Will Inefficient Financial Healthcare Reform Kill the ACA?
By - Is the Affordable Care Act (ACA) hurling the healthcare industry further into the red? The answer is a definite yes, according to a recent RevCycleIntelligence.com article about key findings from a pair of Harvard Medical School professors’ Health Affairs blog study.
The bureaucracy will gobble up a quarter of federal spending; the ACA will add almost $274 billion in new administrative costs heading into 2022, well beyond what would have been expected had the ACA not been passed, maintain David U. Himmelstein, MD, FACP, Lecturer in Medicine at Harvard Medical School and Professor at the City University of New York School of Public Health at Hunter College and Steffie Woolhandler, MD, MPH, FACP, Lecturer in Medicine at Harvard Medical School, Professor in the CUNY School of Public Health at Hunter College, and Adjunct Clinical Professor at Albert Einstein College of Medicine. Two-thirds of this new overhead – over $172 billion – are directly associated with private insurers’ administrative costs and profits, Himmelstein and Woolhandler state.
RevCycleIntelligence.com conversed with Himmelstein last week about the greater implications of what such numbers mean for the healthcare industry at large.
“We are wasting an enormous amount of money that ought to go to healthcare on paperwork,” Himmelstein maintains. “It’s been an extraordinarily inefficient way of deploying resources. Frankly, that’s just one piece of it because we analyzed just one piece of the paperwork costs, those in insurance firms, the flip side of the paperwork which we have not documented in those numbers, is the providers’ cost for complying with insurers’ paperwork requirements. That’s enormous as well,” he says.
“Previous work we’ve done suggests that a third of the total healthcare dollar goes to paperwork and bureaucracy,” Himmelstein states. Such numbers are likely mere underestimates that require updating, he confirms.
“The way we go about financing healthcare is extraordinary wasteful and politicians have been unwilling to do anything about it up until now,” Himmelstein says. “Winston Churchill once said, ‘You can always rely on Americans to do the right thing after they have exhausted every other possibility,’” Himmelstein says, in reference to what he refers to as a wasteful approach to financial healthcare reform.
“Even most of the new Medicaid money is going through private Medicaid HMOs or managed care plans. And we know that private insurers’ overhead is much higher than overhead in public programs,” he confirms. “The politicians have made a decision to use the most wasteful way of going about financing care,” he adds.
Costly and inefficient exchanges, Himmelstein says, are further hindering the healthcare industry. “The best estimate is that the exchanges themselves will add about 3 ½ percent to the cost of premiums of policies that are sold through the exchanges,” he claims.
“Most other nations are much more efficient in the way that they finance and administer healthcare,” Himmelstein confirms. “There is no reason, other than political difficulty, that we can’t shed massive bureaucratic costs.”
Himmelstein predicts the ACA will soon lose dominance within the healthcare industry, moving forward. “Instead of fighting about whether to go back to an old system, repealing the ACA,” he says, “the debate will turn to how we move from here to something different, hopefully better.”
Such will occur just as Medicare and Medicaid, once newly implemented, became a focal point of the healthcare system only a few years after they were passed, with attention then focused on what could be next around the bend, Himmelstein states.
“Costs are likely to resume an upward growth pattern and more and more people are going to find themselves grossly underinsured. All of those problems are going to be part of the debate very soon,” he says. “We are moving to a handful of giant organizations controlling the health delivery system, largely focusing on their own interests and giving lip service to wanting to serve patients, but really acting like corporate masters of the healthcare system and shaping it to do what they want rather than what patients need,” he maintains.
The simple solution is to implement national health insurance, Himmelstein maintains. “Is it appropriate that some private organization have the decision making power over the healthcare of the vast majority in that region?” he asks. “Privatization is much less efficient,” Himmelstein states. “We’ll again be coming to a debate about national health insurance.”
