As the debate in Washington rages on over the efforts to repeal and replace the Affordable Care Act (ACA) there is a fundamental truth that is being ignored: there are no provisions of the current ACA replacement bills – either from the House (the American Health Care Act, or AHCA) or the Senate (the Better Care Reconciliation Act, or BCRA) – that specifically focus on reducing health care costs. This is a missed opportunity.
The current legislative proposals contain a number of provisions that shift premiums or out-of-pocket costs from one group to another. Each of these provisions moves costs around within the health care system and will create some winners and losers. While shifting costs from Group A to Group B may lower costs for Group A, the shift does not reduce health care costs overall.
Here are some examples:
- The AHCA and BCRA allow insurance companies to charge older Americans a premium that is up to 5 times more for coverage than the premium charges for younger Americans. (The Affordable Care Act had capped this differential to 3 times.) So, younger Americans may see their insurance premiums go down—but older Americans will see a premium increase under this law. And, net/net – shifting premiums around across different groups is not truly reducing health care costs.
- AHCA and BCRA also allow states to redefine the “essential health benefits” that must be covered by health insurance policies. This change is expected to lead to lower insurance premiums (as insurance covers less) – but this also means that, in a post-ACA world, people who need services that are not covered will simply have to pay for these services on an out-of-pocket basis.
- AHCA and BCRA contain different penalties for people who cannot prove that they have had continuous coverage during the prior year. This provision is intended to reduce insurance premiums, by preventing people from buying coverage only after the need for the coverage has been identified (i.e., a condition has been diagnosed). But, here too, imposition of the surcharge may protect insurance companies and allow them more stability in determining premiums—but it does not actually reduce the cost of health care itself.
Proponents of cost-shifting argue that placing more responsibility directly onto individuals creates incentives for those individual consumers to use health care more sparingly and to seek better prices in the market. This is a nice argument and there is, indeed, some evidence that increasing individuals’ out-of-pocket costs does lead to lower health care utilization. But shifting costs to individuals is still…shifting costs. Some of the decreases in utilization will result in postponing needed care and will, ultimately, lead to increased utilization (and costs) down the road. And, while some individuals will seek to obtain lower prices when they have skin in the game, individual consumers – especially those facing an illness or with limited means – lack the resources and tools to actually lower the overall cost of health care.
This focus on cost-shifting, and not actual cost reduction, represents a missed opportunity. While the political debate is focused on the winners and losers in the proposed ACA replacement bills, we are failing to engage in a meaningful debate on what is needed to truly reduce costs and improve the results delivered for the dollars spent.
America is paying too much for a health care system that does not deliver results or value for the amount spent. Health care costs will moderate only when the United States changes the way we pay for health care—when we change the payment system from one where we pay for volume into a system where we pay for value.
While the political debates continues, there are significant efforts under way to change the underlying basis for payment—to make a single payment for all care associated with a single “episode of care” (such as a coronary bypass or hip replacement) or to pay drug manufacturers based on the value provided by their drugs. These efforts are already under way, as evidenced by a variety of government pilots and private sector initiatives.
Increasing the use of value-based reimbursement offers much promise as a major component in America’s battle to rein in health care costs. But, more can be done legislatively to promote these efforts. It is a pity that the AHCA does not address this issue and that Congress is devoting so much energy in the battle to score points over cost shifting and winners and losers, rather than looking for ways to help all players in the system win.