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Adequate and affordable health for all

By John Rother

3 June 2009

The need for comprehensive reform of health care financing, insurance coverage, and delivery has never been so urgent. With close to 50 million Americans now lacking coverage, the need for a new model is rapidly increasing. In just the first quarter of this year, two insurers reported that more than one million enrollees lost coverage. Yet the coverage problem goes deeper than the current economic cycle. Research by the AARP Public Policy Institute has found that more than seven million Americans aged 50 to 64 were uninsured in 2007, a 36 percent increase from 2000.

The broad goals of the current health reform effort are clear: we are seeking a distinctly American model that will feature vital roles for the government and private sectors, while finally delivering affordable, quality health care for all. It will impose new responsibilities on all players in the health care system. The government will have to oversee coverage expansions, transform reimbursement incentives to encourage prevention and quality care, and make strategic investments in infrastructure—for example, to expand health information technology.

For the model to perform as needed, providers must also embrace change. While we take a “show me” attitude toward the recent announcement that providers pledge trillion-dollar-plus savings in the next decade, we believe—strongly—that big savings are attainable. The US Congressional Budget Office has estimated that as much as 30 percent of health care expenditures do not promote better health, so the potential for greater efficiency is significant. Indeed, regions in our country with a more economical approach to health care fare quite well. For example, spending on health care is three times higher in Miami (where intensive resource use is the norm) than it is in Minneapolis (where providers are not as quick to recommend costly treatments). And the results are better in Minneapolis. Cost containment is essential to keeping health care affordable—and the system sustainable—over time. It would be self-defeating to steer many millions of individuals into a system that cannot sustain itself. Insurers, too, need to pitch in by working with government to find a way to make coverage available to all, regardless of age or health status. And individuals must play their part by learning to make responsible lifestyle choices.

There are specific steps these players must take for any reform to work.

In the future, the public sector will need to take a more direct role in order to insure greater coordination, prevention, and wise stewardship of resources. Medicare, for example, should implement payment reforms that compensate doctors for coordinating their services. This will promote delivery of more efficient and effective care, replacing the current fragmented system that makes treatment—especially of patients with chronic conditions—both challenging and expensive.

Higher reimbursements can be linked to patient-centered approaches to care, such as the “medical home” which places an emphasis on keeping people healthy and avoiding the duplication or overuse of costly health technologies. Again, Medicare offers a good place to begin. It could set an example by hiking payments for primary care doctors as a way to attract more young physicians to that field and away from less necessary, if more lucrative, specialties. Medicare could also provide patients and their caregivers guidance and support after a hospital discharge. Unplanned hospital readmissions now cost the program more than $17 billion a year. Reducing such readmissions promises significant savings.

Government health programs such as Medicare should also take advantage of comparative effectiveness research, which attempts to systematically quantify the effectiveness of various treatments. Opponents of reform try to spread fear by falsely claiming that comparative effectiveness will become health care rationing. But this misses the point: patients who get the right therapies do better. It is misuse and overuse that cost the system dearly and can hurt people.

While government must take the lead in establishing some of these policies, we are counting on providers to make them work. Doctors, for example, will have a new responsibility to consider the findings of evidence-based research and to use professional judgment in determining how these findings may best apply to an individual patient. And although revised financial incentives can be a powerful tool for modifying behavior, reimbursement strategies that encourage a team approach to care will work best only if doctors can see the medical benefits of interdisciplinary cooperation.

While the new model of care will reserve special responsibilities for the public and private sectors, that does not mean individuals are off the hook. We must each take greater responsibility for our own health, recognizing that personal behavior, health, and doctors’ bills are all linked. Competent adults should also be responsible patients, which means following doctors’ advice and taking medications as prescribed. Individual responsibility also implies a reasonable use of resources. For example, individuals should go to emergency rooms only when there is no reasonable alternative.

Finally, insurers too must meet new obligations. We believe they should be required to accept everyone for coverage, regardless of age, current health, preexisting conditions, or past health history. Recent offers from within the insurance industry to stop considering preexisting conditions in coverage decisions are welcome but do not go far enough. Insurers also must restrict their practice of age rating, which by itself can make insurance unaffordable for older consumers. Many individuals will need subsidies for insurance to be affordable, and tax credits seem the most efficient way to deliver that support. AARP believes that no one should spend more than 10 percent of their annual income on health premiums and out-of-pocket costs.

