Take This Opportunity to Reform Health Care

(Originally published in the San Francisco Chronicle)

The Obama administration's first 100 days focused largely on the nation's financial crisis. Nonetheless, this initial period includes two major health care efforts, one contained in the stimulus package, the other embedded in a policy strategy. A promising start, but the follow-through will be critical.

The stimulus package includes not just tax cuts and transportation projects but also some important health care provisions. There is a temporary 65 percent COBRA subsidy for people who lose their employer-based health insurance. It adds $87 billion in Medicaid funds for states, such as California, hit hard by the recession.

Such visible stimulus funds immediately fill revenue gaps. More important from a policy perspective are two long-term efforts. The legislation includes $19 billion over five years for health-information technology, which, if designed well, can be critical in transforming medical care. Likewise, $1.1 billion for comparative effectiveness research will help assess the value of various clinical interventions.

As for strategy, President Obama has repeatedly said that health care is a top priority but that he is willing to let Congress take the lead in putting forward proposals. This contrasts with the effort of the Clintons 16 years ago: They developed a fully formed plan and presented it to Congress, where it died before coming to a vote.

Democratic majorities in Congress do not ensure significant health care reform. A major split is developing between some Democrats, who favor a public plan to compete with private insurers, and most Republicans, who are unalterably opposed to such an arrangement. A do-or-die battle over a public plan would doom reform. It would, moreover, be a fight over a useless piece of "policy territory." Both sides believe that a public plan leveraging Medicare's market power over fees will drive private insurers out of business. For some, this is the goal; for others financial ruin.

"Medicare for all" might reduce administrative costs, but it will do little about the growth in overall expenditures that truly threatens our nation. Medicare expenditures vary enormously across the country, and no evidence exists that the high-use areas have better care or outcomes. A public plan is good for expanding coverage but not for innovations in the delivery of care. Special-interest groups routinely get Congress to prevent true cost-saving innovations.

Forget "more of the same" - a public plan just like either private insurers or Medicare. Obama should seize this opportunity to transform health care. A differently designed, publicly chartered plan can complement both private insurers and Medicare. It would build on the strengths and avoid the weaknesses of each.

The new public plan would cover just hospitalization and chronic illnesses. Those two categories account for more than 60 percent of the costs for those younger than 65. Pre-existing (chronic) conditions are the main reason private health insurance for individuals and small employers is so expensive. The new plan would price coverage according to demographics, not one's health. By combining a mandate that everyone have this basic coverage with income-based subsidies for affordability, we could rapidly reach universal coverage.

This new insurance pool would not just be open to individuals but also would sell its "coverage" to private insurers. The private plans then would not need to worry about attracting high-risk enrollees, markedly reducing their wasteful underwriting and marketing costs. Instead, private plans will compete by offering more attractive primary-care options.

The new pool would alter the ways providers are paid. Hospitals and physicians coming together would receive a bundled payment for the whole episode of care and have freedom in how they organize services and are compensated. With greater incentives for efficiency and quality, care would be transformed.

Medicare is too constrained by special interests to encourage greater efficiency and coordination. The new pool would not attempt to control fees, instead setting its payments based on the costs of those physicians and hospitals achieving better-than-average outcomes. Episode-based payment will lead to greater cost savings than fee reductions that simply encourage more use. The publicly chartered, but politically insulated, pool could even offer its more effective payment options to Medicare.

Fundamental health care reform must not only expand coverage to everyone but also put us on the path to greater efficiency and higher quality. We cannot do this with more of the same - be it public or private. We can do it by realigning payment and incentives.

Harold S. Luft is Caldwell B. Esselstyn Professor Emeritus of Health Policy and Health Economics at the Philip R. Lee Institute for Health Policy Studies at UCSF, director of the Palo Alto Medical Foundation Research Institute, and the author of Total Cure: The Antidote to the Health Care Crisis (Harvard University Press). More information available at www.haroldluft.com.

Comments

[PlaceboStudman]

There will not be a single effective measure made to reform health CARE until we deal with the incestuous relationship between the FDA and BigPharma. Say what you want about insurance companies and their illegal immoral price gouging, it isn't going to matter one bit if we eradicate the insurance from the equation if the FDA is still allowed to approve substandard or dangerous drugs that are not intended for long term use, and yet are given to some of us for 10, 20, 30, 40 years or more to treat chronic conditions. We need to be extra vigilant and put pressure on the government to improve the medicine and technology we receive. Sure, comparative effectiveness is a good idea, and a potential good start, but it won't matter one lick if the best of the worst of what CE gives us is still just as dangerous or deadly. We MUST stop the drug pusher culture, and insist that we be given fewer drugs, and find other alternatives to drugs that have been widely known to cause such things as kidney or liver damage to suicide. 2 side effects of drugs that I have faced myself as a disabled patient, being put on various cornucopia of drugs for 36 years

[MMX]

The last post was 600$ a month. Sorry for the typo

[MMX]

You can have anything you want as long as you pay for it. Healthcare is free if the doctors, hospitals and Drug Company’s give it away. If the government gives us universal healthcare then our income taxes will go up about 20%. Health insurance company's including the government have to charge over what the doctors, Hospitals, and drug company’s charge. The government does not generate an income they use our money.
Canada has a government program that provides doctors visits and only what is done in the hospital. That free government health plan cost them 118$ month. They say that they pay 10% more income tax then in the USA, so if a family of four earns 60,000$ that would be 6,000$ a month. Then they say they have to pay another 75$ per person a month through a supplemental plan from a private health insurance carrier to make what we have today as coverage.

Add this free government handout up and you will get a cost of about 918$ per month. So do you want free health insurance or better health care. That is two very different things!

[IntellectuallyHonest]

The best course of action really to get the health care we all want and deserve is to demonstrate in the streets in front of the capitol. I don't plan to organize the demonstration, but I would attend one if there was one. There could be a gigantic banner that says 'UNIVERSAL HEALTH CARE' and another one that says 'WE WANT THE SAME HEALTH CARE BENEFITS THAT GOVERNMENT OFFICIALS GET FOR LIFE' or another one that says 'WE WANT THE SAME QUALITY OF HEALTH CARE THAT OUR NEIGHBORS GET IN CANADA AND GERMANY' or still another one that says 'BENEFITS FOR PEOPLE THAT PRODUCE, NOT PEOPLE THAT RECEIVE.' It's just a colossal injustice, but I guess the people that agitated for reform in the 60's have gone into hibernation.

If you don't think I would never attend a demonstration, check out the photo on page A8 of the Sunday Washington Post after the demonstration against AIG's policies at their headquarters in Washington, DC not too long ago. You'll see a man with a frown on his forehead wearing a blue coat carrying a sign. I'll leave the organizing to the Democrats, the Republicans or whoever it is out there that can get the permit and advertise the action.