POLICY/HEALTH PLANS: Has George changed his tune?

Found this Interview with KP CEO George Halvorson put out in January. Here he is talking about single payer

PwC: Are there other practices you see overseas that you think are importable?George Halvorson: One of the nice things about almost every other country, particularly the ones with single-payer systems, is that they focus very heavily on primary care. Most health-care costs come from a very small number of people: 1% of the population represent 40% of the costs; 10% of the people represent 80% of the costs, etc. So the largest potential you have for changing the total cost of health care is to focus on that small group of people and take care of them appropriately. And the only really effective way to focus on those people is with primary care. You need to intervene medically with those people before diseases progress to the point where they’re extremely expensive. And that requires a primary-care model.Countries with single-payer systems all have put in place extensive primary care, and employ much less expensive specialty, secondary and tertiary care. That’s actually not a bad model, because what you end up with is fewer people needing a heart transplant. If you need a heart transplant, you may be less likely to get it in those other countries. But if you have really good primary care, you’re much less likely to actually need the heart treatment.PwC: Does that mean there are trade-offs regarding care?George Halvorson: Only if you have to decide where you’re going to invest. If you decide to invest in the primary care part of the equation, then you eliminate the need for some of those very expensive treatments. On the other hand, if you don’t invest in the prevention part of the agenda, then you have to invest much more heavily on the tertiary side of the equation. It’s a cost trade-off for the system. For the patient, think of the quality-of-life perspective: Would you rather have a massive heart attack, or would you rather be treated by a primary care doctor? It makes more sense to focus on early prevention and not on the tertiary care rescue model.

It’s a sensible and pretty accurate description. But that’s not exactly the terms he was using about single payer more recently at the Commonwealth Club when his description of single payer used the terms “rationing”, “Canadians coming to the US” and he alluded to single payer being like the prison health care system. I wonder what changed his tune? Was his body invaded a la Harry Potter movies by Sally Pipes?

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  1. Peter,
    I don’t think there is any question that people who have to pay at least some of the cost of their healthcare, either through a deductible, a co-pay or both will be more cost conscious than those who don’t. If total healthcare costs continue to rise at unacceptable rates anyway, it is quite likely that the problem would be even worse if there were no out-of-pocket exposure.
    I was thinking recently about medical events that result in very high costs. While we sometimes argue about rationing – via price, supply restrictions, QALY metrics, etc., I was wondering if you or anyone else out could provide any information about how physicians in Canada, the UK, Western Europe, etc. define sound medical practice in deciding whether or not to perform an expensive intervention based on all relevant factors about the individual who needs it – age, overall health, mental capacity, etc.
    Here is a list of some of the procedures and services that are expensive to provide:
    1. Neurosurgery
    2. Orthopedic surgery.
    3. Cardiac surgery – CABG, valve repair or replacement, stents, etc.
    4. Kidney dialysis
    5. Organ transplants
    6. Cancer treatment
    7. Very premature infant care
    8. Long term custodial care – including for Alzheimer’s and dementia patients.
    In the U.S., we often perform interventions just because we can or there is no living will and doctors believe they must in order to protect themselves from lawsuits. However, what if the patient has dementia or advanced Alzheimer’s and can no longer recognize relatives? What if he or she is already 85 or 90 or 95 years old? What if the prognosis is grim?
    If the medical community and society in another country has evolved a very different consensus than we in the U.S. as to just what constitutes good, sound medical practice, there could well be some very significant differences in decisions to provide services or withhold services that have absolutely nothing to do with rationing. A comparatively small number of decisions to withhold expensive services in other countries but to provide them here could make a significant difference in healthcare costs. Just because we have the technical capability to intervene doesn’t mean that we always should. How do other countries come down on this?

  2. Barry, I’m trying to understand the psychology of deductibles that you say will hold down costs. Certainly getting money from people’s pockets rather than insurance/taxes will keep any program from spending more. But will it lower overall costs for healthcare and will it provide better health? We have an insurance system now with deductibles and co-pays (do you want co-pays in your system as well?), it doesn’t seem to be keeping costs low. It does increase profits for insurance companies though. I think people aren’t really concerned about how they spend their deductible since the insurance kicks in after it runs out anyway. As well the calendar timing of the treatment deductible would also affect how a patient handles it. If the patient needed care at the beginning of the year then there would be ample time for the deductible to be fulfilled so it would be advantages to use a lot of medical care at the beginning of the year. Conversely at the end of the year less time, so treatment delay would help the patient’s checkbook as the deductible would start all over again the next year. So medical care would still be determined by dollars not best medicine. Possibly giving people a liftime healthcare dollar amount might work better (I’m not really convinced though). If you know that your total paid-for medical costs would be finite, say $1,000,000 in your lifetime you might want to preserve your fund, at least in your younger years, so as not to run out in your later years.
    The problem with people going to the docs office with minor ailments that they would normally self treat did seem to be a problem with Canada’s system when I was growing up. The cost though was not the doc visit but the OR visit and not waiting to see their family doctor. I’m not sure how that was finally worked out except for better triage in the OR. But Canadian healthcare costs don’t seem to be running amuck because of it.

