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.

In my less than glowing reviews of the Bush Administration as a whole I reserve a special place of opprobrium for Condi Rice. This is partly not really her fault. I turned up at Stanford in 1989 to do a one year masters in Poli Sci wanting to take a class on Soviet affairs (remember that?) and found that the Stanford professor who specialized in Soviet affairs had taken the year off. Yup, because Condi had decided to have fun somewhere else I had to get up early every Friday and take a rickety old bus to Berkeley to take a similar class there. So as well as being a completely incompetent National Security Adviser — "I believe the title was ‘Bin laden determined to attack in the US’ but it was a historical document" — she’s also directly responsible for me having to wake up early, often hungover as Thursday was sorority girl drinking night, when I was a young grad student. Yesterday Condi was getting what passes for a reaming these days from a mostly compliant bunch of Dems (well done Kerry and Boxer for voting ‘Nay’) in the Senate as she advanced up to and beyond the level of her own incompetence to Secretary of State. Good grief.

Meanwhile, to end my political rant and return to healthcare, down the hall in the Senate a much more agreeable bunch was giving plaudits to the soon-to-be former governor of the nation’s most conservative state as he takes over Tommy Thompson’s job at HHS.

As in the last week hints have been emanating from the Rove White House about figuring out a way to cut Medicaid — presumably because its recipients can’t afford to buy seats at today’s inaugural — the conversation in the confirmation hearings somehow turned to block grants. Sates’ rights-loving Republicans approve of block grants as they give states the ability to do what they like, and Leavitt did some of what he liked in Utah–basically using the Oregon formula of giving worse benefits to more people. Of course block grants also do something else, in that they theoretically stop states gaming the system to get more matching Federal dollars. New York has been the master at this forever and there are going to be some Medicaid cuts there soon anyway. (For much, much more on that see the excellent Health Signals New York).

Leavitt was at pains to deny that he’s ever heard of such a thing.

Leavitt was asked repeatedly about block grants and avoided answering directly several times. When pressed hard, he finally replied, ‘I know of no block grant proposal that would come to you.’ But at other points in the hearing, he mentioned that he was not yet privy to all White House plans and on several occasions he differentiated between the core Medicaid population that states must cover by law, and other ‘optional’ groups that states can choose to incorporate.

Bush a few years ago proposed what was essentially a block grant system that would apply to the optional groups. That was controversial even among congressional Republicans, and many Republican state governors also oppose it.

Of course what’s really fiction is that any cabinet secretary would be privy to any information at all about policy that might affect their area of authority. And you don’t just have to look at the treatment of Paul O’Neill. In fact look no further than the words of Leavitt’s predecessor, (and I assume for a few more minutes) current HHS secretary Tommy Thompson, who was also a Republican governor. Here’s what Thompson said after he quit about the small matter of the biggest legislative change to Medicare in 20 years.

In response to a question after his resignation speech, Secretary of Health and Human Services Tommy G. Thompson said, "I would have liked to negotiate" or bargain with pharmaceutical companies over the price of prescription drugs.

Thompson also said this:

"Out here, in this department, you get an idea and you have to vet it with all the division heads and the 67,000 employees. … then it goes over to the supergod in our society, and the supergod is. … the White House Office of Management and Budget. And they turn you down nine times out of 10, just to show you who the boss is. Then it goes to the young intelligentsia of the White House, who don’t believe that anything original or good can come from a cabinet secretary. And if you do get by them, it goes to the president. And if the president does agree with it, it goes on to the Congress, and if Congress ever does pass it, it’s time to retire."

So frankly I don’t doubt that Leavitt is telling the truth, I just don’t think that the Rove/Norquist Administration has yet told him what’s he’s selling. And it’s clear that like a fresh young car salesman he gets no choice of the options he’s offering the bemused customer standing in the dealer’s lot. I’m sure he’ll look forward to deferring to his manager.

It is though somewhat all of a moot point. Medicaid is a disaster. It has been continually forced to pick up all the expansion of coverage thrown at it from both the first Bush Administration (that’s daddy, not the last 4 years), then Clinton’s CHIP program, then the abandonment of health coverage from employers in the last recession. And increasingly it has had to do this on less money as states went into deficit big-time in 2001.

Don’t forget that Medicaid is three and a half programs masquerading as one. It’s pays for poor moms and kids, it pays for nursing home care for the spend-down elderly and disabled (and for their Part B premiums for Medicare), and it provides the DiSH payments to big inner city hospitals. And most of the money (about 70%) goes to the long term care for the elderly and disabled. There’s not enough money in the system to fix it by moving people into different programs, and the whole thing ought to be wrapped into some kind of universal coverage program for the working poor.

But pigs will not be flying anytime soon, so Medicaid is all there is to prevent even more kids being thrown out of health insurance and even more destitute seniors being thrown, literally, out on the street. So for that reason, despite the terrible margins on the business associated with it, the maintenance of Medicaid is of interest to lots of players in the health care sector from nursing home operators, to safety-net providers, to pharma companies, to a sub-set of health plans. And to anyone concerned that we may not be treating our most vulnerable citizens very well.

Meanwhile, apparently some other chump who couldn’t manage his way out of a paper bag is also getting a renewed contract for his job today. I need to get better at screwing up as it seems to be what Americans like to reward.