The Way Forward

When we started the debate over health care reform earlier this year, it is probably probably safe to say that collectively as a people, we knew, either intuitively or objectively, that the American health care system was beyond repair. While polls on health care tend to be a muddle, everyone I talk to agrees that something is very wrong and we need to do something about it. And yet, we seem to be incapable of coming to grips with the means to fix the deep set problems we all see or feel. The political divide, on full display over the past several months, pits conservatives and liberals against each other and prevents meaningful discussion of real system reform. When liberals call for a single payer, conservatives rail at a government takeover. When conservatives call for buying insurance across state lines and tort reform, liberals scoff.

The current reform measures under discussion in Washington right now will fix only one aspect of a broken system--coverage for many of the un-insured (though even this seems in doubt). What they will not do is cover everyone, nor will they reduce costs. It is this growing realization that has independent-minded voters in a state of dismay. Throughout the campaign, Obama pledged to bring cost trends down. But in fact, health reform is apparently going to cost an already expensive system more. The Administration may say, as his budget director Peter Orszag has, that the House-passed bill “positions” the nation for reductions, but it seems apparent that virtually no one believes the bill will seriously address system cost.

It has been apparent for years that if we cannot mitigate financial trends in the health care system, it will collapse. In fact, it may already have done so, though few dare say it. Still, the voices about Medicare’s insolvency have grown louder and even a few conservatives are beginning to whisper that something must be done. Employers, both large and small, continue to complain loudly about costs, as do patients. Their voices are only going to get louder.

It is my opinion, having worked in the health care enterprise (mostly for payer organizations) for more than 25 years, that the system has indeed failed. The fact that we cannot come to a consensus on reform does not mean that health care will somehow go on as it is today. For while Congress debates what measure to pass, the underlying forces that drive costs higher continue unabated. It is curious then why those who have health insurance seem relatively disengaged (town hall meetings aside) from the discussion about reform because they are finding it increasingly difficult to pay for care and thus are sometimes delaying it or paying their portion of the bill slowly if at all. As a result providers find their collection rates in decline. This has led them to beef up accounts receivable departments and to seek higher payments from health plans and employers. But all of this has the effect of simply increasing costs for everyone.

A massive cost shift in health care has been in place for many years, as Medicare has fallen further and further behind in covering provider costs. (One might reasonably argue that provider costs are too high, but let’s leave that for another discussion on another day.) Medicaid has always been the lowest payer and has been a drain on the system for years. Over the past decade or so, employers have complained of the shift in cost to them from government programs. It is odd then why they have not led an effort for national health care since they and their employees are the victims of this burden.

A simple and compelling problem in a private, multi-payer system is that none of the players are allowed to collaborate with each other to insure that no one pays more than their fair share. Medicare doesn’t seem to care about cost shifting to private payers. (In fact, it may help the program.) Nor, it would seem, do Medicaid programs. Because both government entities (and they now pay for close to half of all the care in the country) pay what is purported to be less than the cost of care, providers simply charge health plans, employers and patients more than the cost of care to make up the difference.

What has happened over time has been written about by many--small employers simply drop coverage because they cannot afford it. This adds to the number without insurance or on government programs and those remaining employers and plans in the private market must pay the difference, with trends having accelerated over time as there are fewer participants in the pool that pays more. In the insurance industry, this is called a “death spiral.” What this means is that more and more U.S. citizens are covered by Medicare and Medicaid or they are without insurance. But providers, in many cases, are obligated to care for these patients and uphold standards of care. If they aren’t paid enough to cover those costs, they simply charge more to those who can pay. When the U.S. economy was growing rapidly employers were able to fund large increases in premiums. In fact, they felt compelled to as they competed for workers.

Since the economy has plunged and health costs continued to increase by two to three times the rate of inflation, employers began to cut back--first forcing workers to pay more out of their paychecks for coverage, ultimately reducing benefits so that workers now pay higher out of pocket costs. (While deductibles and coinsurance have increased fairly dramatically, individuals still pay a small share of the cost of care.)

This is where we find ourselves today. Employers continue to face significant premium increases, consumers higher costs, providers less revenue, all the while Medicare and Medicaid are growing in number and the un-insured problem persists. If this is not a state of collapse, I am not sure what would qualify as one.
To be certain, there are many other problems in health care. Quality is suspect, the population is aging and increasingly ill and new drugs and treatments drive costs higher without concomitant gains in outcomes. It is my contention that these other problems are secondary to the root problem of a multi-payer system which drives administrative costs up enormously and overly complicates our ability to standardize and measure the practice of medicine conducive to evidence-based guidelines . The evidence from other developed countries would seem to prove that a system in which government plays a more central role as a payer or regulator produces superior results at lower costs. But the distrust of government in American is such that conservatives, for the most part, cannot bring themselves to consider seriously a single payer or heavily regulated payer world.