  3. jd,
    I agree with your comments related to the relatively small impact consumption of primary care, asking about generic drugs, and price shopping for MRI’s, etc. will have on healthcare spending. I also think the wellness programs are fine, and I support high taxes on cigarettes as well as sensible carbon taxes to reduce air and water pollution. I’m not as sure about taxing unhealthy food because of the difficulty in designing, administering and collecting such a tax. Regarding people who are overweight, they are not always overweight because of a lack of discipline or effort. Sometimes there is a chemical imbalance that makes a person think he is still hungry when he shouldn’t be.
    The more important appeal of high deductible plans to me is that they could contribute to aligning incentives across the system to care about costs. If I need heart surgery or a knee replacement, etc. I would like my surgeon to know which hospital can provide appropriate care at the best price. I want my doctor to know and care which drugs are most cost-effective for my condition. I would like to see provider utilization of services tracked and related to health outcomes for their patient population with appropriate adjustments for health risk. Finally, robust price and quality transparency tools would be especially useful for referring doctors to steer patients to the most cost-effective doctors, hospitals, imaging centers, labs and other facilities.
    I have said many times before that there are also meaningful opportunities to reduce utilization through more widespread use of living wills, malpractice reform (like health courts) to reduce defensive medicine, and more robust efforts to combat fraud.
    One of the key reasons why healthcare is more expensive here is that doctors (especially specialists) earn higher incomes than their counterparts in other countries. Part of the reason is that doctor compensation needs to incorporate the opportunity cost of what they could have earned in law or business (after fewer years of education and training). That opportunity cost is probably higher here than elsewhere. We also have a reimbursement system that rewards doing procedures much more generously than thinking and counseling patients.
    Some of the larger insurers are embracing the Centers of Excellence concept for certain categories of care. Wellpoint, for example, is going in this direction for cardiac care, organ transplants, bariatric surgery, and, soon, oncology.
    I do not think we would be well served if Medicare determined prices for all healthcare services for the entire population. It probably overpays for some services like cardiac care and underpays others like primary care.

  4. By the way, barry, I take these comments about wellness to be consonant with your initial remarks in this thread (“Even with great primary care, individual behavior and lifestyle can be a critically important driver of disease development and associated costs,” etc.)
    There is no question that this is true. In your last set of comments defending high-deductibles, you focused on behaviors in a clinical setting. But the majority of change really needs to occur before that point to prevent people from getting chronic diseases.

  5. Barry,
    I think that high deductibles could have an impact in each of the areas you mention, but I don’t see how the impact of these things is more than a few percent of total health spending. Office visits for colds and other ephemeral or phantom illnesses that go away on their own has got to be a very small percentage of total spending. Is it 1%? 3%? These visits are also inexpensive enough, and some people are anxiety-prone enough, that even with high deductibles most people who aren’t poor and make these visits now will continue to do so. Do you have reason to believe that the impact will be more than 1% of total health care spending?
    The Rx spend is about 15% of the total health care spend. What portion of that would be reduced by people who could switch to generics but don’t, switching over? Maybe 15% (or 2.25% of total health care spending)?
    Same again for the MRIs, is there reason to think that even if nobody got unneccessary diagnostic tests we’d reduce total spending by more than a point or two?
    These kinds of savings don’t get us on track to be a normal nation when it comes to health care spending. We’d still be roughly twice as profligate (and get half as much bang for the buck) as other nations.
    As for incentives, why not wellness incentives? What is we had low deductibles, but people were penalized for smoking, weighing too much, not exercizing, etc. (or rewarded for doing the right thing, whichever is more effective and politically palatable).
    Companies that report a stable reduction in medical cost trend when adopting CDHP (as opposed to a once-shot reduction through cost-sharing) pretty much always have active wellness programs with incentives and aggressive education campaigns. High-deductibles alone make very little difference to trend.

