Challenging Dogma - Spring 2011

Tuesday, May 10, 2011

What the Accountable Care Act Did Not Account For – Christopher Toretsky

Health care expenditures accounted for an estimated 17.3% of the U.S. GDP in 2010; this number will rise to almost 20% by 2019 (1). Additionally, per capita health care expenditures in the U.S. are roughly 2 – 2.5 times higher than all other wealthy nations (2). Seeing how this unsustainable cost was crippling our economy, the government enacted the Affordable Care Act (ACA) on March 23, 2010 (3). The ACA has promised to reduce health care costs by “improving government-wide efforts to fight fraud and waste” (3).
It is worth pointing out that fraud and waste are not mutually exclusive events: fraud is a type of [intentional] waste, but not all waste constitutes fraud. Other forms of waste include administrative, clinical, and high prices of care. And although the ACA frames the majority of waste as fraud, Lewis Morris, chief counsel of the Office of Inspector General (OIG), Department of Health and Human Services (DHHS) explicitly states, “we cannot measure the full extent of health care fraud in Medicare and Medicaid [that accounted for more than half of the $98 billion in “improper payments” in 2009]” (4). Because of the difficulty in identifying and quantifying fraud in health care, the term “waste” will be used when referring to fraud, et al. for the remainder of this paper. This change in semantics will not influence the main issue that will be discussed: health care costs are exceedingly high due to unnecessary “wasteful” spending and the ACA has fallen incredibly short in negating this problem.
Several flaws are imbedded in the ACA in regards to reducing health care waste, but the three most prominent are using the Extended Parallel Process Model to elicit behavioral change without accounting for all factors of the situation, failing to address the U.S. health care’s Tragedy of the Commons structure, and limiting stricter regulations to a small portion of those who are insured (i.e. those people utilizing government-funded programs such as Medicare, Medicaid, and CHIP). After explaining why these flaws exist in the current ACA, three fixes will be proposed: a structural Kaiser-like design to the U.S. health care system, a national anti-waste marketing campaign, and de-linking health care from employment in hopes to obtain universal coverage.

Extended Parallel Process Model
The Extended Parallel Process Model (EPPM) describes how a person evaluates and responds to a message that attacks his/her fear appeal. A fear appeal is a “persuasive message designed to scare people by describing the terrible things that will happen to them if they do not do what the message recommends” (5). This fear appeal message first initiates a threat appraisal within the person. Here, the person assesses the susceptibility and severity of the threat. If these are low, the person will not process the message; conversely, if these are high, a person enacts his/her efficacy appraisal and determines if he/she has the ability to engage in the “safer” behavior and if this “safer” behavior will actually prohibit the threat from occurring. “A high level of efficacy coupled with a high level of threat is predicted to lead to self-protective action.” Furthermore, “for a fear appeal to be successful it must instill susceptibility and severity in the receiver, as well as self-efficacy and response efficacy regarding the proposed behavior change” (6).
This paradigm is unsuccessfully used in the ACA as government officials aim to prevent health care waste. Regulations such as “increas[ing] the Federal sentencing guidelines for health care fraud offenses by 20-50% for crimes that involve more than $1,00,000 in losses” and “impos[ing] stronger civil and monetary penalties on those found to have committed fraud” which “may exclude providers and suppliers for providing false information on an application to enroll or participate in a Federal health care program” are now in place (7). Lastly, “The Affordable Care Act provides an additional $350 million to ramp up anti-fraud efforts, including placing more “feet on the street” by allowing for the hiring of more law enforcement agents and others to fight fraud in the health care system” (3).
Clearly these new laws are playing into health care members’ fear appeals as they threaten these people with stronger monetary fines and indicate that more officials will be policing the health care streets in hopes to detect waste. Studies have shown that stronger fear appeals generate higher levels of perceived susceptibility and severity, which yield greater results than weaker fear appeals, but also “strong fear appeals with low-efficacy messages produce the greatest level of defensive responses” (8). Since no message is given as to how the ACA plans to account for other variables that contribute to health care waste – namely environmental and social factors – physicians and other health personnel have little incentive to cease fraudulent behavior.
Iglehart states, “The Government Accountability Office (GAO) has designated Medicare as a high-risk federal program because its vast size and complexity make it vulnerable to fraud, waste, and abuse” (4). What makes the system so complex is the myriad of billing codes used and the difficulty in administering said codes and procedures. This results in upcoding by the physicians and providing unnecessary care. Since the structure of this multifarious environment remains intact, the ease to which physicians can game the system is not mitigated. Therefore, although the perceived severity of being caught is high, physicians’ perceived susceptibility remains the same and will not deter them from continuing their current behavior. As the status quo ensues, those physicians who were initially reluctant to game the “new” system will notice the simplicity in which their peers are able to do so and will follow suit, perpetuating the endless waste cycle.

