How Accountable Care Organizations Came About

By Greg Scandlen

Thanks to the Freedom of Information Act, we were able to secure a transcript of this conversation that took place in a bunker deep underground in the Old Executive Office Building of the White House in 2009 —

Health Economist Joe: “Hey, Fred, whatcha working on?

Health Economist Fred: “Hi, Joe. I’m drafting the new health reform bill for President Obama and Nancy Pelosi.”

H.E. Joe: “Great! It is long overdue. We seriously need health reform.”

H.E. Fred: “Man, I’ll say. The health care system is a mess. Too many people uninsured, costs that are out of control, and quality that is questionable at best.”

H.E. Joe: “Yeah, but that has been the problem for fifty years. Every time we expand coverage or improve quality, the costs go through the roof. Or if we try to lower costs, people lose access and quality gets worse.”

H.E. Fred: “Not this time. We’ve solved that problem.”

H.E. Joe: “No kidding? How the hell did you do that?”

H.E. Fred: “It was easy. We’re going to create a new kind of organization that will take care of it.”

H.E. Joe: “You are? I’ve never heard of an organization like that. What do you mean?”

H.E. Fred: “You’re right. Such an organization has never existed, but it will this time.”

H.E. Joe: “Okay, what’s it going to look like?”

H.E. Fred: “Well, first it has to be interoperable. Next it has to be collaborative. And it certainly has to be high-performing and patient-centered. And of course it will be cooperative and evidence-based and involve all the stakeholders.”

H.E. Joe: “Ooooooh, I like it! Interoperable, collaborative, high-performing, patient-centered, cooperative, evidence-based, and involving all the stakeholders – how can it miss? Is there anything else?”

H.E. Fred: Of course, dummy. It must be also accountable. That is why we are calling it an Accountable Care Organization. That’s the most important thing.”

H.E. Joe: “Yep. There is nothing more important than accountability. But who will it be accountable to?”

H.E. Fred: “Me.”

H.E. Joe: “You?”

H.E. Fred: “Of course, you idiot. That’s how I’m going to keep this job until I retire.”

 

 

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Chronic Failure

By Greg Scandlen

Every federal initiative that I can think of in health care has been a failure. Maybe you can think of some that have worked as promised. I can’t.

This is not an ideological critique, but a practical one. Most Americans are practical people. We like to do what works and avoid repeating our mistakes. This country is famous for “second acts” and “second chances.” We don’t condemn people for making mistakes, but we expect them to learn from the error and do better the next time. But that assumes that the second act is not an exact repeat of the first one.

Unfortunately, today we are repeating all of the things that have been proven failures in the past. Managed Care was soundly rejected by most of the public, so now we are doing it all over again with a new name – “Accountable Care Organizations.” Much like today, we tried to lower health care costs by reducing the supply of health care services with the massive federal Health Planning Act in the 1970s. It had the exact opposite effect. Hospital rate setting was tried by 30 states in the 1980s and repealed in all but one (Maryland.) But today there is new talk of a new round of hospital rate setting. Community Rating and Guaranteed Issue have been tried with horrendous results, but today it is national policy with one small twist – everyone will be required to buy whether they want to or not.

Even the much-touted Medicare program is a failure by any standard. Yes, it is popular and defended by the elderly. Of course it is. The “beneficiaries” pay a mere fraction of what the program costs. Of course they like it. And there no longer exists any alternative in the market. Of course they defend it. That does not make it a success.

As John Goodman writes in Forbes, Medicare’s unfunded liabilities are $89 trillion on top of any expected premiums and dedicated taxes. Or, he adds, if we froze the program today and just looked at what is owed to today’s worker’s and retirees the unfunded amount would equal $33 trillion. That is – 33,000 billion dollars, or about $100,000 for every man, woman, and child alive in the United States today.

More recently, writing on the From Forum, Bruce Bartlett looked at an obscure federal report, “The Financial Report of the U.S. Government,” that takes an accrual approach to obligations, rather than the cash flow approach of the federal budget. Every private corporation in the United States is required to use accrual accounting in its financial statements, says Bartlett.  He reports that Medicare liabilities over the next 75 years were $38 trillion at the end of 2009, but were cut by $15 trillion in 2010 because of the health reform law. Of course, that $15 trillion “cut” was just being transferred from Medicare to the other programs within ObamaCare, so it isn’t really saving money at all.

So, the program is massively insolvent. But it is also a lousy insurance program. You would not be able to sell this program as a private benefit plan. It has a bewildering array of deductibles, coinsurance, and limits on covered benefits. In fact there is absolutely no limit on the out-of-pocket liability for beneficiaries, so that most people on the program also have to buy an expensive supplemental policy to cover all the coverage gaps.

The list of failures is so long it would take a book (which I am currently writing) to list them all. The SCHIP program was supposed to ensure that all low-income children would have insurance coverage. It didn’t. Hillary Clinton’s federal vaccine program was supposed to ensure that all kids could be vaccinated at low cost. The doses rotted in warehouses.

It is not the opponents of these programs that are ideological, but the supporters. In most cases the skeptics were willing to give the ideas a chance to succeed even while doubting that they would. But the supporters are unwilling to ever admit failure and keep pushing the same ideas in spite of all the empirical evidence.