Finding Sustainable Funding For Health Care Coverage
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I was in a meeting the other day when someone said - mostly in exasperation - ”Everyone’s for affordable health care for everyone, but no one cares very much about dealing with the cost of health care.” I’m sure that truer words have been spoken, but I can’t think of any off the top of my head. It’s too bad. Somehow, we’ve divorced the coverage/affordability question from the cost question, and we pay for it - everyday. In a recent article in the Journal of the American Medical Association (JAMA), bio-ethicist Zeke Emanuel from the National Institutes of Health, put it pretty well - “Without controlling health care cost, any attempt at universal coverage will be transient. Sustainable expansion of coverage to all Americans requires credible changes in the rate of health care inflation. In the strange calculus that is American politics, the more politically salient issue of costs may provide a better way to achieve the comprehensive reforms necessary to cover the uninsured that the hitherto futile direct moral appeal.”
It shouldn’t be that hard to accept the notion that it’s easier to cover more people if health care costs are under control - and harder to cover more people when they are not. But, most of the time, the coverage debate has been only about coverage - and not about cost. I’m pretty sure there’s a morality play in here somewhere - that covering people is a moral issue, while controlling the increase in health care costs is an economic one. For some, arguing the rightness of providing coverage is more compelling than engaging in the grind that comes with discussing what to do about health care cost increases. But, the simple fact remains that covering more people is intrinsically linked to health care costs. If costs go up, coverage goes down - and vice versa.
Two years ago, Massachusetts enacted major health care coverage expansion legislation, which did very little to deal with health care costs. As the cost of implementing the new law became clearer (and higher), everyone began discussing how hard people would need to work on the health care cost issue to preserve and expand on the gains made under health care reform. Yet here we are in 2008, there are significant pieces of health care legislation under discussion in the closing days of this legislative session. Unfortunately, some of the proposals being considered would raise health care costs if passed - a big step backward in efforts to reduce the increase in health care costs.
Why? Because it’s easier to talk about doing more things for more people than it is to talk about taking costs out of the system.
Two people in Massachusetts who’ve been willing to discuss both issues at the same time are Alan Sager and Deborah Socolar from the Boston University School of Public Health. Sager and Socolar have maintained - for a long time - that there is no answer to the coverage question that can work without fundamental reform of the delivery and payment systems. They offered up an op-ed in the Boston Globe the other day that basically said health care reform - and the ongoing expansion of coverage - cannot be maintained without a major change in the payment system. In this case, they recommend moving away from fee-for-service, which pays for volume, but not outcome - to something more like - GASP - capitation - in which physicians would receive monthly payments in exchange for managing all of the care someone requires.
Many people may recall that capitation failed in the 1990s, mostly because most physicians rejected it - and once they rejected it, patients and policymakers rejected it, too. Health plans also did a mediocre job of incorporating the risk inherent in serving people requiring different levels of care into the payments they made to physicians thereby speeding up physician dissatisfaction with the whole concept. After all, should someone who’s taking care of three patients with cancer and two with HIV get paid the same budgeted amount as someone who’s taking care of five healthy 25 year-olds? To solve this issue, Sager and Socolar suggest using risk-adjusted payments that account for the relative health of each group of patients served by a physician and his or her practice, and they propose to only include those physicians who are willing to try this approach. This idea may work for some, but I don’t think capitation - even if it’s risk-based - is going to bring too many physicians back into a financial risk arrangement.
Still, I share their larger perspective that coverage and cost have to be discussed together, and that our chances for sustaining health care reform improve the more we do to lower the increase in health care spending. Unfortunately, the discussion in Massachusetts this year has been mostly about expanding mandated health benefits, reducing coverage options for employers and individuals by increasing minimum benefit requirements, and collecting more money from participants - health plans, employers, providers and consumers - to fund unanticipated expenses.
Health care reform will not succeed if this keeps up. People who care about health care coverage need to engage as aggressively on the cost question as they do on the coverage question. Otherwise, the ongoing expansion in coverage that they fought for and care about will not be sustainable.
Capitation and risk adjustment payments are very sound concepts in theory. The problem with capitation, however, is that doctors and hospitals have little or no confidence in their ability to project the healthcare costs of the patients they are responsible for which means they cannot determine what the capitation payment per patient needs to be to produce a viable and sustainable business model. As for risk adjustment, I don’t think the science of risk scoring at the individual level is anywhere near as advanced as it is for, say, credit scoring. Moreover, for those who require very expensive treatment every year, taxpayers would probably have to offer reinsurance for claims above some maximum level either per individual or in aggregate for the insured population.
As for more general impediments to healthcare reform that focus on taking cost out of the system, I think the diagnosis is straightforward. Namely, everyone wants to solve the problem at someone else’s expense. Nobody wants to give up anything themselves. Consider the following:
1. Consumers resist eliminating or sharply curtailing the favorable tax treatment currently afforded employer provided health insurance. They are also reluctant to accept sensible limits on end of life care.
