Obamacare, its repeal and why healthcare is so hard to discuss
It may be a purely political battle, but it may serve to remind us why discussing the healthcare model is important. Also, it shows how NOT to do it.
One of Donald Trump’s 2016 campaign issues was repealing Obamacare. Enacted in 2010, the Patient Protection and Affordable Care Act (otherwise known as Obamacare) is a way to subsidize healthcare to low-income individuals, aimed to provide insurance to the 15% of the US population without one at the time. Noble intentions, but there really is no free lunch. To finance it, the bill depended on business, healthy young people and federal spending to pay for it. So, for it to work, everybody needed to join in, or there would be an incentive to drop altogether and refrain from paying insurance until you actually need it. So, it also mandates individual insurance, that is, everybody HAS to buy a health plan or there are penalties.
Now, let us remind again why healthcare (as related to Medicine) has anything to do with insurance (as related to finance). It is a fact that, in most populations, 1% of the patients account for up to 50% of the costs related to care provision. The well known Paretto law also holds here, 20% of the patients account for 80% of the costs. In simple terms, most people will die, hopefully old, requiring minimal hospital intervention, and this is great. But, if you happen to need it care, it will be so expensive that few people can pay. So, in the 1920’s, health insurance starts to take shape, pooling risk so everybody can rest safe at night. And risk is the key word here. People pay health insurance so that, if fate selects me to the expensive route, the pool dilutes my suffering.
At the individual level, though, the clean and clear economics is twisted. Two terms are key here: Information asymmetry and supplier induced demand effect. In principle, outcomes cannot be assured in healthcare, as a physician cannot be completely sure that medication will work, or that procedure will be fine, or even that the diagnosis is correct. No, in healthcare, money pays for services, not results. And since it is highly complex, consumers have a difficult time to evaluate which services they actually need. That is why they go to physicians for consultation, most physicians are consultants. On their side, physicians are the gatekeepers of additional services. If they believe more service is needed, all they need to do is request it. Due to several reasons, such as legal requirements, payment model distortions and even pressure from patients themselves, physicians are incentivized to, when in doubt, do more rather than less. Even when it doesn’t lead to better outcomes. In fact, as the Dartmouth study shows, even when it leads to WORSE outcomes.
Back to Obamacare, it was actually successful. Uninsured population dropped from 15% to around 10%. However, it has no effect on neither information asymmetry nor on supplier induced demand. Therefore, it led to a predictable and significant (25%) increase in premiums in 2017. Also, the rules and unpredictability of the risk pool (that becomes less risky as healthy young people get in, which didn’t happen as expected), led insurers to pull out from some states. Risk is becoming too big to be worth it.
I understand people getting angry at this. It is a tax increase to pay for other people’s healthcare bill, in a country where self-determination is king. The new bill is the expected answer: it promotes tax cuts and stops mandating people to buy healthcare. In other words, it stops telling people what to do and moves towards free market pressures. So, instead of looking forward, this new bill is really little more than a repeal, as if things were actually good before. As said before, free market has a poor record in healthcare.
Taking a broader look, money is actually a very ineffective way to change things in healthcare. It is very effective in ruining things, but not in fixing things. Take the pay-for-performance (P4P) movement. It makes sense at first: if paying for services can make physicians perform more than needed, paying them for outcomes should drive a conscientious use of resources. But the truth is: do you believe paying your doctor, say, 10% more, will make him actually give you the right answer and not a wrong one? A guy who spent 14 years training for a job, risk being sued and most often than not likes his job, will perform better because of increased pay?
A review supported by the European Observatory on Health Systems and Policies, published in 2014, looks at several P4P programs around the world and draws some hypothesis. In their words:
Pay for performance does not lead to ‘breakthrough’ quality improvements, and performance measures and other key building blocks of P4P programmes remain highly inadequate. But the findings of the study also suggest that P4P has a broader role to play as an instrument for improving health system governance and strategic health purchasing.
It is not about money, but information. One interesting find is that there was a significant improvement of chronic disease care in P4P programs. This was not related to outcome indicators, but to evidence-based care. When healthcare professionals are paid to follow science, outcomes improve.
So, why is it surprising that science is more important than money? The best healthcare systems of the world have some way to determine what should be covered and what services should be provided based on hard evidence and improved information systems. We know that healthcare service access is a somewhat minor determinant of health. What about exercise, diet, self-care in chronic diseases, drug abuse? Any serious attempt at reforming a healthcare system must contemplate what we know about health and find ways to solve it. Changing and throwing money around is not a sustainable answer, but Americans don’t seem close to stopping doing just that.
This post originally appeared on www.avicenahealth.com/blog