Perspectives

Lessons from Caesar: Looking back to move forward in health care

Health Care Current | January 3, 2017

This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory, and legislative changes.

My Take

In health care, we must look to the past to inform the future

By Bill Copeland, Vice Chairman, US Life Sciences & Health Care Industry Leader, Deloitte Consulting LLP

In most countries, January 1 starts the New Year. We have Julius Caesar to thank for that. In 46 BC, Caesar added the months of January (Ianuarius) and February (Februarius) to reform the Roman calendar. The Julian calendar more accurately measured the passing of the seasons based upon the solar year. It remained the standard until 1582 when Pope Gregory XIII refined it to measure more accurately the solar year and to better align with the spring equinox and Easter.

The Gregorian calendar was adopted quickly by many Catholic countries, such as Spain, France, Portugal, and Italy. In many Protestant countries, such as England and the British Empire, it was viewed as a plot to gain control over their religious beliefs. In England, there were demonstrations and riots over any consideration of using the Gregorian calendar. But, eventually, almost all countries had adopted the Gregorian calendar – and it only took four centuries.

Even though Caesar’s calendar was 11 minutes longer per year than the Gregorian calendar, he did select an appropriate name for January. He chose the name in honor of the god Janus. Janus is two faced – one face looks backward and the other looks forward.

We will need that perspective as we watch health care reform 2.0 begin to take shape in the US Congress starting on January 3.

I do not pretend to understand politics nor the legislative process, but it seems clear to me that the effort to “repeal and replace” the Affordable Care Act (ACA) will be long and complicated and might require several iterations before a workable framework emerges. The latest figures indicate that approximately 20 million people gained health insurance coverage as of 2016, either through Medicaid expansion or because they enrolled in a health plan through the federal or state health insurance exchanges.1 However, roughly 27.2 million remain uninsured, and 40 percent of these individuals qualify for some financial assistance.2

In any scenario, improving the stability of the insurance pool will be mission critical for an affordable and vibrant market to emerge on the other side. Part of this will mean encouraging eligible healthy and younger people to become insured. And, during the transition to reform 2.0, stabilizing the current exchange marketplace will be job number one – intensifying the coverage situation we already have could put greater stress on the health care system at a time when we are likely preparing to pivot to a new platform for coverage and health care financing.

Since 2011, the health plan sector has seen underwriting margins for providing coverage to individual subscribers deteriorate from -1 percent to -9.8 percent, generating $11.4 billion in losses.3 This has resulted in far fewer choices for subscribers and a risk pool that could increase morbidity and lead to higher premium rates. Health systems are also feeling margin and earnings pressure. As more patients seek care, reimbursement rates in government programs and the high cost of out-of-pocket deductibles are leaving many health systems in financial distress. Indeed, 27 percent of hospitals had a negative margin in 2011, and the Congressional Budget Office has projected that anywhere between 41 and 60 percent of hospitals could have negative margins by 2025.4

As a country, health care reform 2.0 must align our incentives to create a more affordable health care system that offers greater quality, value, and access. We can’t compete in a global economy if we don’t have a competitive health care system with comparable value and competitive costs. We should focus on moving toward a more precise and accurate system as society did when we moved to the Gregorian calendar. And we can’t afford to take hundreds of years and waste billions of dollars to create access to health care for any less than all of our citizens.

I wish there was a star we could hitch our sights to that would help us calibrate the changes we need to make in health care. But because that doesn’t exist, I hope we have learned some valuable lessons from the ACA and will use our collective wisdom to look back and then go forward and create something better. That’s my New Year’s wish!

Happy Gregorian New Year!

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Sources:
1 HHS, “20 million people have gained health insurance coverage because of the Affordable Care Act, new estimates show,” March 3, 2016
2 Rachel Garfield, Anthony Damico, Cynthia Cox, Gary Claxton, and Larry Levitt, Kaiser Family Foundation, “Estimates of Eligibility for ACA Coverage among the Uninsured in 2016,” October 18, 2016
3 Deloitte Consulting analysis of SNL data
4 Congressional Budget Office, “Projecting Hospitals’ Profit Margins Under Several Illustrative Scenarios,” September 2016

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