Oba­macare and ef­fec­tive gov­ern­ment

Financial Mirror (Cyprus) - - FRONT PAGE -

When his­to­ri­ans look back on the United States’ Pa­tient Pro­tec­tion and Af­ford­able Care Act (ACA), Pres­i­dent Barack Obama’s con­tro­ver­sial 2010 health-care re­form, we pre­dict that they will not de­vote much at­ten­tion to its reg­u­la­tions, its trou­bled in­surance ex­changes, or its web­site’s flawed launch. In­stead, we think that they will fo­cus on how “Oba­macare” en­cour­aged a wave of in­no­va­tion that grad­u­ally tamed the spi­ral­ing costs of a dys­func­tional sys­tem, even as mil­lions of pre­vi­ously ex­cluded Americans gained ac­cess to health in­surance.

In­no­va­tion is prob­a­bly the least dis­cussed as­pect of health-care re­form. Yet it is cru­cial to “bend­ing” the sec­tor’s cost curve, be­cause it en­ables the de­liv­ery of qual­ity health care in cost-ef­fec­tive ways. Oba­macare has pro­vided pow­er­ful new in­cen­tives for such in­no­va­tion.

From 1980 to 2010, US health-care spend­ing grew almost twice as fast as the econ­omy, ris­ing from 9.2% to 17.4% of GDP. While many fac­tors con­trib­uted to this surge, most ex­perts agree that the sin­gle most im­por­tant cause was a fee-for-ser­vice sys­tem that re­warded health-care providers for billing as many ser­vices as pos­si­ble, rather than for keep­ing peo­ple healthy and treat­ing their ill­nesses ef­fi­ciently.

The ACA has been chang­ing that, by es­tab­lish­ing myr­iad new in­cen­tives to foster ef­fi­ciency in health-care de­liv­ery – for ex­am­ple, by re­duc­ing costly and un­nec­es­sary hos­pi­tal in­fec­tions and read­mis­sions, and by adopt­ing elec­tronic health records. Most im­por­tant, the ACA is pro­vid­ing in­cen­tives for the cre­ation of “af­ford­able care or­gan­i­sa­tions,” “bun­dled pay­ment sys­tems,” and other de­liv­ery in­no­va­tions to en­cour­age bet­ter co­or­di­na­tion of care, es­pe­cially for pa­tients with nu­mer­ous chronic con­di­tions. Such pa­tients are among the 10% who ac­count for an es­ti­mated 64% of over­all health care costs.

Around the US, providers, in­sur­ers, non-prof­its, and lo­cal gov­ern­ments are re­spond­ing to the ACA’s in­cen­tives. The Cen­ters for Medi­care and Med­i­caid Ser­vices (which pro­vide health in­surance to pen­sion­ers and the poor) has just an­nounced its sec­ond round of grants – $665 mln to 28 states, three ter­ri­to­ries, and the Dis­trict of Columbia – to en­cour­age in­no­va­tions in health-care de­liv­ery.

Of course, it is still too early to de­clare vic­tory, but Oba­macare seems to be work­ing. Ac­cord­ing to a re­cent anal­y­sis by the Coun­cil of Eco­nomic Ad­vis­ers (CEA), about ten mil­lion peo­ple gained health in­surance cov­er­age in 2014 as a re­sult of the ACA – the largest in­crease in cov­er­age in four decades. But the real sur­prise is that growth in health-care spend­ing slowed dra­mat­i­cally from 2010 to 2013, to roughly the same pace as GDP growth. This rep­re­sented a sharp break from the pre­vi­ous half-cen­tury; in­deed, this pe­riod was char­ac­terised by the slow­est growth in real per capita health-care spend­ing on record. To be sure, the ACA is only one fac­tor in this promis­ing trend; growth in health-care spend­ing of­ten slows in the wake of an eco­nomic down­turn. But Medi­care spend­ing, which is not af­fected by re­ces­sions, has slowed along with pri­vate health­care spend­ing. In a re­cent study, the CEA con­cluded that the ACA’s Medi­care re­forms ac­count for a sig­nif­i­cant share of the slow­down. The ACA is an ex­am­ple of how gov­ern­ment can pro­mote in­no­va­tion to ad­dress ma­jor so­ci­etal chal­lenges by pro­vid­ing goals, di­rec­tions, and in­cen­tives, rather than dic­tat­ing so­lu­tions. The gov­ern­ment plays a role akin to that of a ven­ture cap­i­tal­ist pro­vid­ing seed money and fi­nan­cial support to foster in­no­va­tion.

