Affordable Protection

Emulating our pretentious president, I call it the audacity of hypocrisy and the most outrageous misnomer ever to emerge from the cloakrooms of our capital: the Patient Protection and Affordable Care Act.

Whom did our disingenuous legislators think they were fooling when they smeared lipstick on this twenty-eight hundred pound (or page) pig, whose proper title should have been the Patient Coercion and Exorbitant Care Act? Because as a morass of provisions (twenty thousand more pages worth) seeps into this $2.8 trillion sector of our economy, all constituencies -- patients, payers, and providers -- are foundering under a rising tide of regulation and medical costs.

At least one group finds protection more affordable -- women purchasing their birth control pills, which their employer-funded insurance plans now must pay for. I don't object to this mandate on religious grounds, and I can appreciate the linkage between health and preventing unwanted pregnancies. It's the something-for-nothing syndrome that disturbs me.

Once the cost of these products and services disappears into the black hole of insurance coverage and they can be had for free, all value-driven decision-making dissipates along with it, resulting in inevitable price inflation and increased utilization, not to mention a twenty to thirty percent administration factor, even for ten-dollar-a-month contraceptives.

Since condoms are not included, the unintended consequence is that their usage is discouraged, a real shame, since they are inexpensive, reliable, free of side effects, and control the transmission of diseases. Either their manufacturer's lobbyists didn't shell out enough bribes, or they fell victim to the sexual revolution, having leapfrogged from behind-the-counter to over-the-counter.

Such perversity is typical of our omniscient but obtuse government policy makers.

Like thousands of other businesses, Schewel will now be closely monitoring the number of hours worked by its part-timers, lest they exceed the prescribed maximum and trigger the culprit's enrollment in the company's health insurance plan. While the obvious purpose of this scrutiny is to get more people covered, did any of these savants even consider how many will be taking home smaller paychecks -- like my stepdaughter Kali, whose thirty-eight-hour work week at the Amuse Restaurant in Richmond is being reduced to thirty?

I'm wondering if Kali is going to join the ranks of the restless uninsured stampeding straight to the nearest Health Exchange, when these nebulous agencies swing open their gates. The pool of prospects supposedly is set to explode when small employer groups find their obligations too onerous and shut down their own plans.

While prescient policy wonks are collectively holding their breath, hordes of consultants are raking in hundreds of thousands of fees advising their clients -- like the local provider-owned insurance company of which I am a board member -- how to prepare for the onslaught.

Follow the nuclear chain reaction to see who gets irradiated.

Policies sold through the exchanges won't be cheap, because, in spite of a presumed competitive marketplace and a twenty percent limitation on combined administration costs and profits, insurers are facing considerable uncertainty (and high risk).

They cannot exclude individuals with pre-existing conditions nor terminate them when they become sick. They must include hospital, emergency, maternity, and mental health care, preventive services such as mammograms and colonoscopies, and prescription drugs. Out-of-pocket payments are capped, and lifetime and annual limits are prohibited.

Besides healthy thirty-somethings having to ante up for benefits they don't want or need, they will be further penalized by an arcane but crucial requirement that they can be charged no less than one-third the amount an older person is charged, compared to the current average one to five ratio.

For example, if a twenty-five-year-old pays $100 and a sixty-year-old pays $500, the new rule would hike the former premium $50, or fifty percent, and lower the latter premium $50, or ten percent.

Isn't this just another aberrant priority, to foist a hidden tax on youthful workers who are already encumbered with their grandparents' Social Security and Medicare bills while they struggle to raise their families but who have no AARP to cry shame when their entitlements -- in this case, their earnings -- are jeopardized?

Insurance executives are predicting "sticker shock" rate increases. "Young people may decide not to buy coverage at all," says Robert Zirklebach, spokesman for the trade group America's Health Insurance Plans, and pay the federal fine, which rises from $95, or one percent of income, in 2014 to $695, or two-and-a-half percent of income, in 2016. "And that's going to drive up the cost for everyone else."

Theoretically, the exchanges are supposed to have the opposite effect. Fearing that only the sickest will be purchasing their policies and desperate to entice healthier customers to sign up, spread the risk, and cushion their losses, insurance companies will be motivated to cram down their premiums to a level below their anticipated claims. But losses there will be, unless -- and this is the second key component of this grand design -- the insurers can negotiate more favorable payment contracts with their hospital and physician networks.

This optimistic scenario seems too good to be true, considering that it's predicated on its two principal players acting in a manner contradictory to their self-interest: insurance carriers absorbing severe body blows and providers voluntarily accepting less remuneration.

Its craftsmen have probably forgotten President Obama's promise that premiums for a family of four would be $2500 lower by the end of his first term, since they are now $3000 higher, a miscalculation of twelve hundred percent.

