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Reform: Round 2

Joe flower It’s coming back!

The health care reform debate is only through the first round. In a few years, as early as 2013 or 2014, we are likely to see another round, with at least as much whacked-out drama as this one. But the cry will not be, “Bring back the good old days!” The cry will be, “These costs are killing us! Do something! Now!” This next round will be entirely focused on draconian cost-cutting.

The push for reform was about three things: Cost, quality, and access. Well, one out of three is not bad. The bill we got will eventually do a pretty good job on access, but it does little substantive or forceful about the other two. Quality is not a political issue with any grip; despite what we wonks and practitioners know, the public still doesn’t think that quality is a big problem. But cost? Big time. Look at the trends: Health care inflation continues unchecked (the cost of each item continues to rise faster than general inflation). The Baby Boom is hitting its 60s (I turn 60 this year, and I am a pretty good marker for the pig entering the python), so utilization will rise rapidly – we will each use more health care items, and there are more of us at the age of increasing usage. Obesity and other markers for chronic illness continue their decades-long rise. Medicine is increasingly able to save us from death, but not cure us, meaning we need decades of continuing care that our great-grandparents did not live long enough to need. Meanwhile, even as they have saved themselves from annihilation or even serious government competition, the private health plans have entered a slow “death spiral,” as even those who have insurance increasingly back away from high-cost comprehensive plans in favor of ever-skinnier high-deductible plans. As costs rise, individuals (that is, voters) are more and more personally exposed to those costs, even deferring needed treatment because of costs. The forced inclusion of sick kids (though a great thing) will also add to the costs.

But…but…all those new people!

Full implementation of the act in a few years will bring tens of millions of new rate-payers into the system spreading the cost over more people. But that may actually add to the pressure for cost reform. There are, roughly, three chunks of uninsured. One chunk has been priced out or tossed out because they have a serious health problem. They will certainly welcome coverage. A second chunk is poor or near-poor. They will certainly welcome the subsidies to help them get coverage. The third chunk, though, are not necessarily poor or unemployed. They work for themselves or for an employer who does not offer insurance, and they have made a rational economic decision that the benefits of health insurance are not worth the cost, because they are, for instance, young, healthy, and childless. They are likely to feel dragooned into paying for something that they already decided is not worth it. And the new rules will have a leveling affect: If you can only charge the near-elderly three times what you charge the youngest, those youngest (the ones most likely to feel they don’t need health care coverage) will be paying considerably more than they would have under the old regime.

So the next few years will see a “perfect storm” of factors pushing up the costs of healthcare – particularly as expressed through private insurance premiums.

Is our political system capable of real cost reform?

That’s a good question. Any way you cut costs cuts into someone’s livelihood and someone else’s gravy train. Nobody thinks of what they are doing is “waste.” Nobody. And much of the public has what Ian Morrison calls a “Pimp My Ride” attitude toward healthcare: Bring on all that magic stuff! Don’t you dare take any away before I get mine!

So the political difficulty is quite real. But the pain felt by the public is also quite real, and will become more real and obvious as the months go by.

What if the Republicans regain power? What if the Democrats lose their majority in the House or the Senate, or lose the White House? That is not really a problem for this scenario: The underlying forces are so great that whoever is in power will have to at least appear to be doing something about the cost of healthcare. The Republicans will frame it as fixing the mess the Democrats made.

The clash between the public demand for cost reduction and the public demand to “Pimp My Ride” will mean that the cost-cutting legislation will not be shaped as across-the-board, government-imposed cost controls. Instead, it is more likely to be shaped in a complex of measures that allow politicians to take credit for “doing something” about costs while distancing themselves from what is actually being done. The measures would include such things as:

–   a Medicare rate commission with teeth, able (like the military base closure commissions of the last decade) to make decisions that can only be overturned by Congress en masse, not piece by piece.

–   Mandated bundling: Call it “beyond DRGs” – all common, definable interactions, procedures, goods, and services bundled into packages: A compound fracture of the tibia, an uncomplicated birth, a diabetes care subscription, a medical home.

–       Mini-caps: Certain services, especially ones dealing with wellness, prevention, or chronic illness, not only bundled into subscriptions, but priced by the year in a kind of mini-capitation: Well-baby care, diabetes services, pregnancy and birth.

–       Common carrier rules: As in transportation and telecommunications, the provider can set whatever prices and offer whatever inducements and discounts and special offers they want, but they must give the same price, the same special deals, to all comers, large or small.

