A Footnote in History: Why the Obamacare Ruling May Not Matter

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Despite the attention lavished on President Obama's health care law, industry reform is likely to proceed with or without it.

scotus-615.jpgHealthcare law proponents walk past opponents from the Tea Party Patriots group on the sidewalk outside the Supreme Court in March. (Jonathan Ernst/Reuters)

The Supreme Court is poised next week to rule on the constitutionality of the Affordable Care Act, popularly known as "Obamacare." Assuming it strikes down the individual mandate -- a requirement that everyone purchase qualified insurance coverage -- rather than upending the Act as a whole, the impact on health reform is likely to be modest, contrary to what many believe.

The Court's decision may have significant political implications -- even though health care is rarely a top-tier voting issue in presidential elections. It could have a historic impact on judicial precedent, although the ideological bent of the current Court may limit this as well. And it would certainly affect millions of Americans who otherwise could have obtained affordable health insurance coverage with decent benefits. Many of these Americans, if polls are to be believed, are unaware that such benefits might be coming their way.

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What it is unlikely to do is make much of a difference to the future of health care reform, except as an important footnote. Here's why:

Much of the law will go forward in any case, and along similar lines. If the individual mandate is found unconstitutional, the Obama administration intends to forge ahead with the other parts of the Affordable Care Act. This means more Americans are likely to sign up for coverage voluntarily, making the (minimal) coercion contained in the individual mandate less pivotal.

Moreover, Mitt Romney, should he win in November, will find it very difficult to repeal the ACA in full. The recent divisions between some G.O.P. lawmakers and Tea Party leaders over popular provisions of the law are just a preview of that potential clash.

Should Romney and Congress choose to scrap the ACA, the problem of poor insurance coverage, rising costs, and middling quality of care will put the health care dilemma back on the table. After a brief lull, health costs will continue to rise faster than GDP and coverage and access will continue to erode.

Existing Republican proposals such as the Ryan Plan either stand no chance of gaining wide support or are too small-bore to make a dent on the big problems. This underscores the fact that the ACA was truly a bipartisan approach without bipartisan support (which hurt its popularity on all sides). Under such pressure, some form of this deal will come back, repackaged and renamed.

Assuming federal subsidies are not withdrawn altogether, state action will continue -- even if the Court's decision induces heartburn for state officials who have been putting the ACA's architecture in place. California, which narrowly failed to enact a comprehensive coverage bill that was similar to the Affordable Care Act, will go as far on its own as the state's slowly-improving fiscal conditions allow.

Even implacably anti-Obamacare states like Utah have embraced reforms, including an Expedia-like health information exchange, which could serve as interesting models for a somewhat different version of comprehensive reform, one decoupled from employer-based coverage or Medicaid.

The health care industry has made its bet on change. The compromises in the Affordable Care Act, though unsatisfying to many, were a non-refundable down payment on bringing the many wings of the $2 trillion U.S. health care industry on board.

The industry, in general, has already decided that the piecework, fee-for-service model of payment is unlikely to hold up. It has embarked upon an unprecedented path of consolidation in the expectation of new reimbursement rules.

In the process, it is undergoing the long-predicted shift toward greater scale and efficiency that most other American industries have long-since completed. The Affordable Care Act simply accelerates mounting trends -- in particular, the integration of care and consolidation of hospitals and medical groups.

For instance, over 200 Accountable Care Organizations (ACOs) -- loose but formal collaborations of hospitals, physicians, and sometimes health plans -- have been formed with the aim of coordinating patient care. Such ACOs have been launched in all but five states. The number of physician-sponsored ACOs has almost doubled in the last six months. By promising to coordinate care under hospital and physician leadership, ACOs are unlikely to run afoul of industry resentment.