But cost is no obstacle when the government is involved. Customers whose incomes range between 133% and 400% of the poverty level ($92,200 for a family of four) can receive subsidies (in the form of tax credits) ranging from $5,000 to $10,000, courtesy of a surtax on wealthy individuals -- provided they can fill in the blanks, all seventy-five pages of them.

Yes, in a blatant display of bureaucratic bombast, the draft applications for exchange participation and subsidy eligibility stack up to fifteen and sixty pages respectively, and these are just the preliminaries to an individual's plan selection. Since most of these folks, frankly, are challenged by more than one hundred characters, professional counselors will be available to guide them through the maze of legalese. Who will be paying these navigators is as yet unclear, but there's no check-writing mystery regarding the thousands of new Health and Human Service and IRS workers who will be hired to review all the forms.

While I understand the objective of enlarging the insurance umbrella, and believe everyone should pay his fair share, by forgoing more productive investment opportunities and transferring these funds into the insurance and health care coffers, aren't we just further feeding the beast, whose appetite for our nation's gross domestic product appears insatiable?

Is it more than coincidental that, as these complementary industries engorge themselves, our economy slithers sideways and wages stagnate?

For example, in my company, which pays seventy percent of the health care costs of its 550 employees, the bills have risen thirty-five percent since 2010, and now equate to 14.3% of total payroll compared to 11.1% three years ago. Sadly, this three percent spike in benefits has soaked up dollars that more efficiently could have been deployed as raises and incidentally boosted morale and performance.

One would think that hospitals -- including our local non-profit monolith, Centra Health -- would be eagerly ramping up to accommodate the impending wave of newly-insured sick people and calculating all the free money swirling in their wake. Compelled by its tax-exempt status to provide charity care to indigent patients, Centra now stands to recoup at least a portion of these charges, as many of these former non-payers will be eligible for an expanded Medicaid, courtesy also, I believe, of the aforementioned surtax.

But in the bizarre, dysfunctional world of medical logistics, management's persistent message to its Board of Trustees is that fully-realized health care reform, which contemplates a reengineered system of provider reimbursements, will reduce the number of inpatient admissions. They have yet to convince me.

With more people insured and higher levels of coverage mandated, elementary mathematics and simple logic would suggest more visits to hospitals and physicians, assuming there are enough of the latter around to meet the demand. And while no one can deny that every citizen is entitled to adequate preventive and clinical care, when does the merry-go-round stop, or even slow down?

At the eruption of pain, curiosity and fear drive us to the internet, where reams of information concerning every conceivable bodily breakdown are available at the click of a mouse. Yet, ultimately, we are mere helpless laymen, and must defer to the wisdom and authority of the presumed experts attending us. Desperately seeking diagnosis, medication, and cure, we submit ourselves to a battery of tests, punctures, scopes, and treatments, all the while groggily oblivious to their absolute necessity, possible side effects, and mounting fees, as ninety percent are borne by an invisible third party, either the government (that is, the taxpayer) or our employer-funded insurer.

Whenever such cynicism rears its ugly head, full disclosure obliges me to acknowledge that, for sixty-four years, other than five kidney stones, I've been blessed with good health. And when the ax falls, as inevitably it must, I expect I will endorse the sentiment of my father, who said he never appreciated the efficacy of narcotics (or the comforts of religion) until he was stricken with lung cancer.

In a process from which the customary buyer-seller checks and balances have been expunged, the allure is irresistible, and the abuses routine. Four years ago, when a nagging knee injury threatened to end my thirty-year running career, I gulped a dose of the Kool-Aid myself and limped straight to the office of Lynchburg's most prestigious orthopedist. After a perfunctory x-ray, a bout with an anti-inflammatory prescription which gave me blurred vision, three weeks of useless physical therapy, a gratuitous MRI during which the technician almost zapped the wrong limb, and who knows how much money doled out (by my company), I settled for a cortisone shot, which, along with an eight-month layoff, actually took care of the problem.

Extrapolate this micro-incident into the warped universe of health care, and the possibilities are endless -- and frightening. With providers paid by procedure and patients their profligate consumers, misaligned incentives on opposite sides of the transaction coalesce to ensnare each party in the utilization trap: it's in the best interest of both to spare no expense because, in essence, there is none.

The new paradigm in the industry is marketing. Open the Sunday newspaper, and right beside the furniture ads are beaming cardiologists and orthopedists encouraging readers to get their irritating hips or chest twinges examined. Turn on the television at any hour of the day or night, and one is subjected to a barrage of drug testimonials and cancer care options, even though recent research implies that prostate and breast cancer have been over-treated. Meanwhile, the hospital arms race continues unabated, as competitors spar over the territorial rights to erect lucrative scanners and imaging machines, which are guaranteed to lure customers like iron filings to a magnet.

And should an insurance company be so cold-blooded as to deny coverage, like a cloudburst from the heavens, the ensuing wrath is unforgiving.

