Stanley Feld M.D.,FACP,MACE

In an ideal world ACOs should work. There is no evidence that  untested and complex organizational structure of ACOs developed by Dr. Don Berwick (head of CMS) will improve quality of care and reduce costs

ACOs are supposed to provide financial incentives to health care organizations to reduce costs and improve quality. There are too many defects in the ACOs infrastructure to improve the financial and medical outcomes.

At a conceptual level, the incentive for ACOs would be to increase efficiency and avoid overuse and duplication of services, resources, and facilities. In this model, ACO members would share the savings resulting from the increased coordination of care.

I have said over and over again that excessive administrative fees and ineffective management of chronic disease is the main source of waste in the healthcare system. ACOs do not deal with these main drivers of costs.

The only stakeholders who can demand that this waste be eliminated are consumers/patients. Patients must control their healthcare dollars.  They will make sure there are competitive prices and will not permit duplication of services.

ACOs are not a market-based system. They do not put patients at the center of their medical care or permit them to choose their medical care. The government controls the healthcare dollars and is at the center of patients’ medical care decisions directly and indirectly.

In order to truly repair the healthcare system a system of incentives for patients and physicians must be created. There is no question that the processes of care for chronic diseases must be improved. More importantly, the medical and financial outcomes must be measured and not the process changes.

“In theory, ACOs provide financial incentives to health care organizations to reduce costs and improve quality. In reality, given the complexity of the existing system, ACOs will not only fail; they will most likely exacerbate the very problems they set out to fix.”  

ACOs are merely the latest in a long history of unsuccessful health policy innovations. Since the 1970s, Congress and successive administrations have tried a number of tactics to control rising health care costs.  The tactics tried have been:  

1. Payments for diagnostic related groups of services, or DRGs.
2. Health maintenance organizations (HMOs).
3. Preferred provider organizations (PPOs). 

They all failed. Consumers reacted negatively to the care provided. Healthcare costs continued to rise. ACOs are being promoted as the new structure that will address the lack of success of the past tactics.

“Under Obamacare, the Secretary of the Department of Health and Human Services (HHS) is charged with developing a method to assign Medicare beneficiaries to ACOs.”

“ Because the statute is unclear about the resolution of many vital issues, the crucial details will be supplied and refined by federal regulators—as is the case for so many other provisions of the new health law.” 

Congress has relinquished its power to the unelected portion of the executive branch of government to construct a system that will reduce the rising costs.

ACOs create a new organizational structure to remedy problems inherent in the existing healthcare system.  The complexity of the structure of ACOs will result in the same or similar types of unintended consequences that led to earlier failures. 

There will be consolidation of providers. ACOs will result in increased costs rather than decreased costs.  It might decrease duplication of testing. The resulting savings will be small. There is no evidence that ACOs will provide improved medical and financial outcomes. I believe it is Dr. Berwick’s naïve wish that it will improve medical and financial outcomes. 

The are at least 7 key deficiencies with ACOs

1. ACOs do not empower consumers to be responsible for their own medical care.  Healthcare should be consumer driven with consumers controlling their healthcare dollars. They will then make informed choices about their care and insurance coverage.

      2.ACOs create artificial incentives to improve quality and provider performance. Consumer driven           healthcare creates real incentives to promote price completion. Competitors are constantly           working to improve their products, attract consumers, and ultimately increase market share.  

Consumers have no part in driving that competition in an ACO system.

           3.Most physicians are reluctant to assume accountability for patient outcomes.  Physicians                           recognize that much of the outcome is directly under the consumer/patient behavioral control.

            4. ACOs remove the patient/consumer from being responsible or accountable for their medical                   care. ACOs undermine any attempt to create a truly accountable healthcare system that can                   drive down costs.

            5.ACO do not encourage provider accountability even though it seems that provider buy-in would            be integral to an ACO’s success with its shared savings incentive.  Many physicians believe the                  share savings incentive is bogus. 

            Providers continue to be paid for each service they perform until the government provided funds             run out. There are also grave uncertainties and practical complications of distributing production             and savings between the hospital system and physicians.

             6. ACOs create an unfair competitive advantage for large organizations that are hospital                 centric. Eligibility requirements are vague and ambiguous. The eligibility requirements                 suggest that larger organizations have an unspoken eligibility advantage.

