Opinion: Health Reform Doesn't Have to be This Hard
There’s a set of changes that will get us where we all want to be—better health care for less money
Most Americans support health insurance reform because a “free market” health care system is an oxymoron. There is no rational marketplace that self-regulates the exchange of quality services at a fair price for all. Nor is there an invisible hand driving providers toward offering the right care at the right place at the right time—which is the key to a high quality, affordable health care system.
Rather, private insurers—the middlemen between the consumer and the health system—are economically rewarded for charging inflated premium prices to customers lacking purchasing power or who have higher health risks. Providers’ income largely depends upon the numbers of procedures performed regardless of need or outcome. Government-run Medicare and Medicaid programs secure the lowest prices while shifting costs in the form of a hidden tax to the privately insured. So the current system looks like this: the insured risk hyper-inflated premiums and uncertainty of coverage as nearly fifty million of our citizens go without insurance.
In what appears to be the final stages of Congress’ attempt to forge meaningful and lasting change, it must create financial incentives and outcome measures for public and private payers, providers and patients to partner together to deliver affordable, quality care. Without this, any new delivery model designed to expand access and increase competition—most likely a “public option”—will fail due to uncontrolled costs, estimated to minimally run close to one trillion dollars over ten years, a very scary price-tag in this shaky economy.
Reform proponents concentrate on potential administrative savings to control costs, but the uncontrolled costs are primarily medical (eighty-five to ninety percent of the health insurance dollar is spent on doctors, hospitals and drugs). Historically Medicare, Medicaid, self-insured employers and insurance companies manage costs by ratcheting down payments for service rather than rewarding providers for improved outcomes and lower costs. This approach to cost management leads providers to under-invest in innovations that lead to a high-quality, affordable health care system. No wonder for-profit drug store chains are the ones innovating primary care.
So how might we move forward? In addition to several insurance reforms such as guaranteeing portability, limits to out-of-pocket costs and curbs on wasteful spending that the president has specified, federal policy must contain the following components for his model to succeed.
First, everyone in a large geographic area (e.g., state or multi-state), regardless of sex, age or health status should pay the same monthly individual or family premium. “Community-rating” creates incentives for communities to get healthier, discourages discriminatory and irrational premium pricing, and protects against the sick and needy all ending up in a public plan. Most important, it shifts insurers’ focus from pricing to innovations, a focus found in most other markets outside the U.S.
Second, government and private insurance need a system that pays providers fairly based upon pre-determined health care budgets (not for the number of procedures performed) and that align incentives and risks between payers, providers and individuals to encourage high quality and conservative resource consumption.
A third provision should create universal access to primary caregivers as a primary health care home, including nurse practitioners and other highly trained physician extenders. This will divert the uninsured out of costly and ineffective emergency room care and care that comes too late in a disease cycle. Expansion of primary care will require huge investments in workforce training for the army of professionals necessary to absorb fifty million new consumers. It will also require a cultural shift to accept the idea that we can receive excellent care in non-traditional settings, for example, at the neighborhood pharmacy, that is the accepted practice in most western European countries.
If these changes are put in place they would create the foundation for a rational market, but it will only work if everyone has ready access (via the Internet) to information that identifies provider and insurers’ costs and performance (clinical quality and satisfaction) along multiple quality dimensions (e.g., percent of youth vaccinated, surgical complications and percent of satisfied customers). Information will make us better consumers.
Our transformation to a high-quality health care system will also be expedited by creating financial incentives for physicians, hospitals and other caregivers to adopt and continuously innovate new ways to improve quality, lower costs and rapidly share best practices across the country.
Finally, we need incentives for consumers to reduce unhealthy lifestyles. One third of our children are obese. Seventy-five percent of our health problems are directly attributable to lifestyle choices—overeating, over-drinking, smoking and other risky behaviors (riding a bike without a helmet, not wearing a seat belt).
These policies and practices have been successfully developed by the four health plans doing business in the Madison region for nearly thirty years. They have effectively controlled costs, while demonstrating the highest levels of clinical excellence, and consumer and practitioner satisfaction as measured by objective national standards. The rest of the country can benefit from these inventive examples.
Regardless of how politicians resolve the “public option” debate, incentives that align all parts of our health care system to continuously innovate and improve quality will translate into lower costs and long-term success.
Kay Plantes, Ph.D., is an MIT-trained economist and owner of Plantes Company, LLC a strategy consulting firm focusing on business model innovation in Madison, WI, and author of Beyond Price: Differentiate Your Company in Ways that Really Matter (Greenleaf Book Group, 2009).
Martin A. Preizler has been the President and CEO/COO of three health insurance companies, most recently retiring as president and CEO of Physicians Plus Insurance Corporation in Madison. He currently consults on leadership, strategy and quality. Earlier in his career he directed the Wisconsin’s Medicaid program.