PNHP

Beyond the rhetoric of consumer-driven health care

Beyond the rhetoric of consumer-driven health care

HSR (Health Services Research)
A Special Supplement to HSR
August 2004

Guest Editors’ Introduction
Consumer-Driven Health Care: Beyond Rhetoric with Research and Experience
By Anne K. Gauthier and Carolyn M. Clancy

The evidence and commentaries in this special issue, while needing to be interpreted with caution, are rich with lessons to help purchasers, policymakers, plans, consumers and researchers as consumer-driven health care continues to evolve. At the moment, the reality of consumer-driven health care appears to be neither the panacea promoters would wish nor the poison opponents fear, and there are still concerns for how the poorer and sicker will fare.

Commentary
Current MSA Theory: Well-Meaning but Futile
By George C. Halvorson

The MSA theory makes sense only until you add the actual cost data to the equation. Then the MSA approach runs into a real problem if you assume that the goal is to actually reduce health care costs. The typical MSA benefit package is irrelevant to expensive patients; irrelevant to cheap patients; and a potentially painful disincentive for chronic care patients.Despite its undoubted good intentions, that is not really a good care-based approach.

Commentary
Defined Contribution Health Plans: Attracting the Healthy and Well-Off
By Gail Shearer

The findings from these two studies (two studies in this special edition on consumer-driven health care plans or CDHCs) are troubling for another reason: because of the nature of adverse selection, over time, DCHPs (defined contribution health plan, a more apt label according to Shearer) may drive lower-deductible health insurance options out of the marketplace.

Bolstered in the health care market with the enactment of the health savings account provision in the Medicare bill, in a few short years, it is very possible that unpopular high-deductible health insurance coverage will be the only choice that many employees may face for their coverage in the employer-based market. Those with high health care expenses will face higher out-of-pocket costs than they would in the absence of DCHPs. It is troubling that this type of change in the health care marketplace will take place in the absence of a public debate. Advocates of medical savings accounts, for example, maintain that there should be a choice of plans. The reality is that over time, as adverse selection pushes the next “relatively healthy” group toward high-deductible plans, an insurance marketplace death spiral will result and ultimately will remove the very choice (a low-deductible plan) that employees want.

Concluding Commentary
Consumer-Directed Health Care: Will It Improve Health System Performance? By
Karen Davis

These studies are too preliminary and the consumer- directed health plan products too new to reach firm conclusions about their long-term value. However, concerns are raised by the initial experience. It seems clear that they are relatively more attractive to higher-income individuals. When health status is measured by prior utilization rather than demographic characteristics such as age or presence of chronic conditions CDHP plans appear to experience favorable risk selection. The downside of the growth of CDHP is likely to be increasing market segmentation, with lower-income and sicker individuals served by managed care plans and higher- income, healthier individuals enrolled in CDHP products. Without risk adjustment, sicker and lower-income individuals will pay higher premiums, and HMOs may eventually face a “death spiral” as unfavorable risk selection worsens.

http://www.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=hesr&volume=39&issue=4p2&year=2004&part=null

And…

Kaisernetwork.org
Alliance for Health Reform
7/9/2004
Briefing: Consumer-Directed Health Care: The Next Big Thing?

Excerpts from the transcript of the Q & A portion:

Ed Howard: Time for one more question

Bridget: I’ll be very brief. I’m Bridget [inaudible] with the Energy and Commerce Committee. I spend a lot of my time working on the Medicaid program, and I have to tell you that every time I see that one of the states has made an application to put in their waiver to include HSAs I fall on the floor laughing, simply because I can’t imagine, since Medicaid was originally designed for people who have very low incomes to pay their deductibles and [inaudible] to have access to health care because they don’t have it. I would really just like to know how you would define a compassionate, competitive deductible for somebody who makes say $6,000 a year.

Michael Parkinson (chief medical officer, Lumenos, a provider of consumer-driven health care): …What we’re saying is, that if you look at the public resources, state and federal going into to pay for the Medicaid recipient and then even if you were broadly thinking about what went into everything around them that was meant to be health inducing behaviors, monetize that in a revenue neutral demonstration project to say, that is discretionary money that person can have. I’m not saying dealing with an HSA with $600 and make them come out of their own pocket. What I’m saying, think of the vehicle that has an insurance product and discretionary account that gives them disability control and support, somewhat like cash and counseling, and let’s basically do it…

Bridget: …the question I have is if you got somebody at that income level, they got a lot of things going on in their lives and you try to tell them that they can go out and shop for where they’re going to find a doctor who they’re going to pay, are they even going to know enough to ask the doctor what the right treatment or whatever, I think you’re just setting yourself up for a situation…

Michael Parkinson: That’s why we want to do a demo on the health care side. In reality here’s what we do. We assign you a personal health coach who helps you understand your case-

Bridget: That’s like a clinical trial for treating children. You’re going to take away health care services from people because you want to find out if it works or not.

Ed Howard: Gary, you have a comment?

Gary Claxton (vice president, Kaiser Family Foundation): What’s the risk that people, what happens when they do a bad job as consumers and they have absolutely no money, what happens? I think that’s Bridget’s question.

Michael Parkinson: That’s what happens today. We all pay for health care anyway in the end.

Gary Claxton: Some people have [inaudible].

Michael Parkinson: I guess I’m not expressing myself clearly folks. The community, the state of Tennessee, the state of Georgia, the state of Florida are paying 100% of all expenses in one way or another jointly with the feds.

Gary Claxton: You put them at risk [inaudible].

