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Obamacare’s 7 million enrollees will change health insurance forever

Ezra: How does Obamacare change the health insurance industry?

Zeke: The Affordable Care Act is going to change how we buy insurance. Instead of insurers selling it to companies, they're going to sell it to individuals. Individuals are going to be looking for value. They want a low premium, low deductible with a high quality program. That is going to force the insurers to not just take the premium and pay doctors, but to actually get into the business of how care is provided to make sure people are kept healthy - and not use a lot of unnecessary services or services that could have been avoided.

The places that really have transformed their care and focused on keeping people healthy, keeping them out of the hospital – those places can cut about 20% off the cost. That's a lot of money.

Similarly, providers are going to come in, and they're going to say, "Hey, I can offer insurance too, and I can take care of the whole patient, and I can do it cheaper than the insurance company." You're going to have this big competition between providers which are now offering insurance, insurance companies that are now contracting or owning hospitals and doctors, and I think that's going to make the whole system more efficient.

It'll be more of a keep-patients-healthy health-care system rather than what we've had, which is a sick-care system.

Ezra: Why hasn't the system focused on health on its own? Why isn't it profitable for hospitals to keep people healthy at an affordable price?

Zeke: The reason we have a sick-care system is you pay people to take care of the sick. If you pay people to keep people healthy, that changes. And the way to do that is to give them a capitated amount of money. I say, "You've got to take care of Ezra Klein, and I'm giving you twenty-seven hundred and fifty-three dollars for it." Then if you can care for him at two thousand dollars, all the rest is profit.

That's going to be the key. Because then, if Ezra is with you for a long time, you don't just want to skimp on care because at some point that's going to come back and haunt you.

Ezra: I think someone on the left hearing this conversation would say, "These are a lot of good but somewhat complicated theories about how insurance can be de-fanged and how doctors and hospitals will set up new kinds of insurers that provide more care on their own. But the real problem is having insurers as a middleman at all. What we should have done here was single payer."

Zeke: A single payer has the same perverse incentives. Take Medicare. What's their incentive to actually get it right - especially if they don't want to piss off voters?

Medicare is not necessarily the most nimble agent out there. Sometimes it has behaved nimbly, but it hasn't all the time. And if you had all three hundred million people in? There are lots of areas we don't know the best way of either delivering care or paying for care. We're going to have to run a number of experiments over the next four or five years to get that right. Doing that in one organization is hard.

Ezra: Are you surprised Obamacare's exchanges reached seven million?

Zeke: No. In December after all the disasters, I made a bet with a private-equity guy in New York that we would make seven million. What it tells you, really, is the pent-up demand for affordable health-care insurance in this country is huge.

People don't like going without health insurance. They've gone without it because they can't afford it. Now you're giving them a mechanism to afford it, and they're going to come out. If we can get this website and the whole exchange thing working really well so that shopping takes under thirty minutes and the website behaves like Zappos, you're going to see a lot more people come out.

And when that happens, I think the CBO projections for max of 25 million signing up in the exchanges are going to look low. I've predicted in the book that we're going to get up to 75 million in the exchanges by the end of the decade.

Ezra: The thing people miss about Obamacare, I think, is the long-term theory: you put these people into the exchanges, and this massive base of customers, alongside Medicare, gives government-driven health-care systems in America the leverage to begin changing how care is actually delivered. What begins as an insurance reform ends up as a health-care reform.

Zeke: I would put it a little differently. What the exchange does is change insurance from a business-to-business to a business-to-consumer situation. We know one thing about consumers really well: price - mainly premiums but also deductible and co-pays - are what they are shopping on.

I actually do care about the absolute cost. The long-term deficit of the federal government is driven by health-care cost, not value.

They're willing to not go to the big brand name to get a lower premium-and-deductible combination. That downward price pressure is going to force hospitals to take lower prices and doctors to take lower prices. But there's only so much of that you can do. The next stage is you're going to have to transform your care to lower prices.

We've seen in the marketplace the best places - the places that really have transformed their care and focused on keeping people healthy, keeping them out of the hospital. Those places can cut about 20% off the cost. That's a lot of money.

I think that's the way Obamacare is really going to transform the system. That's why I think having a large number of people in exchanges is really the key. It's because their buying power is going to translate into the insurers, and then the delivery system keeping the cost down.

Ezra: We talk an enormous amount about cost. I think that's actually a mistake. Value is what matters here. If health care cost exactly as much as it does now, but it made people live twice as long, I would not be concerned at all about cost. To what degree do you think that the other side of the value proposition is going to change? Which is to say, to what degree do you think Obamacare will actually change the quality of the care we get?

Zeke: First of all, I'm not sure I completely agree with you, at least personally, that it's only about value. I actually do care about the absolute cost. The long-term deficit of the federal government is driven by health-care cost, not value. At state-government levels, it's Medicaid crowding out primary education. So I am concerned about the absolute cost.

But the second part of your question is "Can we improve quality?" The first thing I would say is in the Affordable Care Act we had a number of incentives to change quality. One of the things I'm proud of that has gotten hardly any attention is the Partnership for Patients.

In 2010, Don Berwick and a bunch of us in the White House helped design a program to work with hospitals to reduce their infection rate, to reduce their elective Cesarean-section rate, to reduce falls and other things. Recently in a three-year evaluation - a remarkable success. Central line infections are down 40 percent. If you're on a respirator, infections there are down 50 percent. Early elective C-sections down 50 percent, falls down I think 11 or 12 percent. This is a big success. Not turn-the-corner, not we're done, but improvement.

The last thing I would say is that part of the secret, at least of most places that have been able to really reduce cost, is to focus on the chronically ill - the 10 percent who use most of the money. That's a big quality improvement, and that I think is going to have to be the focus for the next six, seven, eight years until we get that exactly right.

Ezra: How do you think the White House feels that they actually hit seven million?

Zeke: I think they feel fantastic. I'm just a little worried that they might think well, we got the gold medal, we can go home now. The problem with medicine is there's no going home. There's no final gold medal. There's no resting point. It's a three trillion dollar industry, it's very dynamic, and you constantly have to change.

The website has to be upgraded substantially before open enrollment starts in the fall because you have to get it to be much more user friendly. You have to get the shopping experience down under thirty minutes. You have to get better products out there. They've been so concerned just about the website and getting the mechanics right that I think running it is as a real start-up that gets the customer experience to a really optimal place is something that they really need to shift their focus to.

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