In his twenty-six-thousand word investigative report in the March 4th issue of Time Magazine, Steven Brill attributes much of the exorbitant cost of our nation's health care to indefensible hospital mark-ups on every raw material from aspirin to implants, to excessive executive compensation and profit margins, and to the inordinate disparity among charges assessed to Medicare, commercial insurers, and the poor self-payer, who fares the worst in this impenetrable maze of irrational price-fixing.

In some respects, I find such fault-finding an oversimplification.

For example, not all hospitals generate the returns cited in Brill's article. Centra's margins are in the three-to-five percent range, and are compressed considerably by a combined Medicare and Medicaid population exceeding fifty percent. Centra's Medicare reimbursements traditionally run about eight percent less than the state average and twenty percent less than the national average. Contrary to Brill's generalization, management maintains that it loses money on Medicare, and, like its peers, while it won't admit it, compensates by growing that volume of patient procedures, especially expensive ones, and by boosting rates for commercial payers (and employers), a phenomenon endemic to the system known as cost-shifting.

Consequently, utilization is driving Medicare down a fast track to insolvency. According to David Goldhill, writing in the Washington Post, "In ten years, the number of CT and MRI scans more than doubled; hip replacements increased by thirty-six percent. One out of three beneficiaries now has at least one surgery in the year of his or her death. The average seventy-five-year-old takes five prescription drugs." Unfortunately, the risk of error has spiked commensurately; one in seven Medicare hospital admissions results in an adverse event, and ten percent of those events contribute to the patient's death.

The case of eighty-nine-year-old Alan A., as recorded by Brill, is instructive. After he suffered a heart attack, twenty-six doctors saw him or read a diagnostic test at Virtua Marlton Hospital or ManorCare convalescent center, and submitted fifty bills. "They paraded in once a day, or once every other day, poked around a bit, and left," says Alan. Other than the attending heart specialist, "I had no idea who they were." Cruising the halls and racking up a few extra dollars is a common practice, says a physician who has worked at several hospitals across the country.

Lower Medicare reimbursements, and more Medicaid patients, which the new law envisions, seem likely to aggravate the pain.

Sympathy for corporate America is decidedly unpopular these days, and Brill has little for businesses footing fifty percent (after co-pays, contributions, and tax deductibility) of their employees' medical bills. He bemoans the fate of individuals caught "in circumstances beyond their control," and disparages plans that "have a payout limit or don't cover a necessary drug or treatment." He has either failed to follow the money to its true source, employers like me, or is blithely assuming our pockets are deep enough to withstand the highway robbery he has so diligently unearthed.

Here is some other lunacy to ponder.

In the United States, prices for everything from an office visit to a CT scan to intensive care are higher than anywhere else in the world; even within our borders they vary wildly among communities and hospitals.

Prices for medical services have little correlation to their value in improving health. For example, elective angioplasty (surgery to repair narrowed blood vessels in the heart) doesn't prevent heart attacks or reduce chest pain any better than drug treatment alone, yet it costs tens of thousands of dollars more.

The exponential -- and costly -- increase in high tech imaging studies, number of days in intensive care units, and robotic surgeries over the past fifteen years has been inconsistent in producing better outcomes.

As much as thirty percent of spending doesn't make patients healthier, and may in fact be counterproductive. Women are being diagnosed and treated for breast cancers that research indicates would never have harmed them. Expensive new drugs are no more effective than older cheaper ones. Pricey new procedures like proton beam therapy for prostate cancer have no demonstrable benefits over former, lower-tech alternatives.

Finally, says Goldhill, writing in The Atlantic (September 2009), since insurance is "the most complex and distorted method of financing any activity, its use to fund nominal and routine as well as large and unexpected expenses is a major cause of health care's huge cost," and why innovation and technological advancements never generate efficiencies or savings.

For every two doctors in the United States, there is one health insurance employee. In 2006, it cost $500 per person to administer health insurance. Inefficient claims processing wastes $210 billion annually, according to Price Waterhouse Coopers Health Research Institute. Many small businesses like Schewel are forced to employ at least one human resource staff person to advise and assist workers in filing claims.

Moral hazard -- the tendency for people to alter their behavior and take less care with their decisions when risk has been minimized or eliminated -- adds more excess cost to health insurance. I have already described how consumers, with little of their own money at stake, are easily enticed by the newest drug, device, or procedure promoted by physicians whose livelihood depends on their ordering diagnostic tests, performing surgeries, and scheduling follow-up consultations.

But because the insurance model is so firmly entrenched in the culture of health care, and its advocates so politically powerful, rumors of its demise proved to be grossly exaggerated. Indeed, after relentlessly demonizing the brutish carriers as avaricious and heartless, our self-righteous President and his legislative cronies did an immediate about-face, not only creating for them twenty-seven million new customers at the stroke of a pen but also supporting their premiums with tax dollars. Apparently, these fellows are not nearly as villainous as previously advertised.

