home email us! sindicaci;ón

Archive for Policy Makers

How Serious Is Medicare About “Preventable” Sickness Care?

by Scott MacStravic

When I wrote the blog piece posted on Aug 15 about “non-payment for non-performance”, little did I realize how prophetic it was.  In yesterday’s Times appeared an article - “Medicare Says It Won’t Cover Hospital Errors” - announcing that it will no longer treat the costs of preventable errors, injuries and infections that occur in hospitals.  This is expected to save the federal government millions of dollars, while also saving many lives as hospitals have that much more motivation to prevent such errors.

Imagine what could happen if Medicare, Medicaid, commercial insurers and consumers got together and decided not to pay for preventable sickness!  It has been estimated that roughly 75% of all sickness care could have been prevented by effective health management, immunizations, and other forms of proactive health care.  There has long been a category of “avoidable” hospital admissions and treatments, regularly estimated as a large portion of all such treatments, based on best practices in ambulatory care.

This could easily become a “blame game” of course.  Insurers, employers, and governments could blame either consumers for not adhering to healthy behaviors, or complying with medical recommendations and prescriptions, for example.  Or they could penalize providers for not following best practices in managing their patients’ health, or not getting their patients to behave better.

Patients could blame insurers and their employers for not offering proactive health management programs they could enroll in (unless, of course, they did so), or not covering preventive and proactive services (unless they do).  Providers could blame payors for not paying them enough or otherwise supporting them in proactive health care, e.g. not covering the amount of time and effort it takes in terms of “cognitive services” to get patients to behave themselves.  And providers could easily blame their patients for not following their advice, once it has been given.

Payors would clearly have the upper hand in the blame game if they denied all payment for preventable sickness, not merely preventable errors, nosocomial infections, etc.  They have a lot of practice in denying, or certainly dictating lower payment levels when they feel such is appropriate, as Medicare recently did in decreeing that ambulatory surgery centers should only get paid 65% as much as do hospitals for comparable procedures. [”Doc Group Says New ASC Rate Would be ‘Death Blow’” ModernHealthcare.com Aug 20, 2007]

Consumers, when they are payors for some or all the sickness care involved could also exert extreme pressure on providers, by denying them full payment of their charges for sickness care if they deem the sickness something their provider should have prevented.  Providers could be caught somewhere between the impossibility of surviving on payment only for non-preventable sickness, and what they could legally command, or negotiate as their share of the blame for preventable sickness.

Given the widespread number of examples of in-fighting among healthcare stakeholders, there may be some movement toward such a policy and practice combination.  After all, few insurers, employers, consumers, or governments have espoused a sense of responsibility for keeping the current sickness care system alive.  And denying payment, in whole or even in part, for sickness that a given payor deems to be preventable, would threaten the existence of almost all providers.

Wouldn’t it be far better for providers, payors, consumers, etc. to get together and set annual goals for reductions in preventable sickness, involving all of their efforts, with all sharing in accountability for preventable sickness that doesn’t get prevented.  Negotiating the relative share of accountability, in the form of lower payments by payors to providers, would be an interesting process to watch.  On the other hand, if a cooperative approach to common problem solving were tried, where providers and consumers, as well as payors defined and treated preventable sickness as a common problem, that might end up moving the current sickness-focused “healthcare system” in the right direction

Healthcare Providers as Health Managers: Clock Issues

by Scott MacStravic

Okay, I admit that had I not begun with an obsessive commitment to “C” issues, the title of this piece would have been “timing” rather than clock issues.  But it is clear that deciding when the ‘clock starts running’ is a key element in health management (HM), for not only providers but all current and potential payors, as well as for consumers.  And generally speaking, nobody seems to start the clock early enough.

The total challenge of health management is to reduce the incidence and prevalence of disease and injury, in order to reduce sickness care costs, productivity and performance impairment, as well as move personal health and employee performance into “better than normal” range.  Different payors have different notions of what is the most important goal, and how best to achieve it, as well as when they should begin.

If it were up to healthcare providers, the time to begin is probably pre-pregnancy in preparing mothers for healthy pregnancies and having healthy babies.  During pregnancy has already been cited as a great point in time to prepare parents for promoting optimal health in their babies after they’re born, from healthy diet to immunizations to child development.[W. Boggs “Better Prenatal Education May Improve Childhood Immunization Rates” Medscape.com Aug 16, 2007]

Preventing childhood obesity is known to be vital for their future health, and preventing metabolic syndrome among children would avoid the fifteen times higher risk of heart disease that this risk condition creates for children. [“Metabolic Syndrome in Kids Ups Adult Heart Risk” Reuters.com Aug 7, 2007]  Teens are among the most susceptible to adopting unhealthy behaviors such as smoking, alcohol and drug abuse, which can condemn them to lifetime addiction.

