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Penn Experts Outline Challenges at D.C. Forum

Road ahead

University of Pennsylvania health care management professors Mark Duggan, Dan Polsky and Ezekiel Emanuel took to the stage to examine the future of the ACA at a Wharton School Lifelong Learning forum in Washington.

WASHINGTON, D.C. -- Ezekiel Emanuel, the University of Pennsylvania professor and former White House advisor who was one of the architects of the Affordable Care Act (ACA), candidly admits that almost nothing about that law's implementation -- particularly its website -- has gone smoothly.

Speaking at "The Road Ahead for Health Care Reform" forum in the W Hotel here, Emanuel said "The interface isn't perfect and I'm sure by next year when we do this for the 2015 season, you're going to have systems that work better. It won't be the experience but it will be getting close. By 2016, the experience will be the equivalent of Amazon shopping and most people will be happy with it."

Emanuel, who is both a professor of Medical Ethics and Health Policy at Penn's Perelman School of Medicine and Health Care Management at The Wharton School, appeared with Penn professors Dan Polsky and Mark Duggan in an event that was organized by Wharton's Lifelong Learning department and conducted by the new Penn-Wharton Public Policy Initiative (PPI).

Increased capital presence
The evening session was one of several recent PPI events that mark the University's increased presence in Washington. The goal of the program, which has established a D.C. office, is to make the expertise and insights of faculty members more directly available to policymakers.

Moderated by Duggan, a Professor of Business Economics and Public Policy and Faculty Director of PPI, "The Road Ahead" took a frank look at the embattled ACA's challenges and shortcomings.

Road ahead

Emanuel, MD, PhD, MSc, is a former White House advisor and one of the architects of the Affordable Care Act.

Emanuel called for national patience. "I like to tell my students, 'Look, the American health care system is the fifth largest economy in the world. We spend more on health care in America than the entire GDP of France.'" he said "So, you're not going to change the American health care system overnight, and certainly not in a year. It's going to take time. Let's not assess how good it's doing by every three months asking, 'has it blown up yet? Has it blown up yet?'"

Duggan noted the high levels of uncertainty about the overall economic impact of health reform and the concern that employers are going to shift to part-time employees or not grow their companies above 50 employees so as to avoid the mandate requiring employers with more employees to provide them with health insurance.

Biggest economic impacts
"Health reform over the long-term is a complicated process that has a lot of moving parts. What do you see as some of its biggest economic impacts?" Duggan asked Polsky, who aside from being a professor at both the Wharton and Perelman Schools is also a member of the Congressional Budget Office's Panel of Health Advisers.

"If you're an employer," Polsky said, "and you have a lot of low-income employees, there is the temptation to say 'Well, instead of paying insurance through my human resources department, why not just get rid of my insurance product and send the low-income employees into the exchange where I can get the government to subsidize my employee's cost of insurance?' But it's not that easy. There's an employer penalty per employee for doing that. So, the employers actually face a choice of whether to create an insurance product for their own employees or pay a penalty for every employee sent to the exchanges."

Road ahead

Polsky, PhD, MPP, is the Executive Director of the Leonard Davis Institute of Health Economics (LDI) and a member of the Congressional Budget Office's Panel of Health Advisors.

Polsky also pointed out that "the total amount of money being spent is a mere fraction of one percent of GDP. Some employers will be making difficult decisions and some employees will be affected but it's not going to have any macroeconomic impact in terms of what's going on in the labor force."

Eliminating 'job lock'
"One place there is some promise," he said, "is that we'll have a more flexible work force because employees are going to have options to get around 'job lock' where they're stuck at their job for fear of losing their health insurance. So, if anything, employers might be a little bit more concerned that employees having a little more power in the marketplace, which could drive total compensation up, potentially creating more value in the work force where people end up with a better job match because of the new flexibility."

Emanuel said companies could benefit from "dumping" employees onto the exchanges but that some surprising evidence suggests they won't do it.

"First of all, companies can slim down their HR departments by not dealing with health care, which is now a major component of HR," Emanuel said.

