Thursday, July 30, 2009

Why Health Care Reform Is So Hard

Those who wonder why health care reform has proved to be so difficult need not blame the pharmaceutical and health insurance lobbies, however powerful and self-serving they might be.

Instead, they need only read last Sunday’s New York Times (7/26/09). The Times devoted the full two page-length columns of its editorial section to a subject it titled Health Care Reform and You. But the last sentence of the first paragraph read “How does my family stand to benefit from health insurance reform?” thereby changing the subject from health care to health insurance. The rest of the editorial then focused on that topic.

As President Obama has pointed out repeatedly, the urgency of health care reform arises partly from high and rising cost that threatens the stability of the economy and the fiscal solvency of government and partly from issues relating to insurance, such as limitations of coverage and the uninsured, that involve moral considerations including tragedies for the individuals affected.

The two subjects are related.

Cost issues underlie some of the insurance problems. Denying or limiting coverage can result from attempts to contain costs. Some people don’t have health insurance because it costs too much and they either can’t afford it or don’t think it is worth it.

Almost all of the insurance remedies call for increased expenditures, which will cause costs to go up even further.

So a case can be made that the cost issue ought to be addressed first, with insurance remedies being considered after cost is brought under control. However, insurance matters are amenable to legislative remedies that are politically appealing while cost issues call for long-term efforts that are both thorny and painful and, therefore, politically hazardous.

A recent issue of The Boston Globe carried interviews on the subject of health care reform with several health leaders in the Boston area. One conclusion reached by the article was that the issues of cost and insurance coverage may be incompatible.

Small wonder that reform is proving so difficult to achieve.

Monday, July 27, 2009

Thoughts on Health Care Reform from Wesbury

Stuart Wesbury, long-time friend and colleague, former association executive and academician, and regular reader of this blog has composed the following letter-to-the-editor. Although I don’t agree with all of it, I deem it to be is well thought out and worthy of consideration.

Finally, the Congressional Budget Office has cleared the air. We now know that the current health reform bills will significantly increase health care costs. Another piece of insight that must be understood is: reducing a Medicare payment does not save the health care system anything. The government may pay less, but the cost of providing that service has not changed. Instead of spending more money, our Federal government must pay attention to things it can do to REDUCE costs! This can be best done by reducing the demand for health care services. So it is time to get started. Specifically, what can government do? Let me count the ways.

· Encourage cost savings through primary prevention by providing financial incentives for individuals to live healthy lifestyles. Congress must promote patient prevention rewards and abolish the concept of community rating. Patients’, practicing healthy behaviors, should be allowed to earn cash incentives or insurance premium discounts without limit. The result? healthier citizens, utilization of fewer services and less cost.
· Secondary prevention (early detection) and tertiary prevention (teaching individuals how to care for their chronic diseases) must be supported. Cost benefit studies and development of better educational techniques are two more items for the research agenda. Primary prevention is still the most likely preventive methodology to produce significant savings. However, secondary and tertiary prevention hold much promise.
· Re-direct significant health care research dollars to explore the best way to deliver effective and economical care. Remember managed care and HMOs? They worked! Kaiser–Permanente, Group Health and my care provider in Arizona, Cigna Staff Model HMO. All of these and more are highly rated and collectively, they spearheaded lower cost efforts for years. They were and are successful. If this is what is meant as “accountable organizations,” let us have many more.
· Another spot for more research is for comparative treatment evaluation. We know that medical practice varies greatly from one area of the country to another. What treatment is best? Let us learn more about outcomes and costs. The potential of government edicts concerning treatment selection cannot be a hindrance to getting facts. Deciding whether to muzzle research results should not be on Congress’ agenda. Get the information.
· Attack Defensive Medicine. Up to 20% of our nation’s health care costs are the result of a tort system out of control. Excessive testing, un-necessary treatments and non-productive pressure on physicians and the health care system are a national disgrace. Injured patients must be cared for. But, today’s roulette wheel of justice is a disaster. Community systems of injury adjudication must be created and put into place. Incredible savings will result and all deserving patients will be cared for.
· Eliminate state mandates and allow national sale of health care policies, period.

Let’s face it. Just spending more money will make our heath system problems worse. Taking more money away from selected segments of our population by taxation will negatively impact investment and innovation. Why not simply work to make health care less expensive. Who loses?

Monday, July 20, 2009

Response to Valpodoc

Valpodoc responded to my posting entitled Recommendation as follows:

Let me get this straight. Your solution is to make the doctors, employees of the hospitals. An [sic} the hospital administration would then "fix" the problems. Sounds like government healthcare with a different name.”

This comment offers an example of the hazards of trying to deal briefly with complex issues.

As a practical matter, it may well usually be the case that consolidating the professional and institutional components of health care means making doctors “employees of the hospitals.” Only large group practices can do it the other way round.

