Health care policy expert Ezekiel Emanuel, brother of former White House Chief of Staff Rahm Emanuel, makes the bold prediction in the New York Times that in just eight years the health insurance industry will be extinct in America. He claims it will be replaced by accountable care organizations, or ACOs. Emanuel’s description of how these future new ACOs will work sounds incredibly similar to how Health Maintenance Organizations (HMOs) are supposed to work.
You may then ask yourself why his prediction about the growth of ACOs won’t just turn out like very similar failed predictions decades ago about HMOs. Emanuel’s justification leaves much to be desired (emphasis mine).
A.C.O.’s are not simply a return to the health maintenance organizations of the 1990s. Although in both models patients are members of a provider network with a specific group of doctors and hospitals, and both are paid primarily per member rather than per procedure or test, there are big differences between them. H.M.O.’s were often large national corporations far removed from their members. In contrast, A.C.O.’s will consist of local health care providers working as a team to take care of patients who are likely to be members for years at a time. H.M.O.’s often cut costs not by keeping people healthy but by denying patients services and by forcing doctors and hospitals to take lower payments. In the 1990s, we lacked the information technology and proven models of integrated care delivery that we have now. These advances will allow A.C.O.’s to simultaneously improve health outcomes and reduce costs.
Lets break his argument into two main parts:
1) ACOs will be local and smaller.
Addressing the issue of size. There were always many relatively small HMOs and there was nothing stopping the formation of small HMOs, if there was a real market or business case for them. There is also little reason to believe that very profitable ACOs will just choose to stop growing or be willing to stop growing to please Mr. Emanuel. After all Kaiser Permanente at one point was a small local ACO-like company until it grew into a huge national company.
2) Technological magic will make the laws of economics no longer apply.
The second point is frankly just wishful thinking. It is possible developments in technology will improve medical efficiency, making it easier to improve health outcomes and reduce cost, but this has been happening for decades. Many efficiencies have already been worked into the system.
The reality is that many other major medical treatments will be expensive for the foreseeable future, so denying care will be remain a smart financial move for the ACO. Providing someone with a more cost effective heart surgery that only costs $60,000 instead of $100,000 is a better financial move, but it still isn’t nearly as good a financial move as denying that person any surgery or otherwise skimping on the quality of care if the ACO/HMO/insurance can get away with it.
There is no reason to believe an ACO, like an HMO, will not try to make money from new efficiencies and also try to make money by denying care and demanding lower payments. If you are paid a set amount ahead of time, the same basic financial incentive to try to do anything to not spend money on the patient remains.
Sadly this basically magical thinking played a huge role in the creation of the Affordable Care Act. Instead of copying proven solutions that have been in use for decades in other countries, we are going to rely on wishful beliefs that essentially claim we will make a new version of a previously failed idea work.