2. Doctors resist price and quality transparency, P4P, and working with hospitals to offer bundled payments for an entire episode of care connected with expensive surgical procedures.
3. Hospitals resist price and quality transparency and P4P as well. They also are reluctant to practice less aggressively, especially at the end of life, because doing so would reduce their revenue. Both hospitals and doctors are reluctant to pay for electronic records because they think the benefits will mostly accrue to payers and patients.
4. Lawyers don’t want to give up the current jury based medical malpractice system in favor of health courts, arbitration or some other sensible alternative that would remove juries from medical dispute resolution.
5. Insurers often require confidentiality agreements that preclude doctors and hospitals from disclosing how much they are actually paid for various procedures. Insurers have also backed away from serious attempts to manage care as opposed to just manage reimbursement and focus on risk selection.
6. Drug and device manufacturers resist comparative effectiveness research because it would probably reduce demand for many of their newer, more expensive products that are little or no better than established treatments.
When every interest group steps forward with serious proposals that would cost it money or power in the short term in exchange for a better and more sustainable healthcare system in the long term, we might finally start to make some progress. We all have to give up something and the sooner we accept that, the better.
Hi Charlie -
Your emphasis on the centrality of controlling costs is spot on. The one point I would disagree with is calling cost containment an economic issue, in contrast to expanding coverage, which is typically seen as a moral issue. The degree to which ever-expanding health care costs eat away at wages for employees and other social goods like education is at least as much of a moral issue as expanding coverage. Paradoxically, letting health care consume so much of our national wealth actually reduces overall health and well being, by starving other sectors that contribute as much to population health as health care does.
Charlie - The fact that the state is now taxing the local insurers reserves for $33 million and hospitals for another $28 million, there is just no way those costs won’t be passed on to working people that pay for their Tufts, HPHC or BCBS insurance. Aetna just released their earnings and their medical costs increased 19%. If medical costs continue to rise and then the state adds on more increases as a result of these taxes on insurers and hospitals it could result in premiums at levels that are unaffordable to everyone. The irony of premiums becoming unaffordable to working people as a result of costs added by the state to cover people that get their insurance for free is just mind boggling. This is unsustainable and is not healthcare “reform” in any sense of the word. Add in a slowing economy that will cause more people that currently pay for their healthcare to enter into the pool that get their health insurance for free and you have forces at work that will tear this whole thing apart. Again, health insurance for all is a great idea but this plan was not well thought out and does not address the cost side of the equation which will end up killing this whole thing in the near future. Frankly, if the feds kill this mess by not authorizing their piece of the funding we might all be better off.
Charlie, experience as a provider, manager, student of innovation, change facilitator for hundreds of physicians, author of a comprehensive book on system redesign, consultant to numerous national improvement initiatives, survivor of care for a life-threatening illness, and a comedy improv class has taught me that this exquisitely, complex overbuilt system desperately needs radical simplicity.
I think the reason costs are out of control are three fold:
-a totally outmoded, grossly inefficient delivery system designed 100+ years ago to rely on physician memory, compliant patients, office visits and hospital care
-we can’t decide as a society whether healthcare is a right or privilege and who should pay, so the system has devolved to the chaos of diverse self interests. Payers and providers long ago spun into their own internally-focused, costly orbits of turf guarding and quarterly profits
-a dysfunctional market where the patient isn’t viewed as a paying customer, resulting in perverse financial incentives and rushed interactions vs. healing relationships.
Why not draw a line in the sand that asks for commitments from payers, providers, and employers to establish common ground and results that are SIMPLE, complete, and easy to understand. A common purpose that re-focuses us on why we’re here in the first place. An example of such common ground might be: Care that heals, enables and delights at the lowest possible cost. Every time.
I can attest from vast experience that of the hundreds of thousands of healthcare encounters that happen every day, those that heal (not just medicate), enable and delight at the lowest possible cost are rare indeed. A commitment to common ground among payers, providers and employers that patients also understand, could begin to establish a common national purpose and mobilize far more innovation.
Folks - great comments/insights from all of you. But getting off the dime and on the road to something that’s truly different is a long, hard slog. There’s so much inertia in this sector, and nowhere near enough outside pressure being brought to bear on the various players to get out of their comfort zones. For the time being, I think the best we can hope for is incremental reform over a long period of time - because many participants, including consumers, employers, and public officials, aren’t sure about what kind or how much change they want.
Let’s face it, providersw and plans will respond to others on this one. For example, Barry points out that plans stepped back from aggressively managing care and limiting their provider networks. We didn’t do that because we thought it was a good idea. We did it because employers, government and consumers - our customers and our overseers - told us to. Until they can stomach something other than very modest changes, we will be somewhat limited in our ability - at least on the plan side - to deliver significant reforms. Sigh.