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The affordability factor must accompany discussions on health care coverage

Charlie Baker is the president and CEO of Harvard Pilgrim Health
Care, Inc., a nonprofit health plan that covers more than 1 million New
Englanders. Baker blogs regularly at Let’s Talk Health Care.

I was in a meeting the other day when someone said — mostly in exasperation — "Everyone’s for affordable health care for everyone, but no one cares very much about dealing with the cost of health care.”

I’m sure that truer words have been spoken, but I can’t think of any off the top of my head. It’s too bad. Somehow, we’ve divorced the coverage/affordability question from the cost question, and we pay for it – everyday. 

In a recent article in the Journal of the American Medical Association (JAMA), bio-ethicist Zeke Emanuel from the National Institutes of Health, put it pretty well — “Without controlling health care cost, any attempt at universal coverage will be transient. Sustainable expansion of coverage to all Americans requires credible changes in the rate of health care inflation. In the strange calculus that is American politics, the more politically salient issue of costs may provide a better way to achieve the comprehensive reforms necessary to cover the uninsured that the hitherto futile direct moral appeal.”

It shouldn’t be that hard to accept the notion that it’s easier to
cover more people if health care costs are under control – and harder
to cover more people when they are not. But, most of the time, the
coverage debate has been only about coverage – and not about cost.

I’m
pretty sure there’s a morality play in here somewhere — that covering
people is a moral issue, while controlling the increase in health care
costs is an economic one. For some, arguing the rightness of providing
coverage is more compelling than engaging in the grind that comes with
discussing what to do about health care cost increases. But, the
simple fact remains that covering more people is intrinsically linked
to health care costs. If costs go up, coverage goes down – and vice
versa.

Two years ago, Massachusetts enacted major health care coverage expansion legislation, which did very little to deal with health care costs. As the cost of implementing the new law became clearer (and higher), everyone began discussing how hard people would need to work on the health care cost issue to preserve and expand on the gains made under health care reform. Yet here we are in 2008, there are significant pieces of health care legislation under discussion in the closing days of this legislative session. Unfortunately, some of the proposals being considered would raise health care costs if passed – a big step backward in efforts to reduce the increase in health care costs.

Why? Because it’s easier to talk about doing more things for more people than it is to talk about taking costs out of the system.

Two people in Massachusetts who’ve been willing to discuss both issues at the same time are Alan Sager and Deborah Socolar from the Boston University School of Public Health. Sager and Socolar have maintained – for a long time – that there is no answer to the coverage question that can work without fundamental reform of the delivery and payment systems. They offered up an op-ed in the Boston Globe the other day that basically said health care reform — and the ongoing expansion of coverage – cannot be maintained without a major change in the payment system. In this case, they recommend moving away from fee-for-service, which pays for volume, but not outcome – to something more like – GASP – capitation – in which physicians would receive monthly payments in exchange for managing all of the care someone requires.

Many people may recall that capitation failed in the 1990s, mostly because most physicians rejected it – and once they rejected it, patients and policymakers rejected it, too. Health plans also did a mediocre job of incorporating the risk inherent in serving people requiring different levels of care into the payments they made to physicians thereby speeding up physician dissatisfaction with the whole concept. After all, should someone who’s taking care of three patients with cancer and two with HIV get paid the same budgeted amount as someone who’s taking care of five healthy 25 year-olds? To solve this issue, Sager and Socolar suggest using risk-adjusted payments that account for the relative health of each group of patients served by a physician and his or her practice, and they propose to only include those physicians who are willing to try this approach. This idea may work for some, but I don’t think capitation – even if it’s risk-based – is going to bring too many physicians back into a financial risk arrangement.

Still, I share their larger perspective that coverage and cost have to be discussed together, and that our chances for sustaining health care reform improve the more we do to lower the increase in health care spending. Unfortunately, the discussion in Massachusetts this year has been mostly about expanding mandated health benefits, reducing coverage options for employers and individuals by increasing minimum benefit requirements, and collecting more money from participants – health plans, employers, providers and consumers – to fund unanticipated expenses.

