Health Reform: What Should Pass or Run Out of Gas

by William DeMarco, June 25, 2009

I was asked to provide a brief answer to the following question for the current issue of MCOL’s Thought Leaders newsletter: “Which specific component of various current major health care reform proposals do you feel is most likely to be adopted before the end of the year, and which component is least likely to be adopted?"

What follows is a more thorough discussion of how we view the outcome of some key provisions that have surfaced in the national reform initiatives.

We believe the public plan and the exchange will be adopted although not in its current proposed form.

We envision Federal Board very similar to the Federal Employees Health Benefits program that governs structure, benefits levels and perhaps some consumer complaints. However we do see this Board overseeing each of the states to implement the public plan in their own fashion.

This would meet current insurance commissioner laws and interstate commerce laws for licensure and would also follow consumer protection with existing insurance departments. Such things as post claim underwriting/recessions would be outlawed nationally and the fed may require the states cap to place a on margins as there are in some states already.

The exchange is vital to distribution channels for this and other plans and would reduce and perhaps eliminate the need for brokers and brokers fees which would reduce costs by 10% or greater. Again these exchanges would need to follow state licensure laws but would be overseen by the Federal Board to make sure they meet the rules of selection, open enrollment and fair disclosure.

Least likely to pass are the Comparative Economics CER legislation. Not because it is not needed but only because people do not understand yet that quality and process are uneven and in a state of flux. This means Dartmouth Atlas and Health Grades and others will do well to show distinctions in the delivery system and tiering and profiling will continue.

We believe MedPacs recommendation to move to ETGs and bundled reimbursement tied to severity follows our early concepts for integration. Many hospitals and physicians continue to fail because they cannot get the reimbursement and utilization data to track together. Given the opportunity to combine these two will support further Information technology and advance web based connections between provider’s, plans and employers.

This will create a new interest in hospitals and physicians working together to form their own product especially as the public plan forces consolidation of local plans thereby giving a handful of plans incredible bargaining power.

Provider sponsored plans have a distinct advantage in the market as the owners control the means of production. Using this bundled reimbursement we see that providers who do well can harvest their reward for their improved care outcomes and , in doing so, apply these savings to more benefits at less cost competing effectively with insurance companies that are unable to control volume and quality and therefore cannot control price.

What this means is that launching things state by state may take a year but once uninsured and underinsured have an option and small business can hire without worrying about this overhead of insurance we will see a spark in hiring and productivity. Without a public plan this will not happen and extend the recession far beyond next year. This time the recession has, and will continue to affect health care employment and this affects service quality and availability so we are truly in a historic moment in history.

William J De Marco MA CMC

De Marco and Associates

Bill.demarco@demarcohealth.com