Hard times continue for the Affordable Care Act (aka Obamacare). The administration has scrapped the law’s long-term care insurance program, covering nursing homes and home health care. The program was deemed unrealistic. This is a harbinger. As the law is implemented — assuming the Supreme Court doesn’t declare it unconstitutional or Republicans don’t repeal it — disappointments will mount.
Nursing homes are expensive; typical costs can run up to $80,000 per patient annually. Home health care averages almost $22,000. The ACA mandated that the long-term insurance, called CLASS (for Community Living Assistance Services and Supports), be self-sustaining. Private insurance premiums would cover costs without government subsidies. Impossible, the administration found.
This setback heralds others. Controlling health spending was a major promise. After all, it’s called the Affordable Care Act, and boosters argue that it will subdue runaway spending. It almost certainly won’t. One prominent skeptic is Arnold Relman, the former editor of The New England Journal of Medicine.
Something needs to force change. Republicans have a strategy. Rep. Paul Ryan would convert Medicare — the nation’s largest insurance program — into a voucher system. Medicare beneficiaries would receive a fixed amount and would shop for the most appealing health plan that their money would buy. Government spending would be limited by size of the vouchers. To attract patients, doctors and hospitals would be compelled — so the theory goes — to combine in ways that lowered costs and improved quality. Through tax credits, the same approach would apply to the under-65 population.
Relman’s solution is not entirely dissimilar. He would replace fee-for-service with an annual per-patient payment to doctors who would be responsible for the patient’s “comprehensive care.” Both Ryan’s voucher and Relman’s lump sum are what health experts call “capitation” or “global payments.” The big difference is that Relman would have government administer the payments directly, with attendant regulations. A single-payer system, he thinks, would extract savings from the overhead and profit of the insurance industry. In 2011, that’s estimated at $152 billion, 5.6 percent of health spending.
Despite profound differences, both these radical proposals proceed from common premises: Limiting health-care spending requires explicit ceilings on the dollars put into the system; and changing incentives for doctors and hospitals will create a superior delivery system. We should be debating ideas like these, because overhauling the health-care system is important in its own right and for controlling federal spending. Instead, the ACA skews the agenda. Many of its promises rest, like CLASS, on unrealistic assumptions. Disappointments loom, and the needed debate is deferred.