Business As Usual: California’s Reform Proposal – Brian Klepper

Brian_klepperIn the world of health reform wonks – the writers on this blog qualify in spades – all eyes
are on California at
the moment. His Republicanism notwithstanding,
Governor Schwartzenegger has developed a generous $14 billion bill that
would extend universal coverage to all Californians by 2010.

that the plan is set, the special interests are lining up. Most of the
health care groups – the physicians, hospitals, the health plans (with
the interesting exception of Wellpoint) – are supportive, fully aware
that if more money can be found for health care, they’ll be the
recipients. Also in the mix are two prominent unions: SEIU (the Service
Workers’ International Union) and the American Federation of State,
County and Municipal Employees. They are both key supporters, each with
health care workers who would benefit from the deal.

Now it comes out
in the LA Times that the Governor’s ally in the reform package,
Assembly Speaker Fabian Nuñez, sweetened the deal for these unions’s
members with millions of dollars in workers’ training and benefits. Here at The Health Care Blog, SEIU Executive Vice
President Mary Kay Henry, posted a piece called "As Goes California, So Should The Nation," hawking the reform proposal, but conveniently leaving out that SEIU’s members will get special benefits in the deal.

got calls from several reporters yesterday asking about the prospects
for real reform in California. Alas, as much as I would like to see it,
it seems very unlikely. California’s reform proposal is all about
universal coverage, and almost – not quite, but almost – absent
meaningful cost controls. It finds new money from purchasers to pay for
the care, but extracts virtually no concessions from the health care
sector on how that care will be supplied or delivered. It will remain
impossibly expensive. A couple making $54,000/year – more than the
subsidized 400% of poverty – will be required to come up with $12,000
for health care, or more than 1/5 of their income. Pretty onerous.

of this is lost, of course, on the business sector, which has not yet
begun to flex its influential muscles. Assuming that the reform
proposal is pushed out to a referendum, it will become a battle of the
propogandists. My bet is on the businesses who comprise 6/7 of the
California economy, and who will feel that the cost is too lopsided and
too excessive, that too little has been asked of the health care sector
and that no disciplines have been demanded.

The jury’s still out,
but I can’t believe that meaningful reform will win out in California.
Because, in the end, the ways that it is playing out is unchanged from
the core of the problem itself. There is little consideration of how
best to provide health care, but who will win the biggest purse. And
that approach never really solves problems.

18 replies »

  1. A group of French students will come to the Silicon Valley in the first week of june.
    We will discuss the subject “Access to Health Care for everyone”. If you want to participate in our project (whether you like to meet us or you want to give as an advice), dont hesitate to contact us.

  2. Interesting that this “Universal Health Insurance” scheme was killed in the very liberal Health Care Committee of the California Lesiglature, headed by Rep. Sheila Kuehl, a long-time advocate for universal care. Even she gagged on the back-breaking price tag, when the state already has a $14 Billion budget deficit, growing daily.
    Los Angeles today announced the closure of all their health clinics. No money.
    Any bright ideas by you wonks?

  3. To Brian:
    I didn’t question your credentials, experience, or intent; there’s not need for you to do so toward me. I merely responded that your post dismissed a major health coverage expansion that would provide significant benefit to millions of Californians. And I acknowledged it wasn’t perfect, but that advocates were working to make it better.
    What I didn’t see in your post is what you would propose in its stead.
    By all accounts, in your post, you support major components of the proposal. I just don’t understand why this is an either/or proposition. It seems that many reforms are needed–up to and including single-payer, and different reforms, working together or in succession, are worthy of support.
    To Brian and Peter:
    On the issue of group purchasing, I think it is very clear that in health care, group purchasers get much better deals than individuals. Self-pay patients pay more for doctor visits, hospital care, and prescription drugs than insurers and public programs. For hospital care, individuals are charged 3-4 times what insurers pay; for drugs, individuals pay 20-50% more. Coverage in the individual market provides significantly less value than coverage purchased by large employers. Some of this is purchasing power; some of this is economies of scale (not needing, for example, to market to an individual at a time). The savings may not huge, but every little bit helps.

