HEALTHCARE REFORM: ARE WE LOOKING IN THE RIGHT DIRECTION?

There is an ongoing discussion whether our healthcare system is or is not the best in the world. Those, who say it is, refer to the fact that thousands of patients from around the world come to the U.S. for treatment. According to the Deloitte Center for Health Solutions, "In 2008, more than 400,000 non-U.S. residents will seek care in the United States and spend almost $5 billion for health services… Most come for a medical or surgical specialty program requiring hospital-based care." No doubt, our leading hospitals and clinics provide high-tech facilities and unmatched professional expertise. At the same time, compared to the other OECD countries on the basic health status indicators, such as life expectancy at birth, premature and infant mortality, as well as on healthcare expenditures per capita, we clearly overpay for mediocre results. Apparently, we are entering the stage of diminishing return in healthcare.

We all agree on the goals of healthcare reform:

• Covering the uninsured
  
• Improving quality of care
  
• Cost containment
  

According to the Economic Policy Institute,
in 2008, 58.5% of Americans were enrolled in an employer-sponsored health insurance plan, 8.9% purchased individual private insurance, 29% had public plan coverage, and 15.4% were uninsured.

In most cases, insurance plans, offered by employers, effectively insulate insureds from medical bills, except for co-pay and deductible, which are usually relatively low. So it comes at no surprise that 75% of policyholders are satisfied with the coverage they have. The problem is though, that rapidly rising costs of insurance for both companies and employees create a vicious cycle. On the one hand, in order to keep budget in check employers try to lower their contribution, cut benefits, or switch to high deductible plans. That makes employer-sponsored insurance even less attractive for younger and healthy employees, who normally pay higher percentage of their salary or wages in premiums than their older co-workers. If they opt-out of the plan the pool becomes smaller and riskier for the insurer and more expensive for the remaining participants. The same happens on a larger scale when some employers stop offering health insurance altogether. "Watered down" benefits increase the ranks of underinsured patients, who pay at least 10% of their income on medical bills, excluding premiums. It seems extremely unlikely that we will be able to extend coverage to the uninsured through individual mandate and subsidies for low-income Americans in the current environment without additional federal spending.

There is a popular perception that a large portion of healthcare expenses, especially, uncompensated for providers, is associated with the use of ED facilities by the uninsured Americans or illegal aliens. In June 2006, though, Health Affairs published an article that links higher use with age, health status and income, rather than with lack of insurance or legal resident status. If its conclusions are correct we can hardly expect any real savings on ED services by covering the uninsured.

What actually makes our healthcare so expensive?

In his testimony to the Senate Committee on Health, Education, Labor and Pensions, Dr. Dean Ornish, President of Preventive Medicine Research Institute, said that "…Heart disease, diabetes, prostate/breast cancer, and obesity account for 75% of health care costs, and yet these are largely preventable and even reversible by an integrative medicine program of comprehensive lifestyle changes." Most of us, unfortunately, find it too hard to change our habits, and instead rely on a "magic pill" that should fix problems our body develops over years of neglect. Actually, few use free or deeply discounted wellness programs and regular screening available through their insurance.

Some studies suggest that our healthcare system has become over-specialized, with primary care being marginalized, largely due to income disparity between specialists and primary care physicians. The Medicare fee schedule, often mimicked by private insurers, favors hi-tech diagnostic and treatment procedures, with little regard to their value or outcomes. The share of capitation payments is down even in primary care, whereas evidence-based payment systems, such as PROMETHEUS, do not seem to be quite ready yet for wide adoption.

The fee-for-service payment model, basically, shifts providers' focus from patient's health to selling more services and does little to promote care coordination and information sharing. The Dartmouth Atlas found no evidence that greater supply of resources and higher utilization improve access to care and its outcomes.

The pharmaceutical industry remains the most active lobbying force in Washington in its bid to prevent the government from obtaining the power to negotiate prescription drug prices under Medicare, maintain the existing inventor's protection regulations for "traditional" pharmaceutical products and make them more stringent for biologics. Despite slowing growth in spending on prescription drugs over the last eight years, which is mostly attributed to wider use of generics, the pharmaceutical sector is still exceptionally profitable. Besides, it may even benefit from the push to control healthcare spending, by replacing advanced surgical procedures with more conservative treatment.

Getting back to our first goal of covering the uninsured, any solution currently discussed requires additional funds, at least, to assist those who cannot afford it now. There is no way around that, but this is what has to be done anyway.