"Second," he continued, "since health care costs have been going up in excess of inflation, businesses can get their arms around inflation better and year-to-year salary increases by not having to cover health care and putting more money into cash wages. And I think that's the thing they're looking at."

Road ahead

Duggan, PhD, is the Faculty Director of the new Penn-Wharton Public Policy Initiative (PPI) that conducted the forum in the W Washington, D.C. hotel.

"But then we have to look at what unexpectedly happened in Massachusetts when it went through this same experience," Emanuel said. "All the economists predicted there would be lots of employer dumping. I predicted the same thing. But that's not what happened. Instead, workers demanded coverage by ther employers and there actually was what economists call -- and almost never see -- a government program that caused 'crowd-in' rather than 'crowd-out'. After the Massachusetts exchange was established, more employers offered health insurance than before. Is this what we'll see in the other states? I think that's anyone's guess."

Billions for Medicaid expansion
Duggan asked Polsky about his long-view on the current controversy over the expansion of state Medicaid programs. Will states that have refused expansion -- and billions more in federal funding -- ultimately regret it and reverse that decision?

"Texas is a good example to look at," Polsky said. "There's a million uninsured there who would be able to get coverage if the states followed the Medicaid expansion provisions written into the law. Over a ten-year period, the federal subsidies would contribute something like $60 billion toward insuring those people. And the amount that Texas would have to kick in is about $5 billion versus $60 billion. That's the math of the decision from an economic point of view. I'm not going to predict the politics but I think eventually every state is going to move toward that federal money. It may be a matter of one or two more election cycles, but everyone's going to move."

"Look back at Medicaid that was passed in 1965," he said "It took a long time for all states to adopt Medicaid, the last being Arizona in 1982."

80 million people
According to the Congressional Budget Office, if all states did expand Medicaid over the next several years as envisioned by the ACA, about 26% of U.S. residents -- or about 80 million people -- would be on Medicaid. That's why the expansions were crucial to the ACA's original intent of establishing "universal" health care coverage.

Road ahead

A point of contention was whether or not the ACA contained specific provisions that could actually cut costs across the health care system. Polsky said it didn't. Emanuel disagreed. "I'm the optimist," he said.

Although the rhetoric used to promote the ACA has generally placed heavy emphasis on "cutting costs," questions from the audience indicated a high level of skepticism that the law's implementation will lower U.S. health care costs. One pointed out that the 900-page law has almost no specific cost-cutting provisions.

Health economist Polsky agreed, "I don't think we've figured out the way to reduce costs," he said.

No cost reduction formula
"There's a lot of experimentation going on," Polsky continued, "but we really haven't put in place a formula that's going to drive cost down. One big piece that's potentially on the horizon is how Medicare pays doctors. It's still done the old-fashioned way, which is paying doctors for the amount of care they deliver, and not whether they're delivering health. Most policy people are looking to change that system to incentivize value but it really has yet to be done. Accountable Care Organizations, bundled payment and all the other tools show promise but we haven't found exactly what will work, nor do we have the broad system in place to implement those changes.

Emanuel took issue. "So let's agree that the Affordable Care Act did not do enough on cost control," he said. "That's not to say it didn't do anything. And, so, some of the things I've mentioned will have an effect on costs and will change the incentive structure, be it hospital infections, the readmission rate, or Accountable Care Organizations. These do importantly transform the incentive structure for hospitals and doctors and the system."

"And here's the important point," Emanuel said. "I think the health care system has heard that the payment system is going to change. What we don't have now, and what all of us lament, is a timeline on that change. What I would have liked to have seen in the Affordable Care Act is a timeline. That would have been the ideal."

Politics as usual
"I think we might get a deal on that after the 2014 election," Emanuel said. "Right now ain't nothin' happening on health care on the Hill. They're going to fight the 2014 election over health care once more. But that will be the last election fought over health care. Then we are going to have some additional legislation to fix certain things we know need fixing like changing the financial incentives around doctors. If you talk to staffers on the Republican and Democrat sides both know they've got to do that. But all they're fighting about right now is politics. After all, it's Washington."

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Hoag Levins is a journalist and Managing Editor of Digital Publications at the Leonard Davis Institute of Health Economics.

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