Michael Parkinson: I didn’t say anything about monetizing or giving them the average of the risk. I don’t want to do on the back of an envelope how this would work tactically. The reason that I came to the Hill today among others, is that you have the opportunity to think more broadly about designs in the employer sector, innovate and also I can tell you that there is some merits to this model as it relates . . . one of the things to me about this model, it’s very cost empowering and it’s very ennobling on the individual level. I personally, call me an idealist, but that’s another outcome of cash and counseling, people felt better about some of the things they can do, the choices that they had. I think that you might want to consider how this might work, that’s all. I’ll leave it at that…

http://www.kaisernetwork.org/health_cast/hcast_index.cfm?display=detail&hc=1224

Comment: The comments here will be limited to consumer-driven health care (CDHC) as a means to reduce health care costs by increasing patient sensitivity to the costs of care. Improving an informed patient-consumer choice through greater transparency in the quality of care delivered by physicians, hospitals and other providers is also frequently labeled as consumer-driven health care. Though an important but essentially unrelated topic, it will not be addressed here.

Many respected, objective health policy analysts have cautioned that it is too early to draw clear conclusions on the impact of these proposals which shift the burden of paying for health care to those who have greater needs. Implicit in their comments is the fact that we will need another decade or so of experience to discover just what will happen, just as we had followed the impact of a decade and more of managed care. But it is crucial to realize that these proposals were not created in an informational void.

An extensive body of health policy literature provides us with enough information to use informal simulations to project quite precisely the impact. We already know that erecting financial barriers to care, which is fundamental to CDHC, impairs access and results in impaired health care outcomes. Period!

Using Bridget’s words, “taking away health care services from people because you want to find out if it works or not,” is nothing short of health policy malpractice! This experiment will kill people. Let’s abandon it immediately!

Op-ed by Drs. David Himmelstein and Steffie Woolhandler on the Kerry Health Plan

Cure a Sick Healthcare System

Universal coverage under National Health Insurance would not increase health costs

By Steffie Woolhandler and David Himmelstein
In These Times
July 23, 2004

Like Capistrano�s swallows, the Democrats always return to health reform. Unfortunately, this year they�re showing little more brain power than the birds.

Don�t get us wrong, we�re no fans of President George Bush�s health agenda: Ship tens of billions of federal dollars to a panoply- of healthcare firms privatize Medicare and dangle skimpy tax credits in front of the 44 million uninsured. But Kerry seems intent on refilling a failed prescription for reform: by proposing to give hundreds of billions to private insurers in exchange for measly coverage for some of the uninsured.

Our healthcare system is so sick that even people with good insurance are feeling the fever. Premiums for employers and their workers are rising 12 percent, even 18 percent per year. Employers have downsized coverage by super-sizing copayments and deductibles. Insurance often proves illusory when it�s most needed�payment denials, visit limits, loopholes and policy cancellations leave millions stuck with huge medical bills despite what they thought was good coverage. Most people�s choice of doctors and hospitals is restricted. Seniors can�t afford drugs, Medicaid recipients face draconian cuts and everyone�s rushed out of the hospital.

Investor-owned healthcare has flourished, despite definitive evidence that it raises both costs and death rates. And bandit CEOs regularly raid our health system, making off with seven- and even eight-figure incomes as their reward for cooking the books, defrauding Medicare and abusing patients to inflate profits.

Bush�s signal healthcare achievement, passage of the $534 billion Medicare drug bill, already is unravelling. Double-digit yearly price increases�even for older drugs�already have eaten up the paltry savings (about 15 percent) available from the recently introduced Medicare drug discount cards. Even the massive flow of federal funds that will commence in 2006, when the full drug benefit kicks in, will only get seniors back where they started last year in terms of drug spending.

Why will $534 billion in new federal spending (over 10 years) buy so little? First, the new drug coverage will be purchased through private insurance plans with overhead costs that average four times Medicare�s. Second, the bill prohibits Medicare from negotiating with drug companies to lower their prices (and effectively bans imports of Canadian drugs on the preposterous pretext that they�re unsafe). Both the Canadian government and our own Defense Department have used their purchasing clout to garner volume discounts. Prohibiting such bargaining assures drug firms of hundreds of billions in excess profits.

Finally, the bill hands Medicare HMOs�which have been ripping off Medicare for years�an extra $46 billion. Since 1985, Medicare has paid HMOs for seniors who choose to enroll. The payment formula has allowed HMOs to collect far more than it would have cost the taxpayers to care for these seniors in the traditional Medicare program. The Congressional Budget Office and the General Accounting Office have estimated these extra costs at about $2 billion per year. Yet HMOs�burdened by administrative overhead far higher than Medicare�s�complained they couldn�t make a profit from Medicare patients.

Bush�s solution? Send them more money. So in 2004, Medicare will pay HMOs an extra $552 above the cost of traditional Medicare for each senior they enroll, according to an estimate by the Commonwealth Fund.

Incredibly, the Republicans (and many Democrats) describe this corporate welfare program as a �pro-competition� health policy. Drug firms are granted patents that shield them from generic competitors, foreign drug imports are banned, government is precluded from negotiating over prices and HMOs are given huge subsidies to compete unfairly against Medicare�all in the name of competition.

Sadly, many Bush initiatives merely continued Clinton�s policies. Kerry promises more of the same. He proposes to spend about $65 billion annually to expand coverage through two mechanisms: One, offer government subsidies for private insurance; two, expand Medicaid. As a nod to middle-class Americans, he�d try to hold down private premiums by having the feds pick up the tab for any patient whose care costs more than $50,000�a misguided effort that shifts some costs to the taxpayers but leaves control in the hands of private firms. Kerry�s massive new spending would leave at least 17 million uninsured (by his own estimate) and tens of millions more with inadequate coverage, and stimulate the malignant growth of healthcare costs.

In contrast, a single payer national health insurance (NHI) program could simultaneously cover all of the uninsured, upgrade coverage for most other Americans and save money. Under NHI, everyone would be covered for care at any hospital, doctor�s office or clinic without copayments or deductibles. Patients would enjoy a free choice of provider, and doctors and nurses would be freed from the massive bureaucracy that encumbers care and wastes money. For-profit ownership of hospitals and other clinical facilities would be proscribed, and private health insurers and most HMOs would be eliminated�saving billions now squandered on profits and executives� incomes, while upgrading quality.