                This is the reason hospital systems are trying to form ACOs. Hospital systems think they will                 make money. I think they will fail. Hospital systems will lose a lot of money. They will fight                 with their physicians over the distribution of government reimbursement. The cost of hospital                 care will then increase. The consumer will lose.

                7. Groups of independent practitioners as well as other types of small and mid-sized practices                     may lack the infrastructure, Internet technology, or other resources needed to qualify for                     ACO eligibility. They will be forced to join hospital systems. Hospital systems have a                     history of taking advantage of physicians and their skills and intellectual property. More                     tensions will be created. Hospital systems’ ACOs will crumble. The cost of medical care                     will continue to increase further.

I have presented some common sense observations. Common sense does not seem to prevail in the difficult world of repairing the healthcare system.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

Stanley Feld M.D.,FACP,MACE

Obamacare is already proving it is going to fail. By President Obama’s own admission, it will not achieve universal coverage. It will not provide affordable coverage because the healthcare insurance industry is already raising the price on private insurance and the fees it charges the government to administer service for Medicare and Medicaid.

Seniors will notice that their Medicare premiums for Part F has increased starting August 1^st. Seniors can also expect premiums for Medicare Part D, Ordinary Medicare and Medicare Advantage to increase on January 1^st 2011.

Why would premiums increase? Physician reimbursement has decreased.

There will be an increase in the fee the government pays administrative service providers (healthcare insurance industry) to subsidize Medicare and Medicaid. The reason for these increases will be non- transparent.

To many the name Newt Gingrich is a dirty word. Nonetheless, he is perceptive. In his recent book “Real Change: A Fight for America’s future”, he explains why the current third party payment system for healthcare is inefficient, ineffective and leads to fraud. I will amplify his model in order to point out the dysfunction in the healthcare system and its solution.

He explains why a “buyer-seller model” in healthcare is more efficient than a" “buyer-seller-receiver bureaucratic model”, whether it is a public or private system.

In the third party payer system (buyer-seller-receiver system), the buyer (insurance company, employer or government) receives no direct value for its payment. Its goal is to pay as little as possible. The seller (physicians or hospitals) knows the buyer suspects the seller of greed, and incompetence. The relationship is adversarial.

The receivers (patients) have little concern of cost. They have first dollar coverage. They have no incentive to save money. They have been conditioned to believe the medical care is an entitled service. Patients want more service with more convenience. They have no accountability for their habits. They have no incentive to lose weight or exercise consistently. Obesity leads to chronic disease and its complications. Patients have no incentive to care for their chronic disease.

President Obama’s healthcare reform plan does not provide these incentives. Yet the key to repairing the healthcare system is patients being the keeper of their health and the manager of their disease.

On the other hand, in a buyer-seller system, the buyer (patients) can be given incentive and educated to be a wise buyer of a service (medical care). The buyer (patients) has freedom of choice. Patients decide whether a service is worth the price. They decide whether they want to avoid the cost by taking care of their health.

The sellers (physicians, hospitals, or pharmacies) can choose to sell at the offered price or refuse to sell. The seller has a free choice. The seller’s freedom is not shackled by government regulations. The price is determined by previously negotiated prices. Prices are transparent.

Patients must be made aware of the negotiated prices by the government.

The buyer-seller-receiver bureaucratic model with the government being the buyer in a single party payer will lead to;

1. Fraud, abuse and administrative waste.

2. Lack of individual freedom of patients to choose their medical care.

3. Bureaucratic control of healthcare which undermines personal responsibility for health and medical care.

Fraud, abuse, and administrative waste.

There are many examples of fraud. The easiest examples to comprehend are the occasional physician or physician’s clinic billing for services not performed.

There are examples of hospital systems overbilling Medicare and Medicaid for non-rendered services. These actions seem to have political overtones. It is usually private hospital corporations or management companies and not faith based non-profit hospital systems that are accused of this level of fraud.

Medicare and Medicaid outsource the administrative services to the healthcare insurance industry. There are many examples of the fraud and abuse by the healthcare insurance industry.

The public perceives the largest cost is physician abuse. Physicians are the weakest stakeholder. However, if the government looked closely enough it would find the largest area of fraud and abuse comes from the healthcare insurance industry.

