Why the Supreme Court’s Healthcare Decision Will Mean a Lot… and Not So Much

By  |  June 18, 2012 | 

Like waiting outside the Vatican for the puff of white smoke, the nation sits on edge awaiting the Supreme Court’s ruling on the Affordable Care Act. The ruling, which is likely to be announced next week, could toss out the entire healthcare reform bill, chop off one of its limbs (probably the so-called individual mandate), or leave the ACA intact. Whatever the ruling, it will be chum for the blogosophere, particularly in the heat of presidential silly season.

The two fundamental challenges to American healthcare today are how to improve value (quality divided by cost) and how to improve access (primarily by insuring the tens of millions of uninsured people). The bill sought to address these twin challenges in ways that were complex and intertwined. I’ll argue that a decision by the Court to throw out all or part of the ACA will have a profoundly negative effect on the access agenda, but surprisingly little impact on the value agenda. To understand why requires that we focus less on the bewildering details (mandates, insurance exchanges, PCORI, CMMI, IPAB, etc.) and more on some big picture truths and tradeoffs.

The job of any healthcare system is to deliver high quality, safe, satisfying care to patients at the lowest possible cost. Although America certainly does specialty and high tech care like nobody’s business, on all of the key dimensions of value we aren’t very good. The numbers tell the sorry tale: we provide evidence-based care about half the time, there are huge variations in how care is delivered, we kill 44,000-98,000 patients per year from medical errors, and we spend 18% of our gross domestic product on medical care, far more than any other country.

While quality and safety were our focus for the past decade, in the past few years the center of gravity has shifted to the denominator of the value equation: costs. Employers, who foot the bill for about half of all the money spent on care, complain about the backbreaking expenses. (Famously, GM spends more money on healthcare than steel, and has a hard time competing against Toyota because of it.) Workers with health insurance see stagnant wages, partly because a larger share of their reimbursement comes as employer-provided health benefits. They also experience growing out-of-pocket costs – both in the form of co-pays at the point of care and paying a larger proportion of their insurance premiums.

And government, the other dominant payer, has much the same problem as business: with larger and larger slices of its budgetary pie going to healthcare, little is left for everything else, including schools, armies, National Parks, Social Security benefits, even medical research. Just as businesses can’t easily raise their prices to cover the increased costs (lest they become uncompetitive), government can’t raise its taxes, lest the offending politicians get voted out of office (see Bush, George H.W.).

Put all these stakeholders in a pot, turn on the heat, and you have the makings of a solution to the value crisis. First, create a compelling mandate for safety (“A jumbo jet a day”), quality (Crossing the Quality Chasm), and “bending the cost curve” (McAllen, Texas). Encourage social networks and collaboratives (100,000 Lives Campaign; Choosing Wisely). Advance improvement through transparency (Hospital Compare, Leapfrog). Enhance accreditation standards for hospitals (Joint Commission’s unannounced visits and National Patient Safety Goals), doctors (Maintenance of Certification), and trainees (ACGME’s duty hours and supervision regulations). Build capacity by supporting the diffusion of information technology (Meaningful Use incentives). Then, slowly, gently, turn up the burner by beginning to tweak the payment system – by penalizing hospitals for serious mistakes (No Pay for Errors”) and readmissions, and experimenting with new payment and delivery models to encourage value improvement (bundling, ACOs, medical homes).

Note that while several of these initiatives are promoted by the ACA – with new funding or legislative changes designed to grease their paths – all of them predate the ACA, and all of them will go on if the ACA is thrown out. The Value Train has truly left the station, and it’s not coming back.

How did the ACA attempt to connect the value and access agendas? Remember the Peace Dividend? I think we are now facing the prospect of a “value dividend”: if all of these interventions I cited above lead to significant cost savings (and they are already flattening the cost curve), where should the new money go? Lowering premiums for businesses? Helping Medicare remain solvent for a few more years? Cutting the deficit? Lowering taxes?

Or insuring the uninsured?

Therein lies the problem: convincing the 85% of the US population with health insurance – and the businesses and government agencies that pay for it – that any value dividend should be used to insure the uninsured requires a level of concern for their fellow Americans that our vast, heterogeneous populace has not demonstrated. That fact that we allow 50 million people to go uninsured (and tolerate the other insanities of our patchwork system, such as allowing insurance companies to deny coverage because of pre-existing conditions and discontinue insurance when people get sick) is a national disgrace. Yet we have not yet succeeded in convincing the majority of Americans that insuring the uninsured is a problem that must be fixed. Sadly, the moral argument – that it’s simply the right thing to do – doesn’t work very well, so we fall back on personal appeals (you too could lose your health insurance, the uninsured are crowding your emergency room, that uninsured guy coughing next to you on the bus might have untreated TB) that aren’t entirely disingenuous, but aren’t quite on point.

If the Supreme Court strikes down the ACA or its core provisions, it will be a disaster for tens of millions of uninsured people in the United States, and there’s no way that risk-averse politicians will touch this particular Third Rail for at least a decade. That will be a crying shame, a cause of many preventable deaths, and a tangible marker of our nation’s inability to solve big problems anymore.