Surprisingly, universal coverage under NHI would not increase health costs. At $6,200 per capita, Americans already spend nearly twice as much for care as do Canadians, Australians, Germans, Swedes and the Swiss�all of whom enjoy universal coverage and lower death rates than ours. Much of the cost difference is due to our mammoth health bureaucracy, which wastes upward of $300 billion annually. NHI could slash bureaucracy by replacing the current welter of private plans with a single public payer and simplifying payments. Even the Congressional Budget Office and the General Accounting Office concede that NHI could save enough on bureaucracy to cover all Americans for what we�re now spending.

On the contrary, Kerry�s plan would actually boost bureaucracy. He�d funnel hundreds of billions of additional public dollars through wasteful private plans. And he�d do nothing to cut the tens of billions that doctors and hospitals waste on insurance paperwork. Kerry claims administrative savings for his plan�through computerized billing and claims processing. But such claims are not credible; more than two-thirds of all healthcare bills already are filed electronically. It�s not sending the bill that�s expensive. It�s the insurance advertising and sales, utilization review, eligibility determination, obtaining pre-approvals for referrals, cost-tracking, and co-payment collections. All would continue under Kerry.

For the 85 percent of Americans who currently have insurance, Kerry offers virtually nothing. No plausible plan to upgrade their coverage, slow premium increases, bring down drug costs, improve quality, or ex-pand the number of nurses. He�d just ask tax-payers facing skyrocketing premiums to chip in for the coverage of the uninsured.

Much of what Kerry is pro-pos-ing already was tried, and failed miserably. Medicaid expansion has been pushed by Democrats for decades. Since 1987, 11.4 million people have been added to the Medicaid rolls, and Medicaid spending has risen from $50 billion to $228 billion, eating a hole in state budgets. Yet the number of uninsured has grown by 10.2 million people during this period, and Medicaid has remained second-class coverage, segregating the poor. On many measures, Medicaid patients fare no better than the uninsured. Medicaid should be replaced by mainstream coverage, not expanded.

Subsidies for private coverage also have a dismal track record. A 2002 federal program offers to pay 65 percent of premium costs for workers who�ve lost jobs due to foreign imports. As of December 31, 2003, 8,874 of the 500,000 eligible workers were taking advantage of the subsidy. With private coverage costing about $10,000 per family, few low-income workers can afford insurance, even with a big boost from government.

NHI isn�t just good policy, its good politics. According to a recent Washington Post/ABC News poll, 62 percent of Americans favor �a universal health insurance program, in which everyone is covered under a program like Medicare that�s run by the government and financed by taxpayers.�

Of course, NHI would be a death blow to the health insurance industry and it would threaten the super-profits of powerful drug and hospital firms. Presumably, that is why only Ralph Nader and Dennis Kucinich have been willing to buck the special interests, and say what Americans long to hear about health care: NHI can succeed. Healthcare is a right, not a commodity.

The political process in repairing a single payer system versus a fragmented system

The political process in repairing a single payer system versus a fragmented system

Toronto Star
Jul. 22, 2004
Televising health summit `very risky, very bold’ move
Martin to meet provincial leaders Sept. 13 to 15
By Les Whittington

(Prime Minister Paul) Martin, who fought the recent election campaign largely on a promise to protect medicare from being eroded by private, for-profit services, revealed the date of his health-care showdown with the premiers after meeting for the first time with his newly appointed cabinet.

The written announcement of the first ministers’ meeting left no doubt about
Martin’s aims. “The major agenda item will be how to strengthen for the long
term Canada’s publicly funded, single-payer health-care system,” it said.

In a horse-trading session to be broadcast across the country from Ottawa,
Martin will seek support from restive premiers for the Liberals’ main electoral promise – a 10-year blueprint to refurbish the hard-pressed health-care program.

Much of the talk will focus on Martin’s offer of $4 billion in extra federal cash to the provinces in exchange for their help implementing a National Waiting Times Reduction Strategy.

This is envisioned by the Liberals as an “all-out drive” over the next five years to achieve significant reductions in waiting times for medical procedures in five areas: cancer, heart, diagnostic imaging (MRIs), joint replacements and sight restoration.

The federal Liberals also want provincial help with major reforms to reduce runaway medicare costs while improving access to health providers, expanding
home care and developing a national pharmacare program.

http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=1090447813703&call_pageid=968332188774&col=968350116467

Comment: Opponents of health care reform in the United States frequently claim that we don’t want to have a “mess” like they have in Canada. Canada does have a problem with queues (though often exaggerated), and they are now addressing, in an open political process, how they can best rectify this problem. Although single payer systems require continual political maintenance, they certainly do work in ensuring that everyone continues to have affordable access to health care.

Contrast that with health care in the United States, a non-system for which “mess” is a grossly inadequate descriptive term. Our fragmented system is suited to incremental measures which have failed to achieve universal coverage and access and have perpetuated mediocrity in our health care outcomes in spite of the massive infusion of funds. Until we adopt a comprehensive, universal system, we will not be able to resolve our current problems and then maintain higher standards by fine tuning our system through an open public process as is currently taking place in Canada.

Imagine the system that we would have if we exchanged our fragmented mess
for Canada’s single payer, and then infused the resources that we have already designated for health care. With the tweaking of incrementalism, our health care parameters have only worsened. But wouldn’t it be nice if we had a high quality, comprehensive system that really would require simply modest tweaking to enable it to continue to function well? That’s a mess that we could live with.