A popular notion in congress is that 40 cents of every healthcare dollar goes for administrative costs to the healthcare insurance industry. I believe this is a low estimate. Some economists have demonstrated that administrative services expenses are 60 cents of every healthcare dollar.

Congress has chosen not to change the accounting rules used by the healthcare insurance industry. These defective accounting regulations lead to the largest area of fraud and abuse. An estimate is $250 billion dollars a year.

The Government Accounting Office estimates that 10% of Medicare and Medicaid spending is lost to fraud and abuse. Ten percent of Medicare and Medicaid cost is $80 billion dollars a year. Over the next decade, the cost would amount to $800 billion dollars if both programs were not expanded. With the entitlements being expanded it could be 2 to 3 trillion dollars over the decade.

I believe if we created a buyer seller system, the fraud and abuse would decrease to less than 1% of healthcare expenditures. Every patient would be a police officer for his own healthcare dollar.

Lack of individual freedom to choose.

Bureaucracy can only function by creating rules and regulations to control the receiver and the seller. This leads to an increase in the number of regulatory agencies. The result is many unenforceable and conflicting rules and regulations. The rules and regulations usually lead to unintended consequences and greater budget deficits.

The receivers’ (patients’) medical needs might be unfulfilled by these rules and regulations.

Americans love the free market and their ability to make choices. We love to be consumers and admire incentives, bargains, and choices. One only has to look at consumer products such as electric products and automobiles. Consumerism drives our economy not centralized bureaucratic control. Healthcare should be driven by consumers and not by the system, which President Obama and Dr. Donald Berwick advocate.

Bureaucratic control of healthcare will undermine personal responsibility for health and health maintenance.

The buyer (the government bureaucracy) pays for the receiver (patient) to receive care from the (physician). The patient is forced into a passive position. The government defines what care the patient can receive. The physician must provide the care the government dictates.

Patients are conditioned to believe that someone besides themselves is responsible for their health and healthcare.

The government should provide the appropriate information and education for the patients to make wise hea
lth decisions. These wise decisions must be encourage by giving patient control and ownership of their own healthcare dollars.

This can be accomplished through the ideal medical savings account.

Patients should make healthcare and medical care decisions for themselves.

Patients must play an active role in the management of their health and disease.

I believe the bureaucratic single party payer system will not Repair the Healthcare System.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

Stanley Feld M.D.,FACP,MACE

The traditional media is not discussing the economic consequences of President Obama’s healthcare reform program.

In these final days the traditional media is describing the horse race to the finish line for a deemed vote (“Slaughter rule”) vs. a partisan up and down vote on the Senate bill. The horse race is a distraction to avoid discussing the unintended consequences of the bill.

Congressman Paul Ryan is the Ranking Member of the House Budget Committee and senior member of the House Ways and Means Committee. His focus has been to bring fiscal discipline to federal spending. The House Ways and Means committee’s jurisdiction is tax policy, Social Security and healthcare. He has been addressing America’s long-term fiscal crisis and the dangers of explosive entitlement spending.

He has accused President Obama of being dishonest to the American public about the costs of his healthcare bill.

I can understand the emotional appeal of President Obama’s healthcare reform plan. His solution will not repair the healthcare system. It will increase the price of care, decrease access to care and decrease many freedoms.

President Obama has said repeatedly, “I will not sign a plan that adds one dime to our deficits either now or in the future.”

If passed by this phony congressional “Slaughter maneuver” it will simply make the healthcare reform bill’s failure to solve our healthcare system’s problems even more grotesque. I predict the bill will cripple Americans’ ability to maintain their present standard of living.

I am sure Paul Ryan is frustrated that his remarks to President Obama at President Obama’s Healthcare Summit would be thought of as disrespectful by Democrats.

No one has refuted Paul Ryan’s accusations.

President Obama continues to recite his unsound sound bites about his healthcare plan. He claims it will save Medicare, provide coverage for 30 million more Americans and reduce the deficit.

I believe that anyone who votes for this terrible bill should not be reelected. They are doing a disservice to Americans.

Congressman Paul Ryan of Wisconsin made the following points before President Obama at the Healthcare Summit.

1. Medicare, right now, has a $38 trillion unfunded liability. That’s $38 trillion in empty promises to my parents’ generation, our generation, our kids’ generation
2. Medicaid’s growing at 21 percent each year. It’s suffocating states’ budgets. It’s adding trillions in obligations that we have no means to pay for . . .