Tragedy of the Commons
As people involved in health care continue to game the system and act in a self-serving manner, they inevitably will slowly strip away all of the resources available. This economic concept is known as Tragedy of the Commons and was first discussed by Garrett Hardin (9). Hardin uses the example of a shared open pasture where herdsmen keep as many cattle as possible. For each additional animal a herdsman adds, two processes simultaneously occur: he receives the profit from selling that animal (a positive shared only by him) as well as overgrazing from that animal (a negative shared by all). The herdsman realizes that it is in his best interest to add the animal since he reaps all of the benefits at only a fraction of the costs. Ultimately, this leads to the deterioration of the land / common good. Analogously, America’s health care system is an open pasture where physicians, payers, and patients all overgraze.
Firstly, in the current fee-for-service model, physicians have an incentive to perform more services since each additional service brings in an additional payment (10). Problems arise because this method of payment not only provides financial incentives for a higher quantity of services, but lower quality services receive the same incentives (11). Even more alarming is the fact that a fee-for-service model leads to more (unnecessary) hospitalizations than other payment methods (12). This is because primary care services are not reimbursed at a level comparable to specialty services; therefore, it is in the physician’s self-interest to perform more costly procedures in a hospital setting (13).
Secondly, under the current health care system, payers strip away the system through arbitrarily set annual premiums. As paranoia about the newly proposed health care reform bill swept the nation, insurers estimated the cost impact the bill would have on their clients. “Regence BlueCross BlueShield of Oregon said the cost of providing additional benefits under the health law will account on average for 3.4 percentage points” while “In Wisconsin and North Carolina, Celtic Insurance Co. says half of the 18% increase it is seeking comes from complying with health-law mandates” (14). Regions should experience various rate increases as cost of care fluctuates differently between states; however, at an almost threefold percent discrepancy in calculated costs, action needs to be taken in order to streamline this process and remove the ambiguous rate setting. The health care sector has a finite amount of money, but payers turn a blind eye and collect “unjustified rate increases” (14) leading to more waste in the system.
Lastly, patients make up the remaining herdsmen in the health care common land. Remarkably, they do so just by the fact that they have insurance. “Moral hazard is the term economists use to describe the fact that insurance can change the behavior of the person being insured” (15) and its role in health care has been discussed ad nauseam by Mark Pauly (16-18). The tendency of people to use their insurance solely because they have it arose because “none of the three main requirements for insurance are satisfied in health care: low likelihood of a bad event, high cost of the bad event if it occurs, and unpredictability of the bad event” (19). This coupled with the fact that “the current U.S. system is not structured to provide incentives for less expensive preventive care and healthier lifestyle choices” (20) leads to the patients’ overutilization of x-rays, labs, scans, and other expensive medical procedures.
The tragedy of the commons principle is an extensive issue in the health care sector as all players (physicians, payers, and patients) have self-fulfilling incentives to pare down the shared resources. Given the severity of this issue, it’s perplexing that decision makers’ best approach to curb wasteful spending is through Accountable Care Organizations (ACOs). ACOs have promised to “provide good quality care to Medicare beneficiaries while keeping costs down” (21). However, there is little explanation as to how this is going to be done, though two details are apparent: “ACOs [won’t] do away with fee for service” and “patients [will] still be free to see doctors of their choice outside the network without paying more” (21) – so the tragedy of the commons effect will continue.