Single Payer Healthcare Study Approved

Commonwealth Of Massachusetts
MASSACHUSETTS SENATE
7/22/04

Contact: Kate Regnier, 617-722-1280
617-251-9567 (cell)

Senator Steven Tolman Announces Approval Of Bill to mandate Single Payer health care study

(BOSTON) – Senator Tolman today announced that the House and Senate have
approved a bill that mandates an analysis by the state of the effects of a single
payer health care system. A single payer system would replace the current
fragmented mixture of public and private health care plans with a single uniform
plan.

The bill requires that a study be made of, among other things, both the cost and the potential savings associated with the implementation of a single payer health care system. The bill further requires that a study be made of the impact on Massachusetts residents, the Commonwealth’s budget, health care professionals and institutions, the Medicare and Medicaid systems, and state and federal laws and regulations. An interim study must be filed with the general court by December 1, 2004, with the final report due by April 1, 2005, along with relevant draft legislation if necessary.

Massachusetts currently faces a crisis in its health care system, with studies indicating that approximately 1.5 million individuals under the age of 65 were uninsured at some point during 2002/2003. One of the primary arguments advanced by opponents of a universal health care system is the potential cost to
the state. However, a comprehensive study of the costs as well as the myriad
benefits (both financial and otherwise) has not previously been performed by the
Commonwealth.

“With literally millions of people un-or underinsured, despite the exorbitant amount of money that we spend on health care, it seems clear that our current health care system is broken,” said Senator Tolman. “We took powerful strides toward remedying that situation with the passage of the health care constitutional amendment last week. This study is vitally important and should highlight the waste and inefficiency that is endemic in our current health care system. We must continue to be vigilant, however, in exploring solutions that would offer affordable, quality health coverage to everyone.”

The bill will now go to Governor Romney for his signature.

Article by PNHP member in New Haven

New Haven Register
July 22, 2004

With health care crisis, the trees are obscuring the forest
Steve N. Wolfson, M.D.  

Our health care system is in massive disarray, but we are focusing on the trees and missing the forest. This is most obvious in the “insurance state.”

This came home to me as I sat with a patient and she told me that she shortly will not be able to afford her medication. Her husband has been laid off from his job, and their insurance will lapse in three months. They will then join the uninsured, Americans whose prognosis for illness and death shames us all.

The trees: Faced with rising costs, declining reimbursement, and patients who are uninsured and unable to pay for services, formerly charitable hospitals are foreclosing on homes and garnisheeing wages. Faced with increasing barriers to reimbursement while malpractice insurance rates soar, physicians are leaving their practices and their patients.

Patients are foregoing needed medications and losing the opportunity to avoid illness. When illness comes, they are accumulating a crippling burden of debt. More and more of the burden of payment is being shifted to patients. The result is that expenditures that appear discretionary are being dropped.

Too often, this means preventive medicine is out. For those who cannot drop services, meaning those who are already ill, the burden is excruciating.

Meanwhile, businesses complain that the cost of health care for employees and retirees handicaps them in international commerce.

Faced with razor thin or negative bottom lines, the health care system as a whole copes with a rising tide of medical errors with an obsolete, incomplete information system and communications network. And those errors that are detected are snapped up by our legal colleagues, pursuing them within a tort system that with comparable inefficiency neither deters malpractice nor reliably compensates victims of negligence.

These are the trees. Newspapers are filled with examples of the injury done by the fragmented, incomplete approach we have taken toward health care, leaving only the insurers and the drug manufacturers as healthy, wealthy components of the industry.

We need to look at the forest. We have enormous resources in this great country, but they are being misdirected, confused, and diffused. Sophisticated information systems, thousands of nurses, countless thousands of administrative workers monitor insurance claims processing, sending bills with relentless efficiency, denying claims with speed and dispatch, while doctors’ offices, emergency rooms, laboratories and pharmacies barely communicate.

We have an accelerating nursing shortage, forcing hospitals to recruit talented nurses from all over the world to care for the sick, while here their colleagues are recruited away from the bedside to work for lawyers and insurance companies.

This is the forest. Our health care system is broken, the pieces lay all around, and directing our attention just to the pieces is doomed to failure.

This is the forest. We need a single health care system, a single payer for all services, a single focus for setting policies and priorities. It can incorporate all of the components.

We can use the enormous bureaucracy that has grown here. But it must be unified, prioritized, redirected toward delivering care, not paying for it. Clearly, this is an effort that would best be pursued by Congress and the national administration. But if not, then let it start in Connecticut.

Just by unifying the countless forms and applications, drug formularies and benefit plans, we can reduce the burden of administration that lies over health care, thereby freeing energies to address real problems, such as coverage for those now uninsured, and a systematic approach to medical errors. We need to do this now, for delay will only mean more pain.
—————————————————————————————–
Dr. Steven Wolfson is a New Haven cardiologist. Readers may write to him in care of the Register, 40 Sargent Drive, New Haven 06511.

NCHC's call for comprehensive reform

NCHC’s call for comprehensive reform

National Coalition on Health Care
July 20, 2004

Building a Better Health Care System

Principle 1 – Health Care Coverage for All

Principle 2 – Cost Management

Principle 3 – Improvement of Health Care Quality and Safety

Principle 4 – Equitable Financing

Principle 5 – Simplified Administration

Conclusion

The members of the National Coalition on Health Care are determined to work
for comprehensive reform of the American health care system. We offer these
specifications for reform as an agenda – an urgent agenda – for action. We close with two observations.

First, we would emphasize again our conviction that reform must be systemic
and system-wide. The problems of our health care system – and the principles
that guided our development of specifications for reform – are so closely
interrelated that they must all be addressed at the same time. One-dimensional reform will not work.

Consider: Unless we improve the quality of care, we will not be able to manage costs or afford universal coverage. Unless we manage costs effectively, we will not be able to achieve equitable financing or cover all Americans. And unless we assure coverage for everybody, we will be unable to make the system less complex, establish a level playing field without cost-shifting, or create a truly competitive health care marketplace.

