The Outlook for 2011 in Health Care

Today's date, 1/11/11, suggests a contrived approach to blogging about the New Year -- like predicting the one big change to expect or the top eleven predictions for 2011.  However, my crystal ball view for this year is not precise or symmetrical.  It is very cloudy.  In my 40+ years of full-time work in this business, I have never been more uncertain about the near-term future.  Health care could go in several different directions this year, and it almost certainly will.  We need to be prepared for the simultaneous occurrence of seemingly contradictory outcomes.  One of my favorite Oriental sayings sums it up nicely: "Things are not as they seem, nor are they otherwise."

If you are likewise confused in your own thoughts about the immediate future, I believe you understand what's going on.  Nothing makes sense.  Health care's leaders do not have a roadmap to follow because there's no consensus on where we want to go and how to get there.  The country does not have any identifiable leaders who have a persuasive vision and the power to move the health system in a clear direction this year, and I certainly do not see any political or economic forces that suggest rational convergence is on the horizon.  Rather, I foresee unraveling (but not repeal) of the health reform laws due to shortfalls in appropriations, plus exemptions from the laws to the point that exceptions will be the rule.  And the annual increase in health spending -- down to 4% last year -- will fall even further due to serious structural problems in the economy.  We are approaching zero growth in the medical sector.  The underlying problems are likely to be solved in the long-run, but not in 2011.  The wild card is constitutionality of the health reform laws.

My perspective on the future is undeniably shaped by formal training in economics, with its theoretical assumption that the "higgle and joggle" of the marketplace will move us toward desirable equilibrium.  The philosophical question that divides economists is how much the process should be managed by government vs. how much it should be left to the "invisible hand."  Because our political system is broken, I think that providers, payers, and purchasers need to lead the way in setting the nation on a better course and reallocating resources to move us in the right direction.  My crystal ball doesn't suggest that this will likely happen in the next 12 months.  I hope I'm wrong.  Yet, as another Oriental sage once said, "Surely, we will end up where we are headed if we do not change direction."  Can anything be done to start pushing us in a good direction in 2011?

Forecast and Resolution for the New Decade

The infosphere has been full of predictions and resolutions for 2011, befitting the start of a new year.  Curiously, I've seen nothing to recognize the simultaneous arrival of a new decade.  The ten year horizon is much more interesting to me as a futurist, so here are my initial forecast and resolution for the new decade in health care.

The first task is naming the decade.  I propose "Crisis Teens," using crisis in the medical sense of a turning point where a life-threatening problem can get better or worse.  If the health care system in the U.S. were a patient, it would be in the critical care unit with a diagnosis of systemic failure and an uncertain prognosis.  The latest therapy (2010 health reform) isn't offering any realistic hope to improve the nation's health, and changes in the underlying circumstances of 2011 (Republican control of the House, legal challenges to the reform laws, increasing income disparity) suggest a strong possibility that the therapy will be withdrawn.  With no miracle cure on the horizon, the outlook for health care is uncertain at best and gloomy at worst.

This is not necessarily bad news.  Uncertainty can offer hope because it means that outcomes are not predestined.  Thoughtful, purposeful responses to anticipated changes can make a difference.  Consequently, my forecast for the coming decade is a range of outcomes (that is, successes and failures).  Many health care organizations -- particularly progressive, open-minded partnerships of providers, payers, and purchasers that recognize the need to work together -- will develop successful responses to the new circumstances.  Comparable numbers of organizations will either fail because they are not capable of adapting to new circumstances or will survive, barely.

For organizations desiring success, I propose the following New Decade's Resolution: to design an integrated health system that works, and then build it sooner rather than later.  Health systems with a good future will generally adopt a creative "do-it-yourself, now" approach that recognizes the enormous risks of waiting for politicians to find a viable solution later.

If anyone has a better suggestion than "Crisis Teens" to characterize the new decade -- or a different interpretation of the circumstances that will define it -- please reply with a comment.  (While you are at it, the past decade still needs a name.  The best suggestions I've seen so far are the "naughts" or the decade of "lost opportunities," and both explain the mess we are in today.)  I know from my first career as a weatherman that the best forecasts emerge from open discussions leading to clarification and even consensus.  A healthy debate is the key to a better understanding of the future and what we can do about it.  What are your forecasts and resolutions for health care in the new decade?

