Significant health care reform by steps: Doubtful?
By Santiago Leon
1. The need to confront profit-taking in health care
I believe that there is an increasing awareness among the American public that the American health care system as it currently exists is operated for the primary benefit of insurance companies, pharmaceutical companies, vendors of medical equipment, procedure-based specialists, diagnostic facilities, outpatient surgery facilities, specialty hospitals — in short, everyone who stands to make a profit from the provision and financing of health care. The fact that the system is operated for the benefit of all these profit-makers, rather than for the benefit of patients, is THE fundamental problem of American health care.
To attempt to control costs or expand coverage without taking on these major economic interests is a futile effort. The most straightforward way to take them on is to turn health care into a monopsony (one purchaser) — that is, by implementing a single-payer financing system. As Uwe Reinhardt has observed:
The higher cost of health care in the United States has much to do with the high quality of life that the providers of health care can derive from its provision. In general, the U.S. health care sector has been structured to give relatively more weight to the quality of life of providers and less to guaranteeing adequate care to all members of society. America has achieved this lopsided “balance” by fragmenting, and thus weakening, the demand side of the health system. In other nations, the payment side has been given more market power, often by concentrating buying power in the hands of government bodies. There it is easier to guarantee everyone access to an “adequate” package of health care, but the providers of health care are paid less. “Way too much for way too little,” published on the Internet by McKinsey Publishers at: http://whatmatters.mckinseydigital.com/health_care/way-too-much-for-way-too-little
Assuming that Reinhardt is right, the obvious solution is a single-payer system which would control payments to providers and use them to promote a cost-effective delivery system.
2. What a cost-effective system would look like
A cost-effective health care system would have to change the incentives for health care providers from the current piecework system of compensation to one in which an entire health care delivery system was compensated for taking care of people. There is no shortage of outstanding models of the necessary configuration right here in the United States, including the Mayo Clinic and Geisinger Health System. To read about some of these systems and how they work, see “Hospital Savings: Salaries for Doctors, Not Fees,” by Gardiner Harris, New York Times, July 24, 2009, on the Internet at: http://www.nytimes.com/2009/07/25/health/policy/25doctors.html
A seminar was recently held in Washington at which a number of cost-effective systems, and communities which behave as if they were integrated systems, made presentations. See “HEALTH REFORM: Fact, Not Fiction,” by Joanne Kenen, July 22, 2009, in the New Health Dialogue Blog, on the Internet at: http://www.newamerica.net/blog/new-health-dialogue/2009/health-care-reform-or-re-form-what-health-care-can-learn-ferryboat-13438
Some communities have spontaneously embraced a cost-effective style of practicing medicine, but many have not. Among the horror shows are Miami, Florida, and McAllen, Texas, the latter described in a New Yorker article by Atul Gawande. See “The Cost Conundrum: What a Texas town can teach us about health care, June 1, 2009 on the Internet at: http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande
In effect, all we have today to limit the rapacity of a hungry health care provider is a sort of “honor system”: if the provider is inclined to behave responsibly, and leave money on the table, the provider has that choice. However, the provider is free to exploit the system. The continuum from legal exploitation of the health care system to outright Medicare fraud is reminiscent of the continuum from legal campaign contributions to illegal bribery.
