The Dose - JK Wall

Welcome to The Dose, which tackles the finances behind local health care and life sciences and points to the most interesting national analysis. Your host is J.K. Wall.

Health Care & Life Sciences / Life Science & Biotech

Top 5 things I learned about health care this year

December 30, 2013

Launching The Dose this year was a big change for me. I went from writing detached reportage about what the health care actors were doing to writing intentionally provocative analysis about the problems of health care and local players’ role in it.

The Dose is still a work in progress for me. Some have said I have a clear philosophy of health care that I promote via the blog. That was news to me, as I have tried to make The Dose an equal-opportunity venue for assessing blame in what is indisputably a dysfunctional system.

The Dose is also an ongoing learning experience for me. I’ve delved into topics that I never did before, I’ve received excellent criticism and comments from my readers, and I’ve identified major holes in my knowledge that I’m working to fill for 2014.

But before the New Year hits us, let me look back on the biggest lessons I learned 2013.

1. Hoosiers are spending way too much on health care. No matter how I looked at it, I found that Indiana is an expensive place to be when it comes to health care. Each Hoosier spends $780 more on health care, on average, than the average American, even though Hoosier incomes are 15 percent below the national average. There are four reasons why: 1) Hoosiers are less healthy than average Americans; 2) Hoosier health care providers charge higher prices and provide more services than their peers nationally; and 3) health insurance is rather uncompetitive in Indiana and the insurers have fought for larger discounts instead of actually holding down providers’ prices; and 4) Hoosier employers have consistently chosen broader access to providers instead of lower prices, taking away insurers’ bargaining power against providers.

2. The Affordable Care Act won’t make health care or insurance more affordable. I remember chuckling in mild disbelief when the president of a construction firm told me in March that he thought the Affordable Care Act was supposed to make health insurance more affordable for his workers (and his company). Anyone who had paid attention for 10 minutes to the health reform debate of 2009 knew that Obamacare was never designed to make things cheaper for those already insured or already providing insurance. In fact, the law taxes those two groups to help pay for coverage for the uninsured. A series of actuarial studies by Apex Benefits Group Inc. and Milliman Inc. concluded that Hoosier employers will pay, on average, 9 percent more for health insurance next year than they would have without Obama’s health law. For individuals, the math is more complicated, since Obamacare will extend tax credits to low- and modest-income buyers. But there is no doubt Obamacare is driving up the unsubsidized cost of insurance. The Indiana Department of Insurance estimated the increase at 72 percent. Anthem Blue Cross and Blue Shield estimated it at 47 percent.

3. Consumer-driven health care is curbing health care costs, but it has a long, long way to go. Ten years after Congress blessed health savings accounts with tax free status, the percentage of Hoosiers in “consumer-directed health plans” rose to 34 percent. And health care pundits of all political stripes agree that high-deductible health insurance will become the dominant form of benefits under Obamacare. That trend is at least partly credited with restraining the rise in health care spending to just 4 percent per year recently. And it’s having visible consequences in the local marketplace too. I started the year with a story about major Indiana employers were embracing a new health care pricing tool called Castlight Health. Partly in response, the Indiana University Health hospital system cut prices on 38 imaging procedures by as much as 80 percent.  Other price services, such as Healthcare Blue Book and OKCopay Inc., are also getting use by employers and individual consumers. The Obama administration continues to release Medicare data on hospital prices and quality, which attracted lots of media attention, until everyone realized the data was mostly useless to consumers. Doctors are in the dark about prices too, which makes it hard for them to help patients make cost-benefit decisions about care. Patients still need more information before they can truly be health care consumers.

4. Obamacare stumbled out of the gate, but the health care industry is propping it up. The Obamacare exchanges have signed up 2 million Americans, compared with a predicted 3.3 million. The odds of enrollment meeting the Obama administration’s goal of 7 million is still unlikely. But that may matter less than people think. Companies like Indianapolis-based WellPoint Inc. are committed long-term to making the exchanges work, even though the company knows it will lose money next year in those marketplaces. In fact, the major health insurers were loyal soldiers in the face of a bevy of changes and deadline extensions made by the White House in November and December. Likewise, hospitals are ticked off that Obamacare’s promise of lots more paying patients isn’t panning out. But they are making do under the slower rise in reimbursements that has come from Obamacare’s changes to Medicare, as well as Congress’ sequestration. And IT entrepreneurs are flocking into the health care space with a raft of ideas on how to take care of more patients for less money. With the industry’s help, I predict, Obamacare will muddle through without the cataclysmic crash that its opponents are still hoping for.

5. Hospitals are inefficient, but they’re working hard to change. One of the biggest I learned this year came from a 40-year-old paper by health economist Joe Newhouse. In it, he described how providing more and more health care services is the reason d’etre of not-for-profit hospitals. It is why they don’t cut costs unless they absolutely have to. That helps explain why in central Indiana (where nearly all the hospitals are not-for-profit), there has been a proliferation of health care facilities, a steady rise in prices, and high utilization, too. But, to the hospitals’ credit, they are working hard to change. After the building boom of the last decade, there hasn’t been a new hospital facility announced in this area for years. Indiana University Health even shelved plan for an expensive new bed tower at its Methodist Hospital. All four of the major hospital systems in central Indiana laid off workers this year in a bid to cut about 20 percent out of their operating expenses. Franciscan St Francis Health boasted a 6 percent cut in expenses as part of its Medicare ACO project. The three other major hospital systems are all experimenting with the accountable care concept, too, which forces them to do what used to be heretical: reduce the number of people coming to the hospital. Perhaps this will yield the bend in the health care cost curve that policymakers have been seeking for years.

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