State of the Industry 2011: Success of health reform

October 1, 2010

The health reform law will be moderately successful, but it's only going to get half the job done

The health reform law will be moderately successful, but it's only going to get half the job done, says healthcare consultant Peter R. Kongstvedt, MD, author and principal of the P.R. Kongstvedt Company, LLC. He believes coverage is fairly well addressed in the law, but cost remains an issue.

"The legislation does accomplish some very laudable, important reforms, but since it primarily focuses on only one element of the healthcare system, reform is unfinished," he says.

According to Dr. Kongstvedt, PPACA has a modest focus on restructuring incentives but not all the loose ends are tied up. Specifically, PPACA's groundwork to control costs primarily applies to Medicare and Medicaid spending.

According to a report released in September by the Centers for Medicare & Medicaid Services (CMS) actuaries, because of changes in law and regulations from PPACA, national health spending is projected to grow more slowly for 2011, at 4.2%, or 1 percentage point slower than its prior projections.

For private health insurance spending, the forecast notes a 12.8% increase for 2014, to $1.1 trillion. CMS previously predicted a 6.7% increase before the new law.

But supporters say with PPACA's increases in healthcare coverage, the nation will actually be getting a lot for its money. By 2019, the percentage of insured Americans is projected to be 92.7% of the population-roughly 10 percentage points higher than what was projected prior to PPACA, according to the report from CMS.

One of the key determinants of the law's relative success in the coming decade will be behavioral reactions to mandates and incentives applied to employers and consumers. As added implementation rules and other guidance rolls out, uptake on programs will vary.

Dr. Kongstvedt is optimistic about PPACA's provisions to incentivize providers to create accountable care organizations and pilot other experiments in changing the payment system over the next several years. The new structures will be an improvement over the unfettered fee-for-service payment method, but that's not saying much.

He also believes that it is extremely difficult to make substantial cuts in healthcare costs, since each dollar saved by a payer is a provider's revenue lost. However, he predicts that at some point, lawmakers will address cost control and complete the second half of the job.

"The problems are still out there," he says. "We can expect to see continued cost pressures, problems with pricing, and people moving in and out of risk pools. We know that we have to deal with rising costs, but we haven't yet reached the point of sufficient pain. Sooner or later, we will find ways to put stricter limits on healthcare costs."

According to the U.S. Census Bureau statistics released in mid-September, the number of people without health insurance coverage rose from 46.3 million in 2008 to 50.7 million in 2009, while the percentage increased from 15.4% to 16.7% over the same period. The decline in insurance coverage generally can be attributed to higher unemployment and loss of access to employer-sponsored plans.

The uninsured rate for children in poverty (15.1%) was greater than the rate for all children. Overall, uninsured rates decreased as household income increased: from 26.6% for those in households with annual incomes of less than $25,000 compared to 9.1% in households with incomes of $75,000 or more.