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VOL. 36 | NO. 43 | Friday, October 26, 2012

Midstate health care providers brace for cutbacks

The pressure's on, no matter who wins presidential election

By Renee Elder

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President Obama and his Republican opponent, Mitt Romney, seem to agree on one thing: the American health care system is broken.

But they diverge sharply when it comes to plans for making health care less costly and more accessible.

Regardless of the election’s outcome, Tennessee health care officials have been preparing for big changes to the system, including the creation of a program called “No Wrong Door” to help consumers learn which changes might affect them.

Obama’s Affordable Care Act, passed in 2010, has faced a series of hurdles, including strong Republican opposition to the requirement that all Americans carry some type of health insurance. If the plan goes into effect as scheduled in January 2014, an additional 30 million people are expected to become insured.

This is good news for many, especially indigent patients and the agencies that serve them.

“For us, it would mean that most of the 15,000 patients we see over the course of the year with no health insurance could be covered,” says Mary Bufwack, director of United Neighborhood Health Services, which operates clinics for low-income patients in the Nashville area.

Some see the ACA, also known as “Obamacare,” as an underfunded mandate to states and an acceleration of already skyrocketing health care costs.

“Approximately 60 percent of Americans will be eligible for a federal subsidy to purchase health insurance” under the ACA, says Larry Van Horn, director of Health Affairs for the Owen Graduate School of Management at Vanderbilt University, who believes government should be spending less, not more, on health care.

“The primary thing that we must address is that we cannot afford the current level of health care expenditures in the U.S.,” Van Horn says. “The ACA does nothing to address the fiscal challenge and many would argue that it makes it worse.”

Changes are inevitable

If Romney becomes president and Republicans win a majority in the Senate, most health care experts believe at least some parts of the Affordable Care Act will be repealed and its financing trimmed.

“So far it has been very unclear what it would take to overturn it or exactly what might be retained in a Romney administration,” Bufwack says.

But the need for some type of health care reform is apparent on both sides of the political aisle, says Molly Cate of the Brentwood-based Jarrard, Phillips, Cate & Hancock, health care policy consulting group.

“In some ways, that train has already left the station,” Cate says.

“People generally agree on some of the underlying themes, such as the fact that the pay-for-play system is a problem. And there’s agreement that we need to find a way to get coverage for the 49 million people in this country who don’t have health insurance. We are paying for it anyway when they use emergency rooms or other services in the form of higher health care premiums.”

Concerns for providers

No matter who wins the election, payments to providers, such as hospitals, are likely to be cut, which worries members of medical industry organizations, including the Tennessee Hospital Association.

“Frankly, we are not sure we are going to survive some of the cuts,” THA President Craig Becker says.

Becker says that his constituents are worried they won’t get enough money for their services under the policies of either administration, and some small providers could go out of business.

Cate says there already is some consolidation, smaller providers merging with larger networks to build more volume in order to do more with less.

One big shift is the likely basing of payments for medical services on effectiveness instead of the number or type of medical treatments employed.

This means that instead of being paid for two hospitalizations within six months for a single patient to be treated for emphysema, the payments will be tied to the patient not having to be re-hospitalized for the same illness within a certain time frame.

“We’re moving away from fee-for-service, where how much we get paid is based on how many different services are provided,” Becker says.

The current fee-for-services model creates incentives for providers to supply more care, regardless of outcome, Van Horn believes.

Greater “cost sharing” – allowing patients to bear more of the cost of treatment – is the most likely way to reduce demand and make the system more efficient, he adds.

“However, the change will be difficult to enact,” Van Horn says. “It will be all that much more difficult because we have a generation of Americans who are used to consuming health care and having providers supply unlimited care.”

Insurance exchanges under review

Under the Affordable Care Act, states are directed to create “insurance exchanges” that allow all citizens to obtain coverage. States that do not create such programs will be provided one through the federal government in January 2013, when that portion of the law goes into effect.

In Tennessee, an Insurance Exchange Planning Initiative panel is reviewing ACA requirements and meeting with medical providers and members of the public across the state in preparation for running its own program.

More than 1.2 million people now are covered by TennCare, the state’s program for low income residents that uses Medicaid funding in a managed-care network to bolster benefits.

The ACA would extend Medicaid eligibility to cover extremely-low-income adults without children for the first time. The federal government would pay 100 percent of the Medicaid expansion costs for three years, and at least 80 percent going forward.

However, the cost of adding citizens who are eligible but not currently enrolled in Medicaid – “a surprisingly large number” – are not accounted for under Obamacare, Van Horn notes.

“As a result, the fiscal burden on the state will be large,” he adds. “Since we can’t print money, it will require the state to cut back in other areas to fund the health care consumption.”

Last summer, the U.S. Supreme Court blocked the federal government from penalizing states that do not expand Medicaid eligibility. Since then, several states have indicated they will not expand their programs. Others, including Tennessee, are taking a wait-and-see approach.

How much is too much?

Romney proposes to reduce the Medicaid budget, allowing states to divvy up the remaining portion and exercise more control over who is eligible and how much recipients could receive. He also is calling for adjustments that would allow Medicare and Medicaid to operate in a more market-driven fashion.

Van Horn is skeptical about the effectiveness of such proposals.

“Unfortunately, competition among providers and insurers will not solve the current health care problems,” he explains. “The fundamental problem is that Americans demand way too much health care, often with dubious clinical benefits.”

Medicare, which serves mostly seniors and individuals with disabilities, consumed more than 13 percent of the national budget last year, or $483 billion, Congressional Budget Office figures show.

Romney has proposed allotting a fixed amount of Medicare funding to recipients and giving them the option to spend it within the federal program or purchase coverage from private insurers. Under Obama’s plan, the traditional Medicare structure would stay in place, but payments to providers would be trimmed.

Tennessee’s no wrong door

Tennessee is doing its homework to prepare for implementation of the ACA, Bufwack says.

“The state is using a series of portals, called No Wrong Door, that will help people find out what they qualify for,” she says.

Meanwhile, health care providers are working to establish information technology systems to improve tracking of patients, treatments and outcomes, an expensive proposition, Cate says. As a result, mergers, acquisitions and collaborations between various groups of health care providers are becoming more common.

“There’s a gap between big systems and small stand-alone hospitals, so health care reform encourages collaboration,” she says.

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