It is not yet clear whether a public plan is needed to assure sufficient affordable coverage. But an expanded public role is essential. Exchanges or connectors could provide a portal to affordable access for those who have trouble finding it. An exchange could function at the state, regional, or national level. Whatever the mechanism, and whoever bears the risk, the key is that insurers will be required to cover everyone, and that subsidies will be needed to keep this insurance affordable.

And this leads to what could be the greatest political challenge facing the current reform effort: how to pay for it.

Health reform, properly designed, should lead to substantial savings for most households and employers. Medicaid expansions and other low-income protections should save costs for states. Subsidies designed to keep health care affordable will require substantial funding. All of these benefits, along with the necessary new investments, will require substantial new federal financing. The amount will likely exceed $100 billion a year as the program is phased in and cost control incentives take hold gradually.

There are different ways to come up with the money, and Congress is looking at a menu of revenue raisers. These include harnessing savings from Medicare, raising income tax revenues by capping the value of the exclusion for employer-sponsored health benefits, and imposing payment requirements on employers who do not offer health benefits at all. While various mixes of funding might work, we believe strongly in the principle that financing should be a shared responsibility. As part of this, individuals will be expected to purchase their own, affordable coverage.

However Congress addresses the financing puzzle, health reform will have to be an ongoing process. After financing is agreed on, the focus must then shift to delivery. Health reform only can succeed if providers embrace the spirit of delivery reforms and carry out the changes that will fix the system for the long haul.

Comment [18]

Agree? Disagree? Let us know what you think. Please include your full name with your comment. Comments may be edited.

With all respect, I found John Rother’s piece quite shallow. The ideas, suggestions, and points he outlines are known to doctors, industry leaders, and govnmt. officials for at least a decade if not longer. The piece does not point to anything that a good observer would not already know.

Common knowledge says: “Where things don’t make sense, follow the money trail”. Insiders know very well where the money trail leads. Make no mistake about it, these days it goes everywhere with one exception. That exception is U.S. consumer / taxpayer / patient.

What I found ironic and ingenious at the same time, is that the same “experts” who delivered us this beauty will liberate us from it.

Posted 18 June 2009, 15:45 by Arthur Kobalevski
For those of you thinking “Government” will find the solution will thrust it on the rest of us only to see it go the way of Medicare and Medicaid – out-of-control costs, abuse and fraud. Once under the government umbrella, this run-away-train will institute a single tactic – RATIONING. Of course that’s assuming we don’t reach complete financial ruin first.

I find all of the proposed solutions humorous as if insurers have not pursued these approaches before; outcome based disease mgmt, wellness education, information technology, risk mgmt etc… If a private company can’t break the code, what makes you think the government will apply more efficiency toward resolution – ain’t happening!! The same president who said that if we would only put 3 psi more of air pressure in our car tires, we could save enough energy to resolve the oil crisis – is the same president who says wellness and technology will more than pay for single-payer healthcare. Every morning when I climb into my car, I don’t conspire to run on low pressure tires. In fact, despite the knowledge that my tires may not last as long and cost me money to replace them sooner, I still don’t pull out my pressure gauge to ensure compliance – WHY? It’s not practical in the normal course of “life”. Nor am I conspiring to avoid physicals, ER trips, colonoscopies, and second hand smoke – I really do want to be healthy and hope I can access care as I need it – practically speaking.

The broad based demagoguery will drive the “bells and whistles” that pundants want while cost will drive rationing – it’s inversely proportional. Without tangible “skin-in-the-game, patients will meander through the system just as they do now. The 50 million uninsured, a number suffering from dosage creep, is the silver bullet statement for those seeking socialized medicine. Remember, these are not the poor or old, Medicaid & Medicare cover them already. Rother pointed out that AARP estimated 7 million between the age of 50-64 – so that means 43 million are WHO? – Those that choose not to spend their income on healthcare and take their chances in the ER when and if needed – free of course. I know, I know – their costs to purchase healthcare are outrageously high for single coverage; so they can’t afford coverage or can they? Lots of high deductible plans out there!! Perhaps that’s the focus since that’s the only crowd in the coverage gap who could be defined as truly at risk.

