A Federal Health Plan Part II

I spent a lot of time over on Maggie Mahar’s blog (and other places) wrestling (through comment streams in most cases) with the notion that very smart, very informed people believe that a federal health plan is the best step forward in our efforts to contain healthcare cost, increase access, and improve quality. This is what I learned.

1) The pro-plan crew will argue that Medicare in the past has done a poor job of managing the cost/quality balance because it had been handcuffed by the pro business Republican administration. Now that Obama is in charge, we will see big changes in the way reimbursement, quality/outcome measurement, and transparency into CMS activities are handled. If Medicare was managed poorly in the past, it won’t be anymore.

2) What is wrong with the nationalization of insurance if that happens as a byproduct? For-profit insurers by their very nature must put profit above policy holder needs. Their goal is to make money first, everything else second. The big non-profits don’t have an issue with a federal plan, why should you?

3) Medicare reimbursement will change to reflect pay for value.  This will mean that medicare reimbursement will create incentives for better care, not more care as it does today. It also means that CMS will drive an agenda to collect outcome and cost data in order to make more informed policy decisions.

4) The bottom line with pro-plan camp is that they believe that the RIGHT government team (i.e. the Obama team) can drive change fast and effectively in a way that previous (even well intentioned) administrations could not.   A public plan gives medicare even more power and thereby creates a better mechanism for driving unilateral change in the healthcare system.

Most seem to agree that reporting outcome data, improving price transparency, developing value based methods for evaluating care, and reforming payment schemes to incentivize better care, are all vital to success. A public plan would give CMS more power to get the job done. I can see the argument, but I dont agree with it. Medicare is a mess on almost every front and CMS has demonstrated very little ability to make progress.  A multi-trillion dollar unfunded liability, poor coverage, poor reimbursement schemes, all contribute to an image of the stereotypical government bureaucracy. Is this the “insurer” you want coverage from…there aren’t any guarantees that they will be around to provide you with coverage when you actually need it in 30 years time. Before we go with Medicare for All, perhaps we should make Medicare Great for Some.


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A New Federal Health Plan…Really?

There is a good string ongoing at Charlie Baker’s blog on this which includes a link to the discussion also ongoing at the National Journal.( http://www.letstalkhealthcare.org/health-care-costs/public-private-competition-in-health-care/). I won’t reiterate what has been said, but I do want to add a few more thoughts (and questions).

The primary issue at play in the proposal to launch a federal health plan is affordable access to healthcare primarily for individuals and employees of small businesses. The fact that the federal government is involved in this issue likely means that there is a perception or a reality that these populations are being unfairly treated within the existing system. There are two possible reasons for this. The first is that the individuals within these populations have no bargaining power. Large employers buy lots of insurance collectively and hence receive attractive pricing from insurers. The consequence is that individuals (like me) and small businesses subsidize these large groups so that insurers can turn a better profit. Some insurers may not price this way…but some probably do.  My first question: Would it not be easier to create buying pools of individuals and small businesses so that they collectively would have bargaining power rather than creating a nationalized insurance company? Secondly, without an employer contribution the real cost of insurance is staggering. It doesn’t help either that individuals do not receive a tax deduction for this cost whereas employers do. This is an obvious injustice that legislators could most definitely tackle.

One of the most siginificant concerns about a federal health plan is that the government mandates lower provider rates. Due to this cost shifting, the federal plan could offer lower premiums to policy holders. The effect is that more individuals choose the private plan thereby crowding out the private insurers. The issue: government reimbursement rates do not actually cover the cost of medical services provided (this is already the case for many providers). What happens? Hospitals and medical service providers go under…and then where are we? A better option: The federal government could expand the Federal Employees Health Benefits Program or the states could expand their state employee programs thereby creating group bargaining power. By allowing already sick individuals to buy into the state employees plan (or FEHBP) the issue of access for this group would also be addressed. Moreover, the government could extend the tax credits available to employers to individual buyers of insurance. These steps are far less costly to the government and equally effective at solving this particular problem.

Imagine if the government were to create a nationalized company to address every competitive injustice. Rather than try to compete itself, the government should be looking for ways to improve the competitve landscape of the private market so that patients benefit first and foremost. How do they do it? Mandatory health coverage, subsidies for low income individuals and families, risk pools for high risk patients, and the elimination of re-underwriting. These efforts would address access and affordable coverage, but would not necessarily address the massive healthcare cost challenges facing the nation (although they will help the issue- for example by providing primary care to many currently uninsured and thereby avoiding expensive acute care later on). The larger cost challenge is another discussion entirely and should be kept so.

The bottom line: A federal health plan is an overly complex and costly solution with little promise of success.

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A breakdown of healthcare costs…

If cost is one of the largest (if not the largest) issues facing healthcare (not to speak of access or quality yet), then that’s where one should start–understanding the cost. Any cost distribution is a snapshot, a point in time view, of the cost picture. It can not speak to trends or changes in healthcare costs and so can not necessarily answer the question of what has been driving the cost increase. We have to look at various snapshots over time to get a better understanding of that issue. But, looking at snapshot distributions can shed light on where the money goes. It’s a very good start at least to understanding the scope of the problem. At 2.1T dollars a year (16% of GDP), healthcare expenditure is massive. This excludes spending on many health related activities like complementary and alternative medicine, yoga and gym memberships, lifestyle/health consultants, wellness programming, etc. There are many ways to draw up a pie chart of cost distribution–by who pays the bill (insurer, employer, government, individual), by what the money is spent on (interventions, counseling, equipment, hospital room and board, pharmaceuticals), by diagnoses of illness (cancer, diabetes, accident, heart disease), by preventative (smoking induced, accident induced, stress induced) ) or non-preventative illness, or by a value chain analysis (prevention, diagnosis, prep, intervention, rehab). Unfortunately, good data is very very hard to come by…if not impossible. A good data model for healthcare is clearly a major obstacle to really being able to analyze cost. (See http://e-patients.net/archives/2009/04/imagine-if-someone-had-been-managing-your-data-and-then-you-looked.html for a good review of the quality of data in healthcare settings)  That said, there are pieces of cost analysis that are quite telling.  For example, the CDC states that the costs of patients with chronic illness account for 75% of US healthcare costs. In Massachusettes, 5% of the population accounts for 50% of the cost and 50% of the population accounts for 95% of the cost. While these statistics may tell us where the bulk of the money goes (by one cut of the data), they do not tell us why costs have gone up so quickly in recent years.

Are there a lot more really sick people? Have the costs of raw materials risen dramatically (e.g. doctors, medical technology, drugs)? In the US, the ratio of specialists to primary care physicians is 70/30. In peer nations, that ratio is reversed. This is a recent development in the US. Specialists are far more expensive and aggregate results show we are no healthier than peer nations…is this supply of specialists worth it? What about pharmaceuticals? The US accounts for 50% of global big pharma profits. Why? Many quote practice pattern variation (underuse, overuse, and misuse) as a major cost driver. And what about the rise of ever more expensive treatment and technology? Do the costs merit the outcomes? The truth is that there is no consistent or public measure of value within the healthcare system (medical outcomes achieved per dollar spent). Is a 1B dollar treatment worth an extra day of life? This sort of, dare I call it, rationing is an essential part of the cost equation. The bottom line is that better data and measurement is essential to the future of managing healthcare costs, but clearly this project needs to progress in the absence of perfection. So, where should we start?



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