As far as two other goals are concerned, we should shift our focus from treating specific conditions to improving health status of patients. With this in mind, we may need to develop a "health score" or set of measures to gauge the overall physical health of an individual, and which will be based on more than just vital signs. The matrix of indicators could be populated at regular check-ups and hospital admissions and discharges. This would give both the patient and medical team an idea where the body needs attention the most and help work out a treatment plan and targeted wellness program. Measuring outcomes will be easier, but the trick is to get patients to follow the recommendations, especially, when we talk about prevention and chronic disease management in ambulatory settings. The "market way" is to encourage good and penalize bad behavior through cost sharing; with a single payer there could be different incentives. This may work for some of us; others may have to be policed. And, of course, a lot needs to be done to promote healthy living through education and mass media campaigns to make it "cool", at least, to our children.

HEALTHCARE REFORM, ALPHA VERSION

The public may not have noticed, but recently, there was an interesting change in verbiage, coming from the Administration. “Healthcare reform” became “health insurance reform”. Apparently, the center of gravity is now squarely on the demand side of healthcare economics. As much as I want everybody covered, it seems increasingly unlikely that the reform, as it stands now, is going to effectively address runaway costs in care delivery. My guess is that, according to CBO, there is no “shovel-ready” solution, which would guarantee immediate savings and/or does not make quite a few stakeholders upset.

So, whatever bill comes out of Congress, its main focus will be on getting most (ideally, all) Americans insured. There is no serious opposition to an individual mandate, sometimes disguised as “shared responsibility”. Insurance companies welcome it. Any mandate is likely to bring in more young and relatively healthy people to their pools, basically, providing insurers with additional stream of income and lowering their medical loss ratio. What they would not like is:

• A public option, which may be a strong competitor, applying downward pressure on premiums
• Legislation, preventing from denying coverage of pre-existing conditions, unless it allows adjusting premiums on a case-by-case basis

Of course, those young and healthy uninsured are not going to be very happy about this. Luckily for the legislators, this group is a minority among voters. Besides, they will almost certainly be given a choice of high-deductible, low-premium plans. Taxing the wealthy to partially offset insurance subsidies for the less fortunate also does not meet a lot of resistance on the Capitol Hill, especially, in the wake of public outcry against “excessive executive compensations" at bailed out companies.

Healthcare providers look very much on board with this kind of reform, as long as it has no negative effect on their revenue, which seems unlikely, as I mentioned earlier. Moreover, fewer uninsured means less hassle getting reimbursed by the Government for uncompensated care.

Next few months, I expect more push against the public option from “free marketeers”, who claim that it will destroy the health insurance industry, eliminate choices, and result in government run healthcare and higher taxes. Since most Americans, insured through their employer, are satisfied with their plans, this may prove effective, unless the proponents will come up with a convincing response, showing what is going to happen to our premiums and benefits, should we stay on the same trajectory with or without a public option.

HEALTHCARE REFORM: A BALANCING ACT

There are clear signals from Capitol Hill, which suggest that the idea of public healthcare is unlikely to gain traction in either chamber of Congress. Proposals in the works are aimed at preserving the existing market framework, while making health insurance more affordable, covering patients with pre-existing conditions and curbing healthcare spending. Whether the reform is going to work basically depends on how well individual and group interests will be aligned towards maximum efficiency in applying care.

The first, and arguably, most important aspect of any solution is to change the economic environment on the supply side, by drastically reducing use of “fee-for-service” compensation, which generally encourages waste and marginalizes preventive care, and replacing it with value-based reimbursement system. This is supposed to re-focus providers’ attention from selling more services within their domain, to achieving best possible outcomes with fewer resources, in coordination with everyone else involved.

On the supply side, cost sharing is proposed, in the form of higher out-of-pocket expenses and/or deductible. In theory, this should make consumers inclined to take more responsibility of their own health and chose higher-value care when they need it. At the same time, some patients tend to cut back even on necessary services with little regard to their actual value. To mitigate this side effect, patients need to have access to information about their health status and ways to improve it, as well as to be offered incentives for taking good care of themselves. Perhaps, something like a “health score” would help with setting goals and creating a program to achieve them.

In order to be successful in the long run, healthcare reform has to be comprehensive, but to be adopted, it must:
· have support of the most influential stakeholders, not just public at large
· be deficit-neutral during implementation
· have immediate tangible positive effects on a majority of Americans

There is a lot of explaining required from the Administration and Congress, especially on the last two bullet points, to prove that we will have the right treatment for our healthcare.

HOW MEANINGFUL CAN BE “MEANINGFUL USE”?

There are a few major categories of electronic record systems used in modern healthcare:

• Admission-Discharge-Transfer (ADT)
• Scheduling
• Diagnostic and analysis (laboratory, DI, radiology, pathology, etc.)
• Procedure
• Pharmacy/Rx
• Billing
• EHR

As it is with any other information system, their main goal is storing data, simplifying its retrieval and automating its processing to deliver information in the way that makes sense to each user. In most cases, they do a good job increasing efficiency of respective business processes. But their combined effect can be even greater if EHR systems are able to communicate with the others and one another electronically. In my previous post, I mentioned that the capability of an EHR system to interact with Rx applications would decrease the risk of drug allergies and incompatibilities, especially, when the information from available problem and medication lists could be utilized. Another benefit is the ability to use consistent terminology and codes (e.g., SNOMED CT, LOINC, ICD-10) throughout the entire care environment, which would enable much more efficient search and reporting options, especially, at the RHIO and NHIN level. This is what I would expect the Health IT Policy and Standards Committees to concentrate on, when considering definitions of meaningful use of EHR.

