As Vermont legislators confront the burdens and the irrationality of Vermont’s health care system, they face numerous obstacles. One of the most fundamental obstacles is conceptual. A new book written by three Vermonters and to be released within days from now goes a long way to clarifying the conceptual confusion and pointing the way to meaningful reform.
The authors are Cornelius Hogan, a longtime public servant who has served in the Cabinets of Republican and Democratic governors; Dr.Deborah Richter, a physician and expert on health care reform; and Terry Doran, a journalist who has helped put together a book of unusual clarity and insight. It comes at a crucial moment in Vermont history and ought to be read by every member of the Vermont Legislature.
One of the authors’ central insights can be encapsulated in a number. They point out that about 70 percent of health care costs represent costs of infrastructure. By infrastructure, they mean the hospitals, clinics and personnel that are always available to us whether we are using them at a given moment or not. It is important to address the costs of pharmaceuticals and other supplies, but they only account for about 16 percent of health care costs. Reforming the health care system means taking a look at how we finance the health infrastructure.
The authors refer to this infrastructure as a “shared service.” It is a service we expect to be on call for us whenever we are in need. It so happens that about 10 percent of Vermonters account for about 70 percent of health care spending. And yet it would be impossible for that 10 percent to shoulder the entire cost of the hospitals, physicians and other fixed expenses that were there waiting for them when they got sick.
We spend most of our lives among the 90 percent who are not piling up huge medical expenses. But we know that if we want those services ready for us when we need them, we must share the expense even when we are not using them. That is why we have health insurance.
The problem is our health financing system is disorganized, erratic and unreliable. In the past four years, about 20,000 Vermonters have lost insurance. The Medicaid program for low-income Vermonters is stacking up an enormous deficit. The costs to businesses and individuals continue to escalate at double-digit rates. One of the reasons is that our helter-skelter system of health financing requires an enormous administrative expense for chasing or denying payments. About $1 billion out of $3 billion in health expenditures in Vermont goes to administration.
Past attempts at cost controls have not worked, mainly because they have focused on the individual rather than the system. Managed care was an attempt to curb usage by focusing on individual claims. Thus, HMOs and insurance companies set up bureaucratic systems for screening out what were deemed to be unneeded services. The public rebelled at the interference, and the system failed to control costs.
The focus on individual demand is appropriate in its place. Gov. James Douglas has proposed programs for managing chronic disease better and for promoting good health. These are useful for the individual and, to an extent, for the system.
But we are always going to have a predictable level of health care needs— births, broken legs, heart attacks, diabetes, end-of-life illnesses — and we will continue to need to maintain the infrastructure necessary for coping with these demands. The authors note that it is the capacity of our system that costs us, not its use. It is good to encourage heart health, but medical specialists know that in a population the size of Vermont’s there will always be a certain level of heart disease. Our medical facilities and personnel will have to be there to deal with it, and the underlying assumption of our system is that we will share the cost.
It is an underlying but not fully acknowledged assumption. We share the cost at present by means of insurance provided, if we are lucky, by our employers. Many Vermonters are not so lucky. They are underinsured or not insured at all. A high percentage of all personal bankruptcies occur because of health care crises — a sign that the system is not working.
If we acknowledge the assumption that our system depends on shared costs, like our highways or our schools, then we could put in place a more dependable way of financing it and controlling its costs.
This editorial is written by the editorial board at the Rutland Herald. He is a Pulitzer prize winning journalist and a very big deal in Vermont.
http://rutlandherald.com/apps/pbcs.dll/article?AID=/20050222/NEWS/502220310/1018/OPINION