Second, the status quo – clearly, undeniably – is not working. It leaves tens of millions of Americans with no health insurance at all. It allows costs to skyrocket year after year, putting coverage out of reach for millions of Americans and compromising the vitality of our economy and its capacity to create and sustain jobs. And it jeopardizes the safety of patients because of widespread sub- standard care.

The status quo is not acceptable. It is time – it is past time – to change it. The readers of this report can have a tremendous impact on the prospects for reform and the shape of reform. We hope that you will work with us in this important effort.

Full report:
http://www.nchc.org/materials/studies/reform.pdf

Press release:
http://www.nchc.org/news/press_releases/2004_07_20.pdf

Webcast of the briefing:

http://www.kaisernetwork.org/health_cast/hcast_index.cfm?display=detail&hc=1239.

Comment: On reading the full report it is difficult to come to any other conclusion than that a single payer, publicly funded and publicly administered insurance program offers the best option, and possibly the only realistic option, for achieving all of the Coalition’s goals. However, in order not to lose support of several coalition members, the other familiar options were included for consideration in this proposal.

Although this report is quite weak on specifying the one precise model of reform that should be adopted, it is very strong in supporting no less than truly comprehensive reform now. The message is that it is time to abandon the failed policies of incremental tweaking. That is a real step forward. We should move on it.

A private health care information technology system

A private health care information technology system

Health and Human Services
July 21, 2004
The Decade of Health Information Technology: Delivering Consumer-centric and Information-rich Health Care
By David J. Brailer, MD, PhD, National Coordinator for Health Information Technology

Conclusion

Health information technology provides a mechanism for refocusing care delivery around consumers without substantial regulation and industry upheaval. Information technology can result in better care (care that is higher in quality, safer, and more consumer responsive) and at the same time, more efficient (care that is appropriate, available, and less wasteful). There are very few other alternatives that can achieve both of these goals in a balanced and timely manner.

A national strategy for HIT is needed to achieve this change. This strategy should inform clinical care by introducing EHRs on a widespread basis everywhere clinicians provide treatment. It should interconnect clinicians to allow them to share data in a seamless and secure manner that protects patient privacy. It should customize health information and care so that consumers can have more control, more treatment options, and more choice of providers, including clinicians who may be at a distance. It also should improve population health by monitoring health care delivery in a simple and timely fashion so that quality, public health risks, and clinical research can be enhanced.

The changes that will accompany the application of information technology to health care will be difficult and will challenge fundamental assumptions that have been long held. However, this change is inevitable, needed, and beneficial. Actions can and should be taken to ensure that this change happens sooner rather than later, is more widespread rather than less, and also improves health care quality while addressing health care costs. The actions that are taken over the next decade will ensure that the best health care can be delivered to Americans, and that lasting and positive change in the health care industry will result.

And from the report:

Public-Private Leadership

Low adoption and use of HIT are attributable to many factors, including a
challenging marketplace and a previous lack of cohesive federal policies supporting it. Leaders across the public and private sector recognize that the adoption and effective use of HIT require a joint effort between federal, state, and local government and the private sector.

The private sector role

While the federal government plays an important role in HIT adoption, the effective use of, and value creation from, this technology lies predominantly with the private sector. The federal government will provide a vision and a strategic direction for a national interoperable health care system, but will rely on a competitive technology industry, privately operated support services, and shared investments in HIT adoption. The private sector must develop the market institutions to deliver the products and services that can transform the paper-based health care system into an electronic, consumer-centered, and quality-based system. The private sector can best ensure that HIT products are successfully implemented in ways that meet the varying needs of American health care across settings, cultures, and geographies. The private sector can also continue constant innovation in HIT and ensure that products are delivered on an affordable basis.

Federal and state governments have delegated most components of quality assurance to voluntary private organizations, including but not limited, to the JCAHO, NCQA, the National Quality Forum, residency review committees, and others. This will be true of quality and performance accountability in the future world of HIT. New market institutions need to be developed that can support clinician adoption of HIT, provide interoperability, and enhance the value realized by these investments. Close collaboration between public and private sectors can develop new methods for improving care without creating unnecessary regulation and minimizing reporting burdens on private industry.

The federal role

The federal government has substantial cause for addressing HIT adoption. Although the public is only now becoming aware of errors and mistreatments
in care delivery, the incidence and severity of errors has been known by researchers for some time. The health status of Americans is lower than it
would be if care were seamless, timely, and evidence driven. Health care
inefficiency and quality problems create economic burdens on other industries. When working Americans spend large shares of their time moving between physicians, dealing with the morbidity of improperly treated chronic illness, handling care burdens for their elderly parents, and recovering from errors and unnecessary therapies, the productivity of the American labor force, and America’s position as a global output leader, is harmed.

The federal government has numerous means of stimulating change in the health care industry, even if most of that change occurs in the private sector. While the federal government should not seek to reform health care without industry collaboration through the use of information technology, neither should it let the status quo exist simply because change will be difficult, complicated, and challenging to the industry. The DoD and VA are major federal health care delivery organizations and, increasingly, contractors for care in communities across the United States. The lessons these organizations have learned about HIT are an invaluable national asset and should be diffused through relationships with private delivery networks. Also, the Federal Employees Health Benefits Program (FEHB) contracts for care in most urban markets across the United States, and can drive positive economic change in general care delivery. Beyond finance and
contracting, the current operation of the health care industry results from a vast
patchwork of federal regulations that create many unintended inhibitory consequences for quality and efficiency.

The full report (178 pages):
http://www.hhs.gov/onchit/framework/hitframework.pdf

Press release:
http://www.hhs.gov/news/press/2004pres/20040721a.html

Comment: The private, competitive market has produced for us computers that are powerful yet inexpensive. Software that is used widely is quite inexpensive, and that in the public domain is essentially free after the initial development costs. With inexpensive computers and software developed in the public domain, the cost of an integrated health care IT (information technology) system should be quite modest. And the return in error reduction and administrative efficiency would far more than offset any real costs.

