How Will We Know if Healthcare Reform Is Working?

The Affordable Care Act, also known as Obamacare, remains a focus of heated political rhetoric—rhetoric that can obscure what’s actually happening in the healthcare system. A panel of Yale experts discussed what metrics we can look at to know if the law is increasing coverage and reducing costs as intended—and whether there are unintended effects on the larger economy.

Looking to understand how the Affordable Care Act will change the nation’s $2.7 trillion healthcare sector? Four experts advise: be patient. The political dispute surrounding the law is creating pressure for an immediate, and simple, verdict: is Obamacare good or bad? Politics aside, the law directly affects how, and whether, millions of people will be insured next year. But a panel of healthcare scholars and executives agreed that the full consequences of the ACA won’t be understood for years—maybe decades.

In a webinar on November 4, four experts discussed the metrics that they’ll be looking at as the Affordable Care Act goes into effect: Dr. Howard Forman, professor of diagnostic radiology, economics, and public health and director of the executive MBA program on healthcare at Yale SOM; Fiona Scott Morton, professor of economics at Yale SOM and the former chief economist for the U.S. Department of Justice Antitrust Division; Kurt C. Small ’09, senior vice president of health plan operations for the Pittsburgh-based Highmark Health Services; and Lawrence Altman ’09, vice president, Office of Health Care Reform, Horizon Blue Cross Blue Shield of New Jersey.

Among the earliest and clearest metrics to assess the ACA, the panelists said, will be the target enrollment numbers: 7 million people, including at least 2.7 million young adults, in the first year of the exchanges. But the bigger goals of healthcare reform are complex and will take longer to assess.

Forman warned that it will take a long time for a new status quo to be established in healthcare. “The bill doesn’t even finish being implemented until the end of the decade, so we’re looking at 10 years, or more.” And with something this complex, he added, there are inevitably problems and unintended consequences. The ongoing fixes and course corrections will be a major determining factor in the ultimate assessment of the ACA.

The scale of change is unprecedented, Altman said. Healthcare providers, insurers, and consumers will all be involved. He is watching for three possible positive outcomes: insuring more people, slowing rising costs, and improving quality.

With so many moving pieces, nearly every potential outcome is predicated on at least one “if.” Sometimes the “if” is quite big. For example, if the incentives of healthcare providers, insurers, and consumers are effectively aligned, significant change in the system is possible. For providers, if payment is successfully shifted to rewarding value, not volume, they will be pushed to innovate and deliver higher-quality health outcomes. And if almost everyone is insured, hospitals can focus on care without the inefficiencies and distortions created by cross-subsidizing the uninsured through higher fees for the insured.

For insurers, the implementation of the ACA has been an opportunity to enter new markets through the exchanges. There has been significant variation state by state, but Fiona Scott Morton said there could be greater competition, at least in those markets that have had new entries.

The dynamic between insurer and patient could change as well. Right now, the length of the relationship between an insurer and an individual consumer averages only three years because of the frequency with which people change jobs and companies change healthcare plans. Small said that that “churn” pushes insurers toward a short-term focus; value in healthcare typically comes from a long-term approach. Individuals being able to buy insurance and carry it with them as they change jobs could allow for relationships lasting decades, not years, increasing insurers’ incentives to think about overall health.

It is widely understood that full participation by healthy people in the individual markets will be key. While the individual mandate aims to prevent an unmanageably expensive pool of unhealthy people, in 2014 the penalty for not having coverage is generally less than one month’s premiums. The penalty climbs in subsequent years to a maximum of $2,085 or 2.5% of income. As with so many aspects of the reform, it will take time to judge success or failure.

If the individual market is successful, it could serve as a new window on consumer preference. For most Americans, insurance plans are selected by their employers. They present healthcare coverage to employees as a benefit (creating an incentive to make it as generous as possible), but take it out of employees’ overall compensation. Since patients are largely shielded from costs, their true preferences have been obscured. Consumers buying their own plans will have more “skin in the game.” That may put price pressure on insurers and providers, especially if efforts to provide consumers with real-time price transparency succeed.

From an economist’s perspective, Scott Morton will be watching not just how many people enter the individual markets but who they are. People currently counting on employer-provided health insurance may feel freed to venture into entrepreneurship because they know they won’t be locked out of the health insurance market. “If health insurance isn’t tied to somebody’s job, people can choose to work where they want and how much they want,” she said. “There might be a significant productivity gain from labor mobility and labor choices.”