Insurance plans are increasingly tailoring minimal health insurance coverage for young adults who already see themselves as invulnerable, but if they do not include coverage for risk prevention, at least, they are only adding to the likelihood that when they are older, they will also be sicker.  While capturing them early makes it easier to convert them to more complete and expensive coverage, it could also ensure that they will be more expensive members than is necessary, unless health promotion and risk prevention/reduction are lifetime pursuits.

For younger workers, often with minimal skills and low wages, their employers often deny coverage of health insurance of any kind, and certainly don’t invest in their long-term health.  But when these workers get older, they will likely be expensive risks and performance-impaired due to lack of health management by anyone.  And with older workers, Medicare should worry about what their health will be like when they retire and become eligible for government-paid coverage.

The great disadvantage this country has is the unsystematic plurality of efforts to manage health.  All kinds of different organizations, different providers, payors, and advocacy organizations approach their own narrow segments of the population, their diseases or risks, and their times of life, while there is not even a systematic, lifetime framework upon which they might coordinate their efforts for greater efficiency and effectiveness.  The free market is not capable of doing the job when there is no organized market for lifetime health management.

Clearly, all the stakeholders involved, from insurers to consumers to employers to governments and providers – could get together in an integrated effort to create a health management system.  And until we have the will, shared by enough of these to make enough difference, we can predict that the healthcare crisis will never be solved, and the potential of healthy children, workers, parents, and aging will never be realized.  The clock for health management ticks from even before birth, and continues until death, but we haven’t yet timed our health management efforts accordingly.

As far as I know, not even healthcare providers are organized around, nor do they have a lifetime health management structure to apply to the challenge. But at least they include among them specialists in every phase of the individual life cycle, so may have the best foundation for the job.  But it will take the cooperation of all the other stakeholders to make lifetime health management work, and so far, nobody seems to have even stepped up to the plate to take on the challenge.

Messiness and Health Management to Change the World

by Scott MacStravic

I was struck by what I assume was an unintended connection between two recent posts to this blog – one by Nick Jacobs on “Change the World”, and the other by Fred Fortin on “Miscellany, Messiness and Medicine”.  To these I add an article noting a plan for fixing health care, published in WIRED in May [K. Philipkoski “Intel’ Andy Grove Pitches a Plan for Fixing Health Care” Wired.com May 2, 2007]

Andy Grove sees information technology as having a huge potential in fixing health care, along with efforts to “shift left” such care by moving it toward care that is not expensive, does not require hospitals and other institutions, but empowers consumers and innovative approaches to serving them such as retail clinics to take on otherwise highly expensive care.  High-tech gadgets can be used to monitor and manage the care of chronic disease and elderly patients at home, keeping them out of institutions.

Retail clinics can provide care in inexpensive “kiosks” or inexpensive retail and drug store space, and keep people out of hospital emergency rooms.  His other suggestion is the use of information technology in the form of electronic medical records which could be made portable all consumers carry their own with them at all times, making access to them when needed universally available, to ensure the quickest and best diagnosis and treatment of patients possible when they need hospital or physician care.

For some reason, however, Mr. Grove has little good to say about “prevention” as a way to fix healthcare, despite wide agreement among both health gurus and presidential candidates that prevention is an essential element for both reducing healthcare costs and enabling universal insurance coverage.  His objection to prevention is that it requires changing individuals’ behaviors, and he doesn’t think we have the capacity to do this yet in a cost-effective manner, although it is, theoretically, at least, in his view “…absolutely the right answer…”.

I can only conclude that Mr. Grove, as CEO of Intel, has not yet encountered the applications of information and communications technologies to prevention, rather than traditional physicians’ annual checkups, immunizations, and usually unsuccessful or overly expensive coaching for patients.  The search for cost-effective prevention has already concluded that technology innovations are essential to its realization.

Fortunately, such innovation is well under way and already in use.  While I know of no healthcare organization, in the traditional sense, that uses such innovations, the new brand of organizations usually deemed wellness, risk and disease management vendors are well underway.  Examples such as HealthMedia, Inc. and Thomson Healthcare, both in Ann Arbor Michigan, are already using online health risk assessments (HRAs) and customized online feedback therefrom to promote wellness, prevent or reduce risks, and manage chronic diseases.

They have also recognized that commercial or government insurance plans are not the best customers for such innovations.  Employers are, because they gain dramatically more positive impact from having healthier employees than do insurance plans from having healthier members or beneficiaries.  Employer gains include the full range of insurance costs combining healthcare, workers compensation and disability.  Moreover, healthier employers are absent less, produce more output and perform better across the balanced scorecard of business performance, realizing many multiples of sickness care cost reductions.

Instead of or augmented by physical examinations and screenings, online HRAs can be inputted directly into computers and automatically translated into individualized feedback, recommendations and continuous coaching, for a few dollars per employee per month in many cases.  These same HRAs can be used to estimate the productivity and performance value, as well as the extent of employee behavior changes and health status improvements.

