Question

American Medical Association (AMA)​

Determine whether or not, and to what extent, the group supports or opposes, the Affordable Care Act. Note that some groups may support some provisions and oppose others: Support for, and/or opposition to, the ACA. Past (within the last three years) and present political activities related to support or opposition of the ACA; also include: A brief financial snapshot for each organization; i.e., how much money has/will each group spent/spend on their efforts and where? A brief description of who the group interacts with in pursuit of their support or opposition; identify members of the legislative branch in particular, but also consider the executive and judiciary branches as well.  Future plans, strategies, etc., of the group related to the ACA. An assessment of the group's relative success related to their past and future lobbying efforts.

Answer 1

The Affordable Care Act is the most important health care legislation enacted in the United States since the creation of Medicare and Medicaid in 1965. The law implemented comprehensive reforms designed to improve the accessibility, affordability, and quality of health care. The Patient Protection and Affordable Care Act (ACA) has 3 main objectives: (1) to reform the private insurance market—especially for individuals and small-group purchasers, (2) to expand Medicaid to the working poor with income up to 133% of the federal poverty level, and (3) to change the way that medical decisions are made. All 3 objectives rely primarily on private choices rather than government regulation and are rooted in expectations of rational decision making shaped by incentives but unfettered by other constraints. The implicit assumption is that individuals and groups will act within these reforms to produce a valued good (access to medical care) at an appropriate price (what it would cost an efficient provider) financed by fair risk sharing (spreading the cost of necessary services across a large pool). The result will be affordable care.

The expansion of Medicaid to the previously uninsured working poor is key. The Supreme Court thought otherwise, however, and made it optional. The issues in some states blocking the expansion concern the continuation of federal funding, how well Medicaid actually works, and its impact on mobility into the workforce. Interestingly, in general, big business is a strong backer of expansion, because they know they otherwise pay more to cross-subsidize uncompensated care. In fact, typically private payment is approximately 147% of average cost. With more of the uninsured covered by exchanges and Medicaid, employers know they can obtain lower premiums, thus helping reduce benefit cost and allowing job expansion. Yet the fear remains that the low-wage workers, who would be covered by expanded Medicaid, may be trapped in an inferior program. Actually Medicaid coverage is very good, although provider payments are not. The real problem is that available low-income jobs typically have no benefits. So to create a glide path from Medicaid to exchange coverage, the mandate and subsidies for individual and small business coverage are important. To make it even more seamless, some states (Arkansas and Ohio) are considering the use of Medicaid money to allow the purchase of the same exchange policies that would be available to these beneficiaries when their income makes them ineligible for continued Medicaid but qualified for exchange policies. The problem with this approach is that private policies will cost much more than Medicaid.

The third major ACA thrust of interest to family practice includes comparative effectiveness research (CER), alternative organizational arrangements (accountable care organizations, medical homes, etc), and compensation for new systems of delivery (telemedicine, group appointments, nurse-driven clinics, etc). A key assumption is that new information on better treatment alternatives (CER) will inform practice and stimulate value-based benefit design. In addition, the success of new organizational forms will depend on careful decisions by the primary care physician regarding where and how treatment occurs—especially for populations now badly managed. Both of these initiatives should move family practice into a central role. Finally, it is uncertain what the impact will be of alternative delivery methods developed in the Center for Medicare and Medicaid Innovation after the Office of the Actuary certifies them as effective and they are folded into the payment structure. Because they will result in payment changes, they certainly will affect primary care.

There are serious problems in the way the US health system is organized and paid, in the information and choices available, and in the ability of participants to respond to the pressures and incentives provided in reform. These problems will restrict the ACA’s impact. Some market failures are well recognized, whereas most are known only by inside players in the current system.

The first problem occurs when decisions are delegated to someone who is supposed to act strictly in our interest as an agent, but doesn’t. For instance, health insurance brokers who help small business select health plans receive a normal fee from their clients but also are paid by insurers for the volume they produce regardless of whether the contract is best for the firms who engaged them. These arrangements often mean the broker gets more of the premium than the primary care physician—without the knowledge of the small business! In a similar way, pharmaceutical firms pay rebates to insurers based on volume, which have an impact on what competing drugs are favored in the formulary. Closer to home, medical director compensation often goes to the largest admitter (for instance, in dialysis units), potentially affecting where specialty care is directed. Such incentives affect patient care decisions, resulting in higher costs and potentially less-than-optimal care. These agency costs are a serious impediment to the effectiveness of the ACA.

A second class of problems limits potential competitors. For instance, pharmaceutical patents are an accepted public policy. During the life of the patent, no competitors are allowed, although courts have decided that payment to delay entry by generic competitors is not acceptable. In another area, the limited supply of physicians, both primary care and hospital based, restricts competition and allows distortion of the system. Shortage allows those in least supply, such as anesthesiologists, to bargain with hospitals and extract extra compensation in addition to their normal fees. Beyond the insufficient numbers of primary care physicians that potentially limit access under the ACA, shortages in other specialties make it difficult to reorganize processes, negotiate alternative compensation, and introduce more efficient technology and other changes in practice that otherwise might flow from the incentives embedded in reform. Together these market barriers are a serious problem.

A third related group of limitations occurs when one party in a transaction has differential information that allows them to dominate or exploit decisions. Physicians clearly benefit from this almost by definition in dealing with patients. But it also occurs in direct-to-consumer advertising of prescription pharmaceuticals that creates demand sometimes unwarranted by clinical condition. Most advertising and promotion at all levels of the system are directed at this imbalance—sometimes correcting it through education, but often exploiting it to increase sales. In all these cases of asymmetric information, it is very difficult to have the meaningful market relationship between buyer and seller that is implicit in the market mechanisms underlying the ACA.

Finally, the plethora of perverse payment incentives is the most obvious problem in having informed free choice leading to the optimal outcomes desired. These incentives start with fee-for-service payment for individual services but continue with biases in the updates of the Medicaid fee schedule toward specialty services and away from primary care. Some of these biases are well understood, whereas others are hidden in technical coding and payment processes. The latter are particularly hard to change. To the extent that these financial incentives restrict the impact of competition in the insurance market, payment problems may be the biggest threat to the impact of reform.

There is no question that the ACA has changed the health system in the United States and will continue to have a profound impact in the years to come. It is less clear that we will realize the promise of higher value care efficiently provided in the best location at a fair competitive price. The insurance market—the primary target of health reform—definitely will be more competitive, open, and fair in access and cost.

The impediments in the provider and supplier sectors, however, will keep more intensive insurance competition from having the impact that it might on the structure of the system and the delivery of care. Demand may not flow to the best places if financial incentives continue to direct care to captive providers within a closed system and contracted partners, as it is likely to do in the absence of serious antitrust enforcement or limitations on contracting practices. Market forces exploiting information asymmetry may continue to drive drug and specialty care utilization beyond what new comparative effectiveness information and reorganized accountable care organizations might suggest would be more appropriate. The ability of hospitals, specialty physicians, and even primary care groups to negotiate collectively and threaten to withhold services can continue be used as a lever to extract higher payment in spite of pressure from the ACA.

As a worst case, the ACA will correct unacceptable failure in the insurance market practices, thereby increasing demand but leave the structural characteristics of the delivery system untouched. With the same cost drivers intact, the health sector might continue to eat larger portions of the gross domestic product until arbitrary payment cuts are invoked, as is included in the backup regulatory mechanisms of the ACA. Right now health care inflation seems to have moderated to the point that this is less likely. But the threat remains, and the cause would be the market failures untouched by the ACA.