American healthcare needs a trillion dollar disruption, and the Affordable Care Act may end up supporting quite a bit of it -- while also slowing innovation in some areas, according to innovation researchers.
The American healthcare system continues to see medical and pharmaceutical innovations and the increased availability of high tech therapies like proton beam radiation. But as a business, from the perspective of a modern consumer who expects services like online payments, American healthcare remains far behind the rest of the economy, with a crisis of high costs and price opacity.
"While sustaining innovations may improve healthcare in important ways, they do little to mitigate rising healthcare costs," wrote Ben Wanamaker and Devin Bean, researchers from the San Francisco-based Christensen Institute for Disruptive Innovation, in a recent white paper.
"By pursuing disruptive innovations in the healthcare industry, innovators can help address the core issues of accessibility and affordability and make high-quality care available to all" -- and catalysts may be found in the ACA's individual and employer mandates, accountable care organizations and wellness programs, they noted.
The individual mandate and its sliding scale insurance subsidies will help bring insurance to millions of Americans for the first time. Whereas many uninsured may have gone without regularly seeing a doctor and ended up in an ER after leaving health conditions untreated, soon many may be seeking out primary care doctors and subsequently receiving specialist or hospital care.
That, Wanamaker and Bean argue, will likely "increase demand on an already-burdened system and create space for new care delivery models that leverage less-credentialed practitioners to deliver care for more routine health concerns." Those spaces are already emerging in the form of retail clinics or urgent care centers, many relying mostly on nurse practitioners. Likewise, increased demand could give providers new incentive to expand digital consultations through telemedicine networks -- and the demand could also give insurers a reason to pay for them.
Also, Wanamaker and Bean argue, requiring almost everyone to be insured will "expose gaps in healthcare delivery that were previously hidden by blanket care requirements and government services." Increased demand from newly insured patients may pressure providers to "break out routine and high-risk care and to create new, low-cost venues for routine care delivery." That may encourage some health systems to anticipate competition and respond to the new demand by opening their own retail clinics.
The ACA's employer mandate could spur similar changes among healthcare buyers and providers -- even though, at first glance, the policy "seems to discourage innovation," Wanamaker and Bean wrote. The key, they argued, is the policy's "light penalty" of $2,000 for every employee not offered minimum essential coverage who instead ends up buying subsidized insurance through an exchange.
"This creates an environment where the employer is incentivized to offer a plan that is low-cost to the employer but good enough for the employees that they do not desire the more expensive and comprehensive coverage offered through the exchange," they explained.
That kind of "good enough" strategy "is exactly the type of innovation that can disrupt higher cost insurance and care practices," they argue, because it helps keep consumer needs in check -- although some of the main vehicles for that, high-deductible health plans aren't all that popular for consumers when it comes time to paying the deductible.
Still, Wanamaker and Bean argue that high-deductible insurance coupled with a tax-advantaged savings account can help bring more price transparency to local healthcare markets -- with patients encouraged to comparison shop before getting, say, an MRI -- while allowing insurers to "focus on what they do best: insure against catastrophic health issues," Wanamaker and Bean wrote.
The employer mandate may also help address healthcare cost and access problems by encouraging what Wanamaker and Bean call "employer-integrated" healthcare, where employers contract with providers to run on-site primary care clinics. Some employers are even contracting directly with providers for catastrophic care, and, in general under the ACA, they're going to be looking for alternative insurance models, Wanamaker and Bean said.
"Some employers will be more proactive in providing their own healthcare services, looking only to insurance companies for catastrophic care coverage or no coverage at all. This could facilitate a substantial disaggregation in the insurance industry and open opportunities for new and disruptive entrants to provide health services to employers as well as for entrants in the insurance industry to provide new forms of coverage."
That's also partly why Wanamaker and Bean think accountable care organizations could bring business and care innovation as well, because aligning stakeholders "in a coherent value network enables disruption to proceed unencumbered."
So far, though, ACOs "have been slow to deliver the hoped-for disruptive business models and aligned value networks," they added, in large part because individual providers usually don't know whether a patient is an ACO member and because they've mostly focused on patients with complex conditions.
As for the ACA policies that could end up discouraging disruptive innovation in healthcare, Wannamaker and Bean point, perhaps somewhat counterintuitively, to essential health benefits, insurance exchanges and cost-sharing requirements.
Although the essential health benefits are a fairly good deal for consumers in terms of ensuring comprehensive coverage, the "mandated level of coverage exceeds what customers need in many cases and will make it more difficult for innovators to bring truly low-end disruptive health insurance plan designs to market," Wanamaker and Bean argued.
And although public insurance marketplaces will improve transparency of coverage options and pricing, "the ACA's tight restrictions around coverage requirements essentially put a floor on the low end of coverage, thus limiting opportunities for entrants to provide different types of coverage and methods of care delivery," they wrote.
Likewise for the ACA's cost-sharing requirements: "By funneling low-income consumers into Silver-level plans via government subsidies, this provision will reinforce status quo plan designs and artificially constrain demand at the low end of the market (i.e., Bronze-level plans)."
Not that Wanamaker and Bean are suggesting eliminating cost-sharing limits; healthcare expenses are one of the leading causes of personal bankruptcy and inadequate health insurance is one reason for the pre-ACA, nonfunctional individual market.
But as a "hypothetical alternative," they suggested, "patients could use subsidies to purchase Bronze plans coupled with a government-subsidized deposit into an HSA. This would enable payers to create disruptive plan, product, and service designs," as happened in Massachusetts. When the commonwealth enacted an individual mandate and launched its insurance exchange, the Connector, several insurers like Neighborhood Health followed the demand for low-cost insurance (young people as the target members) with low-end, limited-network health plans.