Monitoring Waste for a Few
As discussed above in the EPPM portion of this paper, the ACA has new regulations/provisions to stop waste and save health care dollars. These laws hope to discourage physicians for fraudulent behavior in government-sponsored programs – namely Medicare, Medicaid, and CHIP. But this only accounts for 30.6% of the people covered by health insurance! What about the 63.9% who have private insurance (employment-based or otherwise)? (22).
According to the ACA summary sheet released by the government, the final paragraph is reserved for private insurance coverage. It states:
The new law also provides enhanced tools and authorities to address abuses of multiple employer welfare arrangements and protect employers and employees from insurance scams. It also gives new powers to the Secretary and Inspector General to investigate and audit the health insurance Exchanges. This, plus the new rules to ensure accountability in the insurance industry, will protect consumers and increase the affordability of health care (7).
Without so much as giving one detail as to how waste will be reduced in private insurance, ambiguous phrases such as “enhanced tools,” “new powers,” and “new rules” are used.
In March 2011, the North Carolina Institute of Medicine put together a robust summary of the ACA (23). Although the document contains a few portions that only concern the state of North Carolina (and where they are with implementing all of the ACA provisions), the following excerpts affect the entire country:
Most of these cost savings will accrue to the federal government (Medicare) or to the state and federal government (Medicaid and CHIP). However, the ACA also included other provisions that have the potential of reducing cost escalation in the private market (p. 13, emphasis added).

The CBO estimates that these provisions would save $11.6 billion over 10 years to the federal government, but these provisions could also provide savings to private plans (p. 85, emphasis added).

The ACA includes funding to support more aggressive efforts to eliminate fraud and abuse and to recover overpayments in Medicare, Medicaid, and CHIP (p. 81).
Many of the efforts to reduce fraud and abuse may also be adopted by private insurers (pp. 85-86, emphasis added).

This illustrates that the lack of verbiage found in the government summary as it pertains to eliminating wasteful spending for private insurance wasn’t a mere oversight. Rather, the ACA as a whole almost completely disregarded this sector of health care – one in which roughly two-thirds of those insured reside. By omitting stronger waste-stopping policies for the vast majority of covered people, too much superfluous waste will still be embedded in the health care system.

Using an EPPM After Implementing a Kaiser System
It has been argued that a twofold reason exists as to why using an EPPM to prevent waste in the ACA will fail: both environmental factors (ease of gaming the system) and social factors (witnessing peers easily game the system) will not increase one’s perceived susceptibility of getting caught frivolously spending. Not until the health care system can correct these problems can an EPPM ever work to elicit behavioral change. However, restructuring the current paradigm into a Kaiser Health Plan (Kaiser) model would begin this procedural fix.
Kaiser is a large, vertically integrated, HMO that performs the function of a health insurer, owns and administers its own hospitals, and provides medical services to Kaiser members. Kaiser differs from traditional models by paying physicians a salary and hospitals a global budget (10). A global budget is a fixed payment made to the hospital for all services for one year and puts the hospital “entirely at risk because no matter how many patients are admitted and how many expensive services are performed, the hospital must figure out how to stay within its fixed budget” (10).
Forcing all medical groups and hospitals to adopt this payment method would allow them to easily monitor their flow of money and see how it’s being allocated on a daily basis. Not only could they be more conscious about their finances, but they would need to be in order to generate a profit. Once this system is in place, physicians would be more reluctant to commit any wasteful practices knowing that the company is tracking the budget dollar for dollar and thus the physician would be caught. There would only be one fee per procedure and the hospital would have fewer physicians to monitor (only those a part of their “business”) so perceived susceptibility would go up. Furthermore, physicians would no longer have the mindset to game the system through wrongful (more expensive) billing since they would be given an annual salary (as opposed to the common fee-for-service payment method). Being paid the same amount regardless of how many procedures they administer would negate their incentive to provide more care; their principles and Type-A personalities would keep them from under-serving patients. For those physicians still contemplating gaming the system, their peers would keep them from doing so knowing that wasting money results in lower salaries, bonuses, and benefits.
Studies have shown that the Kaiser model is more cost-effective than other delivery systems (24-25), best in clinical quality (26), and tends to focus more on care management (27). Thus evidence exists as to why this paradigm shift should be made. However, how to make the transition will be difficult. Reluctance will arise by physicians as they might feel slighted in not being able to collect a fee for each procedure, hospitals won’t like this new model because it forces them to be more efficient in their health care delivery, and some patients will pushback since they are familiar with getting procedures where they want and when they want them in an open-network system. Given all this, the only feasible mechanism to enact this proposed intervention is through government assistance.
Both parties should be willing to adopt this change. Conservatives could view this as a market-based approach in which every hospital becomes their own business. Competing on efficiency, quality, and low cost in order to recruit patients, each hospital must now strategize how best to deliver health care. Ultimately, a market-clearing equilibrium will be established for each procedure and hospitals will need to compete in order to stay in business. Liberals, on the other hand, will see this model as a fair way to compensate physicians, have better quality care for those insured, and squeeze out waste found in the current system. Or, at least, this system would allow them to successfully use an EPPM in the next version of their ACA, as both perceived susceptibility and perceived severity would increase to those in health care.