  4. “Looking at the bigger picture, I do believe that medical care should be given with the patient’s entire picture in mind. For instance, my father’s doctor once wanted to give him coumadin for atrial fibrillation even though he was going to die fairly imminently from metastatic cancer. Coumadin requires careful monitoring with frequent lab tests and significant risk of bleeding. This made no sense for my father’s quality of life. This is what I mean by mindless application of guidelines, and I am beginning to suspect it occurs for financial motives – unacceptable in my view.”
    Just wait until Barry’s (and others here) “best practices” physician ratings and “evidence based tiering and rating” starts to take off, then we’ll really see mindless application of guidelines for finanacial motives. Who would want to individualize care and not give your father coumadin for his Afib, that is THE STANDARD after all, his unique situation be dam*ed. Add another med to get his 135/60 blood pressure to “goal” while you’re at it.
    Those docs, under the new “evidence based ratings,” who advocate for what actually makes sense for individual patients will risk lower “performance numbers” and may be left out in the reibursement cold.
    Guidelines should be guides to individual care. If you make them the holy grail, then guidelines are all you will get, not wise clinical decision making. As Bev notes, there are big problems with that.

  5. Tom;
    Your point is well taken. What I left out were 2 things: 1. defibrillators are widely overused; e.g.implanted in people with a very small chance of needing them, enhancing my suspicion in this case; 2. the patient was unable to give informed consent for a procedure which was not without pain to him and, indeed, suffered a complication which caused him more pain and actual risk to his life. It’s not like someone just refused to give him a routine medication or something; this is a procedure that requires a careful cost benefit analysis in an alert patient also. But thanks for calling me on that; your objection is accurate.
    Looking at the bigger picture, I do believe that medical care should be given with the patient’s entire picture in mind. For instance, my father’s doctor once wanted to give him coumadin for atrial fibrillation even though he was going to die fairly imminently from metastatic cancer. Coumadin requires careful monitoring with frequent lab tests and significant risk of bleeding. This made no sense for my father’s quality of life. This is what I mean by mindless application of guidelines, and I am beginning to suspect it occurs for financial motives – unacceptable in my view.

  6. > Dr. Kibbe’s example of the defibrillator in the
    > demented patient illustrates just how broken the
    > physicians’ side of this situation is, also.
    Of course we do not know every detail of this case, but “severe dementia” is not evidence of “overutilization”. If the cardiac condition this poor man apparently suffered would not interfere with his daily activity or pose a serious risk to his life, then the overutilization charge might stick. Otherwise not.
    I do not want a world in which some combination of “demented” or old or mentally retarded or fat or Jewish or poor or ugly or whatever is a contra-indication for medical care. “Dying” is a contra-indication (i.e. the defibrillator can’t achieve its purpose because the man’s body is failing all `round). But “demented” isn’t “dying”, much less “dead” — even the “severely demented” ought to have ordinary medical care.

  7. Barry;
    I agree with you. I think some docs would welcome more studies on comparative effectiveness (which everyone agrees are sadly lacking in today’s corporate-controlled medical research) and would make an earnest effort to incorporate the findings into their practices. Those who don’t must be incentivized to do so – although having to be forced is, in my opinion, already a sign of lapsed ethical behavior.
    However, guidelines can be mindlessly applied, also. An example is my 86 yr old mother who has been in a vigorous and formal exercise program since her 60’s, owns and operates a sailboat, etc. She is unlikely to be significantly osteoporotic. Nevertheless, her longtime physician had her make a special appointment in an effort to put her on Fosamax to avoid osteoporosis – IN SPITE OF her long history, well known to him, of drug-related gastrointestinal distress and bleeding. Then her new cardiologist puts her on Lipitor for 30 days, in the apparent absence of known hypercholesterolemia, and THEN measures her cholesterol (which was 162) – but now she has muscle cramps so severe she can’t walk at times.These are doctors in a major metropolitan area, one of whom I have known for years. I could go on with other family members.
    What has happened to our profession? Don’t we care any more, or are we stupid, greedy, poorly trained or all of the above? That is what I mean by having “given up medicine.”
    Sorry for my rant – but unfortunately these facts also influence our broken system and what fixes might work or not.