ARE WE READY FOR HEALTHCARE TO GO PUBLIC?

The key difference between supporters and opponents of a universal healthcare system is whether guaranteed equal access to medical, dental and mental health services is a right or personal responsibility. Frankly speaking, looking at the statistics that demonstrates how “responsible” many of us are with respect to consumer credit, I understand why medical bills bring tens of thousands of un- and under-insured, even by conservative estimates (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=587901), to bankruptcy each year. But, unlike our spending and saving habits that only affect our financial health, missing out on necessary care can leave a person temporarily or permanently disabled, or even lead to death. There is an article (http://www.msnbc.msn.com/id/30628634) describing how people are forced to ignore medical advice and to forgo recommended treatment because they just do not have money to pay for it. Basically, this is about us, as a society, being ready to provide healthcare to every legal resident, regardless of his or her ability to pay, and to make contributions to the appropriate fund(s) mandatory, just like Social Security Tax.

The Wikipedia article “Health care reform in the United States” (http://en.wikipedia.org/wiki/Health_care_reform_in_the_United_States) cites a number of publications and contains lots of information on the subject. One of the findings is that there is absolutely no evidence that public healthcare in all other developed nations, in which everybody has equal access to services, is more expensive, creates more waste and has worse outcome statistics than the system we currently have. That does not mean that it is ideal. But it is definitely better if we are serious about not leaving millions of Americans out due to financial reasons or pre-existing conditions. Patients can be less concerned about their health records being available to all providers they get care from, since there will be no reason to hide anything there out of fear that their insurance premiums will go up. Free market is not always THE solution. Let us address the issues that we know exist in public healthcare, but not reject it because of them.

TAMING HEALTHCARE COSTS

Looking for information on the breakdown of healthcare costs in the U.S., I came across a recent publication by the McKinsey Global Institute (MGI), titled “Accounting for the cost of U.S. health care: A new look at why Americans spend more”. The report contains some statistics and predictions, based on the current trends, which I personally found very alarming. For example, healthcare costs grow at a faster rate than GDP. In 2006, they accounted for 16 percent of GDP, and, according to the Department of Health and Human Services, will post “annual average growth of 6.7 percent over the next decade”. The Congress Budget Office projects that the share of healthcare spending will increase to 25 percent of GDP by 2025.

MGI analyzed healthcare spending patterns in 13 OECD countries and came up with a measure they call “Estimated Spending According to Wealth” (ESAW), which reflects the fact that countries with higher GDP per capita tend to spend larger portion of their GDP on healthcare. But even adjusted for wealth, in 2006, our combined healthcare expenses were $2.1 trillion, or $643 billion above ESAW.

MGI did not find any proof that we get a better value for the extra money we spend. Among the reasons why the current system keeps driving healthcare costs up well above their fair share of GDP, they mention several economic factors, which I interpret as follows:
· Relatively low and flat out-of-pocket expenses for insured patients
· Large number of uninsured Americans (16%). I believe that creates an incentive for providers to pass on un-compensated costs to those, who pay, in the form of higher prices
· Diagnostic procedures and treatment strategy are often chosen on the basis of maximum profitability for the provider
· Lack of statistical data from healthcare institutions, in part, due to patient privacy protection, keeps payers in the dark as to available treatment options for different conditions. They basically pay the asking price, and pass on the buck to their customers, raising premiums later on

It comes at no surprise that ambulatory surgery (ASC) and diagnostic imaging centers (DIC) are two fastest growing areas of healthcare, being extremely profitable. Sometimes, providers may seem obsessed with MRI or CT scan for almost every single encounter, but it also has obvious economic grounds. One of the solutions we could consider is to adopt the law that would require healthcare providers to switch to a CCHIT certified electronic medical record (EMR) system within, say, 3 years. The government should provide grants to public and community clinics and hospitals, delivering care to Medicaid and Medicare recipients, as well as to uninsured or under-insured patients, to assist them with the implementation of such a system. The patient must have the right to get all his or her medical information, collected or created during the encounter, in the electronic form on portable media, free of charge. EMR systems should be able to display that information, regardless of which of them was its origin. Insurance companies, if we keep our multi-payer system intact, or a single payer, whoever it may be, should create incentives for patients to request and share their medical records, by giving discounts or credits/rebates, respectively. The technology to support this already exists in the form of interoperability standards. It just needs to be utilized to stop the medical inflation from getting out of control.