Waste is Not a Victimless Crime: A National Anti-Waste Campaign
“Did you know that your physician is providing you with unnecessary services, which infringe on your physical liberties and are both damaging to your health and wallet?” So begins the basis of a new national anti-waste campaign. The most effective advertisement/marketing strategy focuses on emotional appeal with freedom, civil liberties, and individual rights as the most salient three (28). Prefacing the campaign in this manner will immediately grab the population’s attention because they will know they have lost control of part of their personal lives; a loss resulting in subsidizing their physician’s monetary greed.
Furthermore, one of the elements involved in building a great campaign is to “give the facts” (29). Fact: “nearly 5 percent of GDP—or roughly $700 billion each year—goes to health care spending that cannot be shown to improve health outcomes” (30). Not only will people now know that health care is expensive: they pay $700 billion either directly (through out-of-pocket payments) or indirectly (through lower take home salary), but that this only accounts for the portion that doesn’t make them healthier! The number also omits financial losses due to missing work – driving to the doctor’s office or hospital, waiting in the lobby, having the procedure, and recovering/rehabilitating. Irate at best, patients would demand that their dollars and liberties be returned to them, the latter because “people care as much about being treated fairly as they do about the actual value of what they are paying for” (31).
Positing Agenda-Setting Theory to be true, the “anti-waste” message must be emphasized in a mass-media outlet before changes can be made (32). Even Kathleen Sebelius, Secretary of the Department of Health and Human Services, alludes to this concept when she says, “You’ve [Families USA] been doing this a long time, even when health care was out of the headlines” (33). Seeing how health care is already a significant topic in the news and that the U.S. becomes infatuated with any sort of scandalous behavior (see Enron and Goldman Sachs), the message about physicians spending 5% of GDP on harmful [if not physically, then emotionally and monetarily] procedures will instantaneously become viral. Not only do these actions violate personal freedom, but ceasing this activity would recapture $700 billion, money a recession-laden economy desperately needs.
Political pressures aside, why then would physicians change their behavior once the anti-waste campaign hit the media? Well, once America stresses that the current standard needs to terminate, that Americans are not interested in being part of a society where physicians provide them with nonessential care in order to take home higher paychecks, then new social norms in America emanate. Social norms are defined as “customary codes of behavior in a group or culture, together with the beliefs about what those codes mean. [Social norms are] both a guide for how to behave (or not behave), and an affirmation of the meaning behind it…they are generally adhered to standards among a group about what should be ‘normal’” (34).
After the new norm is in place and physicians’ behaviors change, Cognitive Dissonance Theory posits that the physicians’ attitudes will change to match and justify their behaviors (6). In doing so, not only will physicians stop giving wasted services, but they will also start to understand why overutilization is harmful to both the patient and health care sector. With the first puzzle piece in place, the second and third pieces will lock almost simultaneously: patients won’t demand certain x-rays/scans because the campaign emphasized this care won’t better their health (and physicians won’t administer the tests anyways) and payers won’t need to set arbitrarily high premiums to recoup the costs of these expensive procedures. The tragedy of the commons puzzle will be solved.