Health care reform will not succeed if this keeps up. People who care about health care coverage need to engage as aggressively on the cost question as they do on the coverage question. Otherwise, the ongoing expansion in coverage that they fought for and care about will not be sustainable.

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hans petschaftNatrbarelliottgrbar Recent comment authors
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hans petschaft
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hans petschaft

Dear Mr Baker ,While I have admired the way you have handled HPHC in the past ,I question where you are going in the future .In Jan 2008 I enrolled in your First Seniority Plus plan with out drugs .Why did I not take your drug plan? because AARP allows me to buy a 90 day mail order generic drug for $0.However in 2009 you took care of that ,forcing every senior to take your prescription plan if you wanted the plus plan or take your vastly inferior basic were there is no such requirment .PLEASE TELL ME WHY? Then… Read more »

Tom Leith
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Tom Leith

Nat says:
> People tend to forget the fundamental problem.
> Today, employer spends (with employee contribution)
> around $12,000 a year to provide insurance
Other people tend to confuse fundamental problems with their symptoms.
Nat’s $12K insurance premium is only a symptom of several fundamental problems (plural) in the medical services industry. Nat focuses exlcusively on one of the fundamental problems and he’s not wrong about its existence.
Unfortunately for him, there’s a lot of evidence that his prescription won’t help reduce suffering and unnecessary death, or cost either.
The THCB archives contain a rich source of digestified reading about all this.
t

Nat
Guest
Nat

People tend to forget the fundamental problem. Today, employer spends (with employee contribution) around $12,000 a year to provide insurance for a family. A big chunk of this money goes down the drain. The suggestion is to direct around 1/2 of this money to the employee’s (& family) HSAs and the rest to a new ‘public catastrophic plan’. And from this HSAs, the individuals pay directly for all non-catastrophic procedures & co-pays for catastrophic procedures. If you don’t use your HSA, the money still stays with you and builds up over time; encourages lifestyle changes (food & exercise) by the… Read more »

Tom Leith
Guest
Tom Leith

Nat does his best to define eficiency: > patients (service receivers) getting directly > involved in the payment process —- reduces over-use Nat wants direct payment for inexpensive, routine services, but wants insurance for expensive services. Direct payment for routine services will decrease the over-use of cheap, routine services. It will also increase their under-use. This is a two way street: patients often don’t know the difference between over and under. Sometimes the docs can educate them, but there’s no reimbursement for that. The under-use of cheap primary care will lead to the increased use (not necessarily the over-use at… Read more »

rbar
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rbar

Nat, I think these are good points, but I wonder whether they will be very effective. Idea 2) may help some patients rethink their attitude towards healthcare (“OMG, this MRI did cost 3595 $”), and I thought this is a good idea. However, what about the cash strapped patients who put things off because of lack of cash? With regards to litigation, my (rather well informed) opinion is: as long as there are patients disappointed by bad outcomes AND as long as there is a financial incentive to sue (and no disincentive not to), there will be malpractice litigation. There… Read more »

Gregg Masters
Guest

Charlie: your comment “Care variation is worth more – much more – than the costs and profits of all the private health plans in the U.S. put together”, is no doubt the fundamental opportunity (and challenge) in the health care reform materiality debate.
Yet, why are you silent on passing through most favored nations (aka the value of group purchasing leverage) access to health plan rate book to the uninsured via a suitable “club” mechanism? Why not served this growing, under-served market?

