BLOG POST

The Next Four Years: Health Care

Four years ago, the work of reforming the American health care system to provide affordable, quality health care to more Americans hadn’t started. Today, thanks to the Patient Protection and Affordable Care Act (PPACA), it is well underway, though some of the hardest problems in our health care system still need to be addressed.

The PPACA has strong provisions to help provide reliable access to health care to more Americans. It requires more employers to provide health insurance, eliminates rules that made it easier for insurers to deny coverage, and expands Medicaid funding for those who can’t afford to buy health insurance on their own. Implementing these and other provisions will be one major challenge for the Obama administration in the next four years. The other, bigger challenge will be figuring out how to slow the rising cost of care.

Implementing the Affordable Care Act

In the next four years, major provisions of the PPACA are scheduled to take effect. Successful implementation will require extensive rule-making by the Obama Administration and states. Some of the key steps are:

  • Get health insurance exchanges up and running, creating consumer-friendly, competitive marketplaces for patients to buy insurance. Nineteen states will be operating their own exchanges, while the federal government will have a role in the exchanges for 32 states: the 25 that have declined to establish their own and will instead rely entirely on the federal government to operate their exchanges, and the seven that plan to operate an exchange in partnership with the federal government. If insurance exchanges are to help patients purchase coverage that begins in 2014, rules need to be established early in 2013 regarding what care health insurance plans must cover so that private insurers have time to prepare to participate.
  • Clarify elements of the requirement that employers of 50 or more people provide insurance. Do part-time workers qualify for coverage? Do all employers have to provide coverage that includes contraceptives?
  • Establish rules regarding the expansion of Medicaid. How much federal funding will states receive to insure newly covered patients? Will states receive federal funds to cover patients that states were voluntarily helping before? The answer to these questions will influence how many more people have access to health insurance.

Addressing the Rising Cost of Care

As politically and technically tricky answering questions about implementation of the PPACA will be, designing solutions to address the skyrocketing cost of health care—a problem only lightly addressed by the PPACA—will be far harder but no less important because health care spending affects such a large share of the economy.

Health care spending consumes 17.9 percent of the nation’s gross domestic product and the rate of growth in health care spending is greater than inflation or wage growth. Nationally, inflation rose 38 percent from 1999 to 2012, while wages rose 47 percent. Health care spending grew faster, with family insurance premiums rising by 172 percent. The federal government predicts that national health care spending will increase from $2.7 trillion in 2011 to $4.9 trillion in 2020. That is an increase to nearly 20 percent of gross domestic product.

In recent years, states have adopted a number of policies to control the cost and improve the quality of health care. The PPACA also contains numerous pilot and demonstration projects that may yield information about which policies are worth broader implementation. Some of the state policies to watch and potentially emulate nationally are:

  • Greater scrutiny of proposed rate increases from health insurance companies. Rather than cutting administrative expenses, driving a hard bargain with hospitals and doctors, or paying for care to keep people healthy, too often insurance companies just raise rates on their customers to cover expected increases in costs. States like Oregon have begun to tackle this problem by examining proposed health insurance rate increases. With the help of independent examiners who can uncover the true costs that insurers face, regulators have been able to moderate rate hikes.
  • Targets on the overall growth in health care costs. Massachusetts, which adopted a state version of the Affordable Care Act when Governor Romney was in office, yet again is pioneering health care policy, this time with legislation that sets a cap on the total amount by which health care spending can increase. The cap is tied to the state’s rate of economic growth, eventually calling for health care spending to grow more slowly than the economy. To achieve this goal, Massachusetts will use a variety of strategies, including stringent review of proposed insurance rate increases, more prevention and wellness programs, and more efficient administrative systems.
  • Improved transparency of outcomes and costs. Better information about the quality of care is essential to figuring out the best way to spend our health care dollars, whether those dollars come from consumers, government or insurers. If the care provided by an expensive hospital is no better than an inexpensive one, then we can reduce our health care costs by copying practices from that inexpensive facility. As one of the major payers for health care, the federal government has tremendous leverage to require greater transparency—and eventually use of best practices. Some states have begun collecting and disseminating this information. For example, Colorado has begun to make cost and outcome information readily available for a number of procedures.

These and other measures will be key to curbing the growth in health care costs and are essential to the success of the PPACA. Ensuring reliable access to health care will be much easier if health care is affordable. The Obama administration will have its hands full implementing the PPACA, but the president’s long-term impact on the American health care system will be far more durable if the nation begins to address the cost of care.