The technologies used by most vendors, as well as most traditional healthcare organizations, have tended to emphasize, if not be exclusively devoted to professionals interacting one-on-one with patients in managing disease.  This is often cost effective, when the right patients, diseases and professionals are involved, but usually quite expensive.  Witness the costs of fifteen vendors and healthcare organizations involved in a Medicare DM demonstration project whose costs per participant ranged from $80 to $440 per month! and whose effects were generally negative in terms of savings vs. costs.

As far as I know, none of the new-technology-enabled approaches to affordable prevention have been tried with commercial insurance plans and either Medicare or Medicaid beneficiaries.  It may be that vendors who employ such technologies are focusing on employer clients whose pockets can be more generous, given their already demonstrated significant savings, even without counting the full economic benefits of employee health.

In any case, it would be a shame to characterize the entire armamentarium of “prevention” as not yet cost effective.  The new information and communications technologies available include many that are indeed “messy”, including consumer-directed communications with each other in support groups, and by the full array of wireless technologies, not merely the ones most providers seem to have tried.  And this approach to prevention still does have the capacity to “change the world”, since it can be used world wide as even underdeveloped countries are finding at least some of its technologies affordable.

Plummeting health scores…

by Nick Jacobs

Thanks to the Associated Press, our national egos can rest uncomfortably knowing that our health score as a nation continues to plummet.  You’d think that at over $2 trillion in health care expenditures nationally or nearly $6000 per capita, the score card would be better, but we have now dropped to 42nd in life expectancy worldwide.

Drunk drivers took the lives of almost 17,000 on the roads, and an estimated 510,00 are injured annually from alcohol related accidents. That works out to about one person per minute. Another part of the problem may be because we have so many guns. Every year it is estimated that more than 30,000 people are shot to death in murders, suicides, and accidents while another 65,000 suffer from gun injuries in the United States.  Defective automobile tires may have killed about 103 people over a number of years, but firearms kill about 85 people every day in this country.  How about obesity? The AMA estimates that nearly 300,000 people are dying annually due to obesity.

We may also rank 42nd because we have not used enough sun screen, have had too many household accidents and because the vast majority of medical centers are not dealing with their infection rates.  (The national average is a 9% infection rate, our medical center has been below 1% for nearly a decade.  They can be controlled.)

The bottom three spenders in healthcare dollars annually are the United Kingdom, Japan and Finland and Finland, Luxembourg and the U. K. are at the bottom as a percentage of GDP.  Guess what countries are included in the list that do better than the United States?  Remember, 41 countries are helping their citizens live longer than us and a few include: Finland, Luxembourg, Japan, the United Kingdom and Cuba?

The AP article pointed out that the country with the longest life span was Andorra?  Andorra is a tiny country between France and Spain where the people live nearly seven years longer than us.  Of course, the contrast to Andorra is Swaziland where the average person lives to be about 34.

Interestingly enough, after having spent time in Europe recently, It seems relatively apparent to me that the reason we are under performing so dramatically is that we don’t invest in preventative care, don’t really embrace public health and have never had a health policy for this nation.  Only about 4% of our trillions goes to prevention in this country.

Please forward this blog to our public officials.

Does “Prevention” Save Money?

by Scott MacStravic

The federal government and various “think tanks” it has hired have consistently found mixed results when asking the question: “Does Disease Management Work?”.  This has always been a ridiculous question to ask, since DM is not a single “treatment” whose efficacy can possibly be gauged in the way that particular drugs or medical treatments can.  DM is a wide range of different approaches, delivered by a wide range of different providers to a wide range of different patients with a wide range of different diseases.

A recent newspaper article attempted to ask and answer a similar question about “preventive medicine”, which includes DM, but goes far beyond that already broad and mixed bag of interventions.  It comes up with a number of arguments, though no data, to conclude that “prevention” will not save money, once its costs are factored in, and certainly will not save enough in terms of total sickness care costs to enable the country to finance insurance coverage for the currently uninsured. [D. Leonhardt “Free Lunch on Health? Think Again”, New York Times Aug 8, 2007]

It notes that the current “system” does not pay providers to keep people healthy, in fact perversely adds to sickness care costs by paying only for treating them once they are sick.  It concludes that studies usually find that prevention makes people healthier, but costs money, not saves it, overall.  After all, physicians and nurses have to spend time to get people to change their behaviors to healthier options.  Moreover, they are likely to be dealing with those who have not been persuaded to adopt and maintain healthy lifestyles through current services and strategies, so they are likely to be the toughest and most expensive to “reform” now.

The author cists a Stanford University School of Medicine study that estimates an anti-obesity program would have to treat five people, with interventions that are not cheap, to prevent just one new case of diabetes.  Prevention has to invest in interventions that will not have any meaningful impact on many of its participants, since they would not have become sick, anyway, while others do so in spite of participation.  Moreover, prevention increases the lifespan of population, and people contract more sickness as they get older, so lifetime sickness costs end up being increased.

