Some observers have begun to suggest that it really doesn’t matter who pays for health care. What matters is how we pay, and what we pay for.
Dr. Atul Gawande made this point in the brilliant piece that the NewYorker published at the beginning of this month. “Activists and policymakers spend an inordinate amount of time arguing about whether the solution to high medical costs is to have government or private insurance companies write the checks . . . ” Gawande observes. “These arguments miss the main issue. When it comes to making care better and cheaper, changing who pays the doctor makes no difference.” In other words, he is saying, it just isn’t important whether we have a public-sector insurance plan competing with private sector insurers.
Over at the Huffington Post, Jim Jaffe makes a similar argument. He begins by saying that health care spending has become unsustainable. Trying to pay less for health care services isn’t the whole answer: “Ultimately we have to provide fewer services.”
“Too many are now invested in a series of side debates irrelevant to this central issue,” Jaffe continues. “The existence of a public plan won't cut consumption unless it includes limits on services . . . A public plan isn't a prerequisite for imposing such limits.”
I have to disagree. I believe a public sector plan, overseen by a Federal Heath Board comparised of physicians, medical reserachers and medical ethicists, is the only plan that can impose limits, weeding out unnecessary, ineffective, and potentially harmful tests, products and procedures.
“Limiting Services”= “Managing Care”
Let's be honest. We are, in effect, talking about “managing care”–what “health maintenance organizations” (HMOs) were supposed to do. As originally conceived, they were called “health maintenance organizations,” because they were charged with keeping us well by providing generous and vigilant preventive care. They were supposed to “manage” chronic diseases, making sure that the right person received the right care at the right time. And they were supposed to use medical evidence to make certain that patients were receiving the care that provided the greatest benefit—and the least risk—for that particular patient.
When Dr. Paul Ellwood coined the phrase “health maintenance organization” he envisioned non-profit organizations subjected to strict quality reviews (with these reviews based on medical research). In Ellwood’s mind, plans would compete with each other on the quality of care they provided, not the price. The cost-consciousness of managed care would be balanced with an emphasis on outcomes.
At the time, there were few for-profit insurance companies peddling health care. For-profits sold other types of insurance—but not medical insurance. When the HMO Act of 1973 was passed, the law did not bar for-profit HMOs, but neither did it encourage them. By contrast, it did offer federal loans and grants to non-profit HMOs. The Nixon administration believed that non-profit HMOs could curb health care inflation by moving away from fee-for-service payments while simultaneously offering better care. The HMOs that Ellwood described in the early 1970s, sound very much like the “accountable care organizations” that Gawande and others talk about today.
But in 1980, with the election of President Ronald Reagan, priorities changed. Non-profits were no longer in favor. The for-profit corporation became the model for the nation. In the early 1980s, Washington eliminated the federal grants and loans for non-profit insurers.
By this time, the nation’s health care bill had begun to spiral. For-profit insurance companies saw just how much money was on the table; and they realized that now that the non-profits no longer had a stream of federal funding, for-profit insurers could probably move in and take over the market. And this is just what they did. Since they had deep pockets, these publicly -traded insurers were able to create price wars–and win them. Meanwhile, non-profits looking for capital turned to Wall Street—and turned themselves into for-profits. In 1981, 88% of HMOs were non-profits; by 1986, the share of nonprofits had fallen to just 41 percent. And by the 1990s, the vast majority of managed care companies were profit-driven.
They took over the HMO business and redefined what “managing care” meant. Rather than looking at outcomes, they looked at costs. Their investors were focused on quarterly earnings; they wanted profits to rise Now. This lead to short-term thinking. Rather than emphasizing on what might keep their customers healthy over the long-term, insurers focused on how to cut costs in the next three months.. Too often, this meant saying “no” to needed, effective care.
As we all know, patients, doctors and the media fought back. Stories of “care denied” became regular features on the evening news. Sometimes the treatment the insurer wouldn’t pay for was, in fact unproven. Bone marrow transplants as a treatment for breast cancer provided no benefit. But the media put enough pressure on insurers that they relented, and covered the transplants. As a result, a great many women suffered horribly from a cure that was worse than the disease. (Some became so sick that when they died, they were unable to say good-bye to loved ones.)
Finally, at the end of the 1990s, the HMOs threw in the towel. They stopped saying “no” and began paying for most tests and treatments that the FDA approved. This was costly, of course, and explains why private insurers’ reimbursements have been climbing by 8% a year. Meanwhile they have passed those costs along in the form of higher premiums, making health care insurance unaffordable for more and more families. In Money-Driven Medicine, I quote a Wall Street analyst: “The social compact was that managed care would make careful decisions about costs; instead they became a cost-through vehicle.”
This brings me back to Jaffe’s argument. He says that, to contain costs, we must limit services, and “a public plan isn't a prerequisite for imposing such limits.” A private for-profit insurer could do it just as well., he suggests.
Here, he ignores the history of what happened in the 1990s. For-profit insurers did not “manage care” in a way that “maintained” their customer’s health.
Why did they fail? As Ezra Klein recently explained in his Washington Post column: “The issue isn't that insurance companies are evil. It's that they need to be profitable. They have a fiduciary responsibility to maximize profit for shareholders.” Klein goes on to paraphrase Wendell Potter, a 20-year insurance company employee who recently testified before Senator Jay Rockefeller’s Commerce committee: “as Potter explains, he's watched an insurer's stock price fall by more than 20 percent in a single day because the first-quarter “medical-loss ratio” [the percentage of premiums that the insurer paid out in claims] had increased from 77.9 percent to 79.4 percent.”
Potter knows what he is talking about. Disappointed shareholders can be brutal. And it doesn’t take much to disappoint them. In this case investors sent the share price plummeting because the insurer had the poor judgment to increase the amount that it paid out to doctors, hospitals and patients by 1.5 percent.
