Health Care Reform

I have been very disappointed by the health care reform debate that has now become insurance reform, and not good reform at that. Having worked in both and insurance company and in government I think I am capable of seeing the strengths and weaknesses of each as they relate to the purchase of health care services. One feature of government that always impressed me was the emphasis placed on programmatic planning. In general a program plan had to be in place before funds could be spent. The plan had to specify where funds were to be spent and why. The planning emphasis was related to the fact that limited resources had to be allocated in a way that was transparent, and it more often than not included those who would be affected by decisions made. This was not a perfect system, but the practice of actually thinking about resource allocation may have made the process more accountable. Insurance companies, in contrast, operate on business plans. Their role is directly related to system design, although it system design was affected by their decisions. For example, if a commercial insurer chose not to fund a particular procedure, then that procedure was likely to be used by a provider. Given that my interest is in mental health and substance abuse, I found that the limited coverage by commercial insurers shaped how providers practice. The worst example was in substance abuse where a 30-day benefit resulted in 30 lengths of stay. Issues related to system shaping were rarely if never considered by the commercial insurers. Rather, they were concerned about being sure that their expenditures for healthcare were less than what they brought in with premiums. An allowance had to be made for profit and overhead also. This balance is what their business plans are all about. Commercial insurers also develop marketing plans to determine how they will increase revenues and their book of business- all with the goal of increasing premium revenue while maintaining control over expenditures. Neither the governmental nor commercial approach is inherently better than the other; each arises out of the requirements of each system.




I think that those who attended the August community forums did not understand how much government is involved in health care. Here are some of the health care services the government funds: mental health, substance abuse, maternal and child health, public health services,(sanitation, inoculations, prevention and education, restaurant inspection, dentistry, animal control, air quality monitoring, etc) public hospitals, Medicare, Medicaid, the VA health system, developmental disability services (in addition to that provided by Medicaid), community health centers, portions of the Temporary Assistance to Needy Families program, etc. There are also health-related services that the government provides, for example, most medical research, epidemiology, provider licensing, quality assurance, provider contracting, and provider training. One of the reasons they are with the government is that no one else will provide them, including the insurance companies.



Both the government and commercial insurers have attempted to control health care costs. One of the easiest ways for the federal government to contain its costs is to make a program the states' responsibility. It has done it in the Medicaid program by requiring the states to match federal money. This is not a perfect control mechanism since Medicaid is an entitlement and is an open bank vault for those who qualify for the services and who also need them. Another, more aggressive way to contain costs is to provide the states with block grants to fund services. This absolutely limits federal liabilities since grant funded programs are not entitlements. In this kind of system, if more services are to be provided this must be done by lowering unit costs or by providing more state funds. This system has worked well, depending on your point of view, in substance abuse. Most providers will attest to the fact that raises are minimal to non-existent. Government programs have also adopted managed care strategies that first were used by commercial insurers. But I will discuss this more later. It is no great leap of faith to say that government-funded services have been rationed for years. They are rationed through the funding mechanisms already discussed but also by enabling legislation that limits eligibility to certain populations that are usually defined either by need or by income. About 25 years ago the federal government attempted to control costs by funding agencies whose mission it was to curtail the growth of health care costs by reducing unnecessary duplication of health services and facilities. The remnants of this system still function in some states, but decisions were challenged in court by providers who had great resources at their disposal.



Commercial insurers adopted managed care strategies to try to rein in costs. These techniques were roundly criticized by providers, who labeled them as intrusions into their practice and the "doctor patient relationship." Managed care worked to some degree on the margin of cost increases. It used techniques such as utilization management and concurrent review to ensure that only medically necessary services, as defined in the insurance contract, were provided. Again, many people do not understand that insurance is a contractual relationship between a policyholder and the insurance company. The contract defines what will and will not be covered. In general coverage should be to treat illness and injury and should be medically necessary. Thus, cosmetic surgery is not covered, except in the case of an injury or birth defect. Managed care strategies, then, rather than practicing medicine, were practicing contract interpretation. The question for managed care systems is "Is the care that this person receiving consistent with the insurance contract?" This too is rationing care. No one is entitled to services that are not on the covered list of benefits in the insurance contract. Those benefit limits ration care. In addition, deductibles also ration care. The current insurance fad is to provide high-dollar deductibles. For example, a contract might include a $1000 deductible, so that the covered person has fairly high out-of-pocket expenses. This is another example of health care rationing. It also has the perverse incentive of having covered individuals getting as many services as possible in a given year, the goal being to exceed the deductible amount in order to have the health insurance begin coverage while avoiding expenditures in subsequent years. Insurance carriers also used capitation as a means to control costs.  In this system, a provider is paid so much per person enrolled in his/her practice per month.  This provides an incentive to providers to reduce the amount of service they provide per patient.  Theroetically it should also provide an incentive to the provider to do preventive care in order to avoid more expensive care in the future.  There are many ways to structure a capitation system and if a provider is a good buiness person, they still can earn a good income by focusing on prevention, and reducing the services per patient.  As noted above, governmental systems adopted these strategies to try to control costs also.



