By Stephen B. Kemble, M.D.
Honolulu Civil Beat, IDEAS, October 4, 2020
In 2009 Hawaii passed a law to create the Hawaii Health Authority, or HHA, and charged the group with designing a universal health care system that would cover all residents of the islands.
The HHA evoked the fundamental questions at the core of health care in the United States today. Should health care be a commodity, sold by corporations to those with the ability to pay? Or should it be a public good that is assured for all, similar to roads, schools, national parks and national security?
I was an original member of the HHA, appointed by Gov. Neil Abercrombie. The HHA met regularly from 2011 until April 2013 but at that point the Abercrombie administration pivoted away from the HHA and toward the federal government’s Affordable Care Act. The ACA was largely written by the insurance industry in order to cement the industry’s central role in health care. At the heart of the ACA was a move to expand coverage by getting greater numbers of people on competing private healthcare plans.
So, what has happened to health care in Hawaii under the ACA?
In the past decade Hawaii’s per capita health care costs have doubled, and they continue to rise at a rate of about 7% per year with no end in sight. Our physician workforce has declined precipitously, decimated by reforms promoted by the Affordable Care Act.
Even before the pandemic arrived on our shores this year, our health care system was in crisis.
To begin to understand why that’s happened, let’s go back to what existed before the Affordable Care Act went into effect. At that point, a patient’s experience of seeing a doctor in Hawaii generally followed expectations. The doctor would talk to you and examine you, make at least a provisional diagnosis and explain it to you, and formulate a plan for further diagnostic tests and/or treatment of the diagnosed conditions.
Even if — unlike in every other economically advanced nation in the world — our health care was being financed largely through corporations, the system in Hawaii was relatively stable. Needed care was generally accessible, and monthly health insurance premiums in Hawaii were among the least expensive in the country.
At that time doctors were paid with fee-for-service: They provided a service and they got paid for it. In 1974 Hawaii set itself apart from the rest of the United States by passing the Prepaid Health Care Act, mandating that employers must provide health insurance to anyone working 20 hours a week or more. Both the Prepaid Act and federal Medicaid rules assured comprehensive benefits.
The Prepaid Act also required that all employer-based insurance must be equivalent to the benefits of the state’s largest health care plan (which was then as now HMSA), a requirement that has effectively banned deductibles and limited co-pays to 10% or 20% of fees. Doctors’ fees were largely standardized due to HMSA’s dominance; other smaller plans used physician networks and fees similar to HMSA. Kaiser had its own prepaid system.
Doctors practiced in small independent practices, and all of them accepted HMSA, other employer-based plans and Medicare. Most also accepted Medicaid. Our per capita Medicare spending was the lowest in the country in 2008.
In essence, things worked. Patients got care in the expected way, and doctors knew how and how much they would be paid. The only problem was that throughout the United States, health care costs were rising faster than the cost of living, and generally faster on the continent than in Hawaii.
The ACA In Practice
The ACA introduced payment reforms called “value-based payment,” founded on the idea that health care costs in the United States were the highest in the world because doctors, paid with fee-for-service, were providing unnecessary services to their patients to make as much money as possible.
This unfounded idea ignored the fact that in the United States the per capita rates of physician visits and hospital days are relatively low compared to other developed countries — in countries in which everyone has health care, fee-for-service payments are often used and the cost of health care per capita is around half of what the United States spends.
Despite the lack of any evidence of over-utilization of primary care services, value-based reform efforts have focused mainly on primary care. The “solution” to the non-existent problem of over-utilization has been to pay doctors and hospitals an up-front per patient fee, a system known as “capitation.” Since 2017 HMSA has paid primary care doctors a flat monthly fee for each patient attributed to the doctor’s practice.
Capitation introduces perverse incentives into the doctor-patient relationship. For example, a flat fee rewards doctors who skimp on care and it encourages the avoidance of sicker and more complex patients who may need more care.
There are efforts to counter these perverse incentives but they have devolved into a byzantine bureaucratic nightmare.
Under the system as it exists now, in order to receive adjusted payments, doctors are required to report detailed data on their patients so that insurers can measure the doctor’s quality of care and the patient’s severity of illness and likely cost of treatment. Doctors must now provide metrics, which necessitates their investing in extra staffing and computer systems.
Doctors who fail to provide these metrics face penalties — in the case of Medicare, a reduction in payment of 2% each year, which has caused the majority of independent Hawaii doctors to refuse new Medicare patients. In July 2019, Wallet Hub rated Hawaii 51st — worst in the nation — for finding doctors who would accept new patients with Medicare.
In addition to being hugely cumbersome, these metrics fail to capture the true picture. Severity of illness depends on a lot more than diagnosis codes, and accurately predicting all of the factors that contribute to the cost of treatment turns out to be impossibly complex and expensive.
Doctors, hospitals and health plans can also game the system by including as many diagnoses as possible and choosing the most severe diagnosis codes — for example, classifying a patient’s illness as pneumonia with sepsis as opposed to simply pneumonia. In America today there is an entire industry of coding consultants to drive up revenues.
