Even if it Survives the Courts, ObamaCare Needs Help

Editor’s Note: This op-ed was originally published on The Hill on January 28, 2019.

As the latest threat to the Affordable Care Act bounces through the federal courts, Congress needs to recognize that the law must be amended to preserve key protections for millions of Americans. With or without a court ruling on its constitutionality, the ACA needs help.

Much damage already has been done to the ability of patients to get adequate coverage and to hospitals and other providers that aim to deliver good care.

{mosads}Notably, the ACA’s goal of universal coverage has proved disappointingly ephemeral, driven by myriad factors. Most recently, the Trump administration has slashed funding for promoting the ACA marketplaces and has allowed states to introduce cheap plans that lower benefits, threatening to siphon younger and healthier people away from the broader pool.

The Republican tax bill has further undermined individual participation in the ACA by eliminating tax penalties for those who do not sign up for insurance.

This last factor was the basis for a recent ruling in a federal court in Texas, which held that without the penalties the ACA had lost the taxing power that underpinned its reason to exist. The appeal of the ruling is likely headed to the U.S. Supreme Court.

Our home state of California has tried to mitigate some of these effects. It budgeted $107 million to promote the Covered California marketplaces last year. And Gov. Gavin Newsom (D) has proposed that all Californians must carry health insurance. But California alone cannot undo all the damage done to the ACA.

Faced with uncertain markets, insurers have reacted by charging higher premiums, pulling out of some regions, creating plans with extraordinarily high deductibles, and restricting coverage to narrow networks of doctors and hospitals.

For hospitals this also has brought considerable pain. During the drafting of the ACA, hospitals agreed to accept $150 billion less from Medicare over the first 10 years of the act. When the hoped-for increase in insured populations did not appear, hospital balance sheets began to suffer. Financial pressures on all hospitals have mounted as insurers have acted to steer patients to ever cheaper providers and extract unsustainable price concessions.

Moody’s Investors Services reported that hospital profitability has sunk to levels not seen since the financial crisis of 2008-2009. At the same time, hospitals face intense pressure on the cost front.

Personnel account for 60 percent of operating costs at a time of chronic, severe shortages. California hospitals are spending big to fortify their buildings for earthquake safety with no new revenue sources to pay for this multibillion-dollar requirement. Even so, providers strive to keep quality high. A USC study of U.S. hospitals through 2011 found substantial gains in patient outcomes and efficient care for a number of key treatments, and that trend is continuing.  

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So, how to move forward?

Assuming Congress will not need to redraft the ACA completely, it should begin making basic reforms. First, let’s stop putting our faith in round after round of payment cuts and cost shaming. Nonprofit hospitals face vast underpayments from Medicare and Medicaid, amounting to $13 billion last year in California alone. These shortfalls play a significant role in driving up commercial insurance costs.

Federal lawmakers and regulators could help by accelerating payment models that promote collaboration among physicians and hospitals to provide the most appropriate and cost-efficient care for patients. For example, Medicare should build on Medicare Advantage, a successful approach that pays private insurers a flat fee to manage the health of beneficiaries.

Over one-third of Medicare enrollees have joined such plans. To further reduce administrative complexity and costs, the government also should explore contracting directly with hospitals and doctors working together to care for Medicare patients. And on the commercial side, simpler payment systems are desperately needed to reduce confusion and ill-will among patients.

The model for the future can’t be more fighting between payers and providers over pricing power. Instead, the various sides need to be encouraged to more closely align by sharing information, resources and responsibility for health outcomes.

In the meantime, politicians and regulators should recognize that hospitals and other health-care providers remain frontline engines of innovation. Although the ruling in Texas was a shock, it served as a strong reminder that we still need creative thinking in health policy, rooted in a realistic understanding of what is possible and how we can create the care delivery system Americans need and deserve.

Thomas M. Priselac is president and chief executive officer of Cedars-Sinai in Los Angeles. John A. Romley is associate professor of public policy at the Price School of Public Policy and the Leonard D. Schaeffer Center for Health Policy & Economics at the University of Southern California.