Season's Greetings!

I'm on vacation through the end of the year.  May all you readers have great holidays and a satisfying 2011!

Clarification: Black Clouds Can Have Silver Linings

Two health care executives contacted me personally over the past week to ask if they should throw in the towel. They were impressed and, therefore, depressed by my analysis in the two previous posts to this blog. I am pleased to report that they may have overreacted to the generally gloomy outlook I presented. A clarification is due—especially with respect to the likelihood of receiving HITECH incentive payments as a meaningful user.


Their misinterpretation related to my view that the expected value of HITECH subsidies is considerably less than 50% of the amount (approximately 30 billion dollars) that Congress appropriated for the program under ARRA. This outlook, shared by at least a few other experts, does not mean that a qualifying provider will receive less than 50% of the amount to which his or her organization is eligible. Qualifying as a meaningful user of certified technology is an all-or-nothing proposition. A provider meeting all of the criteria will almost certainly receive all of the incentive payments.

The slight hedge in the previous sentence allows for the very remote possibility that a future Congress will not appropriate funds as authorized by the law. However, assuming no changes in the law, providers who fall short of meeting all the criteria will get nothing. “Close, but no cigar,” as the saying goes. Congressional staff analysis of the program prior to its passage actually allowed for the possibility that total HITECH expenditures could be less than half the authorized amount. My forecast isn’t as contrarian as it might seem.

The silver lining in the big black cloud is something more than the good news that some organizations will likely get millions of dollars in incentive payments. Rather, it’s my belief in the economic concept of creative destruction. In response to expectations of problems ahead, progressive enterprises discard their old business models and build a better mousetrap—an unending process because evolution will subsequently produce a better mouse.

The silver linings in the black clouds are the new business models developed by providers, payers, purchasers, and their business partners to prepare them for emerging from turbulent times with different, better approaches to producing health care. Many of today’s enterprises will be swept away by the perfect storm that is brewing, but future-focused survivors will transform the medical marketplace in exciting ways. Qualifying for HITECH is not a strategic precondition for their success.

Reform Outlook: State and Local Differences

Last week’s blog post addressed the possibility of differences between what the health reform laws promise and what they will ultimately deliver.  I argued that the probability of reform evolving as enacted is considerably less than 100%.  This forecast is not uniformly negative.  I expect somewhat less than half of the authorized expenditures will be disbursed over time, yet some beneficiaries could actually receive all that the laws have promised (while some others get nothing).  Separate from the national perspective, who gets what and where the benefits are realized will be determined by two significant factors—state politics and local economic conditions.

Substantial implementation powers are delegated to state governments, and states are responding in very different ways.  At one extreme, voters in three states have passed referenda that effectively prevent their states from implementing the federal laws.  Attorneys General in approximately 20 states are pursuing constitutional challenges that would, if successful, make ObamaCare a moot point.  At the other extreme, several states are moving full-speed ahead to implement the powers delegated to them, such as creation of insurance exchanges to facilitate purchase of mandated insurance by 2014.  The ultimate impact of the federal reform laws in a state that has opted out of reform will obviously be very different from the impact in a state that is pursuing full participation.

State and local differences in economic circumstances will also have a major influence on reform’s ultimate payoff, most notably in the adoption of Medicaid as a vehicle for expanding coverage.  Many states will not have the funds or the desire to meet their long-term obligations for enrolling patients in Medicaid, which will cause the projected number of insured patients to fall short of expectations.  In addition, the number of patients insured by employers will depend on the strength of local economies.  Reforms’ projections of reducing the portion of uninsured Americans from 17% in 2010 to 6% by 2018 are based on economic forecasts that are widely believed to be overoptimistic for the country as a whole, but actual results will vary substantially by locality. 

If you are confused by this analysis, you understand the situation.  It is confusing.  The health reform laws of 2010 embody incredible complexity due to the politics of getting them passed at all.  They are not the result of a rational, methodical, non-partisan process to solve a well-defined problem.  The latest reform laws are based on so many assumptions and other “guesstimates” that their outcome is literally unpredictable, and the resulting uncertainty needs to be adjusted for significant differences at the state and local levels.  How do you think reform will play out in your neck of the woods?  In your opinion, how much does location matter?