In effect, because we have to “treat” many more times as many people through prevention as would have to be treated for sickness in order to prevent sickness, the costs of continuously treating those who would not have become sick overwhelms the savings produced by preventing the few cases of sickness that would have resulted.  The article concludes that: “Preventive care saves real money only when it replaces existing care that is expensive and doesn’t do much if any good.”  And it notes that as long as patients think the care they get will do them good, which they must or otherwise they wouldn’t get it, even preventing such “futile” care is a difficult task.

It quotes Jonathan Gruber, an MIT economist, as saying: “…if you’re going to control healthcare costs, it involves denying people care they want – or things they’ve been trained to think they want.”  Somehow,
”prevention” is equal to “rationing” as defined by the article.  But this is simply a “straw man” definition, as is defining prevention as a kind of medical care requiring the expensive services of physicians and nurses, in the same way as sickness care does.  In effect, the argument is that prevention would simply change what expensive providers do for patients, but still cost as much as treating sickness.

But the article ignores a host of preventive strategies and tactics, and a wide range of interventions, that do not require the use of physicians and nurses at all.  And it ignores the growing accuracy of preventive modeling in terms of identifying which people currently at risk represent sufficient risk/reward potential to warrant which kinds and costs of preventive interventions.  Both predictive and preventive technologies are improving dramatically, and both can often be applied on a population-wide basis, rather than the traditional one-to-one physician or nurse visit.

Predictive models can analyze collections of data on past sickness care claims, individual attitudes and behaviors, personality factors and perceptions, as well as on worker productivity and performance, to identify the risk/reward potential of individuals with increasing accuracy.  Individualized interventions aimed at multiple risk behaviors or conditions, or at preventing the emergence of such behaviors or conditions, can be generated automatically by computers, and communicated online of via mail for ten or twenty dollars a year per participant.

By tailoring prevention strategy and tactics to accurately predicted risk/reward potential and individual receptivity, and doing so inexpensively where necessary, plus intensively where justified, “prevention” can be as cost-effective as it needs to be in order to achieve its intended results.  And when it is applied to workforces, its benefits are often two to five times as great as the value of reduced sickness care costs.  Moreover, if it is applied to the young, it can deliver benefits over a lifetime, not just in the short run.

It is impossible to say that prevention does work, just as it is impossible to say that it does not.  “Prevention” is simply too vast an array of different challenges involving different people and intervention modes plus costs to come to any overarching conclusion.  But that is the point, after all – it is simply a silly question to attempt to answer simplistically and finally.  There have been thousands of successful applications reported, and perhaps as many unsuccessful attempts made but not reported, since failure rarely prompts as frequent and as loud reporting as does success.

We are ill-served by attempts to answer such a silly question, regardless of what narrow evidence and arguments are used to support the answer, since the question simply cannot be answered.  The challenge is not to try to reach a simplistic yes or no answer, anyway.  It is to study, identify, and promote what does work, and continuously improve the science and art of prevention, and continuously monitor/evaluate how much we can improve it and enjoy as a result.

What Exactly Does “Risk” Mean?

by Scott MacStravic

I have noticed a disturbing inconsistency in the use of the word “risk” when describing the occurrence of certain “risk factors” and the nasty things for which they are reported to be a risk.  One meaning of the term, and one that seems to be the most popular meaning in the popular press, involves reports that when a given risk factor is found, it is often accompanied by the nasty thing.  So when it is found that both obesity and diabetes have grown at alarming levels in recent years, for example, and that people who are obese are more likely to have diabetes, it is reported that obesity is a “risk factor” for diabetes.

The trouble with any such conclusion reached through “cross-sectional” analysis, i.e. a simultaneous look at two factors in a given population at one time, it is literally impossible to tell whether one tends to cause the other, or vice versa, or if there is no causal connection at all.  For example, if it is found that people who drink a lot of sodas, whether sugary or diet, tend to be more likely to be overweight and obese than those who refrain from sodas, relatively speaking, what does that show?

The answer is – absolutely nothing, except that they seem to occur together.  It could be that some people who drink lots of sugary sodas are obese because their intake greatly increases their daily calorie intake, and they naturally gain weight.  At the same time, other people who are already obese may have shifted to diet sodas in a vain hope to lose weight, while continuing to eat high-calorie foods and engage in little exercise, both of which tend to preserve rather than correct obesity.  Or it could be that both are signs of a “sweet tooth” preference for foods that naturally tend to be high in calories, and this general preference, rather than the ingestion of diet sodas is what causes obesity.  Or there might be no causal connection, whatsoever.

The point is that the only way to arrive at a logical guess as to whether there is any causal relationship between two factors, and which causes the other, is to perform a “longitudinal” analysis, which follows populations to see if introduction of that factor into one segment of that population, where no other significant differences exist between the two segments, is then followed by a difference in the occurrence of some nasty thing.  All other definitions and applications of risk identification can mislead as often as they help focus health improvement attention.

