Why The Supreme Court Decision On Health Care Reform Doesn’t Really Matter

This post first appeared in Forbes.

When the Supreme Court announces its decision on the constitutionality of the Affordable Care Act (ACA) it will kick off a storm of analysis around the political impact.  An outcome that upholds the law as a whole will be seen as a positive for the President whereas a decision that strikes down some or all of law down could be a boon for the Republicans and Governor Romney’s campaign.  The middle scenario results in parts of the law such as the individual mandate to being struck down, with the rest upheld.  While it is impossible to predict the outcome, it is a safe prediction that the decision will be followed by a lot of punditry on cable news channels.

This debate misses one essential fact:  the Supreme Court’s decision does not matter as much as political pundits think.  The American healthcare system is in the midst of intense experimentation and change that cannot, and will not be stalled by the whims of the judicial system.  The major forces behind the changes in our healthcare system—rising costs, an older, sicker population and technological innovation—show no signs of abating and do not depend on Federal legislation.  They are fuelled by private sector demand, not policy preferences in Washington.  So, while coverage may not come as soon as hoped for the uninsured, the systemic efforts to make our health system more affordable and higher quality will continue.

Some changes, like the widespread replacement of paper records by electronic medical records, are visible from a patient’s-eye-view; others, such as changes in the relationship between insurers and hospitals are not immediately visible.  These less-visible changes are potentially even more profound.

Some of the most important changes involve the financing of health care.  In the traditional way of doing business, insurers paid hospitals and physicians under a “fee for service” system; essentially they are paid for the quantity of medical services provided, regardless of the outcome.  Unfortunately, fee-for-service is inflationary, giving hospitals a perverse incentive to focus on driving up volumes and activity without regard for cost, value, or achieving better outcomes.  Even if a patient gets the wrong care or inadequate care, the hospital is paid to treat complications or readmissions rather than to prevent them.  Nobody—especially not the patient—wins and all of us pay.

HMOs grew in the 1990s in an attempt to fix these incentives by combining the insurer and the care provider, but patients hated their HMOs because they restricted choice without proving that they were delivering better care.  The current wave of experimentation, in flavors such as bundled payments for “episodes” of care (e.g., paying for everything associated with a diagnosis, procedure, and treatment in a single payment), accountable care organizations (ACOs), and new penalties for excessive hospital readmissions are all tactics to try to fix these misaligned incentives and aim to cut costs and improve care for the patient, while preserving choice.

Further proof that these reforms have staying power well beyond HMOs is the recent pledge by United Healthcare, the nation’s largest private insurer, to follow many of the regulations included in the ACA even if the law is repealed.  Other insurers, includingAetna and Humana quickly made similar pledges.

Even Congress’ current gridlock cannot completely choke off policy innovation at the federal level.  The Center of Medicare and Medicaid Services has used its authority to experiment with a variety of demonstration projects that do not require congressional approval.  One example is the current project to award bonus payments to Medicare Advantage plans which score well on the program’s Star rating system for providing better and more cost effective care.  While a repeal of the ACA would remove some of the agency’s authority, it would not prevent the agency from experimenting with a variety of demonstration projects that could lead to improved payment models.

Not to be left out—a great deal of experimentation is happening at the state level.  One of the cornerstones of the ACA is the requirement that each state create a “health insurance exchange” which serves as an online marketplace for individuals to purchase health insurance.  Eighteen states representing 42% of the US population are in the process or have already laid the legislative groundwork to establish exchanges.  Many of these states, including California, have indicated that they plan to continue with the exchanges regardless of the Supreme Court’s decision.

Patient attitudes are changing too.  Polling conducted by the West Wireless Health Institute shows that patients are increasingly worried about the costs of their care and taking steps to control it.  This means that they are more likely to scrutinize their health insurance benefits and opt for high-deductible health plans (HDHP).  While attitudes can be slow to change, the inexorable force of the millions of patients choosing health plans that reward shopping for lower cost and better quality care will not be stymied by the Supreme Court’s ruling.

So while it is uncertain how the Supreme Court will rule, or how the ruling will impact November’s results, it is a certainty that our health system will continue on the path of more affordability, more integrated care, and more focus on patients because consumers are demanding these changes. These unassailable trends are led by the private sector and, if anything, will accelerate regardless of the Supreme Court’s views of the meaning of the Commerce Clause.  Moreover, since the private sector contributes virtually all the profitability in the health system, it is a force far more powerful than politicians.

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