But the comment about hospital administration “fixing” the problems calls for further comment.

The health care delivery system is very much in need of individuals who can be effective leaders of organizations that employ physicians and that undertake to manage patient care (which requires the management of medical practice). Those individuals are probably not the hospital administrators of the past whose main role was to keep the doctors happy and the bills paid. Neither are they likely to be patterned after the legendary autocrats who founded the famous group practices or the later physician executives who held administrative processes in contempt.

Instead, they will be individuals – some physicians and some not - with the skill of leading health care organizations that foster loyalty and dedication to a common purpose and that encourage imagination and productivity.

For the foreseeable future, they will also need the ability to change the cultures of the institutions they head. That process will not always be smooth and so they will need the understanding and support of their governing bodies as well as of their communities.

They will not be people who “fix” problems so much as people who maintain the organizational environment needed by those who understand the complex issues involved and who can design and implement the health care system of the future.

Sunday, July 12, 2009


In the context of a discussion on another subject, long-time friend Bob Odean reminded me that in all my blogging, I had not been very forthcoming on my own views on solutions for health care reform.

Summarizing those views in a page or so may be presumptuous, but I’ll give it a try.

I would first recommend that steps be initiated on a national basis to consolidate the professional (i.e., physician) and institutional (i.e., hospital) components of health care into single entities. Mayo Clinic and Cleveland Clinic are examples of such entities. An early step would be the repeal of state laws prohibiting corporate practice of medicine, which prevent corporations from employing physicians, charging for their services, and keeping the money.

The second thing I would recommend is the creation of competitive relationships among the consolidated entities. That would mean breaking up some multi-hospital systems that now enjoy what amounts to monopoly status. It would also mean abolishing Certificate of Need programs that require health care organizations to obtain advance public certification that major construction projects facilities and equipment purchases are “needed” before they can be undertaken.

Third, I would recommend the system of reimbursement known in earlier times as global capitation. Health insurance companies would contract selectively with the consolidated entities with which they are able to negotiate the most favorable terms, and then pay these providers a negotiated fixed amount per subscriber per month. The consolidated entity would then provide or arrange for all the care needed by the subscriber.

The absence of accountability that has so long plagued health care would be resolved by the consolidation of physicians and hospitals into single entities with responsibility for all aspects of a patient’s care. Establishing competition among providers would make it possible to create economic incentives strong enough to cause providers to become serious about cost and quality. The current fee-for-service system adversely incentivizes providers to provide unnecessary care and is expensive to administer. Global capitation, properly designed, induces providers to provide effective care while conserving resources and is easily administered.

This arrangement would also clear the way to addressing the problem of the uninsured. As things now stand, providing coverage for the uninsured adds to the already too high cost of care and bequeaths a financial windfall on the already overfinanced providers who are now providing care to these people without direct reimbursement. In the arrangement proposed, providers who find themselves providing less uncompensated care as a result of universal coverage programs would have an incentive to improve their competitive position by reducing their rates accordingly.

While there would be many details to be worked out, I believe the arrangement I recommend could provide a practical basis for the development of a health care system that addresses the issues of our day.

Friday, July 03, 2009

Competition vs Competition

We Americans have a strong faith in the potential of competition as an inducer of higher levels of performance. We are less aware that competition can take different forms with correspondingly different results.

The June 21 issue of The Boston Sunday Globe included an article about competition between two health care providers in the Boston area. It seems that Beverly Hospital, a major north shore provider, wants to build a radiation treatment facility. Massachusetts has a Certificate of Need law in effect, so Beverly needs the approval of the state’s Department of Health to proceed.

That approval is being opposed by Partners, a Boston-based institution that recently opened a cancer center in the nearby town of Danvers. The center offers radiation treatment. Partners is arguing that its own facility is sufficient to serve the needs of the community and that the Beverly center would constitute an unnecessary duplication of costly services.

Partners – a merger of the Massachusetts General Hospital and Brigham and Women’s Hospital - is the biggest, most prestigious, richest, and most powerful provider of health care services in Massachusetts. Its market clout is such that it has been able to get health insurance companies to pay it higher rates than those paid to other providers in the area.

One would like to think that health care providers would compete on the basis of cost and quality. But that is not at present the case. As to cost, health insurance will cover services provided to the affluent residents of the north shore regardless of whether they get their care from high-cost Partners or lower-cost Beverly. Prestigious Partners is assumed to provide care of higher quality, though it offers no data to prove it and the assumption might well not be true.

So while Partners’ development of a cancer center in Danvers provided competition to Beverly, the result has been to increase the cost of health insurance in Massachusetts. The effect on the quality of care is not known.

Competition ought to be a good thing, but not the kind of competition that exists between health care providers in Massachusetts.

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