Payment Structures Used In The Health Care Industry

Finally, the third policy element involved the passage of subsidies for individuals at 100 percent to 300 percent of the poverty level. This was partly made possible by an agreement between Romney and the DHHS. The annual $385 million previously dedicated to safety net hospitals would now support these subsidies and enable universal coverage.16 Each of these legs would prove essential to the success of universal health coverage. Guaranteed issue without the individual mandate would permit individuals to avoid purchasing insurance until they are sick, known as adverse selection. Several states, including Kentucky, New Hampshire, and Washington, saw health care premiums soar when they implemented guaranteed issue without a mandate as well.17

However, in theory, the combination of the mandate and guaranteed issue reduces adverse selection and stabilizes costs. To avoid punishing those individuals who cannot afford the coverage offered to them in the marketplace, the state must also provide subsidies for low-income individuals. Crucially, this three-legged approach also had the support of essential stakeholders.

Overall, stakeholders believed this reform bill would benefit them.18 This story would largely repeat itself during the passage of the national health care bill, and the result would look remarkably similar. Importantly, Massachusetts’s health reform can teach us a valuable lesson relevant to the ACA as well: improving access, while politically challenging, has proved easier than fixing cost.

Today, 98 percent of Massachusetts residents have health coverage, but this increase in the insured population did not reduce the state’s health care costs—the highest health expenditures in the nation, at $9,728 per capita, compared to a median of $6,795.19 This high cost is not a result of the 2006 reform, but was not corrected by the legislation either (see Figure 2). BIRTH OF THE AFFORDABLE CARE ACT IN 2010 Like Romney, Obama faced the challenge of expanding access while countering reluctant stakeholders. Consequently, it should be no surprise that the ACA shares similar characteristics and unaddressed issues with the Massachusetts legislation.

This includes the lack of truly effective cost control. Despite the public’s uncertainty regarding health care, many politicians in Washington understood the impact it was having on the economy and the well-being of many Americans. In illustration of this point, during the 2008 presidential election, even while the economy was heading into a recession, candidates from both parties discussed their plan to reform the health care system. With the election of Obama, and with Democratic control of both the House and Senate, the passage of national health care reform suddenly seemed possible. Yet like Romney before him, Obama needed the support of key stakeholders.

A wide array of competing interests had ensured that national health care reform had been discussed, attempted, and abandoned numerous times during the past century by presidents from both political parties, including Franklin Roosevelt, Richard Nixon, and, most recently, Bill Clinton.20 Since 1998, major health care stakeholders have spent over $5.36 billion lobbyings Washington, more than was spent in the same time period by the oil and defense industries combined.21 The pharmaceutical industry was prepared to spend $200 million either fighting or supporting the national health care reform bill.22 For their part, the Clintons discovered the importance of these industries the hard way: the American public was in favor of health care reform when Clinton began his fight, but after months of negative advertisements supported by the health industry, opinions evolved, and health care passage failed.

Obama, eager to avoid Clinton’s mistakes, presented stakeholders with the opportunity to shape policy. In a meeting called by the Senate Task Force, a room of gathered stakeholders was provided with three options for health care reform, which had been given the names Constitution Avenue, Independence Avenue, and Massachusetts Avenue: respectively, undergoing a major overhaul (single payer, etc.) of the current system; implementing more limited reforms (possibly tax credits and smaller market reforms to incentivize purchasing insurance); and adopting the Massachusetts reform as a template. After hours of discussion, the stakeholders voiced unanimous support for the Massachusetts Avenue approach.

Faced with similar incentives on a national scale as in Massachusetts, public and private stakeholders supported a bill that, not surprisingly, would achieve near-universal coverage in a similar manner to Massachusetts’s reform.23 After two years of work, the ACA would be voted into law in 2010. In total, the ACA has nine titles and one amendment. Title I of the two thousand–page legislation reflects the bill’s Massachusetts origins, employing the same three policy legs to expand health coverage to the uninsured.24 Thus, the ACA came to be defined by the same characteristics that allowed Massachusetts’s health reform to successfully increase access to health insurance.

Foolishly, many Republicans tend to ignore the conservative bona fides of the ACA’s essential characteristics and ignore their role in allowing the legislation to grow insurance coverage. Republican Senators Orrin Hatch (Utah), Tom Coburn (Oklahoma), and Richard Burr (North Carolina) put the most recent repeal effort, in January 2014, forward. This proposal would repeal the individual mandate, the subsidies for the poor, and remove many of the protections against dropping care based on preexisting conditions.25 Such a proposal would, in effect, undermine precisely the pillars necessary for expanding health coverage. To make matters worse, their plan also cancels Medicaid for the working poor.

People like my first patient would once again be faced with health coverage they could not afford. Despite all its shortcomings, repealing the current iteration of the ACA is no solution to America’s health care needs. Rather, we need policy that builds on the successes of the ACA, while addressing the remaining problems unanswered by the current law.

What are three payment structures used in the health care industry across the care continuum in US? How are they similar? How are they different? Is there a single problem that transverses all three of the identified payment structures? Explain.

Leave a Reply