De-linking Insurance from Employment
Focusing waste prevention measures on government-funded insurance underlies the biggest problem with the ACA. It has the potential to curb government spending, but in no way will this help with wasteful medical practices as a whole. In fact, the problem of high cost of care could become exacerbated if physicians decide to forego seeing Medicare and Medicaid patients and only treat those with employment-funded insurance seeing how easily they can continue to game the system due to the ACA’s lack of emphasis. Fixing this flaw in the system will require de-linking medical coverage from employment and covering everyone under a central system.
Myriads of plans, and thus codes and fees, are interwoven in the U.S. health care system resulting in the largest percentage of national health expenditures spent on administration compared to other wealthy nations (35). Not only do insurance companies waste money tracking these plans, but also employers have to spend money on internal administration and benefits consultants to help monitor their own plan(s). Furthermore, “the link of private insurance with employment inevitably produces interruptions in coverage because of the unstable nature of employment” (10). This disruption causes people to enroll in COBRA coverage (37). Even more plans, more administration, and more waste are thus created through employer-linked medical insurance to provide coverage for those unemployed.
The system’s complexity has become such an issue that when compared to a single payer country such as Canada, the U.S. spends roughly $752 per capita more just on health care administration (36), or more than $280 billion in total (35). De-linking coverage from employment and having one overseer (the government) would substantially mitigate these costs.
A government run health care system does not mean the U.S. would be forced to adopt one plan for the entire country. In fact, the thought of this concept is preposterous. What it does entail is the government working with other health care personnel (e.g. physicians and hospital executives) to create one fee schedule for all procedures. The government would also be the administrator of all monetary transactions found in the newly created plans, in the newly created environment (see proposed Kaiser model above). Distributing money through the one governmental channel as opposed to the millions of channels in today’s labyrinth will vastly simplify payment and administration, resulting in less health care waste.
Lastly, having health care distributed under one umbrella would enable the government to more easily enforce new legislation going forward. Being responsible for all of the money, plans, and system, would allow them to devise streamlined strategies in preventing wasteful practices; strategies which not only could be quickly implemented, but efficiently enforced. They would no longer need to create and monitor piecemealed provisions accounting for the various modes of health care delivery. The government needs to mandate de-linked employment insurance and adopt the role as “Big Payer” if it really wishes to crackdown on wasteful practices inherent in the current system.

Failing to be safe, effective, and efficient (38), the U.S. health care system experiences many flavors of waste: administrative, overutilization, and fraudulent activity to name a few. To combat these and other types of wastes embedded in the paradigm, the government enacted the ACA. However, the ACA did not account for the system’s environmental and social factors before using an EPPM approach to elicit behavioral change, did not offer up a structural modification to address the tragedy of the commons problem, and failed to implement more severe penalties for those involved in employment-based health care coverage. Given all of this, it should come as no surprise if wasteful practices persist and health care costs continue to spiral out of control.
Rather than mere overlays that mask the same botched health care system, the government must mandate structural changes to fix the problem. A Kaiser-like delivery will force companies to be more efficient internally if they hope to generate a profit. This system will be more cost-effective and ultimately deliver higher quality of care. An anti-waste campaign issued by the government and media will address the “overgrazing” perpetuated by physicians, payers, and patients. As argued above, a successful campaign will lead to new social norms in the U.S. that will lead to different waste-curbing practices. Finally, de-linking coverage from employment and having the government oversee the financing and delivery of care will reduce administrative wastes and can streamline all future health care strategies. There is no silver-bullet approach to fix the problem of health care waste; in fact, the aforementioned proposal in total is greater than the sum of its parts. In the vast sea of policy recommendations, the U.S. continues to throw away money at under-studied solutions to the health care waste problem. Stopping these “we tried” philosophies and incorporating evidenced-based, structural modifications must be done now before it’s far too late.

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