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One for the Ages: Health Reform Will Take Years to Unravel

|Includes: Amex Pharmaceutical Index (DRG), IHF, IYH, RYH

As the Senate readies final passage of its version of the health care bill, the country now focuses on the House, and alterations its members might propose in conference committee. Any material change could jeopardize agreements among Senate Democrats, and the bill itself.

Those odds appear quite low, however. Enactment is expected before the president's State of the Union address in January.

In the end, old-fashioned politicking will have enabled the largest health care overhaul in a generation. The Republican party, simply, had little ability to stall a filibuster-proof super majority, other than attempt to win over moderate Democrats and blunt some of the legislation's more pointed provisions.

Applying lessons learned from the past, including the first Clinton administration's attempt at health reform, the Obama administration established an aggressive agenda that centered on the House and Senate majority leaders' ability to shape the manifold details. The Democrats achieve not just a politically, but also an ideologically important victory.

Even with its majority, the party had to coalesce diverse positions on contentious issues. The end result is a substantial milestone in liberal philosophy, and the fundamental belief that health care should be a right just like freedom of speech or national defense. (Lawmakers and lawyers, though, are likely to challenge this notion in terms of the constitutionality of an individual mandate.)

The bill's final version will endure well over 2,000 pages of text, or more than 700,000 words. While lawmakers, congressional staffers, lobbyists and others have pored over its many details, no one has any idea what the total impact will be, or how its different features will intersect. Large sections simply have not yet faced the glare of public disclosure, beyond a coterie of Washington insiders.

As a result, it will take years to assess its full impact. Many of the bill's significant provisions, in fact, don't take effect until after the 2012 presidential election.

Even the independent Congressional Budget Office quantifies just measurable initiatives to existing programs such as Medicare and tax law. For other, more speculative, proposals such as payment reform or comparative effectiveness research, it ascribes less value—if any at all.

And perhaps the best quantifier of all, Wall Street, cannot fully implement its discounting mechanism because it simply does not trade the vast majority of the industry's value. Drugmakers, for example, make up half of health care market capitalization, but prescription drugs account for just 12 percent of $2.4 trillion industry. (Read "The Missing Stakeholder in Health Care Reform" in the Lyceum newsletter Perspectives, volume 5, issue 10.)

With so much uncertainty, folks will dedicate considerable time and effort over the coming months to analyzing and acting on its many consequences—in particular its unintended ones—in countless settings, from corporate water coolers to massive industry conferences. Smart minds will discover loopholes, from which new businesses will emerge as others diminish.

At the bill's heart—and no different than its debate throughout 2009—are fundamental questions of government intervention and consumer choice: How far should public policy extend into the care delivery process? What impact does this have on cost, quality and access? And does this process enable consumer choice? Should it? Its enactment further emphasizes government as the primary price setter (and, therefore, the primary influencer of care), while further diminishing market-based solutions.

However industry practitioners and observers measure its consequences, the public-private tradeoff will always feature as the central framework. One of the biggest tugs-of-war, for example, will be in the expanded number of covered lives: How much economic value do these additional lives create versus the cost of tighter regulation? Does this result in better health outcomes?

Expect the following topics to feature as examples of complex issues that are legislated but which could take months and years to develop and understand fully.

  • Accountable care organizations: the real-world and virtual integration of care delivery, involving local providers such as physician group practices and hospitals, and their patients
  • Comparative effectiveness research: the comparison and recommendation of different interventions in patient care.
  • Follow on biologics: the pathway enabling the manufacturing and distribution of large-molecule medications similar to proprietary predecessors.
  • Health insurance exchanges: the government regulated marketplace of insurance plans with different levels of coverage.
  • Independent cost-cutting commission: the expert body or institution exercising politically independent powers to reduce costs and inefficiencies across the health care system.
  • Payment reform: the shift away from a volume-based, fee-for-service model to something bundled or based on episodes of care.

Disclosure: No Positions