Increasing ACA Premiums: The Real Drivers of Cost Aren't Being Addressed

With political candidates sparring about the 25 percent increased premiums for Affordable Care Act (ACA) insurance plans, the questions of why has this occurred and how we can ameliorate it are bouncing around the media. As a primary care doctor, the answers to these questions reveal themselves every day in my office. While it is convenient to demonize the ACA, insurance companies, and even Big Pharma, the actual cause is related to flawed assumptions and rules within our health care delivery system. One just has to see where insurance pays its money to understand how to fix the problem.

More than 50 percent of Medicare’s non-HMO funding is sent to hospitals and specialist doctors, often for procedures and interventions shown to have little value at high cost. For CareFirst in Maryland, 23 percent of funding is for specialist care and 40 percent for hospital/facility cost, much of this incurred by elective procedures.  Only 5 percent of cost goes to primary care. Such excessive spending for aggressive procedure-based medical care is a salient reason that insurance companies are raising premiums. Is such spending beneficial?

The Institute of Medicine estimates that in 2009 alone Americans spent $750 billion in unnecessary care.   Atul Gawande’s article, Overkill, reveals that 25-42 percent of patients receive care that is either ineffective or harmful. Virtually all of this low-value care occurs in the hospital or is specialist derived. A cardiologist can open an artery with a stent whenever she decides it is appropriate, generating a large profit and satisfying a patient who often feels his life has been saved. But studies show otherwise; stents often lead to more harm than good. Bloomberg News estimates that the cost of unnecessary stents alone is $2.4 billion a year, and patients receiving stents often have worse outcomes than had they been treated more conservatively. This is true of many high-paying procedures performed by specialists, including spinal injections, meniscal repairs, and kyphoplasty for compression fractures. In regions of the country in which there are higher proportions of specialists than primary care doctors, outcomes are consistently worse, cost is higher, and hospital rates escalate.

Hospitals similarly deliver low value care at high cost. As a doctor who takes care of the elderly, I often have no choice but to hospitalize patients who want to stay home and who I know would have much better outcomes at home. The rules of insurance simply do not allow for reasonable home care. Studies consistently demonstrate that for many illnesses home-care is safer and far less expensive than the hospital for the elderly population, and it is what most elderly patients prefer. A recent study showed that 50 percent of elderly leave the hospital more disabled than when they came in and 25 percent suffer actual harm at a whopping cost of $4.4 billion a year.

Specialists are paid high fees to perform procedures. One stent may generate a fee of $1000-$2000 for a cardiologist who orders it, costing the system over $30,000 for that one procedure. Costs for procedures such as hip replacements and colonoscopies are similarly excessive, far higher in this country than any others.  Specialists are not required to discuss actual risks and benefits with patients, and typically self-refer patients for these lucrative procedures without any stipulation that they are medically superior to less expensive alternatives.  Contrarily, a doctor like me who can spend similar time grappling with complex medical and social issues with my patients, steering them on a rational medical course that is individualized to their wants and needs, will earn a tiny fraction of that fee. That is why only 20 percent of medical students are entering primary care and we are becoming a nation of specialists. Similarly, hospitals are paid well only if they hospitalize their patients; home care does not help their bottom line.

This perverse use of health care dollars is not difficult to fix. Doctor fees for visits and procedures are determined by the Relative Value Scale Update Committee, or RUC: a 31-person committee within the American Medical Association (AMA) that is specialist dominated and meets without transparency to determine doctor pay. With a single law that committee can be dissolved and doctor pay can be normalized, so doctors who think and converse with their patients are paid equally to doctors who simply do. Similarly, insurance companies such as Medicare can start paying equally for home care and hospital care so that both are feasible options. It is time we stop encouraging unnecessary procedures and hospitalizations through our insurance payment system, and start encouraging optimal medical care. That is what lies at the heart of our health care crisis, and fixing it will not only save Medicare and the ACA, but will save a lot of lives and give patients more genuine choices about how they receive the best care possible.