The Veterans Administration is far ahead of the rest of the nation in developing and utilizing an integrated IT system. And this has been developed in the public (government!) sector. Many other nations with universal health care systems have also introduced integrated IT systems primarily through the public sector.

What has the magic of the competitive marketplace produced in the way of an
integrated IT system to this date? High costs, very poor penetration, and system failures! Competitive market theory dictates that we should be leading the world with a high quality health care IT system at a low cost. What went wrong?

First of all, a fragmented system of multiple private plans, public programs and uninsurance does not provide an infrastructure that is very conducive to an integrated IT system. A single payer system, or, at minimum, a highly regulated system of universal coverage through multiple plans, would provide a framework that would ensure adaptability of an integrated IT system. Of course, a single, publicly administered system would be much preferred for an integrated IT system.

But the greatest difficulty with private IT solutions lies in the very nature of these marketplace models. Their goals are, above all, to maximize profits and to maximize the market price of their shares. To achieve those goals, corporate behavior varies from that of a public entity that has a simpler goal of establishing an effective and efficient high quality system that serves the heath care system and its patients well. The public system does not have to be concerned about being a successful business enterprise, but the private model does.

What might the private sector do that doesn’t serve our interests well? They will produce products that command the highest prices that the market will bear. They will design the products to provide a continuing revenue stream. Once gaining a significant share of the market, they will design incompatibility with other systems in an attempt to garner the entire market. They will design obsolescence into their systems to ensure future markets for their new innovative products. They will partner with and perhaps acquire other related entities that can expand profit potentials through greater control of components of the health care system which their products can influence. Although these are good business practices, they are terrible policies for our health care system.

But without market incentives, wouldn’t innovation be suppressed? We have market innovations now, and they have not resulted in the IT developments
that we desperately need. Public innovations have been effective in developing systems in other nations and in the VA that are already working. If private entrepreneurs can develop innovations that could benefit a public system, there is no reason that they couldn’t be sold to the government to place in the public domain. But they should be priced to reflect costs plus a fair one-time profit. We really don’t need more superfluous profit centers in our health care system.

The health information technology report released today should alarm us all.
Although we all agree on the importance of an integrated IT system, the Bush
administration is limiting the role of the government to being an enabler that encourages the private sector to develop a successful business model. Rather than higher quality at a lower cost, we’ll end up with mediocrity at a much higher cost, wasting even more of our health care dollars.

We desperately need strong leadership from our government in developing a
health care IT system that will serve us all well. But based on the current leadership that has failed to address even the fundamental issue of adequate
health care coverage for all, it is unlikely that we’ll see any enlightened leadership on this in the near future. But that said, “Watch this swing!”

NCHC’s call for comprehensive reform

NCHC’s call for comprehensive reform

National Coalition on Health Care
July 20, 2004

Building a Better Health Care System

Principle 1 – Health Care Coverage for All

Principle 2 – Cost Management

Principle 3 – Improvement of Health Care Quality and Safety

Principle 4 – Equitable Financing

Principle 5 – Simplified Administration

Conclusion

The members of the National Coalition on Health Care are determined to work
for comprehensive reform of the American health care system. We offer these
specifications for reform as an agenda – an urgent agenda – for action. We close with two observations.

First, we would emphasize again our conviction that reform must be systemic
and system-wide. The problems of our health care system – and the principles
that guided our development of specifications for reform – are so closely
interrelated that they must all be addressed at the same time. One-dimensional reform will not work.

Consider: Unless we improve the quality of care, we will not be able to manage costs or afford universal coverage. Unless we manage costs effectively, we will not be able to achieve equitable financing or cover all Americans. And unless we assure coverage for everybody, we will be unable to make the system less complex, establish a level playing field without cost-shifting, or create a truly competitive health care marketplace.

Second, the status quo – clearly, undeniably – is not working. It leaves tens of millions of Americans with no health insurance at all. It allows costs to skyrocket year after year, putting coverage out of reach for millions of Americans and compromising the vitality of our economy and its capacity to create and sustain jobs. And it jeopardizes the safety of patients because of widespread sub- standard care.

The status quo is not acceptable. It is time – it is past time – to change it. The readers of this report can have a tremendous impact on the prospects for reform and the shape of reform. We hope that you will work with us in this important effort.

Full report:
http://www.nchc.org/materials/studies/reform.pdf

Press release:
http://www.nchc.org/news/press_releases/2004_07_20.pdf

Webcast of the briefing:

http://www.kaisernetwork.org/health_cast/hcast_index.cfm?display=detail&hc=1239.

Comment: On reading the full report it is difficult to come to any other conclusion than that a single payer, publicly funded and publicly administered insurance program offers the best option, and possibly the only realistic option, for achieving all of the Coalition’s goals. However, in order not to lose support of several coalition members, the other familiar options were included for consideration in this proposal.

Although this report is quite weak on specifying the one precise model of reform that should be adopted, it is very strong in supporting no less than truly comprehensive reform now. The message is that it is time to abandon the failed policies of incremental tweaking. That is a real step forward. We should move on it.

WebMD calls for a government solution for electronic communications

WebMD
July 19, 2004
HIPAA Implementation: The Case for a Rational Roll-Out Plan

HIPAA Administrative Simplification, as it is currently being implemented,is increasing complexity and cost for health care providers and payers.

Introducing WebMD

WebMD Envoy conducts more HIPAA transactions than any other private entity. In total, WebMD processes more than 3.0 billion transactions on an annualized basis for 300,000 physicians, hospitals, dentists, labs and pharmacies, submitting to more than 1,500 payer connections.