3. The Massachusetts model: coverage now, cost-control later — and maybe not so much coverage now after all
In Massachusetts, the number of uninsured has been considerably reduced, largely by making more people eligible for Medicaid and by subsidizing the purchase of private insurance coverage, all of which has been accomplished through massive state spending. However, the failure to address cost has made universal coverage impossible. Consider the following: According to the Connector’s Web site in March of this year (2008), the least expensive plan for a 57-year-old had a premium of $4,700 per year, a $2,000 deductible, and substantial co-pays and co-insurance up to $4,000 per year. (That cap did not include prescription drugs.) So a hypothetical 57-year-old with a $32,000 annual income (just over three times the poverty level) could pay as much as $8,700 out of pocket — or over a quarter of his income. Marcia Angell | American Prospect, April 21, 2008, on the Internet at:
http://www.prospect.org/cs/articles?article=health_reform_you_shouldnt_believe_in
Not only is the new Massachusetts system not serving those who are supposedly too wealthy to need subsidized coverage, it has also resulted in reduced care and greater financial risk for the disadvantaged. This is due to the fact that state funds were reallocated from direct reimbursement of safety net providers to the payment of insurance premiums, sometimes for policies that require more cost-sharing than disadvantaged patients can afford. Of course, the undocumented are also worse off. See “The Lessons of Massachusetts,” National Journal Magazine, July 18, 2009, on the Internet at: http://www.nationaljournal.com/njmagazine/cs_20090718_1479.php
Despite these limitations, the Massachusetts system has greatly exceeded cost projections and the state legislature is under pressure to cut the program back.
4. Obama and Congress: Coverage or cost control?
Congress has largely followed the Massachusetts model, focusing on expansion of coverage while going light on restructuring the system to reduce costs. In order to get costs under control, public and private insurers would have to provide strong incentives for integrated health care delivery. For an overview of potential cost control measures and their efficacy, see “The Obama Administration’s Options for Health Care Cost Control: Hope vs. Reality,” by Theodore Marmor, PhD; Jonathan Oberlander, PhD; and Joseph White, PhD, Annals of Internal Medicine, April 7, 2009, on the Internet at: http://www.annals.org/cgi/content/full/0000605-200904070-00114v1
The measures Congress has discussed up to now include small increases in pay for primary care providers and small incentives for hospitals and physicians that deliver “bundles” of health care (e.g. hospital and physician services in connection with a particular operation). For the House’s summary of the cost-control provisions in its bill (HR 3200), see: http://energycommerce.house.gov/Press_111/20090714/hr3200_costs.pdf.
These changes will not come close to changing the course of American health care. The mechanisms that Congress proposes for this purpose relate only to publicly-funded programs, and are far too mild to have a significant impact on costs in the foreseeable future.
Like the Massachusetts legislature, Congress seems to have been more interested in coverage than in cost. For example, most of the proposals in Congress have included expansions of the Medicaid program and limitations on insurance companies to make coverage more available (guaranteed issue of coverage, a prohibition of exclusion of pre-existing conditions). These limitations on insurers have developed as a way for insurers to avoid costs — it follows, therefore, that doing away with them, if not accompanied by other measures to reduce underlying costs, may make coverage available to more individuals, but only at the cost of making coverage more costly for everyone.
Obama, in contrast, has talked a lot about cost. For example, in his July 22 press conference, he did not mention the number of uninsured people or touch on Medicaid expansion, focusing instead on the regulation of insurers and on cost control. He did mention Medicaid, but only to remark on the need to control the cost of the program. At the same time, the cost control measures that Obama has talked about have no more bite to them than those Congress has embraced.
The lack of synch between Obama’s words and the actions of Congress tends to make Obama appear to be disconnected from reality. As a result of this, and in the absence of a clear vision of a new health care system (see section 6 below), he is not particularly persuasive, and his popularity is dropping. See Clive Crook, “Obama is failing on health reform,” in the Financial Times of July 26 2009, on the Internet at: http://www.ft.com/cms/s/0/58931cdc-7a07-11de-b86f-00144feabdc0.html
5. What we are getting instead of universal coverage or meaningful cost control: the public option
It is probably clear to most elected officials that a single-payer system is the most practical way to address the problem of fragmentation described by Reinhardt. In fact, it is evident that the President recognizes that a single-payer system is the only way to have coverage for everyone. Most recently, he said: “I want to cover everybody. Now, the truth is that, unless you have a — what’s called a single-payer system, in which everybody is automatically covered, then you’re probably not going to reach every single individual …” July 22 press conference, on the Internet at:
http://voices.washingtonpost.com/44/2009/07/22/transcript_of_obama_prime-time.html
Why, then, is not that the end of the discussion? It is not the end of the discussion because the President does not, in fact, actually “want to cover everyone” — or, at least, he is not about to ask Congress to do so. And most of the advocacy community has given up demanding that he do so, instead limiting its demands to an ill-defined “public option.”