  6. Peter,
    In the context of high deductible health insurance, I think cost consciousness would happen in the following ways: (1) A patient has a cough, sore throat, cold, mild fever, etc. Rather than run to the doc immediately, see if some rest and drinking a lot fluids, etc. will resolve the problem. If it doesn’t resolve itself in a couple of days, see the doctor then. (2) If the doctor prescribes a brand name drug, the patient makes it a point to ask if there is a generic that will work just as well. (3) The doctor recommends an expensive test like an MRI. The patient asks if it is really necessary or is it just being recommended because of defensive medicine. The patient wants the doctor to know that costs matter to him or her. By contrast, if consumers are completely insulated from out of pocket costs, they will visit the doctor or the ER quickly and won’t care what anything really costs.
    With respect to the poor and near poor getting subsidies to cover some or all of their deductible, this is already what we have with Medicaid, and high utilization is an issue for part of this population. About 14 million of the 55 million Medicaid beneficiaries are aged, blind or disabled and account for 70% of the program’s costs (but 25% of the beneficiaries). What’s needed here, I think, is good care coordination and case management. I think managed care can do a better job of controlling utilization than unmanaged care though outcomes measurement is also necessary to make sure that providers don’t skimp on necessary care. At the same time, the 27 million children and 14 million non-disabled adults in the program are relatively inexpensive to cover (especially the children).

  7. jd, I agree that taxpayer dissatisfaction on assessing the usefulness of the taxes they pay is an important driver of support for any program. But that certainly is not the case for most parts of any tax system I’ve seen. Rarely do taxpayers get any first hand experience with being able to relate what they pay with what they get, other than maybe garbage collection as everybody gets that. One problem is taxes go into the general fund and are used as political power and control by politicians who get to divide them up. I have become a strong advocate for dedicated taxes so that some of the control portion is taken away from politicians. Taxpayers would then have a better view of what they’re paying with what they’re getting. I think healthcare could be structured this way, at least partially. All of my experience with Canadians is that dispite some problems with wait times hardly any citizen there, save the rich, wants a U.S. style system. So I guess they are at least somewhat happy with the taxes and the healthcare relationship.
    Barry, you say that deductibles, high or not, force people to make more cost conscience decisions. To some extent I think you are right. But the fact that most healthcare is pretty much the same cost only really encourages avoidance not cost conscience access, and puts the patient in a position of making treatment decisions based on cost, not good medicine. Aren’t docs supposed to be making those decisions, hmmm? As for the poor or near poor getting a pass on deductibles, how would you then control health cost access for a population segment that needs a lot of healthcare?

  8. Peter and jd,
    The two assumptions that underlie my support for high deductible plans, which you and others disagree with, are: (1) high deductibles will save money by making people more cost conscious and judicious in their use of healthcare resources and (2) personal responsibility should count for something.
    The poor and near poor could easily be given means tested help to cover all or at least a good part of a high deductible while the middle class, upper middle class and wealthy, should pay these costs themselves. People should not need to be completely insulated from paying for routine medical care in order to visit a doctor. They are perfectly willing and able to pay for routine car and home maintenance out of pocket. They should also pay for routine healthcare.
    Not all preventive care is cost-effective. Immunizations, blood pressure checks, pap smears, mammograms and (for diabetics) hemoglobin A1C checks are valuable. On the other hand, it would be enormously expensive to give everyone a colonoscopy starting at age 40 (or even 50) or a stress test at 50. Full body scans are both expensive and likely to result in further testing or even interventions for issues that may never cause harm. PSA tests are controversial because there are numerous false positives that lead to uncomfortable biopsies. Early discovery of lung cancer often does not extend life but may result in more surgeries. The list goes on. More employers are embracing wellness, health risk assessments, health coaches, etc., and that’s all fine, but not all preventive care is worthwhile, and some of it is counterproductive.
    Regarding taxpayer funded healthcare systems generally, there are none that are structured based on a high deductible model. If there were at least one, we might have the basis for an honest comparison with the traditional systems that emphasize primary care.
    I think there is plenty that insurers can do to make themselves easier to do business with for both providers and consumers including simplify and streamline their offerings, embrace price and quality transparency, develop real time claims adjudication, and consolidate into fewer entities.

  9. Peter,
    You wrote “So who cares if it keeps taxpayers happy with access to day-to-day treatment.”
    The short answer: taxpayers care if they’re happy, and taxpayers, when sufficiently motivated, vote to get the system they want.
    Barry’s point about why primary care is given great weight in a single-payer system makes some sense, though I’m not sure why a similar argument can’t be made for why primary care should be emphasized in commercial insurance as well.
    I certainly think that part of why commercial insurance in the US is so reviled is that it doesn’t focus enough on primary care and health promotion. Most people’s only contact with their insurer is when they have a claim, and then have to deal with the hassle of confusing EOBs, the worry of being denied, or the reality of having their claim denied and then fighting to get it accepted. In short, it is more a matter of how unpleasant your experience with your insurer is than whether it is unpleasant.
    One way for private insurers to go is to have fewer contacts with those they insure by retreating to higher deductibles. That seems a losing way to go, since it doesn’t solve the structural problem. Sure, fewer people will have bad experiences, but those experiences will be even more intense and wil resonate as strongly in the popular imagination.
    I would suggest instead that private insurers move to more of a primary care model out of self-preservation, and good medicine. I would also suggest that private insurers focus not just on clinical preventive measures, but place much greater emphasis on health promotion through behavior modification, using wellness incentives and coordinating programs with employers. This is, I think, the only way health insurers will start to dig themselves out of the pubic relations hole they find themselves in (and deservedly so).