Even if an intelligent CEO wanted to do the right thing, take the long-term view, and provide labor intensive chronic disease management so that, over the long term, customers would be healthier—the CEO of a large publicly-traded insurance company probably wouldn’t keep his job long enough to find out whether or not his ideas worked.
But, for the sake of argument let’s assume that under health care reform, both private insurers and their shareholders experienced a change of heart. Patients still won’t accept limits imposed by for-profit managed care companies. They don’t trust them. They know that the law says that a corporation must put its shareholders’ interests first. Patients—and doctors—will always suspect that when insurers try to limit the number of services patients receive, they are just trying to save money. They are not physician organizations. They are not medical ethicists. They are not even elected officials. Put simply, private insurers have neither the scientific expertise nor the moral standing to set the nation’s healthcare priorities.
Should For-Profit Corporations Make Such Important Social Decisions?
Some insurers understand this. “We find ourselves [becoming] private regulators and making public policy by HMO,” Alan Hoops, then chief executive officer of Pacificare told the Los Angeles Times in 1998. “We in the business of constantly passing judgment on the societal value of a given protocol.” If the insurer agrees to cover more treatments, we all pay for them, in the form of higher premiums. Often the judgments raise questions of medical ethics. “How much reconstructive surgery is truly needed for children with severe facial disfigurement?” the LA Times asked. “Surgeons could simply restore normal functions or do more elaborate, and more costly work that would dramatically improve patients’ lives. ‘Do we reconstruct the entire face or simply improve it?’ asked John Golenski, a medical ethicist and executive director of George Mark Children’s House in San Leandro, California. “How to draw those lines in not clear in any insurance organization I’ve ever worked with.”
The LA Times zeroed in on the central question: “As health care is increasingly dominated by large, publicly traded corporations intent on maximizing profits for shareholders, should insurers be taking the lead on issues of such importance to society? Can the competitive marketplace handle these issues in a way that society will find acceptable?”
Probably not. I can only imagine the headlines if Wellpoint decided thatm for a child born with a hole in her face where a nose should be, surgery that ensured that she could breathe easily would be sufficient. Many of us might well feel that federal regulators should insist that private insurers cover full plastic surgery for children born with physical deformities. Many of us might feel that they should pay for the PSA testing for early-stage prostate cancer that many urologists still recommend—even though there is no evidence that it either saves or prolongs lives. Others might argue that MRI breast scans should be available for average-risk women, even though the reseach reveals that, by detecting "pseudo-disease," the scans do more harm than good. The list is endless.
Yet, Jaffe is right, we must reduce the volume of health care services we provide. In some cases we can “pay less” for certain drugs, devices and procedures that are over-priced. But we also need to “pay more” for certain vital services such as primary care, chronic disease management, and palliative care.
We need to pay Medicaid providers more. We need to reward hospitals that invest in systems that reduce errors and infections. We need to fully fund Medicare and Medicaid so that they can ferret out fraud. (One reason Medicare’s administrative costs are so low is because it doesn’t do what it should to find and prosecute healthcare providers who are bilking the system.)
While we pay more for some treatments, we need to eliminate those that are ineffective. We have ample evidence that one-third of our healthcare dollars are squandered on products, procedures and hospitalizations that are exposing patients to risks without benefit. If we want better outcomes, we have to learn to “do less.” We know that more conservative medicine leads to better outcomes. .
Who should decide where to draw the line?
If a Federal Health Board, composed of doctors and scientists began to limit the services that a public sector insurance plan offered– using comparative effectiveness research that had been analyzed by a panel of physicians, nurses and patient advocates who had no financial interest in the outcome (a group very much like the group that now serves on the Medicare Payment Advisory Commission (MedPac)), many patients and doctors would feel far more comfortable with their decisions.
Very likely, in many cases, the public sector plan would not refuse to cover a product or proceduret(unless it was clearly harmful) , but it would be likely to hike-co-pays and lower fees for less effective treatments as the Congressional Budget Office has suggested. Over time, if patient outcomes improved, both patients and doctors would become more comfortable with the idea of following the Board’s guidelines.
Couldn’t a Federal Health Board layout regulations for private insurers, telling them what they can and cannot cover? A Board could lay out minimal standards for what must be covered in an insurance package. But micro-managing private coverage, often on a case by case, drug by drug, procedure by procedure basis, would turn into a bureaucratic nightmare. Think of the how much time hospitals and doctors now spend negotiating approvals with private insurers.
By contrast, Medicare has managed to make it clear what it will and won’t cover without endless wrangling. A public-sector insurance plan should be able to do the same.
This is why it does make a difference whether or not we have a public sector insurer. Privately, some for-profit insures have told MedPac that they never again want to be on the front lines of “managing care.” But if Medicare—and a public-sector option—would provide cover, they would happily follow whatever precedents it set. If a public sector plan refused to cover Vioxx, deeming the risks too great for patients, , they would refuse payment for Vioxx. If the public-sector plan refused to cover bone-marrow transplants for breast cancer patients, knowing that there was no evidence the procedure saved lives—or even extended lives by one day—private insurers would follow suit. But this would be voluntary; the government would not be making case-by-case decisions for insurers, telling them what they couldn’t cover.
At the same time, if private-sector insurers wanted to compete with the public-sector option on both price and quality, they would have to focus on making wiser coverage decisions that would lead to better outcomes. This means paying attention to comparative effectiveness research and covering what patients really need rather than what drug-companies tell them that they should have. Public sector insurers could serve as a model for private-sector insurers that want to life quality while reining in costs.
In the end, only government has the standing—and the responsibility—to appoint unbiased medical experts to set the standards that will best serve the public good. Corporate America was never elected to do that.