  8. Bev,
    When I read Dr. Kibbe’s post about the defibrillator implanted in the patient with severe dementia, I was appropriately outraged as a taxpayer. At the same time, it also appears that there is a lot of low hanging fruit to be harvested if and when we get serious about determining comparative effectiveness and rewarding best practices.
    A Comparative Effectiveness Institute, in addition to evaluating drugs, devices and therapies against alternatives, could also examine treatment strategies for specific conditions in the other OECD countries. In other words, how do doctors in other countries define good, sound medical practice under various common circumstances? For example, should patients with severe dementia or advanced Alzheimer’s ever receive a surgical intervention or get any treatment other than comfort care and aggressive pain management? When is it appropriate to stop chemotherapy for various cancers once they reach Stage 4? How long should ESRD patients stay on dialysis? Should their age have anything to do with the decision? How aggressively should we treat congestive heart failure patients with very low ejection fractions? Who should be eligible for an organ transplant? The list goes on.
    At the end of the day, CMS will need to go further by linking the findings of the Best Practices Institute with rating doctors for quality and cost-effectiveness in a transparent manner that is available to the public. Those who earn below average ratings are probably not incompetent doctors, but their judgment could be open to question. Are the high utilizers driven by a desire to maximum their income within a fee for service structure? Are they just afraid or unwilling to admit to the patient and the family that nothing more can be done that would do any good? If the doctor who implanted the defibrillator in the dementia patient were clearly identified as a high utilizer and patients who still wanted to see him were charged a higher copay, would he at least try to improve the cost-effectiveness of his practice pattern? I think the answer is yes.

  9. Barry;
    Well said, as usual. However, Dr. Kibbe’s example of the defibrillator in the demented patient illustrates just how broken the physicians’ side of this situation is, also. Watching my own family receive poor medical care adds to my impression that, as my (also retired M.D.)husband says,
    “Doctors have given up medicine.” We need something drastic on their side too, something like DRG’s for doctors. I don’t see P4P, as it is currently structured, being effective.

  10. Brian,
    I have a little different take on this. With respect to the CA proposal, the biggest hurdle is likely to be winning voter approval for the various funding mechanisms, and we won’t know how that plays out until November, 2008. Assuming something like the reform package passed by the Assembly also makes it through the CA Senate, and voters approve the funding mechanisms, the uninsured population still would not be eliminated but it probably would drop into the mid-single digits as a percentage of the state’s population.
    At the federal level, post the 2008 election, I can envision something like the following: Congress passes a play or pay mandate for employers (with a possible exception for the very smallest employers) plus an individual mandate to buy health insurance. It provides generous subsidies up to 400% of the FPL, and caps the individual’s contribution toward the premium at 6.5% of gross income. Illegal immigrants are not eligible to participate. It passes little or nothing in tax increases to pay for the federal subsidies and chooses to accept a higher short term federal deficit instead in anticipation of reform related cost savings to be achieved later. Once the uninsured are provided for in a meaningful way, Congress will turn its attention to more effective cost control. CMS will be expected to provide leadership here, and it will get legislation to help it with such strategies as being allowed (or even required) to take cost vs benefits into account in formulating its coverage decisions. Private insurers will follow CMS’ lead.
    A Comparative Effectiveness Institute will be established and funded, though it could take a few years for meaningful savings to materialize. Doctors and hospitals will be given five years or so to implement interoperable electronic medical records. If they don’t meet the deadline, they will no longer be eligible to treat Medicare patients. Pay for performance approaches and, perhaps, differential copays will prod doctors and hospitals to improve care and give patients an incentive to choose providers identified as providing good value and evidence based care. Price and quality transparency will be vastly improved over what we have now which is not much. States can experiment with different approaches to medical malpractice reform and medical dispute resolution. Both CMS and the states could develop pro-active approaches to drastically increase the use of living wills and advance directives and require that they be honored. Obvious medical mistakes will no longer be paid for.
    In the end, I think we can drive medical cost growth down to a level that is more in line with nominal dollar growth in GDP, and we may even be able to shrink healthcare spending as a percentage of GDP to something less than the 16% that it consumes now. I think the politics of all this become much more doable if we can get most of the uninsured covered first and provide more peace of mind for the 160 million or so people who currently get their health insurance through an employer. We will probably have to throw another $150 billion per year at the current system to make that happen, but if it will make it possible to pursue all of the cost reduction strategies that offer promise, it will be worth it.