But healthcare reform is far more than the ACA, and the value agenda will remain alive and well, whatever the Supremes decide. You can bet on it.


  1. Brad F
    Brad F June 18, 2012 at 2:44 pm - Reply

    Problem is, the “value equation” is scored by the CBO, the “savings” are paltry, and thus, what to do with it is immaterial. That is what shapes the debate. As these savings are worth pennies on the dollar, we cant have a cost and access discussion, its only cost vs access. Thats what hard savings from cuts will do to a man’s mind. 🙂

    By the time the spicket opens and real dollars begin to flow from the “value” pipeline, the nature of what our system should (and will) look like will have changed, and the parameters of our discussion will sound different in ways we cant predict. Look at Massachusetts–they are winging it as they go, in ways no one would have forecast, And from my perch, looks a lot more ax than scalpel to me. I keep an open mind however.


  2. Bob June 18, 2012 at 8:42 pm - Reply

    Well written, but I cannot accept the trade-offs of the “value dividend” and I can show you why.

    I’m an American living in Australia and Britain. I see equal (or better results) and universal coverage at a total cost to the respective countries of about half GDP paid in the US. And this isn’t just from the point of view of a consumer. My wife is a physician (fully US-trained emergency physician boarded in US, Australia and UK) who worked in the US many years and now in Aus and UK and highly prefers the latter 2 systems.

    Why can’t the US at least equal the value provided by Australia and Britain which gives that full coverage AND at half the cost? Where is that American exceptionalism?

    • Bob Wachter June 18, 2012 at 9:31 pm - Reply

      Thanks to both Brad and Bob for their comments. Believe me, I’m not an apologist for our system, which is highly flawed in some very fundamental ways.

      Having spent much of last year in the UK, I saw the NHS up close – universal coverage and single payer do wring a significant amount of expenditures out of the system, but the cost is a much more bureaucratic, less innovative culture. Everybody working in healthcare in the NHS makes less than their American equivalents (docs, nurses, administrators). Patients accept a level of rationing (limited access to specialists, wait times, 4-6 patients in a hospital room) that American patients would scream (or sue) about. These are real tradeoffs and the point is that most American providers and many American patients (particularly those with insurance) would not favor trading the UK’s system (or I’m guessing Australia’s) for ours. We’ve set ourselves up for a Tragedy of the Commons, in that everybody is making decisions that seem right for themselves and maybe even their organizations, and yet the impact on the whole population is problematic, perhaps even disastrous.

      Re: Brad’s comment – some of the savings will come from all of the new initiatives (readmission penalties, bundling) and some will doubtless come from good, old fashioned cost reductions: cutting payments to docs, hospitals, and others. In some ways, it doesn’t matter: from the standpoint of the payer, if they can achieve the same outcomes at a lower cost, it doesn’t matter whether they’ve done so through some fancy new structural change (an ACO, for example) or from a 10% across-the-board cut in Medicare reimbursement. The politics will be different, the impact on outcomes and priorities will be different, but the end results may well be the same.

      The point is that savings (however they are generated) need to come from somewhere, and that investing some of the savings in insuring the uninsured is simply one of many options – and it’s one that doesn’t compete very well with some of the others in the absence of an ethical consensus about every citizen’s “right to healthcare.”

  3. Peggy Berg June 25, 2012 at 7:11 pm - Reply

    The case for 85% of the population paying for 15% of the population doesn’t seem to be winning. But, the case for better coverage for the population that is uninsured or under-insured is strong and a more realistic division. While Union, government full-time and Medicare insured population may be covered to a level they feel is safe, the rest of the employed population, unemployed population, and family members are deeply at risk and terrified about requiring medical intervention which they cannot afford. They are trapped between unreasonably high charges for the assistance needed, and leaving dangerous conditions untreated.

  4. Adam Abraham July 2, 2012 at 11:38 am - Reply

    elder care Maryland

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About the Author:

Robert M. Wachter, MD is Professor and Interim Chairman of the Department of Medicine at the University of California, San Francisco, where he holds the Lynne and Marc Benioff Endowed Chair in Hospital Medicine. He is also Chief of the Division of Hospital Medicine. He has published 250 articles and 6 books in the fields of quality, safety, and health policy. He coined the term hospitalist” in a 1996 New England Journal of Medicine article and is past-president of the Society of Hospital Medicine. He is generally considered the academic leader of the hospitalist movement, the fastest growing specialty in the history of modern medicine. He is also a national leader in the fields of patient safety and healthcare quality. He is editor of AHRQ WebM&M, a case-based patient safety journal on the Web, and AHRQ Patient Safety Network, the leading federal patient safety portal. Together, the sites receive nearly one million unique visits each year. He received one of the 2004 John M. Eisenberg Awards, the nation’s top honor in patient safety and quality. He has been selected as one of the 50 most influential physician-executives in the U.S. by Modern Healthcare magazine for the past eight years, the only academic physician to achieve this distinction; in 2015 he was #1 on the list. He is a former chair of the American Board of Internal Medicine, and has served on the healthcare advisory boards of several companies, including Google. His 2015 book, The Digital Doctor: Hope, Hype, and Harm at the Dawn of Medicine’s Computer Age, was a New York Times science bestseller.


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