–       Real and transparent prices: A prime reason to establish bundling and common carrier rules is simply that you can’t have competition on price and quality if you can’t know what the price is. So put up a menu: Having your baby here costs this much, a cholecystectomy that much, a new knee this other amount, the whole thing, soup to nuts, diagnosis to rehab to drugs to scans.

–       Real quality transparency: You also can’t have competition on price and quality if you can’t tell how good the product is. Put up a scoreboard: How many hearts did you do? How many came back to pump? How many infections? Unless you’re Michael Jordan, nobody really likes a scoreboard hanging over their head. But we need scoreboards, or we (individuals, employers, health plans, government) can’t possibly be smart shoppers for healthcare.

–       Comparative effectiveness research with teeth: Today, a procedure, drug or device can be reimbursed if it is safe and effective. We may get to a point where a procedure, drug or device can be reimbursed if it is safe and cost-effective. If your elaborate billion-dollar surgical/genomic/interventional/whatever scheme turns out, after a great deal of study and evaluation, to be 5 percent more effective than rest, aspirin, and yoga, the Medicare rate board will say, “That’s nice, but you’re on your own. We’re not going to pay for it.” And private health plans, under that cover, are likely to follow suit. Such schemes will become like cosmetic surgery: legal, perhaps even somewhat common, but paid for by Visa.

–       De-tortified malpractice: Now, the only way to be compensated for a medical mistake is to pin the blame on someone, sue, win, and win big enough to give a big chunk to the lawyers. And there is little to no evidence that suing doctors improves their skills. Take malpractice claims out of the tort system altogether into a medical compensation scheme like other countries use, and you will help more wronged patients, run the rare incorrigibly “bad” doctors out of the system, and help the rest improve – at about 10% of the cost of our current system.

–       Regional bidding to health authorities: Consider one detail of the Canadian system. The government does not simply say, “Here’s how much we will pay for diabetes services, or long-term care services, or emergency services.” Instead, each province establishes a set of regional health authorities. A metropolitan area may have half a dozen or more. These authorities take bids: Organizations (many of them not-for-profit or religious) step forward and say, “We can provide (for instance) diabetes services for X thousand patients per year for Y dollars, and here is our track record, our quality statistics, our patient satisfaction numbers.” They compete on price and quality. Cost down, quality up. Can the system be gamed? Certainly. But our system comes pre-gamed.

There are probably many other possibilities for fine-grained cost reductions, when the time comes that the public is howling enough for help. For us in the industry, now is the time to get ahead of this curve by figuring out how we can get control of our own processes and drive down our own costs.

With nearly 30 years’ experience, Joe Flower has emerged as a premier observer on the deep forces changing healthcare in the United States and around the world. As a healthcare speaker, writer, and consultant, he has explored the future of healthcare with clients ranging from the World Health Organization, the Global Business Network, and the U.K. National Health Service, to the majority of state hospital associations in the U.S.  He has written for a number of healthcare publications including, the Healthcare Forum Journal, Physician Executive, and Wired Magazine.  You can find more of Joe’s work at his website, www.imaginewhatif.com, where this post first appeared.

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RachelVikram CBarry Caroltcoyotebev M.D. Recent comment authors
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Rachel
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Rachel

Vicram,
I am curious. When you went to India, how did you decide what tests to have done? Did the lab company offer you any guidance in making your selection? Was there any guidance offered to you about how to interpret those results or how to go about fixing a particular problem?

Nate
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Nate

You don’t think Quest would do the same thing, if you could ever reach a person there

Margalit Gur-Arie
Guest

“This one, you will have to hand it to conservatives. ”
I think you have to hand it to the fact that the cost of professional labor in India is about 1/5 of what it is here, and the big corporations haven’t established their monopolies just yet. Don’t worry, it will come….

Vikram C
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Vikram C

Echo Joe’s sentiment on demand being infinite. Just returned from vacation to India. Got tons of test and dental procedures, I wouldn’t have done here. If my vacation had been longer would have got few more procedures as well. Some of the service there is mind boggling. Test lab guy came at home and discussed tests available. Took blood samples for 6 people for about 20 test procedures such as Lipid, blood group, liver etc. Total bill for all tests- $200. Results available on internet the same evening. This one, you will have to hand it to conservatives. That is… Read more »

Margalit Gur-Arie
Guest

Barry, I don’t have all the answers, but here is what I know. There are about 20% inner city kids. The school district is rather small. There are less than 1000 kids in the high school. There are three elementary schools and one middle school feeding the high school. The high school is an open campus. There are numerous tutoring and special classes for reading and math in particular open to all students. There is no zero tolerance policy. Kids get disciplined the usual way. Most common is in school suspension, followed by out of school suspension, followed by transfer… Read more »