  11. Just my point as well we are a nation under the control of Corporation. We fear our jobs and make the decisison for these corporation even if its against our moral values. People working for these Ins.Company’s will go home each night thing what a Great job they did at the end of each day without having a second thought.
    The Corporation have us wright were they want us, we the people and employees are under their control. It’s sad to no that people will do anything reguardless of the outcome even if they know it may affect there own lives some day. We are a nation of greed and its all for the dollar,until the bucks run Dry. The Corporation do not have to change the people have to change the way we let these corporations use us.

  12. Eric,
    This is the critical, core point that you and I agree on. So long as health care is structured to benefit its professionals and corporations more than its patients, it will continue to weaken the fabric of the country. It is impossible to fix health care until we fix America first.

  13. Insurance Company Greed
    There are many that would say the Heath Care Insurance Company system is broken an is in the need of a overhaul, I disagree the Insurance Company has been spending big money over the years in the overhauling of their system for many years now. They have spent big dollars writing disclaimers to their policies.
    Insurance Company makes Heath decision based on your coverage or what coverage they can deny. The cost of writing those disclaimers is past on to policyholder as a cost of Good Business.
    Corporative greed drives good people to make money at any cost and the stockholders vast in the rewards at cost of others.
    There are faces behind these company’s that has put them selves in the place of the Medical Heath care professional.
    I think it would be nice to see the faces of those good people that make the heath care decision for the Medical heath care professional, and see the Life style of those stockholders that vast in there rewards.
    I am sure they would love to in the publics eye after all its just Business. I would like to but these good people in the spot light. Wouldn’t you?
    If you know of any good people that work for an Insurance Company’s that make the decision on your Heath Care coverage good or bad, lets but them in the spot light.
    Lets not forget those good old stockholders they are in the drivers seat and have the most to grain from these decision, so they deserve to be in the spot light as well.
    When the Insurance Company’s have sucked the public dry and we are all fed up and there is nothing left to gain, then maybe someone will come along and help them fix it. So we will not need to bail them out with tax dollar when there is no more money left in the policyholders pockets to suck dry. What are the odds?
    Until then put these good people in the spot light so we all can see the faces of the people that make their living at the expense of our hard earned Money and the well-being of our lives.
    If you are an employee of Insurance Company and make the decisions, for those who will have a needed heath procedure and override a medical opinion based on cost and profit lost to your Insurance Company and have much to gain from that decision, then you deserve to be in the spotlight. So that you can go home that night and sleep well knowing you did your job for your Company’s and there stockholders, then you may return to work the next day and do your job once more.
    The reason you do this is because if you are not doing your job as to the way you were trained your not saving the Company money and you stand to be replaced. So the Corporate Greed goes on and the stockholders vast in their rewards, after all they are not making the decision they are just the receiving the rewards of a good investment.
    Its just business as we like it, are not, right? So should we put those faces in the spot light?
    I think So.

