What is Health Care Reform?

Question from one of our midwestern correspondents:

Precisely what is health care reforming? One complaint I have is that most doctors in this area are employed by a hospital and therefor their 1st master is the business manager who surely tells them to send patients to the plethora of specialists who are also employed by the same entity, to take advantage of the cash flow available from Medicare and health insurance Co's; and the patient is just left to swing in limbo with no good doctor/patient relation available to him.

So regardless of what is being reformed, medical decisions seem to be being made more and more by business managers and government bureaucrats maintaining a cash flow from patients with little regard for their actual health needs.

But what aspects of health care are actually being "reformed"?

Response:

In the first instance, I think reform means availability of health care insurance coverage to all Americans. Second, it means reform of health care provision. And I think those are two different things.

What we did here in Massachusetts is to create a system which requires every resident to get health insurance. Actually about 97% now have health insurance (there are some exemptions available, and you can pay to opt out), up from around 85% before. Or, in other words, the uninsured rolls have been reduced by 80%. There is a state-run exchange (called the Health Connector) that has arranged with a list of insurance providers to provide health insurance to people who don’t have coverage from other sources such as their employer, at subsidized rates for those who can’t afford pay. That helps people whose employers don’t offer health insurance and people with chronic illnesses who can’t hold jobs.

In return for the rules requiring everyone to have coverage, the insurance companies were required to eliminate their riders on preexisting conditions, because before there was an obvious incentive for people without insurance through their job to apply for insurance only when they became sick. With nearly universal coverage, that adverse selection problem is greatly minimized.

In order to discourage employers from dropping their plans and throwing more people onto the Health Connector, there is an employer mandate for businesses with more than 10 employees with a tax (initially $295 per employee) if the employer doesn’t offer health insurance. The tax is less than the cost of health insurance, but if the employer opts to pay the tax it gets nothing and its employees still have to get insurance themselves, so there is a positive incentive to offer health insurance. This has worked well to prevent employers from dumping their plans.

This program, by the way, was worked out by Republican Governor Mitt Romney with the Democratic state legislature. The federal reform program being proposed follows many of its features. One big complaint of the program is that it hasn’t realigned incentives for doctors to provide primary care. That’s the issue that you bring up, where the patient swings in limbo between specialists, and it has a cost component as well.

I think that the proponents of the so-called public option see that as a way for the government to set up its own insurance system with better incentives for doctors. For example, the public insurance plans could reimburse doctors at least partly per capita or based on wellness rather than strictly fee-for-service. Whether they could do a better job of that than they have done with Medicare remains to be seen. I’d like to see some state successfully try that before it becomes part of a nationwide program.

Some of the discussion of cost control, involving utilization review, got caught up in the “death panel” debate last August. The proposed revised guidelines on mammograms that came out recently have also stirred concerns about rationing care. The single payer advocates believe that the solution is global budgeting through a health care bureaucracy, but they are out of the U.S. mainstream and for better or worse haven’t been able to get their proposals on the table. Some countries in Europe have single payer, but other countries in Europe don’t, so it has to be said Europe as a whole is not single payer.

There have been efforts at cost control coming from private insurance carriers. The most effective of these seems to be higher deductible plans, where costs for basic or routine services come out of the patient’s pocket up to a certain amount annually, and only amounts beyond that are reimbursed. These plans are usually coupled with health care savings plans from employers to ensure the employee has savings to cover the costs. Patients feel like they are spending their own dollars, and push back more on whether certain procedures or treatments are really necessary. And doctors feels like they are spending the patient’s money, and not some faceless insurance company’s.

Ultimately, I think successful reform has to mean also giving patients as consumers more power in the patient/doctor/specialist/hospital/insurer/employer/government equation. Getting back to that idea of the good doctor/patient relationship is key. But it might be best to go ahead with health insurance reform and get everybody covered, and then come back to health care provision reform.

There is a third aspect of reform which does not appear to be on the table much at all. That is medical malpractice liability. Frivolous lawsuits and outrageous jury awards are essentially a tax on the health care system. In the workplace, the tort system was eventually thrown out in favor of workers compensation, because it was recognized that some level of injuries are inevitable and need to dealt with on a rational, predictable basis that doesn't needlessly destroy companies and jobs.