So what’s the answer to a very complex problem? Consumerism – YES! Personal responsibility – YES! Let’s focus on the group that’s driving the debate – that 50 million uninsured (and remember, it doesn’t matter why they don’t have healthcare). Have a state governed “purchasing pool” that any insurer licensed in the state must offer several healthcare plans / designs one of which has high deductibles. Use the 10% figure and use levels of poverty, like Medicare does, as to what subsidies and how much these “working poor” would qualify for to help with coverage. Once they have a viable choice then we’re back to consumerism; if they choose NO coverage – we’re back to personal responsibility. And guess what – we haven’t re-engineered the whole healthcare system. As stated earlier, 43 million are below the age of 50 and their health should be pretty good on average. The purchasing pool would allow for the “risk” to be spread across the broader group. If you don’t like the pool idea, then role all of these folks into Medicaid – again using a sliding scale to tap into a portion of their income. It doesn’t matter that NCQA consistently shows poorer quality outcomes for Medicaid & Medicare as compared to commercial plans. This again avoids a complete overhaul of our current system. Top it all off with “tax free” dollars when their income is used for healthcare.

I don’t want to over simplify this issue but it’s the simplification that will save our system. If the argument is the complexity that causes our coverage gaps, then a complete overhaul of a complex system is a recipe for disaster – oh, and lets have it all done by October.

Posted 10 June 2009, 13:32 by John Sadler, MBA
I agree with much of the article. Particularly that people need to take control of their health and make healthy decisions about what we eat, drink, etc.

Has anyone considered applying the “Medicare” system to everyone? Pehaps doing away with Medicaid, get rid of the stigma that goes with it. Offer basic coverage such as Medicare (call it government sponsored) for everyone. Use the money originally from Medicaid to support Medicare. Then for people that have coverage through their employors, let that be the secondary coverage. I currently pay about a third of my employee sponsored plan for my family. I would glady pay more knowing that I have a comprehensive plan. For people that don’t have coverage through their empoyer, offer commercial plans. It seems this would offer the best of both worlds. I honestly don’t think this country is truly ready for “universal” coverage. I don’t think they understand what they would be getting (or not getting really!)

Posted 8 June 2009, 21:30 by Michelle Kielbasa
Rother compares Minneapolis healthcare utlization (low), compared to Miami(high), others have cited McvAllen,TX as another high utilization community. They overlook the simple facts: Minnesotans have healthy lifestyles and low minority populations. The Miamis and McAllens have unhealthy lifestyles and high minority populations, the latter having inherited unhealthy propensities.These are the simple reasons for their current, and any future, higher healthcare costs.
George Conomikes, Economist and healthcare consultant

Posted 8 June 2009, 19:14 by George Conomikes
If there is anything evident in the latest flurry of wisdom regarding healthcare funding, it is that a working solution will not emerge from a sound bite approach to analysis and cure. Healthcare is a very complex process with multiple variables to be considered. Fixing it will require the focus and input from a wide variety of experts in the field and some basic changes in operations that will impact a large number of powerful, entrenched interest groups; insurance companies, government bureaucracies, trial lawyers associations, entrepreneurial medical suppliers, for profit industries, politicians to name a few. The trick will be to bring together knowledgeable thinkers and capable planners who will sort out this complex process and put together a plan that creates a public-private partnership to make it work.

Obama may have an outline of a model healthcare plan, but leaving it to Congress to “work out the details” will be a disaster unless Congress off-loads this work to a tribunal made up of the key players in the delivery and financing of healthcare who are willing to go out of the traditional box. It can be done, but every one must be willing to look a new coalitions and approaches to how to restructure healthcare and with it healthcare funding. Healthcare as it now stands is a tear down and no amount of sincere tinkering will come close to the magnitude of change required.

Posted 7 June 2009, 09:40 by Clyde Nash, M.D.
Providing health care for all is a good slogan because it is so undefined. Basic health care must be defined, unless you want to make the same intensity of health care guaranteed for all by limiting what rich people can have. Who will define “basic health care?” Will the definition be changed from year to year?

Today, almost nobody is deprived of health care. Hospitals and doctors fees are higher for those who pay so that the non-payers are covered. What difference would a government system make?