He then went on to say that the Congressional Budget Office scores bills with the premises and assumptions it is given. If the premises and assumptions are incorrect the score will be incorrect.

1. “And what has been placed in front of them is a bill that is full of gimmicks and smoke-and-mirrors.”

He continued by saying;

“And if you take a look at the CBO analysis—analysis from your chief actuary—I think it’s very revealing.”

1. “ This bill does not control costs. This bill does not reduce deficits. Instead, this bill adds a new health-care entitlement at a time when we have no idea how to pay for the entitlements we already have.”

The CBO letter to Harry Reid on March 11, 2010 states the bill will not decrease the deficit as President Obama claims, but it increases the deficit even as it increases costs.

“March 11, 2010

Honorable Harry Reid

Majority Leader

United States Senate

Washington, DC 20510

Dear Mr. Leader:

The Congressional Budget Office (CBO) and the staff of the Joint Committee onTaxation (JCT) have estimated the direct spending and revenue.

“Under the legislation, federal outlays for health care would increase during the

2010–2019 period, as would the federal budgetary commitment to health care.6

CBO now estimates that the federal commitment would increase by about

$210 billion over that period, rather than by $200 billion as previously estimated.”

If anyone is concerned about our budget increased deficit and increasing taxes for a bill that will not repair the healthcare system, understanding the numbers is important.

Paul Ryan dug into the details at the Healthcare Summitt;

1. “The bill has 10 years of tax increases, about half a trillion dollars, with 10 years of Medicare cuts, about half a trillion dollars, to pay for six years of spending.”

“Therefore the true 10-year cost of this bill in 10 years? That’s $2.3 trillion.”

1. “It takes $52 billion in higher Social Security tax revenues and counts them as offsets. But that’s really reserved for Social Security. So either we’re double-counting them or we don’t intend on paying those Social Security benefits.”
2. “It takes $72 billion and claims money from the CLASS Act. That’s the long-term care insurance program. It takes the money from premiums that are designed for that benefit and instead counts them as offsets.”

Kent Conrad (D) Senate Budget Committee chairman said that this is a Ponzi scheme that would make Bernie Madoff proud.

Five hundred million dollars is taken out of Medicare to fund the healthcare reform bill. This is not shoring up Medicare solvency. It is paying to expand the program.

Paul Ryan did not stop there. He kept pounding away at the smoke and mirrors that the traditional media is not even analyzing much less mentioning.

1. “You can’t say that you’re using this money to either extend Medicare solvency and also offset the cost of this new program. That’s double counting.”
2. “According to the chief actuary of Medicare as much as 20 percent of Medicare’s providers will either go out of business or will have to stop seeing Medicare beneficiaries”.
3. “When you strip out the double-counting and what I would call these gimmicks, the full 10-year cost of the bill has a $460 billion deficit. The second 10-year cost of this bill has a $1.4 trillion deficit.”
4. “Probably the most cynical gimmick in this bill is something that we all probably agree on. We don’t think we should cut doctors [annual federal reimbursements] 21 percent this year and next. We’ve stopped those cuts from occurring every year for the last seven years”.

The “doctor fix” was supposed to go into effect January 1^st. It was delayed until March 1^st. Now it is delayed until October 1^st. It was taken out of the Healthcare Reform Bill and
placed in a separate bill because it added $371 billion dollars to the healthcare reform bill’s deficit.

President Obama’s Healthcare Reform Bill ignores and in actually hides these costs. Hiding these costs does not take the costs off the backs of taxpayers, the deficit, or future tax payers.

12.” I’ll finish with the cost curve. Are we bending the cost curve down or are we bending the cost curve up?”

“If you look at your own chief actuary at Medicare, we’re bending it up. He’s claiming that we’re going up $222 billion, adding more to the unsustainable fiscal situation we have. “

13. “We don’t think the government should control our healthcare system. We want people to be in control. And that, at the end of the day, is the big difference.”

14. “ I’ve got to tell you, the American people are engaged. And if you think they want a government takeover of health care, I would respectfully submit you’re not listening to them.”

President Obama ignored Paul Ryan’s comments. He is ignoring the will of Americans. He is ignoring the fiscal consequences of a bill he is ramming through congress at the expense of the American people for something that will not work.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

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