‘We were too timid on the cost side’

Dr. Ezekiel Emanuel An architect of the Affordable Care Act, gives the landmark law credit for driving significant change across the industry. He said it ushered in a new mindset toward value- and population-based approaches, and put a dent in the rate of growth in healthcare spending. But, he added, the law is not without shortcomings and could use some tinkering. Emanuel, vice provost for global initiatives and chair of the department of medical ethics and health policy at the University of Pennsylvania, spoke with Modern Healthcare’s editorial team about the ACA’s 10-year anniversary. The following is an edited transcript.

MH: Aside from coverage expansion, where has the ACA made the greatest impact?

Emanuel: The data increasingly is that as more people have gotten coverage, you’ve had a decrease in mortality. Probably the hardest endpoint you could ask for. At the second level, it’s clearly had an impact on cost in some way. That’s hard to quantify.

There’s lots of disagreement about the data, but here’s what I think we do have agreement about: on a real basis, inflationadjusted, Medicaid percapita costs had been flat for two decades. It continued to be flat despite getting a bunch more people into the program. Medicare, slightly ahead of passage of the ACA, but for the subsequent decade, on a real basis per capita spending was flat.

It’s hard to say per capita spending is going to be flat unless the ACA has something to do with keeping it flat because it had been going up year after year. So something changed. It might have started slightly ahead (of the ACA). Maybe that was the recession. Who knows exactly what was going on. But that it’s continued all the way through … that tells you that something in the ACA was affecting Medicaid and Medicare spending.

If you look at what the projections were in 2010 and you look at the actuality, we are down substantially, like $700 billion over what was anticipated. (See chart, p. 39) That spending anticipation was the old system. Why are we down? People have changed practice on a global level; $700 billion, which is a roughly 2.3 percentage point difference in healthcare spending (as part of gross domestic product), going from 20.2% to 17.9. That delta, that’s not an error of calculation. It’s something going on in the system that’s keeping healthcare costs under 18% of GDP.

MH: What’s the impact of economic volatility, especially if we have another slowdown or recession?

Emanuel: It’s clear that a recession leads people to hold back on the discretionary spending in healthcare, and maybe even some necessary spending.

I think there’s no doubt that the recession accounts for some of the early slowdown in spending. I don’t think it accounts for … more than 50% over the decade, and it’s probably under 30% over the decade would be my guess.

I do worry that we’re in a slightly different situation coming up. We’re going to go into a recession and maybe the coronavirus will do it. Who knows? You’re going to have this sort of bad situation of high-deductible plans, and people certainly worried about their income. Even if they’re not unemployed, they’ll be worried about their income. Maybe they’re worried about overtime or other things.

I think that will lead on the commercial side to decreased spending, and maybe it’ll lead to worse health outcomes. It shouldn’t affect too much how people use Medicaid. It may affect the numbers on Medicaid. You may see a big jump in numbers if the unemployment rate really goes up.

MH: Part of the policy debate today though is on affordability. Has that slowdown in spending translated to lower costs for consumers?

Emanuel: The big place we’ve seen that out-ofpocket spend is on the commercial side. There are two big drivers there. One is employers driving to highdeductible plans. We didn’t anticipate that. It’s a serious problem. The second is just this mixture of things around pricing of hospitals, drugs, etc.

The American public is apoplectic; it’s a serious problem. I would say honestly, we didn’t anticipate that would be the problem. A large part of that is super high prices for hospitals and you reinforce the problem of high-deductible health plans.

MH: If you could go back, would you have capped hospital prices?

Emanuel: I think you have to.

MH: There’s still a small percentage of revenue being tied to value-based models. What leads you to believe that the ACA led to a sea change in how providers operate?

Emanuel: One of the things we need to have is a recharging of the push on value-based payment. One of the things that could really do it is if the government … in the federal employee health benefits program, required all the insurers who participate to move to 50% of their payments to being valuebased, with downside risk.

Similarly, if you’re participating in (the military’s) Tricare, you have to do that. If you’re participating in the exchanges, you have to do that. If you’re participating in any program with the federal government, you need to do it. Not only you need to do it in that program, you need to do it portfolio-wide.

You would renew a very concerted effort. The second thing the federal government would have to do is work with private insurers to actually have a consistent model, which means the same quality and cost outcomes calculated the same way.

MH: Did you have those conversations about being more prescriptive 10 years ago?

Emanuel: I wanted to say that by 2015, Medicare will be paying at least for five different kinds of episodes on a bundled-payment basis and have that in the law and hold their feet to the fire. The CMS blocked this vigorously.

We were too timid on the cost side. There are lots of reasons for that. Part of it was the philosophy emanating from Massachusetts—“get everyone into the system and then you can attack costs” was the mantra that you heard out of Massachusetts.

“One of the things we need to have is a recharging of the push on value-based payment.”

MH: Can you talk about the ACA being a precursor for population health?

Emanuel: That was something that was very explicit and I think very thoughtful. We did want people to change how they were thinking and to take more responsibility.

We didn’t have tons of levers, but that was definitely one of the things that motivated a lot of the different approaches. Partially in trying to reemphasize or prioritize primary care, that was a major goal and we thought, in the absence of data, that accountable care organizations would really be able to drive that.

The rollout of ACOs, and in particular the problems of attribution and being able to incentivize patients in the ACO (and) penalize them financially for going outside the ACO … hindered a full, robust rollout of that kind of vision of population health.

My view is, there was an attempt to integrate lots of things including the first lady’s “Let’s Move” initiative and public health metrics and move the conversation along to real overall health outcomes. The problem is, what are the incentives for driving the system in that direction? It becomes attenuated if it’s not tied to real payment.

Ten years out, with slight changes in the CMS’ rules regarding Medicare Advantage, you see huge interest in social determinants of health. Whether it’s through community healthcare workers or companies that connect people to other social services, there’s a real positive recognition that health is determined by more than the healthcare services and getting these other things engaged— whether it’s food or housing or transportation—can be good in saving healthcare dollars and for patients.

MH: One big barrier to all of that is the upfront cost of providing such services. Was a funding mechanism discussed when drafting the ACA?

Emanuel: Sadly, it was not. We hadn’t fully thought things out.

If you want a broad criticism it’s around thinking about what it would take for frontline physicians to do these things, or frontline health systems to do these things.

But if we had a normal operation, if we hadn’t passed the bill (with) no chance of amending it, adding on, revising it … we might be on the fourth major series of amendments now, a decade later, that could have addressed some of these problems.

Part of the big problem with the ACA is it was passed and it became very hard to make adjustments along the way that required legislation (after Republicans gained control of Congress). Then six years into it, you had a major change to an administration that was totally hostile to actually implementing the law and making it work.

MH: Industry executives say that they are not planning for a dismantling of the ACA once the Supreme Court rules. Should they be?

Emanuel: If they toss out the entire law, there’s going to be chaos.

No one can imagine that they will overturn it. The arguments are so weak in this case, even very conservative legal scholars think this case has no standing.

(Chief Justice) John Roberts has already taken two shots of upholding this law. The core argument is the whole law goes because the mandate goes, but wait, the mandate is down to zero and the law is still operating, including the exchanges. We have (more than) 8 million people in the exchanges getting subsidies. Clearly what counts for them is what Barack Obama said during the 2008 campaign—it’s all about the premium. It’s not about the mandate. People want health insurance. The barrier is not you’ve got to force them. The barrier is can I afford it?

MH: Right, but should the industry continue to operate as normal? Should they have any contingency plans?

Emanuel: I would operate (business as) normal if I were in the industry. ●