Barry Carol
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Barry Carol

Margalit – I’m curious to learn a little more about integration in your local school district. In Northern NJ, I’ve heard from people on the scene report that at least one former very high performing district declined considerably in quality after poor kids from nearby towns started to be bused in. Specifically, I wonder how many poor kids are there in a given class and what is the total class size for both elementary and high school grades? Is tutoring available to help kids that are having trouble academically? How is discipline handled? Is there basically a zero tolerance policy… Read more »

Margalit Gur-Arie
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There is a big difference between educating children and assessing the results. My statements regarding the lack of opportunity were assessment of results, not lessons to children.
The simple fact is that de-facto segregation does not promote equality of opportunity.
The other simple fact is that McDonald’s ain’t no Harvard Business School and no amount of demagoguery will change the fact that some kids are placed on the McDonald’s track at the age of 5.

Nate
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Nate

“In my opinion, it’s expectations.” How do you build expectations? By telling kids; “Being born in the projects means that barring unusual circumstances, you will have a miserable life.” and “Upwards mobility is a legend nowadays. It didn’t use to be, but there is nowhere to “go west” and “make something of yourself” anymore. The doors, and windows, are shut.” or by telling them they are going to have to work their ass off but they have every opportunity to make it out and it is all up to the decisions they make. The choices they make will determine if… Read more »

Margalit Gur-Arie
Guest

Nate, the kids I was talking about that go to college and go to Ivy League Schools are the kids that are bused out of their neighborhoods to the school district my kids go to. The collective dreams and goals of the kids in this environment are to become lawyers, doctors, presidents of the US, scientists and so forth. Going to college is a given. They don’t all succeed, but over 95% go to college right after graduation. A few go later. McDonald’s is not in their repertoire. In contrast, the kids that do not get bused (about 20 minutes… Read more »

Nate
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Nate

notice you tempered your argument a lot, you started with all poor kids where a lost cause with no chance of ever getting out and now most of them go to college and some even the ivy league. See just in the period of two days my yes you can rehtoric has changed lives. Kids are already moving out of the projects into Ivy league schools. Few weeks I’ll have ended poverty as we know it.
Wait and see what I have planned for May

Nate
Guest
Nate

Why isn’t it good enough? I had Naugles, ghetto version of Del Taco, I managed to make it from there. Actually that was after a stint washing dishes some place else. I would have been lucky to start at a McDonalds instead. McDonalds paid better and had some sembelance of management structure. Very few kids from my school went to college and I’m sure not one made it into an ivey. We only graduated 70% of the total class in a great year. Sounds like your poor are doing a lot better then where I grew up. But your comment… Read more »

Margalit Gur-Arie
Guest

Nate, let me set a few facts straight first. I went to school with people that had no food at home. I was the only person in my elementary school class to go to college. Please don’t lecture me about poverty. My kids go to school with kids from the inner city because I chose this district. A while ago I was driving my son’s friend and some of his “cousins” home and I realized that the kid sitting next to me, talking on his cell, was arranging to pick up some crack once I dropped him off in his… Read more »

Nate
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Nate

“All we need to do is tell them that they can, right before we drive home to our safe gated community on the other side of the tracks..” That’s the difference Margalit, your the lily white person living on the other side of the tracks who speeds through the hood with their head down to scared to experience reality but the first to jump on their soap box as soon as they cross the tracks. My house isn’t on the other side of the tracks. I am surrounded by public housing, not on the other side of guard gates, not… Read more »

Barry Carol
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Barry Carol

I remember reading sometime back that three factors most highly correlated to poverty are (1) no father in the household, (2) mom didn’t finish high school, and (3) mom had children as a teenager, out of wedlock and long before she is able to adequately support them. Before welfare reform, the welfare check increased with each birth further encouraging a cycle of dependency even though working people don’t get a raise just because they have another mouth to feed. While I feel for the kids who are brought into the world under these circumstances, I think their mothers and their… Read more »

Margalit Gur-Arie
Guest

bev, I completely agree with what you wrote. Adopting a poor family is not the answer, just like any other charity is not the answer (as I said above – I hate charity). Charity begets degradation and dependency. Education must be the answer. But how do you educate when the kids go home to a total disaster? It’s a vicious cycle. Inculcating a culture of self sufficiency sounds good, but how do you do that? Whether we like to admit it or not our education system is largely segregated both by race and by class, and that is a huge… Read more »