  14. Brian- the seiu issue is not a side point— it is THE issue. Whether it is the SEIU, hospitals, doctors, insurers, oxygen suppliers, or home health care– the problems come from investing power in a bureaucracy that will have control over a budget that, in many cases, will exceed the entire budget of any state currently.
    The SEIU may be the “flavor of the month” this year, but things change, and the next group will get the special deals at the expense of you, me, and everyone else being able to make our own health care choices.
    Freedom has been and continues to be the casualty of top-down health care policies.

  15. Posted by: Anthony Wright
    “It contains significant language to introduce cost and quality transparency into health care, and a large purchasing pool that will have the ability to bargain for better cost and quality.”
    Anthony, Who would that large purchasing pool consist of – individuals? If individuals, how would they have the ability to bargain collectively for that, “better cost and quality”. There is a large individual market now that hasn’t been able to crack the cost factor and doesn’t know the quality factor until it’s too late. Would the insured be able to get quotes from hospitals on procedures, or would they even care given if they’re “insured”?
    “It finds new money from purchasers to pay for the care, but extracts virtually no concessions from the health care sector….”
    Sounds like the same pie, but which now includes the uninsured (mandate) for that extra load of cash for providers. MA Plan 2.
    “A couple making $54,000/year – more than the subsidized 400% of poverty – will be required to come up with $12,000 for health care, or more than 1/5 of their income.”
    “..the couple you cite would likely get a early retiree tax credit,or an affordability exemption, but it’s not spelled out explicitly.”
    What do you envision as an exemption? The $12K number is about what Barry Carol quotes as the number needed to pay for health costs – in the present system.
    Brian Klepper:
    “And it will all happen in the marketplace, where it must, because health care policy has been effectively captured by the industry, rendered meaningful policy-based reform all but impossible.”
    Brian, this earlier statement seems to support the CA approach (and Anthony’s statements) that you say won’t work?? Which I agree will not work as you’ve described it. Maybe my earlier “give credit to CA” may have to be withdrawn.
    Healthcare costs are not high enough yet or the uninsured pool not big enough yet to insite enough anger from voters to force a solution that weights the consumer higher than the provider. Maybe CA’s real plan is to insite that anger. As with global warming (and the drought here in the SE) crisis will lead political action. The question is, will it be too late?

  16. Brian: Thanks for this update on health care reform legislation, which points out the need for reform of benefits and delivery system structure, alongside reform of the financing of insurance. These other components necessary to successful reform — benefits and structure — are together “third rails” politically speaking. Almost no one wants to touch them.
    But without consideration of what benefits the health insurance plans will cover — and what they will not cover — and without consideration of who and with what specialties and where the delivery system will operate, we are simply putting a more and more expensive insurance umbrella over the populations covered. Guaranteeing increased costs, and ultimate “failure” of the reform.
    My brother, a hospitalist, recently treated an elderly gentleman who, despite advanced age and profound dementia, had a defibrillator placed in his chest, at huge expense to us taxpayers, and at significant discomfort to this poor fellow when it malfunctioned and shocked him for no good reason, repeatedly, necessitaing its removal. This strange scenario seems to me to epitomize the end game when no limits are put on benefits that will be paid for by an insurance scheme. Bad products, bad medicine, bad experiences for patients.
    Meanwhile, as you have so eloquently written about lately, we are seeing our nation’s primary care work force dwindle and wither away. Specialists do more procedures, and get paid very well for them, compared to family doctors, pediatrician, and internists. We seem intent upon building a health delivery structure in which primary care doesn’t exist.
    So, go figure how health care reform that just adds more cost to the current system will actually be a success.
    Regards, DCK

