benefits will be richer, leading to premium increases
• Claims costs for nation will go up by 49% in individual market.
• Big change will be in the "clusters" of states where there had been risk underwriting.
• The insurance mandate is weak, leading many to pay the penalty rather than obtain insurance (which has happened in Massachusetts).
• The new benefit richness mandate may raise rates by 14% alone.
• Hospital business will be affected dramatically.

Rate shock

Sullivan made use of a map of the United States that broke down the states into five color-coded "clusters," based on the state mandates on insurance coverage that are currently in effect. In clusters 4 & 5, which look like a big backward check mark on the United States map, rates will go up between 12%-99% for the healthiest segment of the population to cover the richer benefits that will be required as well as the dramatically reduced underwriting power the bills give insurers to measure risk.

Meanwhile, rates will decline from 47% to 22% for the sickest in those states. Individual and small group coverage will be unstable. Risk spiraling will begin as healthy people drop out of the commercial market because of rate shock.

In Massachusetts, "jumpers" or people who come in and out of coverage, doubled after their healthcare reform package. She expects the same under the new national bill. At the event luncheon Monday, David Nash, MD, at the Thomas Jefferson School of Population Health listed a number of items about the latest health reform proposal:

• Congress passed insurance reform of some kind, but it's not clear what kind of healthcare reform was really achieved.
• There's nothing about coordination of care, cost or quality in reform. Nash is concerned for hospitals.

Nash also presented his more general thoughts about the state of healthcare:

• Only 18% of what the U.S. does to patients is based on trial-based evidence. The rest is based on the "art" of medicine. The evidence shows that U.S. healthcare get it right a little more than half of the time. It's not because of lousy doctors or numbers, but bad systems, he said.
• Variation leads to patient mistakes and patient harm. For example, hundreds, perhaps thousands, of people were harmed at hospitals during the three days the snoozing Northwest pilots made front-page news in the New York Times.
• Hospitals are not only dangerous to patients, but also to the workforce. In fact, healthcare is more dangerous to its workforce than the construction or agricultural industries.
• There's no simulation in healthcare. If the airline industry can improve outcomes based on simulation, then healthcare should too.

Nathan S. Kaufman, from Proven Strategies to Enhance Performance Under Healthcare Reform, also shared his take on the implications of healthcare reform, and says he tried not to sound like a pessimist, but was having a hard time doing so.

Kaufman said healthcare reform has a better than average chance of having made things worse. Change is needed, but the change we're going to get is based on compromise. The bill was written by people who don't understand healthcare, he said. Kaufman listed a number of thoughts about reform:

• Pharma "gives up" $27 billion a year, other interest groups are also "giving up" some future revenue in the healthcare bill, but Kaufman argues that they're all going to make this up somewhere else. All of these companies are winners.
• "Sometimes change can make things worse, and that's what's going to happen here. The Congressional Budget Office's estimate of Medicare Part D's cost was off by 40%. What makes you think they'll get this right?"
• Rate of spending on healthcare is fiscally unsustainable because 80% of spending is on chronic care, which is lifestyle-related. Yet there's nothing on that in the bill.
• There's a difference between coverage and access to care, which was learned in Massachusetts. As a result, the Massachusetts commission is cutting fee schedules and will phase in capitation.
• This bill, as in Massachusetts, puts providers at risk. In Massachusetts, they paid 82% of cost on Medicaid before reform. Now they pay 70% of cost, even with the federal government shoring up the program. Boston Medical Center, a hospital that was breaking even before reform, is now losing $12 million a month.

"Those who don't respond to these lessons will go out of business unless the government bails you out, which, I predict too, by the way," he said.

The bottom line is that hospitals did not do well under this bill, he said. Kaufman's theory is that comprehensive reform is working to hasten the crisis rather than solve it. Healthcare reform is just the beginning. An estimated 30-50% of hospitals will operate at a deficit, he said.