The public option started out as a plan that was projected to fold in federal employees and Medicaid enrollees, use Medicare’s fee structure and cover more than 100 million Americans. What is left in the House and Senate bills, if it survives at all, will be a pale shadow of the original, which will do none of the things that the original version would have done. For an enlightening account of how the “public option” idea has evolved — and shrunk — over the past months, see Kip Sullivan, “How the public option was sold,” on the Internet at: http://www.pnhp.org/blog/2009/07/20/bait-and-switch-how-the-%E2%80%9Cpublic-option%E2%80%9D-was-sold/
Why has the public option changed? Obviously, a massive and successful public option would be immediately threatening, and ultimately potentially fatal, to the health insurers. And unfortunately, as best seen in the bank bailout, neither Congress nor our President is excited about taking on major economic interests — quite the contrary. Indeed, the President is not even up to taking on small economic interests — see for example “Code Red: How software companies could screw up Obama’s health care reform,” by Phillip Longman, Washington Monthly, July-August 2009, on the Internet at:
http://www.washingtonmonthly.com/features/2009/0907.longman.html
6. Popular excitement about health care reform: its absence, its importance, and how to create it
I hear regularly from various sources on reform — both proponents and opponents. That being the case, I was struck by the fact that, despite the fact that the President’s July 22 press conference was billed as a major address on health care reform, none of those advocates thought that the conference was worth telling anyone about that day or any day thereafter. It was simply not inspiring enough for the proponents, or alarming enough for the opponents, to write about.
I believe that emotion is important in politics. Ultimately, emotion — idealistic or reactionary, hopeful or fearful — is what gets people to get involved in politics. The emotion can be positive or negative, but in the absence of emotion, the status quo tends to prevail and the existing constellation of interest groups tends to defend or enlarge its advantages. The problem with the health care debate at this point is that all the emotion is on the side of “no change” — the opponents are doing an effective job of putting people in fear of losing “choice,” of increasing costs and of government-imposed rationing. In contrast, there is no excitement on the side of change.
In order for there to be excitement, I think, people would have to have a mental picture in which they can imagine themselves benefitting from change. It should not be too difficult to paint such a picture: there are any number of countries, including Canada, that have systems that cover everyone and work much better than ours. Moreover, we have within our country systems that provide coverage to everyone within a certain group — for example, Medicare or the VA. But instead of the proponents trotting out happy, enthusiastic Canadians, or veterans, or Medicare enrollees, we have the opponents trotting out Canadians who are unhappy with their system.
The contented enrollees of the systems that work would presumably talk about how they have coverage they can never lose; that they have (in the case of Medicare) the choice of going to any provider in the country; that they have (in the case of the VA or a Medicare HMO) the comfort and convenience of minimal out of pocket cost; that they have (in the case of Geisinger and Mayo) a local system in which physicians collaborate closely with one another to the benefit of the patient. Why have these witnesses not been called? Because, I think, we are not proposing a new system that has the characteristics of the systems about which they would share their enthusiasm. Instead, as with the Clinton plan, we are once again proposing a system that no one really understands; that might make coverage a little easier to get; that might make it a little less expensive; but that does not offer any individual the knowledge that, if the new system were enacted, his or her life would improve significantly in a way that he/she can see and touch.
I am personally doubtful that we will pass any significant health care reform in the absence of a palpable vision (to mix senses) of a new health care delivery system. I am hopeful that, over the next few months, we may achieve a few small victories — an expansion of Medicaid, closer regulation of the insurance market, a few more small incentives for integrated care. However, I think we need to see our efforts this time around as an investment in a more meaningful change in the future.
Santiago Leon is a long-time Miami activist. He is a health-care insurance business professional. He studied law at the University of Pennsylvania.
