As a hospital CEO, I’m often asked if I am concerned about the impact of the Affordable Care Act on rural health care. I can’t give a complete answer here, but I believe there are dark clouds forming near rural health care. They did not originate under the ACA, but that doesn’t mean the ACA is blowing in a favorable direction.
The ACA is a big-government initiative. When the prevailing wind is big, small will struggle – and rural is small. One of the key engines of change in ACA is the Accountable Care Organization. One can debate the merits of the ACO, but there is no debate about the government’s projected cost of creating one – it’s several million dollars. Only a big health care organization can capitalize on something like that, and big means urban.
Does that make me angry about the ACA? I get frustrated when faced with the inevitable truth that big government programs promote big business, but I don’t get angry. It would be like getting angry at a glacier. Big government and big business co-evolve and tend to squash the small, but small can be nimble and adaptive.
Rural health care organizations are like small mammals darting around under dinosaurs.
Big health care has become too highly specialized, differentiated and “industrial.” It is too focused on fee-for-service revenue. It consumes too much. America is spending $2.8 trillion on health care without getting good results. America is good at dealing with trauma and acute illness, but we are not healthy – at least we are not as healthy as many nations spending far less on health care per capita.
ACA was big government’s attempt to solve that problem. It did not specifically target rural health care spending, but the reductions in Medicare and Medicaid provider payments – needed by the ACA to pay for expanded health care coverage – disproportionately impacted rural health care providers.
The rural population is older (Medicare) and poorer (Medicaid) than the urban population. This problem is much worse in states such as Missouri, which did not expand Medicaid.
Of the trillions spent nationally on health care, Medicare represents $575 billion; Medicaid spent $421.2 billion; and private health insurance spent $917 billion, according the Centers for Medicare & Medicaid Services. There are a number of proposals seeking to reduce or eliminate the critical access hospital program. The CAH program gives certain rural hospitals enhanced reimbursement from Medicare. CAHs account for almost 2 percent of total Medicare costs.
How much would eliminating the CAH program save? It’s hard to tell as many of those hospitals would close, causing patients to seek care in more distant urban hospitals that spend significantly more per patient than rural providers.
Rural providers have delivered care for decades through patient-centered medical homes – which is the current model being promoted by big government to reduce costs while delivering higher quality care. Ignoring these inconvenient truths, a short-sighted bean counter might estimate the annual savings at $400 million per year. Call me crazy, but if I need to trim the dinosaur herd, I would start with a bigger dinosaur.
How about drug companies? Spending on pharmaceuticals is more than $400 billion a year in the United States.
In 2012, the top 11 drug companies earned about $85 billion in net profits. Medicare sets the price it pays hospitals and doctors, yet, it lets drug companies set their own prices. How hard would it be for Medicare to cut one-tenth of 1 percent on pharmaceuticals in order to save the CAH program? Harder than you think.
From 1998 to 2013, big pharma spent nearly $2.7 billion on lobbying. In other words, the pharmaceutical industry could more than pay for the cost of maintaining the CAH program by diverting a bit of its lobbying money. The industry that came in a distant second in lobbyist spending? Insurance.
Private insurance companies keep about 22 percent of every dollar of premium for administrative costs and profits. Medicare’s administrative costs are 2-3 percent. I won’t invoke the demonized single payer system, but I believe we can find $400 million a year of loose change in the deep pockets of the insurance industry.
Paul Taylor is CEO of Ozarks Community Hospital. He can be reached at info@ochonline.com.