The fact that the illogical and limited definition and application of “risk” in the purely statistical artifact sense is by far the most common choice in popular media is simply another reason for people to treat media stories with some skepticism.  It is unfortunate that mass media, which could be a major and meaningful ally in efforts to protect and improve the health of populations, is instead a major source of doubtful or misleading information.  And the fact that third-party payors do not even compensate healthcare providers for countering such misleading information is another indictment of the insurance industry.

Not unreasonable

by David Williams

From what I’ve been reading so far, the bipartisan Senatorial agreement on biogenerics sounds fairly reasonable. Apparently the bill would:

  1. Guarantee 4 years of exclusivity for the innovator firm, even if the patent is at or near expiration at launch. Seems reasonable
  2. Require a clinical trial, but allow FDA to waive that requirement. I like the second part
  3. Allow FDA to approve a drug as interchangeable –not just similar. That’s extremely important to the market’s development
  4. Provide one year of exclusivity to the first generic product. That’s ok, I suppose, but it means more time before prices drop significantly

The devil is in the details, so I’ll be interested to learn more. It’s also far from clear that this bill will ultimately be enacted. However, it’s better than what I expected to emerge.

I’m still in favor of my proposal for price regulation post-patent expiry. It’s more economically efficient and safer. Maybe someone will take up the idea if this current effort fails.

Long wait times in the US

by David Williams

An article in today’s Business Week (The Doc’s In, but It’ll Be a While) examines the issue of waiting times for health care in the US.

One of the most repeated truisms about the U.S. health-care system is that, for all its other problems, American patients at least don’t have to endure the long waits for medical care that are considered endemic under single-payer systems… But… waiting times in the U.S. are often as bad or worse as those in other industrialized nations… In addition, 48 million people without insurance do not have ready access to the system.

The article’s author, Cathy Arnst, interviewed me for the story. She’d seen a commentary I’d written about a well-insured patient who had to wait for care, and I let her know about some data sources to back up the anecdotes.

Changing demographics are only worsening the problem. Patients are getting older and sicker and requiring more care. But a new generation of doctors, half or more of them women, is no longer interested in working long, grueling hours. Low insurance reimbursements and heavy paperwork loads also limit physicians’ willingness to see any patient any time. And tightening immigration rules have limited the number of foreign-born doctors entering the U.S. “There are restrictions on the supply side and growing demand, so longer waits are going to be inevitable,” says David Williams, a consultant with MedPharma Partners in Boston.

There are a couple of key takeaways for me:

  1. Americans may have more in common than we think with Europeans and Canadians who go overseas to avoid waiting times
  2. It reinforces my conviction that Americans shouldn’t look down their noses at health care provided elsewhere. We know we spend more in the US. The evidence on what we get for that extra spending is pretty thin

Wal-Mart’s $4 generics having an impact

by David Williams

Wal-Mart’s CEO, Lee Scott closed out the recent World Health Care Congress in Washington, DC. Now Wal-Mart’s PR folks have put together a 4 minute video on their $4 generic program. It has ‘real people’ talking about how Wal-Mart has helped by making drugs more affordable for them. The video ends with a bullet point summary of the program’s impact:

  • Includes 14 of the top 20 prescribed meds
  • Available at all 3810 Wal-Mart’s
  • Saved consumers ~$290 M since it was put in place last year

If anything, Wal-Mart is being too modest about the program’s impact. I’d add the following:

  • Improves medication adherence and health status by making it affordable for patients to take their medicine as directed, rather than stretching it out
  • Saves money for consumers who don’t shop at Wal-Mart, by encouraging other retailers to reduce prices
  • Saves money for purchasers of insurance, by resetting the baseline for what generics should cost

Interview with Jon Kingsdale, Massachusetts Connector

by Matthew Holt
This is the interview I did at WHCC with Jon Kingsdale, who created and is running the Massachusetts Connector–the organization at the center of that reform effort. Also crossposted back at THCB

Matthew Holt: This is Matthew Holt, again on the floor at the World Healthcare Blog this afternoon. Coming towards the end of the session, I have Jon Kingsdale with me. Jon is the executive director of the Commonwealth Insurance Health Connector Authority, better known as the Massachusetts Connector. This is the central body in the middle of the new Massachusetts Health Plan arrangement. And Jon gave a very interesting talk about how that is playing out in a session early this morning. So I thought I would grab him and grab a few minutes of his time. So Jon, thanks a lot for doing the conversation.

Jon Kingsdale: My pleasure.

Matthew: Let’s start in with the basics. Most people know that Massachusetts has gone in with some kind of individual combined with an employer mandate. And know that there’s some arrangement in the middle of that so people can actually buy into an affordable health plan. There’s been come controversy about what affordable means. But what’s the Connector doing in the middle of all that? What does the Connector do?

Jon: Well, we have a number of functions, Matt. One is a whole set of regulatory functions to decide some of the tough policy issues, frankly, that the legislature grappled with and decided they wanted to let the next generation of decision makers handle.

Matthew: Pass-off.