  17. Mr. Wright,
    Before I begin, it’s worth mentioning that I’ve been working on the problems of the uninsured for more than 20 years. For example, I was an author of the New England Journal paper that first led to Florida’s Healthy Kids Corporation, a program that has been emulated by many other states and was a key model in the development of the S-CHIP program. In addition, a decade ago I left a successful private consulting practice and devoted much of intervening period to facilitating reform through the not-for-profit Center for Practical Health Reform. In other words, your sanctimony notwithstanding, I’m reasonably aware of the issues.
    It is a blight on this nation’s soul that it we still have a large and growing uninsured and underinsured population, and that even those who are insured are highly susceptible to bankruptcy with the onset of serious health problems.
    That said, enthusiasm is not an excuse for atrocious social policies that could cascade into an array of devastating impacts.
    My guess is that you are more of a “consumer advocate” than a health care professional with on-the-ground experience, so let’s talk about the “cost containment mechanisms” you’re so sure of. While I am as ardent an advocate for pricing/performance transparency (and Health 2.0) as you’re likely to find in health care, the efforts to date – and certainly those that have been put together by state governments – have had zero discernible impact on cost. For that to occur, you have to develop ways to take problems and opportunities identified in the market (e.g., high and low performing physicians, or best value drugs and devices) and shepherd them to impact. Few programs have accomplished that yet, and we’re only now beginning to see projects by major Fortune companies that attempt that.
    There is virtually NO evidence that larger groups produce anything but very nominally lower costs. Except for marginal costs associated with coverage product distributions, the costs of care remain approximately uniform across populations. So that’s a myth.
    I’m all for the IT investments you’re hawking, and have said so numerous times in print, but the fact is that we still don’t have national IT standards. Even under the best circumstances, widespread EMR implementation probably won’t have a direct cost-impact for many years.
    There is general consensus among health care economists (and the kinds of folks who write for and read this and similar blogs) that the core problems in health care have to do with its reimbursement incentives (e.g., fee-for-service vs performance-based reimbursement), with the lack of transparency (which means we can’t see or do anything about problems and opportunities) and with the discontinuity of care that results from a lack of integration between currently disparate parts of the system.
    Much of the (justified) enmity in California’s health care reform debate has focused on the often reprehensible behaviors of the health plans, but they represent only a small part of the problem. The REAL cost explosion in health care arises from the ways health care is supplied and delivered, and I see very little in California’s proposed legislation that would address any of that.
    Since you fancy yourself a reformer, you would do well to consider the testimonial warning of Peter Orszag, Director of the Congressional Budget Office, to a Senate Finance Committee that met in June. Mr. Orszag said:
    “If [Medicare and Medicaid’s] costs continue growing at the same rate over the next four decades [as they have over the last four decades, at 2.5%/year higher than per capita GDP], federal spending on those two programs alone would rise from 4.5% of GDP today to about 20% by 2050. That amount would represent roughly the same share of the economy as the entire federal budget does today.”
    In other words, there’s only so much money to go around. If we allow health care to continue to expand at a high multiple of general inflation – in the last 5 years it was almost 5 times general inflation, 4 times worker’s earnings and twice the growth of business income – then all other non-health care expenditures will be eroded.
    The larger point here is that, as disgraceful as the health care uninsurance/underinsurance problem is, it is not nearly as significant an issue as the wholesale erosion of the coverage and care that supports the mainstream of the American people.
    Simplistically-devised programs like the ones under development in Massachusetts and California, constructed to favor influential special interests at the expense of the public interest, only dig the hole deeper and faster, and bring us that much closer to the precipice.
    If you’re going to advocate for patients, you might consider a slightly larger perspective than solutions at any cost.
    I hope this is helpful.

  18. Let’s leave aside the problematic notion that the uninsured should wait for coverage until we take on the health industry…
    Let’s look at the bill itself. It contains significant language to introduce cost and quality transparency into health care, and a large purchasing pool that will have the ability to bargain for better cost and quality. There’s other cost containment mechanisms in there, in the areas of public health, information technology, group purchasing, and regulatory oversight.
    I and other consumer advocates are continuing to push on other cost-containment ideas, and on affordability assurances (the couple you cite would likely get a early retiree tax credit, or an affordability exemption, but it’s not spelled out explicitly.
    But to be so pessismistic about “meaningful reform” seems remarkably self-defeating, given the progress that could be made.