A way out of budget impasse

As we watch the unfunny circus over the federal budget in the Capitol, it is hard to fathom either side’s position.

President Obama’s resistance to moving toward a balanced budget and a cap on the federal deficit is puzzling, since we are five years into an economic recovery, albeit a slow one, and we have worked our way out of most of the spending on two wars. All but a few partisan economists would argue that federal deficits and debts should be reduced as the economy improves.

That doctrinaire pro-spending stance is at one end of the impasse on the debt ceiling. At the other end is the shallow Republican position on ObamaCare. They oppose it, but without any clearly articulated position for bringing health costs into line or extending access to 48 million uninsured American.

Mitt Romney lost the presidency in part because of his goofy position on ObamaCare. He opposed it, even though he had given birth to its predecessor in Massachusetts. American voters aren’t stupid; they saw an empty suit on that massive issue. If he were intellectually vapid on that count, why would he be any different on others?

The monumental irony that should be ringing in the Republican tin ear on health care is that the private sector, which the GOP extols, and Obama doesn’t grasp, has built a disruptive business model for the delivery of health care. It’s just sitting there waiting to be adopted by the Republicans.

It’s based on pure GOP principles:

• Market dynamics and engaged consumers to discipline the health care supply chain.
• Individual responsibility for health and health spending.
• Innovative management.
• Transparency on price and quality of care.

Obama’s new law, cynically named the “Affordable Care Act,” will be anything but affordable. Premiums (before subsidies) will soar.

His administration fails utterly to understand that costs can only be controlled by cutting costs. Cutting reimbursements, as ACA does, does not reduce underlying costs. Reducing costs is all about management, at which the private sector excels, and the government is congenitally and politically disinclined to accomplish.

Put another way, “It’s the costs, stupid!”

What neither the party gets is that the market-driven reforms, company by company, in the private sector are working.

The back of the hyperinflationary trends of the last four decades has been broken. Instead of double-digit premium increases that were routine in the last two decades, we are now seeing single digit increases. Overall medical inflation has dropped from a long time up-trend of 7-8% to 4%.

Even better, companies like HP, Safeway and IBM say they have come close to flat-lining costs in recent years. And their employees love the investments being made in their health.

They have done that by creating incentives and improving workforce health. Hospital admissions are dropping sharply in their workforces.

As a consequence of the effective new business model, there is near panic in the provider ranks. Hospitals and clinics have realized that the revenue fairy is dead, and that’s scary.

In the old days, good or bad, depending on whether you were the payer or payee, the federal government could impose price controls on Medicare and Medicaid reimbursements, and the providers could compensate by jacking the prices for private sector employers and employees.

But no more. CEOs are saying, “Time out! Enough already! Old Game Over!”

They are seeking value: high quality and low prices. That means that high priced, low quality hospitals and clinics are in for some tough times – as it should be. And the high-value providers will do well.

One day, the politicians will also figure out that the access issue, which ObamaCare seeks to solve, was caused at the fundamental level by out-of-control costs. Higher costs/prices equal lower access – duh! They will eventually have to deal with the cost issues, just as private payers and some local governmental bodies have begun to do.

Back to the impasse: there’s a compromise waiting to be forged. The President could agree to major amendments to ACA that would cut costs, such as consumer-driven plans, transparency on prices and quality, payment reform and serious chronic disease management at the primary care level.

In return, the GOP could agree to more access to health care – better managed and more affordable health care. The president could then accept a descending glide path to a balanced budget by 2016.
That would be the trade-off.

All this could be accomplished while improving the health of the population, as private companies are proving with their workforces across the land.

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