The HIPAA Promise: Administrative Simplification

As envisioned by Congress, codified by law and embraced by the industry, HIPAA Administrative Simplification would reduce administrative costs by increasing efficiency through the exchange of electronic communications between providers and payers. As HHS noted in the preamble to the final Transaction Rule, “The lack of standardization makes it difficult and expensive to develop and maintain software. Moreover, the lack of standardization minimizes the ability of health care providers and health plans to achieve efficiency and savings.” At the core of the HIPAA promise is the commitment to reduce administrative costs by defining standards for electronic transactions so that all participants in the electronic health care marketplace would speak the same language and use the same practices.

Instead of negotiating the details of more than 400 claim forms,providers would fill out just one form that would be accepted by all payers. The information payers sent back to providers would be equally uniform. The simplicity brought about by standardization was expected to encourage more providers to switch from paper to electronic transactions.

The HIPAA statute specifies that the standards adopted “shall be consistent with the objective of reducing the administrative costs of providing and paying for health care.” Congress reiterated this objective in the statute three times, and the Department clearly stated that “[t]he purpose of [the Transaction Rule] is to improve the . efficiency and effectiveness of the health care system.” Consistent with Congress’s clear intent that Administrative Simplification reduce administrative costs, standard electronic health care communication must be implemented in a manner that is consistent with and satisfies this objective.

Missing the HIPAA Mark

The simplification envisioned by HIPAA has not materialized and the statutory HIPAA goals of reducing administrative costs and increasing efficiency are in jeopardy.

Transaction Format – Lack of Uniformity

The standards and implementation specifications are extremely complicated and thousands of pages long. Multiple versions of a HIPAA standard claim have emerged as each payer defines for itself what constitutes a “HIPAA-compliant” claim. Payers have published more than 600 different “companion documents” setting forth their individual interpretations and implementation of the government guidelines. That number is expected to grow to one thousand. The standards, as currently being implemented, are increasing the complexity, and therefore the costs of electronic transactions.

Getting HIPAA back on Track: HHS Leadership

HHS must take action to facilitate the successful implementation of Administrative Simplification. Industry efforts to implement Administrative Simplification have resulted in complex standards, expensive and inefficient implementation and uncertainty in the market place. A few strategic actions by the Department can leverage the remarkable forces and resources of the health care industry to achieve the objectives of Administrative Simplification.

Implement full complement of HIPAA transactions

It is widely recognized in the industry that only through implementation of all the covered transactions will administrative efficiencies, and therefore savings, be realized. CMS has an important leadership role to play in making this HIPAA objective a reality. We recommend that, as a payer, CMS focus its implementation efforts on the complete set of HIPAA transactions. To these ends, the Medicare contingency plan should address the full set of transactions, not simply HIPAA formatted claims. Other payers will follow Medicare’s example and diversify efforts to ensure a balanced implementation initiative that recognizes HIPAA is more than just submitting claims.

Conclusion

CMS action is vital to ensuring that the HIPAA objectives of cost savings and increased efficiency are achieved. The success or failure of HIPAA implementation will have significant implications for the success or failure of the National Health Information Infrastructure.

http://www.corporate-ir.net/media_files/IROL/11/116708/HIPAApaper1.pdf

Comment: Imagine if we had a single, publicly administered payer instead. The conclusion that we need a government agency to take action to implement the National Health Information Infrastructure would be the same. But the administrative nightmare of attempting to bring into efficient compliance our fragmented system of funding care would be nothing more than a bad dream.

Nation’s Largest Health Coalition Calls For Sweeping Changes in Health Care System

For More Information, Contact:
Janet Firshein or Kari Root at (301) 652-1558, or
Pat Schoeni at NCHC, (202) 638-7151

Nation’s Largest Health Coalition Calls For Sweeping Changes in Health Care System

Washington, D.C., July 20, 2004: Alarmed at what it terms a deepening health care crisis and dissatisfied with the status quo, the nation’s largest, most broadly representative alliance of organizations working for health care reform today called on our nations policymakers to dramatically overhaul the health care system.

The National Coalition on Health Care, which includes nearly 100 of Americas largest businesses, unions, provider groups, insurers, pension funds, and consumer and religious organizations, urged comprehensive reforms that would insure all Americans, control rapidly rising health costs, and dramatically improve quality and patient safety.

Henry E. Simmons, M.D., president of the non-partisan Coalition said, The health care reforms we are recommending go far beyond any proposal now being considered. After a year of study and debate, the Coalition has concluded that incremental strategies will not be sufficient. What we need is action on comprehensive reform, and soon. And it is clear that over the long term, the cost of action is far less than the cost of inaction, he added.

The Coalition, which collectively represents 150 million Americans, today released specifications for system-wide reforms to help frame a renewed national debate about the health care system and to embolden political leaders to act rapidly regardless of who is elected President or wins control of Congress in November. The Coalitionís report, Building a Better Health Care System: Specifications for Reform, calls for:

1.Requiring health coverage for all Americans within two to three years after the enactment of legislation.
2.Bringing cost increases for health care in line with increases in other parts of the economy within five years.
3.Launching a nationwide effort to dramatically improve the quality, safety, and value of care.
4.Making the financing of health care more equitable.
5.Simplifying and modernizing the administration of health care.

At a press conference on Capitol Hill today, the Coalition warned that, if policymakers fail to act:

ï Premiums for family health coverage will exceed $14,500 in 2006 — more than double their level in 2001.
ï The number of Americans without health insurance will surge to more than 51 million in 2006 — an increase of more than 10 million since 2001.
ï Millions will be unnecessarily injured, and hundreds of thousands of Americans will die each year because of poor quality care.
ï Surging health care costs will add trillions of dollars to federal deficits in the coming decades.

According to the Coalition, The escalation of health care costs is not only a health care issue. It is also a major national economic problem.î Soaring health care costs, the new report says, are reducing economic growth and job creation, corporate profits, the global competitiveness of American firms, and the viability of pensions. Health care costs also have become the single most contentious issue in collective bargaining.

