The politics of debt have gotten so insane that both parties are on the verge of gutting Medicare. The moment might be right to actually fix it.
So far, ACO pilot programs have proved disappointing, producing little if any savings. And there are good reasons to believe that most ACOs will never deliver the quality and cost-effectiveness of truly integrated nonprofit health care systems like the Mayo Clinic or the VA. Under newly minted regulations, there is nothing to prevent ACOs from being just loose networks of colluding, profit-driven, fee-for-service providers who go through the motions of pursuing quality. Even stalwart defenders of ACOs now acknowledge their large potential for abuse. As Donald Berwick, administrator for the Centers of Medicare and Medicaid Services, recently told a forum at the Brookings Institution, “There will be parties out there who want to repackage what they do and call it an ACO.”
Berwick went on to warn, as have many others, that many ACOs are likely to be effective monopolies in their local markets, given the massive consolidation already going on in the health care industry. This means they will be tempted to abuse their market power by, for example, raising their rates for non-Medicare patients. This “would ultimately undermine any short-term savings achieved by Medicare,” notes Merrill Goozner of the Fiscal Times, “since increases in a region’s top line health care tab would eventually force Medicare to raise its own rates.”
Even if all these and other pitfalls of ACOs are avoided, there still remains an objection that no one can rebut: any benefit ACOs might bring will at best be only gradual. Unless a more immediate and certain reform is applied, most of the Medicare population will continued to be treated—for years if not decades to come—by the status quo of a pattern of deeply fragmented, wasteful, and dangerous fee-for-service care, the cost of which everyone now agrees is unsustainable. If we’re going to avoid financial Armageddon, we have to do better than that.
As it happens, ACOs are not the first to attempt to provide higher-quality outcomes while lowering the cost of treatment. For ten years during the 1980s and ’90s, Americans embraced and then rejected HMOs and managed care. While the experiment in widespread managed care ultimately failed to reshape American health care, much can be learned by examining what worked and what didn’t.
Today, many Americans view HMOs simply as organizations designed to make money by denying them care. And it’s a sad fact that many HMOs have wound up doing just that, or else using clever marketing techniques to make sure they cherry-pick only young and healthy customers who are unlikely to get sick. But it is important to remember that HMOs and other forms of managed care came into existence in large measure because of a big problem that is still with us and getting worse—namely, vast amounts of poorly coordinated, excessive, and dangerous treatment.
The original vision of those who championed HMOs was that this new model of care would vastly improve the quality of American medicine and only incidentally lower its cost. Paul Ellwood, a pediatrician who more than any other single advocate built the case for HMOs starting in the late 1960s, put it this way: “My own most compelling interest as a physician was in the integration of health care, quality accountability, and consumer choices based on quality first and, secondarily, price.”
What Ellwood and other reformers wanted more specifically was an “integrated delivery system” in which primary care physicians would coordinate care in large, multispecialty medical group practices that would in turn be part of a coordinated system of hospitals, labs, and pharmacies. Moreover, to address the problems of overtreatment and lack of prevention, care providers would be prepaid a set amount per patient. As Alain Enthoven, another champion of managed care, once wrote, this would give “doctors an incentive to keep people healthy.”
Such were the highly idealistic and data-driven concerns and issues behind the emergence of HMOs. What went wrong? Eventually, HMOs morphed into many different forms and hybrids. Some were nonprofits, others were publicly traded companies answerable to Wall Street. Some were “staff models” that put physicians on salary and effectively eliminated the problem of intentional overtreatment; others became little more than loose networks of doctors on contract. Some were run by idealists, others by shysters, crooks, and knaves who convinced themselves that the road to riches could be found by low-balling on prepaid contracts and then denying their patients necessary care.
Even the many HMOs that tried to do the right thing often ran into a fundamental flaw in their business model. Most remained small enough that the majority of their customers changed plans every few years, either because they moved to a different market or because their employers switched to a cheaper plan. For all but the largest HMOs, this circumstance demolished the business case for prevention and effective management of long-term conditions like diabetes. Before any returns from investing in a patient’s long-term health could be realized, the patient was likely to be enrolled in some other plan. According to Lawrence P. Casalino, a professor of public health at Weill Cornell Medical College who has extensively interviewed HMO executives, the common view in the industry is “Why should I spend our money to save money for our competitors?”
By the 1990s, most people who were enrolled in any particular HMO had little or no choice in the matter; they were there because their employers were trying to save money. It didn’t help that many fee-for-service doctors felt threatened by the growing dominance of HMOs and other managed care providers and complained to their patients about it. Neither was the industry’s image helped by the negative press and lawsuits that some HMOs attracted.
The result was a public backlash. But with the benefit of hindsight, we can see that it didn’t have to turn out this way. We only have to look at the big exceptions to the often poor performance of managed care organizations over the last several decades. These are institutions with high levels of patient satisfaction that are also lauded by health care quality researchers for their patient safety, adherence to evidence-based protocols of care, and general cost-effectiveness. They include integrated providers like Intermountain Health Care, the Cleveland Clinic, the Mayo Clinic, Geisinger Health System, Kaiser Permanente, and the VA, the last of which ranks highest of all on most cost and quality metrics and is in effect the largest, and purest, nonprofit, staff-model HMO in the land (though, of course, government run and open only to veterans). The VA’s cost per patient is about 21 percent below what it would cost under Medicare to serve the same population with the same level of benefits. Until the wars in Iraq and Afghanistan heated up, the VA was also holding increases in its cost per patient down to just 1.7 percent a year, compared to annual increases of nearly 30 percent for Medicare.
Feed the Political AnimalDonate
Washington Monthly depends on donations from readers like you.