Jon: You might well say that. I wouldn’t. So those include, what is the affordability schedule? So adults in Massachusetts, starting later in 2007, need to have health insurance if they can find something affordable. Well, given your income, what is determined to be affordable? And what is the minimum amount of insurance that you would have to have? So regulatory policy decisions like that, on the one hand.

And on the other hand, we’re actually running a couple of insurance programs, one that’s subsidized for low-income uninsured. And we set the benefits and the enrollee contribution and actually enroll people, and serve as a market for them. And the other is, private unsubsidized health insurance, particularly for uninsured individuals above 300% of the federal poverty level, who are going to be buying out of their own pocket. And a big piece of what we do there is organize the market for them and try to do almost like some group buying for them. And create sort of a shopping mall for health insurance.

Matthew: So there are a couple of questions that come to mind about that. The first one is, how do you, when you get the–ignoring for the moment the Medicaid dollars and the federal and state dollars that have been put into the plan for the poorer individuals. For the folks who are above 300% of the poverty level who are uninsured, who are typically young or may have had trouble getting insurance before in the individual insurance market, is that going to be completely self-pay for them, or are there going to be subsidies available for them?

Jon: I think there are going to be a couple of different things that are going to happen. First of all, the impact of requiring most adults in Massachusetts to buy health insurance is that it’s actually going to spur more employers to offer and cover their employees. So that happens in a couple different ways. First of all, some employers do not now offer group coverage. Some of them will do that. Secondly, some of their employees don’t take the offer. Those employees will find that an irresistible financial proposition. And then finally, even for folks who don’t get employer sponsored or paid for insurance, there’s a variety of mechanisms set up to reduce the premium costs in general for non-group insurance, and to create some tax subsidies. So that you can do payroll deduction, pretax dollars, to pay for your premiums even if your employer’s not contributing. That pretax subsidy is worth about 41%, on average, in terms of the real, net, after tax cost of premiums coming down 41% by switching it to a payroll deduction plan.

Matthew: And I assume that the other thing that you already have going in Massachusetts, but has been a problem in most individual markets, is that you don’t–you currently already have community rating, but by age, correct? And also, essentially, it’s a guaranteed issue. But what you have in that is the third leg of the stool, which is that they’re being forced to buy into that central pool. Of course, one side of that has got you criticized by people from Cato on the Libertarian right. The other side David Himmelstein and Steffi Woolhandler. They all are equally upset about this. So let’s start with the right. The folks on the right who say that, in essence, you’re forcing people into buying insurance, those who would rather spend their money elsewhere. Have you seen much of that? Obviously, there are people who wanted to get insurance who now can get it. What about the other side? How many of these what in insurance are being called the young invincibles who are being forced into buying are very upset about this, and what do you think the ramifications of that are?

Jon: Well, it’s a little early to tell, because the mandate really doesn’t go into effect until July 1. But let me take the more theoretical criticism from the Cato Institute and so forth. I think there are two essential points, one of which, I would argue, is not really a very credible argument. The other one, I will concede, is a real argument. One is the Libertarian argument about forcing people to buy something that they might not otherwise choose. Clearly there is a principle of solidarity here. There is a principle at work in the universal obligation to participate that everybody is expecting, when they step off a curb and they get hit by a car, God forbid, or they have a skiing accident, or they get a chronic diagnosis, out of the blue, of leukemia, that they’re going to be cared for. But there are a lot of people, particularly those who think of themselves as young and invincible, who don’t want to prepay for that now. They just expect society to step in. We as a humane society say we will step in. This is about everybody also participating. There’s clearly also an element of, in servicing solidarity, an element of obligation or requirement here.

The other issue I would take real issue with, which is the charge that this is a government program, this is really trying to restructure and improve the market. Everything we do works on the principle of choice, on market discipline, on consumer choice, and creating a more effective competition between health plans. One of the problems, frankly, with the non-group market, is that it’s dysfunctional, because the sick buy and the healthy don’t. Well, the universal obligation creates a statewide credible insurance pool where now everybody is buying. And frankly, the people who are coming in are the most price resistant. We get them into the market and we organize choices for them through competitive bidding. They’re going to be a very potent vehicle for bringing market discipline to the pricing of health insurance. So I think this is absolutely consonant with market principles of competition.

Matthew: Now let’s take the criticism from the other side, which is the single payer advocates who are centered in your state with Steffi Woolhandler and David Himmelstein. Essentially, there are many arguments they have against what are market principles in general in healthcare. But perhaps the major one is that if you’re going to end up with a system in which there’s a expansion of separate insurance for the poor, and that the people in the middle and upper incomes are going to be able to maintain essentially their old style system, that, in the end, that lower grade will be cut back and will end up being sort of a second class system. Which is kind of where we have been, honestly, with Medicaid over the years. That’s one of their arguments against it, and maybe they’ve made several others to you. When you’re debating, David, what do you say?