These and other pressures have pushed this unusual alliance of organizations to reach consensus and compromise to make progress, said former Governor Robert D. Ray (R-IA), Co-chairman of the Coalition. “If each of us — each political leader, each organization, each voter — holds out only for our ideal, we’ll remain deadlocked, he warned.

The status quo is unacceptable, added Coalition Co-Chairman Paul G. Rogers (D-FL), former U.S. Representative and Chair of the House Energy and Commerce Health Subcommittee. Todays report is politically significant because it shows that there is broad support across most sectors of the economy and society, and across party lines for tough, system-wide reform. The Coalition’s Honorary Co-Chairmen are former Presidents George H.W. Bush, Jimmy Carter, and Gerald R. Ford.

Speakers at today’s press event included:

Henry E. Simmons, M.D., President, National Coalition on Health Care
Former Gov. Robert D. Ray, Co-Chairman, NCHC
Former U.S. Rep. Paul G. Rogers, Co-Chairman, NCHC
John Aschenbrenner, President, Insurance and Financial Services, Principal Financial Group
John J. Sweeney, President, AFL-CIO
William Novelli, CEO, AARP
James Winkler, General Secretary of the General Board of Church and Society of the United Methodist Church, for the National Council of Churches of Christ in the U.S.A.
Barbara Ross-Lee, D.O., Chair of the Board of Directors, Association of Academic Health Centers
William J. Grize, President and CEO, Ahold USA
Sean Harrigan, President of the Board, California Public Employees Retirement System

A list of the Coalition members issuing today’s report is attached to this press release. Additional information about the Coalition and a copy of the report Building a Better Health Care System: Specifications for Reform, can be obtained by visiting the Coalition’s Website (www.nchc.org) or by calling (202) 638-7151.

The Georgia SecureCare Program

The SecureCare Program would cover all Georgians under a single uniform health plan that is administered and funded by the state. The SecureCare program would replace all current public-sector insurance systems including:
Medicare, Medicaid, PeachCare, CHAMPUS and the Federal Employees Health Benefits Plan (FEHBP). It would also replace private health insurance plans in the state. The program would be financed with current government health care funding for discontinued programs, a payroll tax to replace employer benefits plans and other dedicated revenues (i.e., taxes) on households.

Please click here to read the Lewin Group Analysis

Medical Class Warfare

Medical Class Warfare

By PAUL KRUGMAN.
E-mail: krugman@nytimes.com

If past patterns are any guide, about one in three Americans will go without health insurance for some part of the next two years. They won’t, for the most part, be the persistently poor, who are usually covered by Medicaid. They will be members of working families with breadwinners who have jobs without medical benefits or who have been laid off.

Many Americans fear the loss of health insurance. Last week I described John Kerry’s health plan. What’s the Bush administration’s plan?

First, it offers a tax credit for low- and middle-income families who don’t have health coverage through employers. That credit helps them purchase health insurance. The credit would be $3,000 for a family of four with an income of $25,000; for an income of $40,000, it would fall to $1,714. Last year the average premium for families of four covered by employers was more than $9,000.

A study by the Kaiser Family Foundation estimates that the tax credit would reduce the number of uninsured, 44 million people in 2002, by 1.8 million. So it wouldn’t help a great majority of families unable to afford insurance. For comparison, an independent assessment of the Kerry plan by Kenneth Thorpe of Emory University says that it would reduce the number of uninsured by 26.7 million.

The other main component of the Bush plan involves ”health savings accounts.” The prescription drug bill the Bush administration pushed through Congress last year had a number of provisions unrelated to Medicare. One of them allowed people who purchase insurance policies with high deductibles, generally at least $2,000 per family, to shelter income from taxes by setting up special accounts for medical expenses. This year, the administration proposed making the premiums linked to these accounts fully tax-deductible.

Although the 2005 budget presents that new deduction under the heading ”Helping the uninsured,” health savings accounts don’t seem to have much to do with the needs of the families likely to find themselves without health insurance. For one thing, such families need more protection than a plan with a $2,000 deductible provides. Furthermore, the tax advantages of health savings accounts would be small for those families most at risk of losing health insurance, who are overwhelmingly in low tax brackets.

But for people whose income puts them in high tax brackets, these accounts are a very good deal; making the premiums deductible turns them into a great deal. In other words, health savings accounts will offer the already affluent, who don’t have problems getting health insurance, yet another tax shelter. Meanwhile, health savings accounts, in the view of many experts, will actually increase the number of uninsured.

This perverse effect shouldn’t be too surprising: unless they are carefully designed, medical policies often have side consequences that worsen the problems they supposedly address. For example, the Congressional Budget Office estimates that one-third of the retirees who now have drug coverage through their former employers will lose that coverage as a result of the Bush prescription drug bill and will be forced to accept inferior coverage from Medicare.

In the case of health savings accounts, the key side consequence is a reduced incentive for companies to insure their workers. When companies provide group health insurance, healthier employees implicitly subsidize their sicker colleagues. They’re willing to do this largely because the employer’s contributions to health insurance are a tax-free form of compensation, but only if the same plan is offered to all employees.

Tax-free health savings accounts and premiums would provide healthier and wealthier employees an incentive to opt out, accepting higher paychecks instead, and would lead to higher insurance premiums for those who remain in traditional plans. This would cause some companies to stop providing health insurance, or raise employee contributions to a level some workers can’t afford.

The difference couldn’t be starker. Mr. Kerry offers a health care plan that would extend coverage to most of those now uninsured, paid for by rolling back tax cuts for those with incomes over $200,000. President Bush offers a tax credit that would extend coverage to fewer than 5 percent of the uninsured, plus a new tax break for the affluent that would actually increase the number of uninsured. As I said last week, I don’t see how Mr. Bush can win this debate.