In this sce­nario, dif­fer­ent play­ers – Medi­care and Med­i­caid, state and lo­cal gov­ern­ments, pri­vate in­sur­ers, physi­cians, and so­cial en­trepreneurs – col­lab­o­rate to ham­mer out ef­fec­tive so­lu­tions that can be scaled with gov­ern­ment rev­enues. For ex­am­ple, re­spond­ing to the ACA’s in­cen­tives and flex­i­bil­ity, Arkansas and Ore­gon have launched bold ex­per­i­ments to re­vamp Med­i­caid, in part by re­ward­ing health-care providers who de­liver bet­ter out­comes and keep pa­tients health­ier.

In Cam­den, New Jersey, Jef­frey Brenner, a fam­ily doc­tor, has pi­o­neered strate­gies to re­duce hos­pi­tal stays by “su­pe­rutilis­ers,” a small share of Med­i­caid pa­tients who are fre­quently ad­mit­ted for ex­pen­sive acute care. Brenner mapped “hot spots” around Cam­den, and sought to find out why peo­ple in some ar­eas ran up such huge bills.

The prob­lem was not fraud. It was an ab­sence of co­or­di­nated med­i­cal care, es­pe­cially ba­sic pri­mary care, and a lack of at­ten­tion to peo­ple’s un­der­ly­ing risk fac­tors. The most ex­pen­sive 1% of pa­tients, those with a tan­gle of is­sues, ac­counted for 30% of Cam­den’s pub­lic health-care spend­ing.

Brenner’s Cam­den Coali­tion of Health­care Providers, founded in 2003, re­ceived its first fund­ing from a phi­lan­thropy, the Robert Wood John­son Foun­da­tion, and a pri­vate in­surer, United Health Care. The re­mark­able suc­cess in Cam­den has prompted the foun­da­tion to fund sim­i­lar ex­per­i­ments in Bos­ton, Cleve­land, Cincin­nati, western Michi­gan, and Hum­boldt County, Cal­i­for­nia. Now the gov­ern­ment is pro­vid­ing ad­di­tional support, with grants to sim­i­lar pro­grammes in Maryland, Colorado, Penn­syl­va­nia, and North Carolina.

Ore­gon has en­tered into a pay-for-suc­cess bar­gain with the fed­eral gov­ern­ment. The state will re­ceive $1.9 bln over five years to re­vamp its Med­i­caid ser­vices along the lines of Cam­den’s ap­proach. Ore­gon will get the money only if its per­per­son Med­i­caid costs climb sub­stan­tially more slowly than other states’. At the mo­ment, Ore­gon is on track.

Arkansas has moved 20 dif­fer­ent “episodes” of health-care de­liv­ery (in­clud­ing hip and knee re­place­ments, preg­nancy, colono­scopies, asthma, and con­ges­tive heart fail­ure) from feefor-ser­vice to pay­ing for qual­ity out­comes. The re­sults so far are promis­ing – not just by rein­ing in costs, but also by bet­ter align­ing ser­vice de­liv­ery with best prac­tices.

The gov­ern­ment can spur in­no­va­tion by of­fer­ing in­cen­tives that tap many dif­fer­ent play­ers’ strengths. In health care, that means tak­ing ad­van­tage of the pur­chas­ing clout of Medi­care and Med­i­caid, the risk-tak­ing of so­cial en­trepreneurs and phi­lan­thropists, and the dy­namism of mar­kets and pri­vate business. And health-care re­form is just one ex­am­ple in which gov­ern­ment can de­liver what the pub­lic wants by set­ting goals, en­cour­ag­ing cre­ativ­ity, and pro­vid­ing the re­sources to scale up what works. Twenty-five years from now, we hope that his­to­ri­ans look back on the ACA as the start of a new era of pub­lic-pri­vate col­lab­o­ra­tion to de­velop in­no­va­tive so­lu­tions to com­plex so­cial prob­lems – and thus to re­store trust in gov­ern­ment it­self.

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