Jon: Well, organizing a centrally budgeted health program is something that a lot of countries have done and done successfully, and they’re relatively happy with it. I don’t frankly have a strong argument that says we should never do that. I do have a strong argument that says we’re not going to do it in my lifetime. I’ve signed up 70,000 uninsured people in our program in Massachusetts. We’ve expanded Mass Health by another 50,000 just since last June. So that’s 120,000 people who are newly insured. I think it’s very, very important to move those people from charity care: episodic, emergency room and inpatient acute care crisis care, into comprehensive, well-coordinated, and third party financed health insurance. My argument is, great. If we can get there some other way, I’m all for it. But right now, I want to get people insured. I think this is first class medicine. If you had talked to the folks that I have, people who have been going to emergency rooms to treat a sore throat which turns out to be cancer. Or people who have been falling down with seizures, not knowing they needed certain meds. Then they get into a health plan. They get a comprehensive risk assessment. They get their meds. They get their specialty diagnoses. There’s nothing second-class about that. They’re leaving second-class about that. They’re leaving second-class to come to real medical care and medical care with some dignity. They have a card. If they’re not getting proper treatment from one doctor or one hospital, they can actually go to another one and demand services. And I just think that is so important in a wealthy society, that most people, everybody really, have that kind of health security.

Matthew: So let’s talk a little bit about some of the issue around the price of the plans. And I guess the whole issue of, to make them affordable for people who are buying individually, you have to essentially go to some kind of high deductible model. But we haven’t really seen–although you pointed out that in some cases they’re getting a cheaper plan with a lower deductible, some of the very high deductible ones are the ones available on the individual market. I think an example is a 37-year-old, who for the same amount of money can go from a $5000 deductible to a $2000 deductible. But nonetheless, if you work out the math and end up with everyone in the high deductible plan, there isn’t enough money left in the pool to pay for the sick people. And essentially, and this is something I’ve argued about long and hard on my blog–if you wanted to say that everyone could all get on these high deductible plans, a high deductible plan can’t afford to insure sick people. So at the moment you’re not doing that. You have, obviously, other variations for the poor, and then there are people in private care and people in Medicare. So we’re not there, obviously, universally in Massachusetts. But do you see the high deductible plan as a stopgap? Where you see your piece emerging?

Jon: Well, this is where choice is really important. One of the disadvantages, and there are many advantages to a uniform national system. But one of the disadvantages is, you have to have the right plan for everybody. We’re not saying anyone has to buy minimum creditable coverage, which is the deductible, the $2000, $4000 deductible plan that you’re referring to. They can buy first dollar coverage. They can buy comprehensive benefits with virtually no cost sharing. Or they can buy something that has a lower premium. And it’s really somewhat of a choice of, do they want to pay at the point of service and pay less for a premium? Or do they want to pay less at the point of service and more up front every month for the premium? It’s giving them a choice. Now for folks who don’t have insurance, and who are above 300% of the federal poverty level. So they’re not subsidized. This is a big step forward even if there’s some deductibles. There are a lot of kids in their 20s who really don’t want to have insurance at all. I just don’t think it’s more affordable to have no insurance than it is to have insurance with a deductible.

Matthew: What’s been the actual experience of the plans who come back? You showed a chart today which didn’t have the plans names outlined, but had some different pricing. There was a fair range of pricing there. You were also somewhat interested in talking about paying–in the interim model, seeing some employers paying a certain amount, paying a flat amount. And people having a choice between plans to pay the extra themselves. Can you explain how that’s working?

Jon: Well, we’re about to go live in about a week. May 1st.

Matthew: So you’ll tell me then, right?

Jon: So, so far it’s been without a hitch. [laughter]

Matthew: I’m thinking about the theory behind it. When the plans came back, why did you see these wide variations between pricing from the different plans, for essentially the same benefit packages? Is that right?

Jon: For very similar benefit packages. I think they are a number of factors at work. One of the reasons is that some of plans, as we asked them to, came back with select or high performance networks. Let me give you an example. In Massachusetts, we are a very academically medically oriented medical culture. Whereas across the country, about 16% of Medicare admissions are to academic medical centers, in Massachusetts 40% of admissions are to academic medical centers. And yet, for many things, the other hospitals–and we don’t actually have any community hospitals in Massachusetts. They’re either major or minor teaching hospitals. They virtually all have residents. But people drive right by their community hospital for an uncomplicated vaginal delivery to the downtown AMC for twice the price. And there’s zero difference in outcomes. In fact, you could argue you’re driving by the hospital with the experienced 40-year old obstetrician to go get a kid to practice on you–a resident delivering your baby. There are lots of opportunities for reduction in premiums and reduction in claims costs by doing select networks, so we’ve encouraged that. But we only gave the health plan six weeks. This is all very rapid-fire development. We gave them literally six weeks, from December six till January 16, to bid. In that six weeks, some developed limited networks, and some were not able to do it. I think we’ll see more health plans next year, next round of bidding, come up with select networks and more affordable products. But that’s part of the reason for the disparity.

