The Blog

Reading the Bill . . .

And finding HillaryCare.

12:00 AM, Sep 21, 2009 • By STANLEY GOLDFARB
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The White House has pointedly refused to say whether President Obama will read the 1,000+ page health care bill--HR3200--now pending before the House of Representatives. If Obama does read the bill, he will find it full of densely technical terminology and proposals that were clearly constructed by experts who have toiled in the Schools of Medicine and Public Health and professional societies on their way to work in advocacy organizations, congressional offices, or lobbying shops. The authors of this bill have obviously studied health care policy, but it's doubtful any of them have actually run a health care enterprise.

Within the bill there are an impressive number of pilot programs and demonstration projects that would make significant changes to health care delivery and payment methods. They have received very little attention from the public or the press, but these pilot projects will clear the way for major government intervention in the actual delivery of health care. The proposals are aimed specifically at controlling the cost of care at the level of individual patients and are very likely to become the very substance of our health care system, which will be completely dominated by the federal government.

While hardly the only proposal of note, the project in Section 1866D is of particular interest. Section 1866D describes how, "The Secretary [of Health and Human Services] shall conduct a pilot program (in this section referred to as the 'pilot program') to test different payment incentive models....to applicable beneficiaries (as defined in subsection (d)) by qualifying accountable care organizations."

The language may seem innocuous, but Sec 1866D actually describes the plan for American health care that was first proposed as HR 3600 in 1993 and known as HillaryCare. That plan would have essentially converted the patchwork American health care system into one giant HMO. Sec 1866D will be a backdoor attempt at achieving that goal more 15 years after the Congress first rejected such a plan.

Section 1866D calls for a project where physicians and hospitals will join together as "accountable care organizations" or ACOs. In theory, these ACOs will work together to achieve an outcome that will lower costs of care. Such an alliance may well achieve this goal as currently physicians are paid for whatever they do on a piecemeal basis while hospitals are paid by a more comprehensive method -- usually a set fee per diagnosis or on a per diem basis. If there were one bundled payment to both hospitals and doctors, and if it were an up-front payment, then the cost of care for a particular admission or illness would be limited by that payment. To provide more expensive care for the patient could force the providers, the doctors and the hospital, to provide that care at an economic loss. The conflicts that could arise are obvious.

This payment system is known as capitation. Americans hated this system when it was introduced by HMO's and the number who opt for such coverage has dropped steadily since the mid-1990s. Capitation does save money, but it also creates a dynamic wherein hospitals and doctors have an incentive to do as little as possible for patients if they are to maximize their net revenue. Many European nations, like France, have rejected this model because it is perceived as pitting doctors against patients and threatened to undermine the trust patients ought to have in the motivations of their physicians. Capitated payment systems do not at all guarantee poor care, but they do contain great potential for a conflict of interest between the patient's best interests and the economic interests of the physician.

Interestingly, Section 1866d has a reward system in mind for the ACO. The bill states that "a qualifying ACO that meet[s] or exceeds annual quality and performance targets for a year shall receive an incentive payment for such year equal to a portion ... of the amount by which payments under this title for such year relative are estimated to be below the performance target for such year, as determined by the Secretary."

Note that the reward is based on the "performance target" of cost savings, not the "quality targets." This is exactly the complaint made by providers of health care about insurance companies: Cost savings rather than quality of care is their primary goal.

And also note that the "Secretary" decides payment and outcome and she, Kathleen Sebelius, has a great deal of discretion. This is yet another disconcerting aspect of HR 3200, the current bill. The Secretary of HHS will have nearly total authority over the single largest component of the U.S. economy with an amount of discretion in spending and rule making that is breathtaking.