Hard times continue for the Affordable Care Act (aka Obamacare). The administration has scrapped the law's long-term care insurance program covering nursing homes and home health care. The program was deemed unrealistic. This is a harbinger. As the law is implemented -- assuming the Supreme Court doesn't declare it unconstitutional or Republicans don't repeal it -- disappointments will mount.
Controlling health spending was a major promise. After all, it's called the Affordable Care Act, and boosters argue that it will subdue runaway spending. It almost certainly won't. One prominent skeptic is Arnold Relman, the former editor of the New England Journal of Medicine.
Writing in the New York Review of Books, Relman says that "the law does very little or nothing to address some of the most important causes of the high cost of care and its rapid inflation." Note: Relman isn't a conservative crank. He's a critic of insurance companies and advocates a single-payer, government-run health care system.
The Affordable Care Act, Relman writes, doesn't alter fee-for-service reimbursement that gives "all physicians strong financial incentives to provide more services than needed." The resulting "fragmentation of medical care," he adds, " allows specialists to practice in isolation without restraints on cost, causes duplication and disorganization of services, and discourages the use of primary care physicians."
"Restructuring the delivery of medical care" is essential, Relman says. He takes hope in the growth of multispecialty groups that include primary doctors and specialists. Nearly 200,000 doctors, about a quarter of practicing physicians, now belong to these groups, he says. On paper, they can better control costs by limiting duplication, fostering cooperation and eliminating wasteful services. But this isn't likely as long as fee-for-service prevails.
Something needs to force change. Republicans have a strategy. Rep. Paul Ryan, R-Wis., would convert Medicare -- the nation's largest insurance program -- into a voucher system. Medicare beneficiaries would receive a fixed amount and would shop for the most appealing health plan that their money would buy.
Government spending would be limited by the size of the vouchers. To attract patients, doctors and hospitals would be compelled -- so the theory goes -- to combine in ways that lowered costs and improved quality. Through tax credits, the same approach would apply to the under-65 population.
Relman's solution is not entirely dissimilar. He would replace fee-for-service with an annual per-patient payment to doctors who would be responsible for the patient's "comprehensive care." Both Ryan's voucher and Relman's lump sum are what health experts call capitation or "global payments." The big difference is that Relman would have government administer the payments directly, with attendant regulations. A single-payer system, he thinks, would extract savings from the overhead and profit of the insurance industry. In 2011, those together are estimated at $152 billion, 5.6 percent of health spending.
Despite profound differences, both these radical proposals proceed from common premises: Limiting health care spending requires an explicit ceiling on the dollars put into the system, and changing incentives for doctors and hospitals will create a superior delivery system.
We should be debating ideas like these, because overhauling the health care system is important in its own right and for controlling federal spending. Instead, the Affordable Care Act skews the agenda. Many of its promises rest, like the Community Living Assistance Services and Supports program, on unrealistic assumptions. Disappointments loom, and the needed debate is deferred.