Because this model has been taken off the table reformers are forced to work in a narrow corridor to try to make the system incrementally better. Problem is, if one doesn’t remake the entire payer world “all at once,” reforms will actually make things worse.

It would seem without question that a system that pays variable rates for the exact same product cannot survive, yet that is what we have in a multi-payer world. It would be as if WalMart charged different prices for the same product depending upon where you lived or how much you earned. This is precisely what we have in health care. For a basic office visit to your primary care physician, there are likely to be 10-15 different prices paid to that doctor depending upon a patient’s insurance plan. Medicare might pay $80, Medicaid, $40, Blue Cross $88, Aetna or United Health Care $96, a local plan $90 (unless they pay capitation, which is a different kettle of fish altogether) and someone without insurance $5 or $10 if the doctor will see him or her at all.

And this is just one market. Guess what? Payment rates vary from community to community, state to state, hospital to hospital, physician to physician--for no logical reason except that’s the way we pay for health care in a multi-payer, unregulated market. Medicare supposedly adjusts payments to reflect underlying wages; Medicaid programs vary depending upon state budgets; Blue Cross rates will be 5-15 percent more than Medicare in most instances, depending upon their market share or the make-up of the provider community in a state or locale. (Blue Cross plans collectively insure one third of privately covered patients.) The national insurance carriers (Aetna, United and Cigna) have fee schedules that vary from community to community largely based on their underlying market share, but generally often pay more than Blue Cross plans. Other networks have contracts with providers that pay at very high rates, again for no socially beneficial reason.

For procedures the differences can be even greater. Payments for heart bypass surgery or hip replacement can differ by 50 to 200 percent, depending upon the region of the country or the delivery system. For hospital-based physicians (emergency room, anesthesia and radiology) the variations are even greater. Making sense of it is virtually impossible for payers, providers, employers and patients. In point of fact, it’s just a nutty system. And yet, we cannot agree on how to correct or at least mitigate this problem.

When markets fail, governments typically act to regulate them or pass laws to mitigate their worst excesses. When the financial system was in collapse, the federal government took a central roll in ensuring that it could survive. Not many would argue that national leadership and action was required. Even the conservative Bush administration realized it had to bail out banks and other institutions. Why then cannot conservatives bring themselves to call for some sort of national solution for health care?

So, what can we do about health care in America? Rather than propose a specific fix, I would focus on the governance issues that impede progress. I propose a commission of wise men and women empowered to offer solutions to our health care dilemma. Such a commission would be appointed by Congress and the President and would act on behalf of the people to do three important things:

1. Develop a common view of what we have today. Such an undertaking would help the nation understand the current state and dispel the myths about the system.

2. Educate the American people by holding hundreds of town hall meetings to share the common view, trying to leave political opinions aside (though this is virtually impossible).

3. Develop solutions to present to Congress, the President and the American people. One proposal, one view, one bill.

Who would sit on such a commission? That would be a difficult decision. If it included the stake holders in the current system, they would simply argue their points of view and we’d likely get nowhere. If we left it to politicians, well, we’d have what we have today--a bill that addresses very little of the actual problem. If we left it to academics, we’d have a system that might look good on paper, but might be unworkable in practice.

There are reasonable voices on health care who might be able to work together to craft a solution. Some of the foundations such as the Kaiser Family Foundation, Commonwealth Fund or the Robert Wood Johnson Foundation perform an enormous amount of research and fund many pilots in hopes of finding solutions. Perhaps we ought to let them decide who is on the commission.

There is no easy way forward. But unless we find a way, more and more people will die because they have no real access to preventive or primary care. Many will suffer because we don’t have a system to coordinate care among providers. We will all pay more than we should taking critical resources away from education, transportation and other infrastructure. As a nation we will be less competitive and our economy will suffer.

At the heart (forgive the pun) of the health care crisis in America are moral and national paradoxes. If we cannot provide the means for all citizens to obtain basic health care, what do we stand for as a nation? If we cannot make the difficult decisions required to solve big problems, what do we tell our children?

These questions are fundamental to a people and to the health of a civilization. When one component of our culture is out of balance, we must somehow pull together and put aside some of our differences to solve it. If we can’t do that, health care will be just one more example of our failure as a nation and as a people.