There are other parties that also assist in the rationing of care. Since most insurance is employer-based, the employer attempts to reduce its costs. It decides how much it wants to pay and the insurance companies design a benefit to fit within those costs. Many employers do not want to pay for certain services (e.g., birth control pills, treatments related to the effects of suicide attempts, mental health, substance abuse) so as to limit their costs. This is rationing. Another layer of expense in the commercial insurance market are the benefit consultants whose job it is to match up an employer with an insurance company that provides what the employer wants to provide at the employers target cost. These middle-men are not free and they usually have very nice offices.



All of these systems of rationing are necessary because providers cannot have an open check book to provide whatever they want. In spite of the supposed sacredness of the provider-patient relationship patients should be aware that their physician, dentist, psychologist, psychiatrist, osteopath, radiologist, etc. make money off of the patient’s sickness. No matter how many oaths, high ethical standards, etc. a profession might have, the truth is that the more services provided the more the providers income. Greed is part of the human condition. The guilds for each of these professions (e.g., the American Medical Association, the American Dental Association, the American Psychological Association) advocate for legislation that usually increases their membership's income. Rarely do they advocate for measures that will negatively affect their membership's pocketbooks. They usually do this under the guise of improving quality. There is the implicit assumption that the more expensive the service the better it is when in reality it usually means the wealthier the provider is. This is also true of hospitals. Their bottom line is enhanced with higher rates of reimbursement and increased hospitalizations.



The elephant in the room of health care reform is indeed provider incomes. Why do physicians usually live in the highest hill in town? No one wants to tackle directly the issue of provider salaries. Public and commercial systems hope that this will be taken care of through controlling reimbursement rates, but since most outpatient services are not scrutinized (at least by commercial insurers) physicians and other providers still can provide more (unneeded) services to boost their incomes.



So what should health care reform include? I actually do not think that a public option by itself will drive down costs, although it may help. I have some other thoughts:

1. Real health care reform can control costs by having physicians and other providers be employees of clinics rather than as independent providers who can bill as they wish. By being employees, a cap can be placed on their salaries. This was the original model for the Health Maintenance Organization but it rarely happens. The alternative to this is to have all providers capitated for all of their business, except for private pay patients.  The only other option for providers would be to accept only private pay

2.  Salaries of commercial insurers executives should be capped. This is about as likely to happen as capping the bonuses on Wall Street, but it would help control costs. Holding their salaries to the same level as government bureaucrats with similar duties is one approach.

3. Providers should receive an incentive to provide preventive services. Everyone should be screened, for example, for colon cancer in order to avoid the costs of having it reach an advance state before treatment is started.

4. There should be a standardized benefit across all funding sources. This would make it easier for employers to judge who should provide coverage for their employees based solely on cost. If an employer cannot afford the standard coverage, tax offsets should be offered.

5. All citizens should be required to have the standard benefit. The unemployed should be able to enroll in a New Medicare program that would offer the standard benefit and continued enrollment would be means tested. That is, a person could stay in the New Medicare only if they do not have sufficient income or are not employed. As soon as they are employed this coverage would stop since all employers would be required to provide the standard benefit package. If this were done, Medicaid would no longer be required to fund health care services, but it would continue to fund social services.

6. All specialty health services (mental health, substance abuse, maternal and child health, etc.) would be part of the standard benefit and they would no longer be funded separately by government.

7. Government's role in health care would be to provide quality assurance and financial audits for he New Medicare program. Government would also continue to support research, training, and quality assurance.


8. With a standard benefit, insurance companies would truly compete on cost.



What are the odds that this will happen? Not much, and it is unfortunate that even the milquetoast proposals before Congress are having their difficulties too. Big commercial insurance and pharmaceutical companies and the guilds have too much money, and hence influence, to make real reform happen. In addition we have an administration that just does not seem up to the fight.



Fortunately for me, I go on the current public option next July, i.e., Medicare.