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POLICY: Are we heading for a crash and can we turn the wheel?

I’ve been at a conference on disease management for diabetes where there was an interesting talk from Brian Klepper at the Center for Practical Health Reform. I don’t know much about the Center, (here’s a PDF) but it’s positioning itself as a neutral forum for reform based on the principles that Arnie Milstein’s been espousing — using process technology to reduce health care costs.

Klepper is a pessimist and an optimist. He believes that the sky is falling and quickly. He notes that the acceleration of employers dropping coverage (67 to 63% from 1999 to 2002) is speeding up. He also had another chart showing that only 45% of employees got their coverage from their employer anymore. Plus as cost sharing of premiums is heading up as less is being offered, cost per unit of benefit is increasing. The result is that even in employer coverage, people are being priced out of the market. The impact on providers is that bad debts are rising very fast.

He reasonably thinks that Medicaid is heading to block grants, and that Medicare is heading to defined contribution. So no more money from the government. Meanwhile as private health care funding is half of all income for the system, a 5% of fall in private coverage leads to a 2.5% contraction in actual revenue. This is what’s causing a spike up 10% nationally in hospital bad debt (in a surge of people showing up at EDs who don’t have the means to their deductibles or co-pays). This is showing up first in safety net institutions, such as Grady hospital in Atlanta which last year said that they will no longer admit indigent patients. A few years back community hospitals were at 12% margins–now most are losing money or making 1-2%. But they’re building like crazy and may not be able to service the debts they’re incurring. Meanwhile half of all bankruptcies are caused by medical bills and 1 in 7 families have problems paying their bills. And worse, 2/3 of those have insurance.

In other words there is going to be a net outflow of money from the system leading to a collapse. That’s where I think Klepper’s overly pessimistic. I think that the economy can keep pumping money into health care for a decade or two before we get anywhere near that point.

He says that the health care has refused to do what it takes to limit costs. I’d agree there. Where he’s an optimist is that Klepper thinks that this is the tipping point that will push all the players in the system to sit down and agree a way that will lead to their survival.

But given what he believes, Brian has 3 questions

1. What changes must we make to overcome these problems?2. How do we overcome the special interest gridlock?3. How do we avoid working on the wrong things? (e.g. working on the uninsured rather than the underlying costs that cause uninsurance–although again I think this is the wrong way around).

Brian believes that the only common ground is to get people to act for survival for the sake of their own self-interest. So the crisis has to be very, very visible. He thinks it will be and that all players (including suppliers, physicians and employers) will look for a neutral ground to solve the problem.

How is CPHR going to solve this?They have 3 major principles1) Retool American Healthcare enterprise with standardized management tools, such as–compatible IT platforms–transparency in performance accountability–evidence-based medicine–evidence-based management–pre-market national technology assessment–changes in reimbursement to move to P4P–process changes throughout system

2) Establish a national floor of basic coverage that everyone will get

3) Fix health care liability (but that must include quality and error prevention)

5 phases to the CPHR plana) Show that the system is unsustainableb) Establish a neutral coalition platformc) Outreach and mobilizationd) Develop content and consensus on actione) Coordinate the content through policy adjustment

Brian believes that they’ve achieved 1 and 2. I’m by no means sure, but the effort is worth watching and supporting, faute de mieux.

After this talk there was an interesting conversation among the audience about how long the system can sustain now. I think it can go on for a long while in this mess, but in the room 3-5 years seems to be the consensus. Brian thinks that he can get changes made within that time by setting the right folks up in a political environment where they’ll overcome their opposition. That’s why I think he’s an optimist. I don’t see any initiatives on Capitol Hill that will address any of these problems quickly. Perhaps the CPHR might create some.

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