With negative news predominant, is there any reason to think that the Patient Protection and Affordable Care Act will live up to its name, protect patients (and payers), and make health care more affordable?

As might be expected, unintended consequences are undermining another aspect of the law. Smaller hospitals and physician practices are rapidly discovering that they lack the investment and intellectual resources to adapt to its changing vision of health care. With their reimbursements and viability threatened by their inability to implement certain technological standards, such as electronic medical records, they are left with no choice but to collaborate with larger, stronger partners. Such consolidation maximizes the pricing power of these monopolistic institutions.

One hope for the future -- perhaps the only hope for the survival of privately-funded medicine -- is to scrap the current fee-for-service template, in which the volume of procedures determines hospital revenue and physician incomes, and replace it with an integrated system structured around the management of population health and whole episodes of care. Thus, providers would receive fixed, lump-sum, capitation payments to keep people healthy and treat them for specific illnesses, based on national averages and scientifically-proven protocols.

A trail blazer in the field was the Mayo Clinic, which, writes Atul Guwande in the New Yorker (June 1, 2009) "decades ago, in an effort to eliminate the financial barriers to improved patient care, pooled all the monies it  received, and began paying doctors salaries so their goal couldn't be increasing their income. Mayo elevated leaders who focused first on what was best for patients, and then on how to make that financially possible," and sought input from all stakeholders, including nurses and janitors. The result is one of "the highest-quality, lowest-cost systems" in the country.

Mayo is an exception, however, as reform has inched forward at a snail's pace. Why wouldn't it, since private insurers and the federal government reimburse technology-intensive procedures -- such as imaging and surgery, usually performed by specialists, who know where the money is -- at higher rates than services focused on evaluating patients or managing their care for chronic conditions? While idealistic rhetoric circulates through hospital corridors and conference rooms, until these payers revise the rule book, inertia will prevail.

The federal government, through guidelines and incentives issued through the Patient Protection and Affordable Care Act, is banking on the Accountable Care Organization (ACO) as the mechanism by which meaningful reform will become widespread. An ACO is defined as a group of doctors, hospitals, and other providers who work together to coordinate and deliver seamless, high quality care for their Original Medicare patients (as opposed to those enrolled in Medicare Advantage plans).

ACOs that lower costs while meeting performance standards on quality and patient satisfaction will share in the savings. Patient and provider participation is purely voluntary -- so far.

Three experts, Clayton Christensen, Jeffrey Flier, and Vineeta Vijayaraghavan, writing in the Wall Street Journal (February 19, 2013) claim that, because the concept is based on flawed assumptions about economic and personal behavior, ACOs will not deliver their touted improvements in cost, quality, and access.

First, they say, doctors whose attitudes have been shaped by decades of complicated interdependencies with hospitals, insurance plans, and colleagues will find it difficult to change their approaches to treating patients, to reconcile cost reduction with appropriate medicine. For example, as part of an ACO, they will have to rely strictly on evidence-based protocols in making decisions regarding such matters as medication and surgery.

Second, quality-of-care improvements are possible only with patient cooperation and engagement, which may not always be forthcoming. Wary of the 1990's backlash against HMO's because of their gatekeeper role, ACOs will allow Medicare patients freedom of choice, but will be granted no means -- such as discounts or preferential pricing -- to steer them to the most effective providers. ACOs will continue to be held accountable for patients who don't comply with recommended treatment or lifestyle changes, and even for those who refuse to share their claims data or medical history.

Third, early returns from thirty-two pilot Medicare Pioneer ACOs, the most advanced ones operating, have been disappointing. Even if they should achieve their full desired impact, the Congressional Budget Office estimates an annual savings of $220 million in a total Medicare budget of $468 billion. When the results of outlying commercial and Medicare ACOs are added to the mix, reductions in overall health care spending are no more substantive.

Posting thirty million to the insurance rolls, prohibiting pre-existing conditions as grounds for denial, limiting co-pays for preventive care, ending annual or lifetime payout caps -- these are certainly admirable goals for a nation which values the physical, emotional, and mental well-being of all its citizens. Any person so brazen as to protest them would undoubtedly be denounced as an insensitive curmudgeon.

But even the most compassionate observer is tempted to vent his rage and frustration.

Because the missed opportunity -- and tragic failure -- of the Patient Protection and Affordable Care Act is that, rather than bending the accelerating cost curve of health care, our most dire problem, it has only steepened it, as evidenced by recently reported trends in higher insurance premiums, a function, of course, of expanded coverage. Individuals, taxpayers, and employers will continue to pay the price and suffer under the weight of a distorted system none of them can afford.

And with each passing day more and more of them will be prompted to pose the same question as Brill: What's the benefit of universal wellness if the medical bills end up killing us all?