ACA hasn’t reduced health care costs

By Dana Beezley-Smith, Ph.D.
November 18, 2018 - Last updated: November 17, 2018

Affordable Care Act“The only way we’re going to stop our country from being a latter day Roman Empire – and falling under its own weight,” MIT economist Jonathan Gruber told a 2010 audience, “is getting control of the growth rate of health care costs.”

The 2010 Affordable Care Act (ACA), which Gruber was integral in developing, was hoped to represent the nation’s best attempt at reducing this expense. Three days before its passage, President Obama told House Democrats that “everybody who’s looked at it says that every single good idea to bend the cost curve and start actually reducing health care costs are [sic] in this bill.”

But in his Jan. 2012 address to the Jewish Community Center of San Francisco, Gruber admitted that he and the other ACA architects had no ideas for solving the nation’s soaring health care expenses.

“Even if we KNEW how to control health care costs,” he told attendees, “we couldn’t do it politically. So what do you do?… Well, you do what I like to think of as sort of a ‘spaghetti approach.’ Throw a bunch of stuff against the wall and see what sticks.”

In 2009, when Congressional deliberations began, national health spending totaled $2.5 trillion, representing $8,086 per person and 17.6 percent of the nation’s Gross Domestic Product (GDP).

In 2016, U.S. health care spending reached $3.3 trillion or $10,348 per person, and consumed 17.9 percent of the GDP. Federal government and household costs accounted for the highest expenditures, at 28 percent each.

One cost-cutting tactic, promoted by three former Obama health advisors, has been widely adopted.

In a controversial op-ed published shortly after the ACA’s passage, the authors advocated that providers “vertically integrate” into larger entities to improve efficiencies.

“Only hospitals or health plans can afford to make the necessary investments in information technology and management skills,” they reasoned. “To realize the full benefits of the Affordable Care Act, physicians will need to embrace rather than resist change.”

CBS News published its coverage on the editorial days later, proclaiming independent medical offices “doomed.” The author argued that internal medicine and other specialists, “many of them in small practices,” objected to the strategy because they’re “raking in big bucks, and they don’t want anything to change.”

In 2012, 48.5 percent of physicians described themselves as “independent practice owners or partners.” The Physicians Foundation’s 2016 survey found that number had dropped to 33 percent.

The ACA’s cost and regulatory pressures are motivating doctors to sell their practices to hospitals, writes Reason contributing editor J.D. Tuccille. “Is the independent doctor disappearing?” he asks. “The answer is yes – and to a significant extent, that’s a result of deliberate policy.”

According to The American Journal of Managed Care (AJMC), “The percentage of hospital-employed physicians increased by more than 63 percent” over the past four years. “Regions nationwide saw an increase in hospital-owned practices at every measured time period, ranging from 83 percent to 205 percent.”

Moreover, the hospital systems that doctors are joining are merging at a steady pace. Leigh Page at Medscape reports that the majority of hospitals are now incorporated within ever-larger entities.

“The American Hospital Association reports that 60 percent of its member hospitals are part of a health system, with most of them in systems consisting of three to 10 hospitals.”

PricewaterhouseCoopers’ Health Research Institute projects health expenses will rise 6 percent next year, due in large part to “megamergers” among health service facilities. “In 2019, 93 percent of most metropolitan hospital markets will be considered highly concentrated.”

Consolidation has long been demonstrated to increase costs without adding quality. Large systems can negotiate lucrative contracts with private insurers due to their market share and hospital-owned outpatient sites receive higher Medicare reimbursements than private practitioners. This, AJMC writes, “increases both costs to the Medicare program and financial responsibility for patients.”

“I don’t see a policy justification for why a physician’s time is worth more as a hospital employee,” Jeff Goldsmith, a Virginia health care consultant, told the Center for Public Integrity. Medicare, he maintained, is paying a subsidy that encourages hospitals “to buy up practices and dramatically increase the cost of services.”

According to a 2014 study by the Medicare Payment Advisory Commission (MedPAC), hospital-acquired practices receive $453 for performing an echocardiogram while the independent doctor is paid $189.

“Medicare pays twice as much for office visits at hospital-owned clinics as compared to private physician practices,” claims physician Niran Al-Agba. “Patients with private insurance are responsible for as much as a 15 percent portion of the facility fee.”

In 2012, MedPAC recommended a “site-neutral” payment policy, and in 2015, both Congress and the Center for Medicare and Medicaid Services (CMS) leveled reimbursements across settings. However, locations acquired by hospitals before Nov. 2, 2015 were exempted from the payment cuts.

CMS is proposing payment parity for all clinic visits, the most common outpatient service, reducing reimbursement in hospital-affiliated locations from $116 to $46. The policy is expected to reduce federal spending by $610 million in 2019 and coinsurance by $150 million.

“We’ll have to wait and see,” writes Vox policy reporter Dylan Scott. “Litigation could also follow. But the Trump administration has shown a prior willingness, in the fight over the $340 billion drug pricing program, to confront hospitals.”

The administration’s $1.6 billion cut to the Medicare drug discount program is expected to save seniors roughly $320 million this year. The hospital industry has filed suit to reverse these cuts.

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Dana Beezley-Smith, Ph.D., is in private practice serving children, adults and families in Green, Ohio. Her email is:

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