Exploring Human Potential

Lewin Report: “Uh Oh – Health Care Costs Are Skyrocketing Again!”

Posted on | January 11, 2016 | Comments Off on Lewin Report: “Uh Oh – Health Care Costs Are Skyrocketing Again!”


Jack Lewin

Health care costs went up by over 5% in 2015 after a mind boggling 7-year run of relatively flat costs.  But in 2016 — and for the next few years — the annual increase is thought by CBO and others to be 8% or more. Private insurance and even the new Affordable Healthcare Act (ACA) “exchanges” may be increasing as much as 15% this year. That’s ugly for patients, businesses, and government.


The GOP will blame rising costs on the ACA. Same cause for global warming? The US Senate in late 2015 for the first time sent a bill to repeal the ACA. And Paul Ryan sent a similar House bill to Mr. Obama this week. Yawn. C’mon, the House has done that 63 times?. Obama killed the Senate Bill and Ryan’s latest bill and the ACA lives on; but there are some worrisome new storm clouds forming. Congress quietly buried in the December omnibus budget bill the delay of two ACA taxes that were to go into effect. One, the “Cadillac tax,” a tax on employers and employees for high cost insurance policies, was opposed by business and labor, and thus by both R’s and Dem’s. Like another unpopular provision of the ACA called the IPAB (Independent Payment Advisory Board—a powerful cost cutting body), I doubt if the ACA’s Cadillac Tax will ever go into effect. But, these delayed issues will somewhat undermine the ACA’s cost-saving capacities as costs are starting to rise again.


Dems realize the ACA didn’t manifest as a divine tablet, but they appreciate its value, with 15 million more Americans insured, fully funded prevention coverage, and many other positives. But they – especially Bernie Sanders – instead blame recent cost increases on insurers and on rising drug costs and profits. Hillary also believes the rise in drug costs is alarming – and it is. But, the proliferation of new biologic and ‘personalized’ drugs are therapeutically amazing, even though increasingly unaffordable. Yet so far, the percentage of pharmaceutical costs to total health costs hasn’t yet risen much (because all costs are rising). But patients cannot afford their share of these drugs, nor can state Medicaid programs.


Scientific progress is stunning, and the population is aging. Costs are going to go up. The NY Times this week highlighted the Kaiser Family Foundation recent study revealing that even insured people are increasingly being bankrupted by their out-of-pocket health care costs. Yes, health care is going to be even more unaffordable in the years ahead, unless…….. ?

Unless our next President and the Congress chart a new course (hold our breaths?). Well, President Rubio (my guess as to the R nominee) or President Cruz or President Paul Ryan (could be also!) would all change Medicare from an entitlement to a voucher-based income-indexed concept, shifting more costs to consumers over time. They would all also cap state Medicaid funding. These moves could definitely save government money, but make affected patients very mad (and oops– Medicare patients vote). These guys would also kill off the ACA, which would NOT save money (quite the contrary).


But, wait. What would President Trump do? Build a wall around Medicare? (J) No, but he thinks (along with his Vice President Sanders?) that Canada’s single payer model works remarkably well! Hmm.


So, what do I predict? OK, I predict we as a nation – in the nick of time – will finally take bold action to curtail rising health care costs. Of necessity. We will. Otherwise, health care will vampirise everything else in the economy from wages to business viability. Only one thing mentioned above among the potential candidate platforms might actually make our system much more efficient: a single payer or Medicare-for-all concept designed to drastically reduce administrative costs and also require that hospital and drug costs be negotiated down by an 800 pound gorilla.


But that isn’t politically viable…yet. And, I predict that a US single payer would be different from Canadian and EU models, and we would retain private insurers and private physician groups and hospitals –patients want and deserve choices—but choices that will be working in competition to achieve lower costs and higher quality around standardized benefits and more uniform charges for services. Some people call this approach an ‘all-payer’ model. Whatever we call it, I predict it’s coming.


The other positive (but very controversial) transition that is happening already across about one-third of US health care is that payment is rapidly shifting from paying for units of service (volume) to paying for value (better outcomes at lower costs). The ultimate and probably only viable and demonstrated way to accelerate paying for value is when doctors and hospitals are paid by ‘capitation,’ meaning they must form groups and networks that receive a fixed global budget for the patients they care for. This is how Kaiser Permanente and Geisinger and many large systems are currently paid. This is how Medicare Advantage largely works today. This is what is already happening more commonly in California and the western states than in the eastern and southern states.


But yes, capitation is destined to increase. Many physician colleagues and hospitals hate and resist that concept (equated by many to medical Communism), and I may have to enter the witness protection program for predicting it, but without this shift to incentivize value based payment concepts, we will never contain rising costs effectively. Never. And, it pretty much puts Dr. Wellby right out of business. But Dr. Wellby could join a group, or decide to become a concierge cash-only doctor. CAPG, the California-based national association of physician groups, added 35 very large groups across the country to its already impressive membership in 2015 —and all of them are capitated medical groups. The trend is growing.


So what does all of this mean to you and me as patients? It means we will increasingly choose branded and largely capitated medical groups and systems (like Mayo, Cleveland, Kaiser, university systems, and many others), but within the medical group or system we will hopefully still choose our own personal physician and/or specialist. We will also increasingly choose where to receive our care based on credible evidence of improved quality, fair cost, and higher patient satisfaction. The future will ideally still value the patient-physician (clinician) relationship and the best science over the dollar, but a viable future will have to be different from the status quo. To enable health care to be better, more affordable, and accessible to all, big change must happen. Actually, it’s already in process, even if a lot of folks aren’t too happy about it.
My hope is that doctors, clinicians, and consumers (patients) will participate together in preserving what is good about our current non-system in terms of choice and quality while effectively addressing the growing cost dilemma.


 The Lewin Report represents the personal thoughts and reflections of health policy, science advocate, and would-be futurist Jack Lewin, M.D., President and CEO of the Cardiovascular Research Foundation; Chairman of the National Coalition on Health Care; and former chief executive of the American College of Cardiology, the California Medical Association, and the State of Hawaii’s Department of Health and its public hospital systems. Comments as desired to


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