Posted 5 June 2009, 15:24 by Frederick Costello
The root problem in US healthcare is that it is viewed by consumers as a “free lunch”. If you’re over 65, you automatically receive Medicare benefits. If you’re employed, you (most often) receive subsidized premiums. And if your not able to get insurance (or you choose to opt-out), you can go the hospital anytime you’re sick for free. Why is this? Other “basic needs” are not delivered this way. If you’re homeless, you can’t just show up at any hotel and get a room. If you have no food, you can’t just show up at a restaurant and get a free meal.

Safety nets are a critically important piece of the social and economic framework of the country. But they should be safety nets, not free lunches, and not substitutes for the normal course. Welfare is designed to provide minimal funds to bridge employment gaps, not provide a substitute to working full-time. Food stamps are provided to those in need to be used for basic nutrition, not for fine dining. If you’re arrested and cannot afford an attorney, one will be provided for you, but you cannot choose a senior partner from Davis Polk.

The definition of healthcare today does not allow for such differences in service levels. For two Medicare patients with the same hip pain, one may receive a prescription for anti-inflammatory medication at minimal cost to Medicare, and the other may have hip replacement surgery from a top surgeon at a cost of $50,000 or more – both patients received “healthcare” and achieved the same clinical end point (reduced hip pain), but the cost to Medicare was quite different.

While there are certainly valid reasons to have a hip replacement surgery, the point is that the safety net should not provide a full menu of alternative therapies. It should at most provide basic needs, and be widely deemed an unattractive long-term solution (from the consumer’s perspective), just as welfare, food stamps and homeless shelters are. The market, as it always does, will adjust and provide appropriate and attractive solutions (covering various healthcare service levels) to those not wanting to be in the safety net. But the safety net needs to be such that consumers are incentivized to avoid it.

Posted 5 June 2009, 12:48 by Steve
the fact of the matter is that a single-payer plan is the most efficient economically and most efficacious from a health standpoint. the reason we don’t talk about is a combination of ideological blinders and the overwhelming power of the industry vested in the status quo.

the rationale of single payer is simple. * it frees doctors from the insurance company treadmill that sucks up massive resources simply to obtain authorization and reimbursment for care; * it eliminates the obscene insurance industry profits derived from the denial of care; and * it provides a basic level of service that enhances americans’ freedom to take economic risks without fear of a health calamity.

that AARP is not advocating this option is an abdication of its responsibility to its members and its larger obligations to sound health-care policy.

Posted 5 June 2009, 12:11 by Alex Lantsberg
There needs to be a groundswell of improved health in our society. The unhealthy, unecessarily stress our system and drive up costs. It starts with the young in early stages of development through cultural influences. If everyone paid for thier health care based upon health standards there may be more incentive to stay physically fit and healthy. The small number of cases which cannot be controlled due to a medical condition would not break the system. It is the huge percentage of overweight people and those who use alcohol and smoke that can control their decision to be healthy. The savings alone from better heath would far outwiegh the cost to cover the chronic or finacially unfortunate.

Posted 5 June 2009, 11:12 by Bill Olson
While there is a need for a major change in the system, the approach has to be well-designed and carefully implemented, something I doubt a Government can do… Pouring “good” money into a “sub-optimal” system will not yield results. All etiologies for the crisis have to be addressed simultaneously and we have to exercise patience. Problems such as (not in order of importance): rates of mal-practice settlements (I am referring to the amounts lawyers receive), charges by physicians for surgical procedures (whether elective or not), salaries of Executives (both of insurance companies AND healthcare organziations/hospitals), patients whose life-style is unhealthy (cigarettes, obesity, etc), physician groups which are on the stock market, i.e.- are profit-oriented, the low payment for preventive care, and more, all of these will require painful solutions. Some of the solutions are “non-American” in nature. In Cuba, for example, physicians have a limited number of patients and they know each one of them thoroughly; excpet that their salary is below $20/month…Holland, on the other hand, seems to be going in a right direction but it is a small Nation with ONE governing body, less immigration and somewhat healthier life-style. The complexity of the US social structure will make the solution very difficult; at best, I think, we will improve slightly…Thus we should be ready to lower our expectations.

Posted 5 June 2009, 10:12 by Eitan Kilchevsky