Will Obamacare or private sector reforms carry the day?

A race, invisible to most, is on to solve the nation’s health care crisis.

It is a race between reforms of the delivery system in the private sector and the insurance-based reforms under Obamacare. Which will provide better access, affordability and value?
My bet is that the real reforms in the private sector will win hands down.

The nation is only four months from the Oct. 1 date for the public exchanges to be up and running under the Affordable Care Act of 2010 (ACA). Early signals on whether that deadline is met are flashing yellow, maybe red.

No test sites have been rolled out. Several large insurance companies have opted out of the exchanges in some states. Predictions of premium increases or 20% to 100% for policies bought on the exchanges are rampant. And the administration has delayed the use of the exchanges for small businesses. It’s scary.

In Maine, for instance, only two insurers have said they will put products on the exchanges, hardly the range of choice that Obamacare supporters expected.

Premiums are already so high for individual policies that the thought of stiff increases, even after federal subsides, is alarming.

Meanwhile, on the other side of the race, leading corporations have made workforce health and health costs a strategic priority. They are making huge strides in both.
Safeway, for instance, elevated its management focus on health care to the C-Suite level, and it held its health cost inflation to 2% from 2005 to 2012 – far below the medical CPI. It is saving about $50 million per year.

It used a number of managerial tools to achieve that result, but the biggest factor was reducing its unhealthy population. Safeway reduced people with hypertension by 51%, high glucose levels by 38%, high cholesterol by 63%, tobacco usage by 37% and obesity by 20%.

Many other private companies have achieved similar positive results through a combination of powerful management methods:

• Self-insurance
• Consumer incentives and disincentives
• Transparency on costs and quality
• Value-based purchasing
• New pricing models
• Search for lean health care providers
• On-site primary and preventive care
• Rigorous chronic disease management
• Treating health as a corporate and personal financial asset

Note that the new private sector model for the delivery of health care is patient-centric.

In sharp contrast, ACA centers on rules, regulations, mandates, big insurers, big government and big hospital systems.

The president and his people believe in vertically integrated systems, called accountable care organizations. Such care is usually delivered in narrow networks, which by their nature limit choice.

Private payers like competition and lots of choice. They want their people to go to the best doctors and hospitals, regardless of which system it is. They want the best prices.

The best managed companies in the private sector deliver first rate health care for $8000 to $10,000 per employee, while under-managed plans in the public sector usually cost two times that or more. The former could be called “affordable,” while the latter is decidedly not.

The private sector innovations could be grafted onto Obamacare, but that’s not likely for years to come. Managerial energy at the state and national levels will be drained by the ramp-up for the complex new law.

About half of the companies in the country will opt out of Obamacare. They will press ahead with reforms based on individual responsibility and marketplace disciplines.
They have already helped to stem the hyperinflation in health care by emphasizing health as a strategic priority. They have learned that health is a financial asset. They are using their affordable health benefits to recruit and retain valuable employees.

The Obama path is less clear. There are plenty of people who think the new law is a recipe for a deeper financial crisis that will lead to a default to government health care. There are some who think access will not improve.

Let’s hope that the good guys in the private sector make a convincing case for their better model in case Obamacare implodes.

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  • jhinwb

    So if you are not very healthy you aren’t of much value and will be discriminated against in finding a job. You will still need health care: does it mean high cost care mostly in the emergency room?

    We need universal care in which everyone is in the pool, and the risk is truly shared by all. Isn’t that what insurance means and should be? With medicare type insurance for all we could start working on what the payout might be and how it could more reasonable. Why can all the European Countries do this so much better than we do? They begin with universal insurance, and skip the middle men.

    • JohnTorinus

      We coverall our people.

      The difference between Europe and us is the delivery model, theirs based on primary care doctors, ours based on costly specialty care.

  • MagicB

    Neither the Fed or private sector can do much without the participation of the individual as health begins there. The direct correlation between health and what a person eats and how one conducts themselves is known. Obesity, hypertension, high cholesterol, high glucose, etc. are conditions that can be avoided and certainly mitigated by the individual by eating natural, healthy food and not smoking.

    Engineered food and drink are the issue. Our convenience and fast food proveyors and “sport” drink manufacturers are the root of the health issue for many of the conditions above. The individual needs to be educated and given incentives by communities and employers to eat better and exercise. The private sector and the Fed should be applying pressure on food and drink manufacturing by demanding reduction and eventually banning of High Fructose Corn Syrup and it’s nom de guerres.

  • jhinwb

    The difference between us and the Europeans is also about our insurance industry, they save hugely there, and with delivery based on primary care as you say, and so our doctors have little or no incentive to cut costs since they get a much higher income in the current system……..and poorer outcomes.