The Congressional Budget Office (CBO) recently released an analysis that the Affordable Care Act (ACA) will now cost $48 billion less than expected. That’s the good news, and it makes a great headline. However, in the same report, CBO says that the costs are actually going up from $1 trillion to $1.7 trillion. So which is it?
Does President Obama’s proposal make healthcare cheaper or more expensive? Well, as with anything that comes out of Washington, it depends what you are looking at, what your timeframe is, and what your spin on it is. I am sure the CBO provides its best to guess at these numbers, but let’s be serious: Did anyone really think that we would reduce spending on healthcare by providing insurance to 30 million uninsureds? Of course not.
Rather, this whole thing has been about HOW to pay for the expanded coverage including increasing the ranks of Medicaid, providing subsidies for the poor, and filling the Rx doughnut hole for seniors. In some shape or form, all of us will bear the costs for providing the increased access to care. Pick your poison: higher premiums, taxes, penalties, or assessments on insurers and big pharma (all of which will be passed along the to end customer).
None of this comes at a great time in our economy with $4 gas gallons and conflicting unemployment figures. The Supreme Court just might turn some of the Affordable Care Act (ACA) on its head. Some people will be very happy to go back to the status quo of double digit healthcare inflation and no relief in sight for anyone. However, for two years I have been inside the belly of the ACA beast and there are some promising trends that I see could actually move the needle on costs — maybe not in 2014, but certainly over the course of time. What I like is that the market, in general, is starting to embrace some of the Affordable Care Act concepts, and robust debate is occurring in every city and state. Some examples are:
- There is an increased emphasis on primary care in the Affordable Care Act, a long overdue investment in the U.S. Let’s invest to keep people healthy, not to cure their ills. The initial investment will be expensive upfront as we reorganize the delivery of primary care into medical homes and use IT to improve accessibility. However, the ROI on this will come down the line in the form of savings on acute care, chronic conditions and emergency room visits.
- Obama’s healthlaw promotes Accountable Care Organizations (ACOs), which provide incentives for providers to work together, prove outcomes and share in the savings. There should be some real savings here, although some fear the larger ACOs may monopolize markets.
- Healthcare exchanges are a key component of the President’s proposals, but the private market is also toying with these models. People on both sides of the aisle seem to understand that these exchanges can lead to healthy competition. Initially, there is heavy investment to build the exchange infrastructures, but the promise lies in the power of the market to keep premiums in check and force the players to innovate.
- Consumer awareness is also a key feature in the Affordable Care Act. As they pay more and more for healthcare, Americans are becoming more like true healthcare ‘customers.’ Instead of blindly consuming healthcare, we are starting to shop and compare. Transparency of pricing at every juncture in healthcare will only help move the needle.
So, while the absolute costs of healthcare will go up as the Obama healthcare plan is phased in, I believe there are some hopeful signs that real change is taking place: how we shop for healthcare, how we access healthcare, how we pay providers for healthcare. As in the reformation of different markets in our history, healthcare may be no different. The Government may push us in an uncomfortable direction for a bit, but the market and the innovators will adapt and survive… and possibly save us a few bucks in the longer term.