Matthew: We can talk about the employer mandate end of it in a second, but what’s going to be the enforcement on individuals to actually make sure they buy into this thing?

Jon: Well, this is probably the most difficult and controversial element, and yet, a very essential element of the reform. Particularly in the early years, Matt, we’re going to be very flexible in administering this requirement. First of all, we have a schedule of affordability that automatically exempts some people, particularly at the lower income levels, from the requirement. And then we’re going to have an appeals and waivers process, so you can actually get a waiver ahead of time if you apply, or retrospectively, you can appeal the decision and get exempted from the requirement. And that’s going to have to be a very generous and constructive process, particularly in the early years.

Matthew: But on the other hand, you do want to get everybody involved. Now, you think there’s a certain natural flow to the employer part of this, because people will be simply bargaining with their wages, given that they can now take some of them tax-free, and that may change the model a little bit. But there’s been some criticism. The employer mandate part of the legislation has been pretty toothless, because it’s a very low amount compared to the cost of buying a plan. What’s your sense of where the employers, especially at the low wage end, are going to go?

Jon: I’m glad you asked me that. Matt, I want to correct one thing. It was never the stated intent to cover everyone. We’d like to, but the objective was to get near-universal coverage. And I think that’s an important distinction, just so that we’re not criticized two years from now for covering 99 percent, and not for the last one percent.

Matthew: [laughs] Right. OK.

Jon: But in terms of the employer mandate part of it, I think there’s a lot of rhetoric around it, and it really misses the point. So here’s the point. One of the impacts of the universal obligation to have health insurance is that, on top of substantial demand that already exists from employees for employer-sponsored insurance, we’re going to have substantially increased demand, so that even employers who are not subject to the mandate at all–those below 11 employees–are going to find increased labor market demand and priority on providing health insurance. Now, specifically for those with 11-plus full-time equivalent employees, they have to do two things. One is, they have to make a fair and reasonable contribution towards insurance for their employees. They never had to do that before. If they don’t do it now–they could stop doing it now, come July 1–they could always stop doing it, but now they have an additional penalty of $295 per employee per year. So this is an increase, on top of the labor market demand for it, there is now a government penalty, or assessment, if you will, for not having insurance. So that’s going to increase the incentive for them to do it.

Matthew: But is that enough? In California, they’re proposing a four percent payroll tax in the payer-payee system, and 295 bucks here doesn’t sound like that much.

Jon: Well, I think it is enough, because most employers already offer insurance. With the $295 penalty, the increased demand from their employees for employer-sponsored insurance, there is going to be even more pressure for them to do that. And then the other thing that we’re asking employers to do is, for those, say, below 11, or for their part-time or temporary employees, who would not be eligible for employer-sponsored insurance, to set up this pre-tax payroll deduction. And that’s worth, on average, 41 percent savings to employees who can do payroll-deduct, rather than pay the premiums out of their own pockets. So there’s a substantial set of activities employers in Massachusetts are being asked to undertake.

Matthew: By the way, personally I think that, given where you’re to come from or to go to, it’s not a bad approach. It’s interesting. It’s better than nothing. But the final question and criticism of the Massachusetts plan is: there isn’t much written into the legislation about actually containing costs within the system or, in fact, restructuring the system. We’ve heard all kind of stories about how to reformat chronic care, and I just spent a lunch with Jack Wennberg discussing how we would reduce supply, and all that sort of stuff. And I’m not sure reducing supply is, perhaps, the desire of the big AMCs downtown in Boston. So where do you think that’s going to come into the picture, and do you think there’s going to be enough market clout in the Connector to deal with that, or do you think that’s going to be an issue that has to be raised separately?

Jon: I don’t know. Most people who know me would be surprised to hear me say this, but I am naively optimistic. I think that the cost issue is going to come bubbling up in a way that’s never happened before, as a result of this reform. The problem we have now in this country is we have two separate dialogs that go on. It’s sort of like the authorization and the appropriations process. On the one hand, the dialog at cocktail parties or in the press or public meetings about: “My doctor’s great,” “This hospital screwed up,” “Isn’t it great they can now replace my hips with artificial hips, and I can walk again?” And then you have this conversation about affordability and cost, and how outrageously expensive it is. And those two conversations go on separately. We’re actually going to bring them together. And by bringing everybody in to health insurance, we’re going to then focus the public dialog on the trade-offs that are required, whether it’s deductibles or aggressive pharmacy management or limited networks or other items, to try to bridge that gap between what you can afford, and what you want, and what you need. Maybe everybody won’t get exactly what they want; they will get what they need at a price that they decide for themselves is affordable. And I think that’s going to have a tremendous impact on competition in the market.

Matthew: That’s great. I’ve been talking with Jon Kingsdale. He’s the executive director of the Massachusetts Connector, and, from what I can tell, has built it from the ground up in just a very short period of time. It was great talking to you, Jon.

Jon: Thank you, Matt. My pleasure.

Next entries »