  10. “I think single payer systems are structured to emphasize primary care not because they result in less expensive healthcare for the society (though they may) but rather to insure that as many voters as possible receive tangible benefits for the health taxes that they pay.”
    Barry, you advocate high deductibles as a way to keep costs low (for the taxpayer/insurance company) but you don’t seem to consider that lack of access due to that leads to a minor or beginning condition getting worse and requiring higher cost intervention. Certainly the uninsured already have this system in place. The fact that single pay systems do cost less, a lot less, is enough proof in itself. So who cares if it keeps taxpayers happy with access to day-to-day treatment.
    “and make the really expensive services deliberately hard to get using explicit rationing if necessary”
    By setting high deductibles for primary care, you ration primary care, seemingly the least cost part of healthcare. You restrict people from getting timely knowledge to change bad habits – possibly. Not sure what you mean by “explicit” rationing. But rationing by need and not dollars seems a better approach which forces the system to control scarce dollars.

  11. So much about how single payer would work is still an unknown. How would it be implemented, and how will we transition? Will there be middlemen, and if so, to what extent? Who will those middlemen be?
    George Halvorson’s thoughts on single payer could be an insight into how Kaiser Permanente is seeing the situation evolving. If (when?) single payer happens, it would (will?) have a profound impact on insurers and health plans especially, and it would (will?) mean a seachange for the providers wrapped up in the managed care and integrated delivery systems. Nobody likes change, especially if it will have a currently unpredictable personal impact, even if there’s the potential for enormous long term benefit.
    To what extent KP (as we know it today) ends up being compatible with SP is undoubtedly a huge question for Halvorson and his doctors. Halvorson’s evolving statements on single payer seem to say that he and Kaiser Permanente might be viewing single payer with more skepticism, and that could well be as the result of their vested interest (and prime position) in the (dysfunctional but profitable) U.S. health care ecosystem as we know it today.

  12. If you need a heart transplant, you may be less likely to get it in those other countries.
    I think this is an important aspect of single payer systems that advocates prefer to downplay or ignore completely. Not surprisingly, my take on this issue is different from Halvorson’s.
    Even with great primary care, individual behavior and lifestyle can be a critically important driver of disease development and associated costs. In the case of cancer, for example, we know that lung cancer is much more prevalent among smokers. People who work in dangerous environments like coal mines, steel mills, etc. are more likely to develop cancer. Other environmental factors also play a role. So does genetic predisposition (breast cancer, etc.).
    Look at heart disease. Poor diet and lack of exercise are important contributors to heart disease no matter how good the primary care is. Family history and genetic predisposition are important factors as well.
    Diabetes is another example of disease that is more prevalent among people whose diet and exercise regimen is poor and is exacerbated by smoking and obesity.
    While it is certainly helpful to get routine physicals, mammograms, etc. at appropriate frequencies based on age, we don’t need a single payer system to make that happen. Indeed, most people except for the poor and near poor should be able to pay for these services out of pocket.
    I think single payer systems are structured to emphasize primary care not because they result in less expensive healthcare for the society (though they may) but rather to insure that as many voters as possible receive tangible benefits for the health taxes that they pay. If, by contrast, the system were structured as a high deductible plan that paid all costs (for covered services) above a stiff deductible but nothing below it, the vast majority of taxpayers would receive no benefits (aside from the peace of mind that comes from knowing that they would be covered if they suffer a catastrophic medical episode) for the high taxes they are forced to pay.
    This same approach underlies the structure of Medicare Part D. The plan has a comparatively low deductible plus a donut hole because there wasn’t enough money to provide complete coverage. With a higher deductible, the donut hole would not be there but many more voting seniors would pay more in premiums than they would receive in benefits. Also, remember the effort in the late 1980’s to pass a catastrophic coverage benefit for Medicare to be paid for by a surcharge on upper income seniors? Then Ways and Means Chairman Dan Rostenkowski had his car stormed by angry seniors in Chicago. The law was repealed soon afterward.
    The bottom line with respect to taxpayer funded healthcare is that the political process will not allow spending a huge percentage of the dollars on a tiny fraction of the voters (many of whom are too sick to vote anyway) unless the majority of taxpayers receive what they perceive as meaningful tangible benefits. Thus, give them primary care with a low or no deductible, and make the really expensive services deliberately hard to get using explicit rationing if necessary.