Nat
Guest
Nat

Efficiency means
— patients paying only to the providers and not to the middlemen
— patients (service receivers) getting directly involved in the payment process —- reduces over-use
— medical decisions are made only by patients and their doctors.. not by health-plans —- reduces litigation.
— patients choosing and keeping their doctors based on their comfort level (and not directed by healthplans). Leads to better understanding between doctors and patients; it means reduced defensive medicine, reduced litigation, more frequent routine visits for checkups, early diagnosis of diseases.
Nat

Barry Carol
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Barry Carol

Dr. rbar, Your comments about how the amount of defensive medicine might change and by when under a more favorable legal environment are consistent with my perceptions, which accounts for at least part of the reason why the U.S. healthcare system is likely to remain significantly more expensive than anywhere else for the foreseeable future. One factor that could potentially accelerate the decline in defensive medicine here if the legal environment changed would be if a critical mass of physician practices emerged that embraced a culture of cost-effective, evidenced based medicine and made it clear that excessive utilization due to… Read more »

Tom Leith
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Tom Leith

> Tom conveniently ignores the numbers. Nat completely ignores the numbers, but more than that, dreams that the market for medical services ever could be a competitive market. It can’t. But under his proposal where professional fees are paid for out of pocket and everything else by insurance, ceteris paribusthe only consequence is that the price of the average visit (especially in primary care) will rise versus today’s prices, and the docs will fire their billing services and take more money home with them. Not that I don’t want them to have it. Professional fees of all types account for… Read more »

elliottg
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elliottg

Nat,
Tom and you will never agree as long as you stick to your fantasies of the problem. Excessive middlemen adds at most 15% and excessive litigation less than 3%. The vast majority of the problem is a really bad system with practice variation caused by insane financial incentives and ignorance and people with considerable (excessive) expectation of high income.

elliottg
Guest
elliottg

Nat,
Tom and you will never agree as long as you stick to your fantasies of the problem. Excessive middlemen adds at most 15% and excessive litigation less than 3%. The vast majority of the problem is a really bad system with practice variation caused by insane financial incentives and ignorance and people with considerable (excessive) expectation of high income.

Nat
Guest
Nat

Tom conveniently ignores the numbers. He doesn’t care about the efficiency and willing spend $52,000 a year on healthcare for a family of 4. What he doesn’t understand is that median household income is less than $50,000. And so….he just wants the chaos to continue. I suggested ‘fee for service’ only for non-catastrophic procedures and not for chemo, radiation, etc. Why the heck a simple doctors office visit should be subject to in/out of network issues, copays, deductibles, annual/lifetime limits, claim submission/processing, multiple billing/payments, etc when you can pay directly which would cost much less and very much affordable. Lets… Read more »

rbar
Guest
rbar

Elliot, I wrote above: there is currently no incentive for a physician not to perform a noninvasive test. Therefore, it does not matter how succesful defensive medicine is – as long as there are situations (and believe me, there are plenty) where a test that was not ordered is reason for a “failure to diagnose” lawsuit. Barry, How quick will this change? Well, this is guesswork only, but I believe that some practice patterns are pretty much hardwired, while some others can be more readily abandonned – and all this varies from practitioner to practitioner. Let’s not forget that most… Read more »

Tom Leith
Guest
Tom Leith

Nat writes: > This is exactly the reason, I blogged > about EFFICIENCY and cost control. > Any comments? Yes. One definition of economic efficiency says that a market is efficient when everyone willing to pay at least the marginal cost for goods or services is able to buy them. The market for gasoline is almost perfectly efficient, whilst the market for hydrocodone/APAP isn’t even though its just as much a commodity as gasoline. Given that Nat thinks that a market whose only participants are Providers and Patients leads to efficiency, I have chosen a definition of efficiency that presumes… Read more »

Peter
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Peter

Nat, if we do nothing about health costs, healthcare will cost $4.2 Trillion by 2016 – private system OR public system, neither is sustainable with present structure. The pupose of a public system is not to just transfer costs to the taxpayer – it is to set a universal budget and get costs down. I don’t advocate a public system with the present cost structure or mind sets. But the private sector has shown it can/will not rein in healthcare costs and include everyone with affordable healthcare. When you talk about taxes for healthcare it’s not as if you’re not… Read more »