Here in Hawaii HMSA intended to base each doctor’s capitation rate on the doctor’s prior fee-for-service revenues but HMSA failed to account for the increased overhead necessitated by capitation. Three recent surveys found most Hawaii primary care doctors have seen their personal income decrease under capitation, many to the point that they can no longer continue an independent practice.
The only way that physicians can now maintain their incomes is to increase their number of patients, which means spending less time with each patient, which further amplifies the incentive to avoid sicker and more complex patients. A survey by Aimed Alliance just prior to the COVID-19 pandemic found 80% of Hawaii doctors blame HMSA’s capitation as a significant cause of our physician shortage. Prior to the pandemic, we were 25% short of needed doctors and losing 3% to 4% of our doctors per year. Now the losses are accelerating.
Meanwhile, with Medicaid: Our state government used to administer our Medicaid program, but by 2009 the state had turned the administration of Medicaid entirely over to insurance corporations. The corporations created numerous rules that blocked care and forced doctors to jump through all kinds of new hoops.
As a result, we have seen heightened inflation in Hawaii’s Medicaid costs, with rates rising at a rate 3% faster than the national average, and most independent Hawaii primary care doctors no longer accept Medicaid. On the neighbor islands, where many patients are on Medicaid, large number of doctors have stopped practicing altogether and departed.
Here Connecticut’s story suggests a solution. In 2000 Connecticut also contracted its Medicaid program out to competing private insurance companies. But in 2012 the state took Medicaid back. It used the resulting administrative savings to enhance fee-for-service payments to primary care doctors and to fund community-based programs for complex high-risk patients. Four years later, physician participation had improved substantially, per capita ER costs were down 25%, hospital costs were down 6% and overall per capita Medicaid costs had dropped 14%.
Where We Are
These days if a patient in Hawaii can still find a primary care doctor to see them, a typical visit starts with questionnaires about the reason for the visit, a medical history and questions required to satisfy metrics, all administered by the receptionist or medical assistant. The patient is prompted to get preventive health tests, such as colonoscopies and mammograms. They may see a physician assistant or nurse instead of the doctor.
If they do see the doctor, it is often briefly with little time to ask questions and minimal or no physical exam. Since the doctor is pressed for time, patients may be discouraged from coming to the office and treated over the phone, and they are more likely to be referred to urgent care or the ER, or for diagnostic imaging or to a specialist, instead of the doctor obtaining a thorough history and doing a physical exam.
Multiple studies show that the true reasons U.S. health care costs are so high are the excessive administrative demands of our current system, coupled with the fact that for-profit health care is riddled with parasites. In 2018 the CEOs of the three largest health insurance corporations each took in over $20 million in annual compensation. Some pharmaceutical company CEOs had even higher annual compensation that year, anywhere from $28.5 million to over $100 million each. The CEO of Regeneron, the company that two days ago supplied President Trump with experimental COVID-19 antibody treatment, was the highest paid CEO in the health care field that year: He took in $117.8 million.
In Hawaii, our system is actually less mercenary than in many other states. All of our hospitals are run as not-for-profit entities. All of our employer-based health care programs, while run by corporations, are not-for-profit. And three of the five corporations administering Medicaid for us are not-for-profit.
But our system is rife with huge amounts of administrative waste.
The Way Forward
It is time to take another look at the recommendations of the Hawaii Health Authority.
Instead of starting with the system we have and asking, “How can we make it a little better while trying to keep all current stakeholders happy?” the HHA started by defining what a truly cost-effective system would look like and asked, “How can we get there from here?”
We recommended creating a comprehensive “all payer” system akin to what exists in several European countries, which would greatly simplify, unify and streamline health care in Hawaii.
Under this system, which would adhere to the state’s 1974 Prepaid Health Care Act, government regulation would ensure that every health plan in the state would offer the same benefits with no deductibles and minimal co-pays. Anyone who wasn’t covered by their employer or Medicare would be covered by Medicaid. Money would be saved by reducing administrative burdens and costs.
Using fee-for-service, all physicians would be paid the same fees in the same way by all payers, including Medicaid. Billing and payment would be kept as straightforward as possible. Management of care would be left to doctors and their patients. Collective negotiation between organized physicians and the state would keep physician fees reasonable for doctors, health plans and taxpayers.
The reforms recommended by the HHA would reduce overall health care costs, restore professional autonomy to physicians, assure reasonable fees and again make Hawaii an attractive place to practice medicine, including on the neighbor islands.
The HHA is already in Hawaii law as HRS 322H. All that is required now is the backing of Gov. David Ige to appoint new members who are committed to cost-effective universal health care and not the special interests of the health insurance companies.
If the governor empowers the HHA to fulfill its statutory mission, Hawaii could again have the most cost-effective health care system in the country and regain its reputation as a leader in health care.
Dr. Stephen Kemble practices psychiatry at Queen Emma Clinic and teaches it at the John A. Burns School of Medicine.