'Obamacare' Is More Than Exchanges -- And These 3 Charts Will Help You Understand How

Apr 2 2014, 2:32am CDT | by

President Obama has a new favorite number.

“7.1 million Americans have now signed up for private insurance plans” through the Affordable Care Act’s marketplaces, the president said in a speech on Tuesday afternoon. “7.1,” he added after a pause for effect.

A few hours later, Obama dispatched an email to White House supporters and reporters. His subject line? “7.1 million.”

(All told, the president invoked 7.1 million seven times in his speech and email.)

Not even two months ago, the Congressional Budget Office estimated that just 6 million people would sign up for Obamacare this year because of technical problems, a 14% cut to its initial projection of 7 million.

So understandably, the White House is celebrating an achievement that once seemed impossible. Hitting 7.1 million sign-ups is a politically significant victory.

What it isn’t: An especially useful way to judge Obamacare.

Don’t get me wrong. The number of enrollees is important, sure. It’s a barometer that I’ve tracked closely in my role as editor of the Advisory Board’s Daily Briefing.

But there’s a lot we still don’t know about the people who have signed up for insurance plans. How many were previously uninsured. How sick they are.

And all the early data we did know about Obamacare customers, as Megan McArdle writes at Bloomberg View, have been “blown to hell” by the final month’s frenzy of sign-ups.

Meanwhile, the difference between 6 million and 7.1 million enrollees may not be as relevant as you think. Even if 15% of Obamacare enrollees don’t end up paying, there’s not much of an impact for hospitals, insurance companies, or even the long-term success of the law.

The more important story now is all the other elements of Obamacare—the ones that no one is talking about when they talk about ”Obamacare.”

Don’t forget; the ACA is much, much more than just insurance exchanges. The law’s coverage reforms have gotten the lion’s share of attention, because they impact so many people and tend to be so politically sensitive.

But Obamacare also includes dozens of other provisions designed to increase access, lower spending, and boost quality.

Taken together, these elements are known as the “Triple Aim.” And its provisions are interconnected, in ways both obvious and subtle. For example, expanding coverage to millions of people has implications for health costs (they’ll probably grow) and care quality (it could suffer, if doctors don’t have enough capacity).

So here’s a more complete way to understand Obamacare: Look at some of the law’s other provisions…say, its planned changes to Medicaid, creation of accountable care organizations, and readmissions penalties. Taken together, they help capture the sweeping ambition of the law’s reforms, and illustrate how much is still left to do.

1. The incomplete Medicaid expansion

It’s a true glass half-full, half-empty scenario: Only 26 states have now said yes to the ACA’s Medicaid dollars.


For the law’s supporters, the optimistic read is that 4.5 million more Americans will get Medicaid coverage this year, thanks to states like California and Ohio expanding their programs. The pessimistic viewpoint is that just as many Americans—nearly five million—are missing out on Medicaid in the 24 states that are currently sitting out.

As our map indicates, those holdout states generally remain across the South and Midwest—states where local leaders are concerned about the political and financial costs of opting into the program. Regardless of the reasons, the decision to opt out of Medicaid is causing short-term pain for providers and has real implications for the law’s long-run success, too.

“Obamacare will be a failure until Medicaid expands in red states,” The New Republic‘s Alec MacGillis concluded last week.

“We have passed a law meant to expand coverage to all Americans, and yet it does not reach the poorest of our fellow citizens in nearly half the states in the country.”

2. Early ACO results appear mixed

The ACA also includes a slew of reforms intended to shift providers away from fee-for-service reimbursement and toward fee-for-value.

For instance, the law features value-based-purchasing provisions, which withhold and redistribute a small amount of reimbursement from providers, and represent the first real step by CMS toward pay-for-performance. (More on this in a second, in the context of readmissions.) And the ACA also has fostered several major payment pilots, such as Medicare’s bundled payment and accountable care organization initiatives. Both programs have lured hundreds of participants thus far.

It’s too soon to tell how well the ACO payment reforms are working; the early evidence on achieving shared savings is mixed, and some of the initial cohort already has dropped out. But experts generally believe that the health care sector’s slowing growth (aka, “slowth“) partly reflects the shift toward these models—not just by CMS, but by private payers that are following the goverment’s lead.

I asked my colleague Rob Lazerow, who’s studied Medicare’s savings programs, for his early read on Obamacare’s payment reforms.

Programs like ACOs are “encouraging providers to examine the quality, efficiency, and quantity of the care they provide–plus how they contract with private payers too,” Lazerow said.

Lazerow also pointed out that the implications of payment reform probably outweighed coverage expansion for many hospital CEOs. “For many organizations, these new payment models will drive more near-term transformation than coverage expansion,” he added.

3. Readmissions penalties flash promise

Perhaps the least equivocal ACA-related victory yet has to do with care quality: The law appears to be having a real effect on readmissions rates, which refused to budge for years.

Specifically, the ACA’s Hospital Readmissions Reductions Program allows CMS to withhold up to 1% of regular reimbursements for hospitals that have too many 30-day readmissions for heart attack, heart failure, and pneumonia patients.

The threat of penalties prompted hospitals to institute new programs—like home care visits and free medication—that seem to have translated into lower all-cause readmissions. The map below tracks the percentage point change in Medicare readmission rates by hospital referral region, beween January and August 2013 compared to the average across the 2007-2011 period.

If these early gains prove lasting, and the reductions in readmissions continue, CMS will be able to crow about a dual achievement: Improving care and lowering costs.

That’s an incredibly difficult goal, of course. And it’s harder to measure that than the number of people signing up through insurance exchanges. But achieving better quality at lower cost is what Obamacare’s really supposed to be about, too.

Source: Forbes Business


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