The provisions that promote ACOs are unlikely to be greatly affected by the Court's ruling. Even if they were, many CEOs who are signing up for these partnerships insist that such reforms need to continue regardless of what happens with the broader health care law. As Dr. Hal Teitelbaum, the CEO of Crystal Run Healthcare, a 250 person physician group in upstate New York, put it, "Our transaction-based health system doesn't make sense. We're not in the business of selling mammograms or colonscopies. We're in the business of improving health and outcomes."

There is early evidence that this kind of coordinated care can indeed lower health costs. For example, in the Sacramento area, a virtually-integrated organization which resembles an ACO, with participation from a purchaser (CalPERS, the state's pension/ retirement system), a physician group (Hill Physicians), an insurer (Blue Shield of California), and a hospital system (Catholic Healthcare West, now Dignity Health) recently achieved a $20 million one-year cost savings for a group of some 42,000 employees and their families.

Employers are pushing reforms with new vigor. Like the health care industry, employers have made their bets on reform, largely in response to costs that are rising less rapidly but still outpace GDP growth and sap competitiveness. Employers were staunchly against the more ambitious elements of the Clinton Plan in the 1990s, notably regional health alliances, because they thought they had found an elixir to hold down costs in the form of a less constraining version of managed care. They were wrong.

On the surface, the ACA made little change to employer-based coverage. But employers have seized this moment to focus on reining in costs, often much more sharply than envisioned by the crafters of the federal law.

Employers are realizing they can't rely on insurers alone to cut spending. That's why they're hiking cost-sharing for employees. For instance, health savings accounts (HSAs), which feature a high deductible, are gaining wide acceptance, if only grudging approval. Workplace wellness programs are taking off. The gradual erosion of employer benefits may also prompt Americans to take more personal responsibility over their own health.

The structure of health delivery is changing rapidly. Obamacare envisioned a sweeping vision of medical reform that was delivered in an essentially orderly and old-fashioned way: a revival of primary care practice, linked to the increase of insurance coverage through traditional channels such as employers and Medicaid.

Regardless of what the Court decides, the main action taking place in health reform is actually on the ground. It has to do with the breathtaking speed of change in how patients get care, where doctors practice, and how data is deployed and linked to improve care and to reduce errors.

These major trends include the rapid growth of clinics (both community health centers and pharmacy-based), the employment of doctors by hospitals, the use of digital electronic records across entire health systems and medical groups, the use of IPads and portable phones as low-cost medical devices, the take-off of generic prescriptions, and unprecedented alliances between hospitals, insurers, and employers to lower health costs. Old habits, new policies, and privacy laws will take some time to catch up with this new era of digital health transformation.

What all these trends have in common, along with their aim of improving value and lowering spending, is that they tend to circumvent the traditional models of insurance and hospital-based care and loosen the hold of entrenched institutions. And in virtually all cases (scores more can be cited) such reforms are running independently of the Affordable Care Act, though in some cases the law will give them a boost.

Added to this is that the compelling narrative of waste and error in U.S. health care has gotten traction, in books, articles, movies, and simply in evolving patient perceptions of care. What this means is that the automatic deference to the knowledge of doctors and the wishes of hospitals is eroding fast, adding a dimension of consumer pressure to the mix of forces demanding reform.

Obamacare is as much a trailing indicator of where health reform is headed as its catalyst. It represents a pragmatic, middle-of-the-road solution that relies upon incremental though large-scale change. It has been attacked, in the courts and elsewhere, primarily because there is no middle-of-the-road in contemporary national politics. But because it is more of a bellwether than an instigator of health reform, the Supreme Court's decision is unlikely to leave more than a trace on reform's broader trajectory.

Whichever metaphors one chooses -- the horse has left the barn, the train has left the station, the cork is out of the bottle -- the U.S. health care system is already undergoing changes that are likely to be momentous and irreversible. The Court's decision, at most, will only delay them by a little bit.

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Leif Haase

Leif Wellington Haase is president and founder of LWH Consulting, a California-based health policy research firm, and a California-based senior fellow in the Health Policy Program of the New America Foundation.

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