14
PRIVATE SECTOR REFORMS TRUMP GOVERNMENT EFFORTS
THOUSANDS, perhaps hundreds of thousands, of people in health care, now the largest industry in the nation at more than 18 percent of the economy, are working on various reforms of the system. Collectively, they are making astounding strides on the medical side of health care, including making many cancers treatable versus palliative, allowing people with creaky joints to be mobile again, and enabling people with major handicaps to lead useful lives.
A majority of the medical advances in the world are American advances, and there are many more to come, such as medicine personalized to each person’s genetic makeup, the growth from stem cells of new organs, and the development of drugs that will treat Alzheimer’s, Parkinson’s, addictions, and other afflictions. These will happen because the researchers at our great medical institutions are closing in on breakthroughs in science. And they will happen in the lifetimes of most people.
There are also some major advances in the management of the delivery of health care, innovations such as electronic medical records, the elimination of infections in some operating rooms, and round-the-clock, electronically monitored intensive care units.
Yet all these advances in medicine, in technology, and in systems have not paid off on the economic side of medicine. Costs, prices, and the resulting insurance premiums remain wildly out of control. Insured businesses experienced double-digit premium hikes in 2010. Those staggering increases have driven more and more companies out of health care as a benefit; more than 40 percent of businesses now don’t provide care.
With the national average at nearly $11,000 in health costs per employee, it should come as no surprise that struggling companies continue to drop coverage. Their exodus compounds the nation’s access problem.
For some Americans, the natural reaction to the hyper-inflation and lack of access is to look to the government and hand over the payment challenges to the taxpayer instead of the employer.
But the hard truth is that public employers and public health plans do a terrible job of managing the economic side of health care delivery.
Public sector programs have to satisfy many stakeholders, so they have a hard time bringing about reform or change. More often, they are pushed relentlessly by interest groups to broaden coverage.
The result is that government at all levels pays two to three times per employee what is paid by well-managed private payers. For instance, Milwaukee County was spending more than $20,000 per employee annually on health care in 2008, the Cedarburg School District was at $24,000, and even a fairly well-managed Wisconsin State employee plan ran more than $15,000. In contrast, Serigraph was then running at $6,839, and we offer a full benefit plan.
The health law signed by President Obama in early 2010 was not, by nearly everyone’s estimation, really health care reform but instead health insurance reform and access expansion. The underlying cost structures of health delivery in America went largely untouched.
A number of pilot programs were included in the new law, and some of those may some day change the way health care is delivered. But the wheels of bureaucracy grind slowly, so it will be years before any successes are worked into how virtually insolvent programs like Medicaid and Medicare are managed.
Meanwhile, the galloping cost, price, and premium trend lines will continue to point sharply upward. Indeed, most insurance companies are expecting to see premium increases accelerate because of ObamaCare. Just what we need—more fuel on the inflation fire.
It doesn’t have to be that way. The innovations and reforms being put to work in the private sector are readily available to public and private payers alike.
There is no reason why a poor person on Medicaid, for instance, couldn’t be given a health account of several thousand dollars, accompanied by reasonable deductibles and co-insurance. That would instantly put an end to many of the abuses plaguing Medicaid, such as recipients calling 911 and getting an expensive ambulance ride to an expensive emergency room for a sore throat or simple headache.
Don’t think that example is an exaggeration. It happens every day in emergency rooms across the country. A friend who is an ER doctor quit because she just couldn’t stand it any more. Another said emergency room physicians are often treated with disrespect, which often happens when people receive free care.
Similar abuses are endemic to other public welfare programs administered at the state or national level. Responsibility suffers when it’s other people’s money—taxpayers’ money.
In contrast, I cannot remember a co-worker at Serigraph ever ripping off our system.
If a person in an entitlement program would pay something out of his own pocket, or even out of an account in his name that is provided to him, those kinds of abuses would be greatly mitigated.
Inevitably, because the financial pain will become so high for governments and taxpayers, there will be an imperative to figure out how to foot the bill. Government at all levels will have to deal with the cost of care that Congress inadequately addressed in 2010.
The federal government may be forced to set a maximum annual budget for health care, much as Canada does, which could lead to care rationing. Or it will have to raise more taxes to pay for the unaddressed inflation.
The better solution would be to learn from the reforms and innovations that have been deployed in the private sector.
Here are some hard-earned lessons in the private sector that, applied broadly, could produce savings to pay for the broader access, rescue government budgets, and bend the inflationary trend line downward. These proven tactics should drive what happens in both private and public sectors:
• Change Who Pays—Follow the lead of more than one-half of private companies, including most hospitals and health insurers, by changing who pays. Instead of third-party insurers or governments making virtually all payments, thus immunizing people from the economics, let the consumers pay directly for routine health care. With consumer dollars in the game, behavior changes, and consumerism and marketplace dynamics take hold. Use tax breaks or subsidies where necessary to give the consumers a hand in buying insurance and creating personal health accounts. Activate individual responsibility.
• Restructure Payment System—Instead of piecework payment by procedure, make payments for complete treatments. Bundle charges into one sum so consumers can understand what they are buying. Serigraph has negotiated some bundled prices, so it can be done. Year-to-year rate hikes could then easily be tracked.
• Pay Bonuses for Good Outcomes—The Marshfield Clinic in Wisconsin earned bonuses from the federal government in 2007 and 2008 for keeping Medicare patients out of the hospital. The clinic was rewarded for delivering high-quality results. Once people enter a hospital, the meter on costs starts running wildly, so pay incentives to keep them out. Otherwise, hospital systems will continue to be tempted to look at prevention as revenue losers.
• Make Prevention Free—Leading private companies are emphasizing good health. So they charge zero for mammograms, Pap tests, PSA tests, and even colonoscopies. They put low prices on primary care visits, such as $6 at QuadGraphics and $20 or free at Serigraph.
• Flip the Pyramid of Care—The health care system must revolve around primary care doctors, not specialists. The high-priced specialists should be called only after primary care providers, such as nurses, nurse practitioners, physician’s assistants, and general practitioners, have done what they can for a patient. Public plans pay specialists much more than primary providers, just the opposite of what is needed. Create incentives, like loan forgiveness, to encourage medical students to go into primary care. Provide primary care at the work site, where possible, or in convenient clinics. Hire a retainer doctor to deliver exquisite primary care. Create a medical home for every plan member.
• Lead with Lean—Health care providers must adopt lean disciplines. They must follow the examples of the Cleveland Clinic and ThedaCare, where millions of dollars of waste and hundreds of thousands of potential errors have been eliminated. ThedaCare’s prices are sharply lower than those of fat providers. The Wisconsin government subsidizes lean experts who consult with the state’s manufacturers. Why not health systems?
• Require Mini-Physicals Annually—Health-risk assessments, adopted by many private companies at a relatively inexpensive charge, should be required annually. They are effective in catching high-risk situations needing immediate attention, in identifying chronic diseases, in convincing people to change lifestyles, in setting a platform for health coaching, and in allowing payers to measure and manage their overall health costs. Full annual physicals would be even better.
• Make Price and Quality Transparent—People have an inalienable right to patient-friendly information on quality and real prices. Outcomes like infection rates of hospitals and doctors are slowly becoming available, but must be made widely and immediately public. Governments could mandate such information. As a start, they could easily publish their own price lists of what they pay. Payers, private and public, could require quality audits in the absence of forthcoming data. Transparency should apply not to sticker prices but to discounted, bundled prices that are understandable to the average citizen. Present pricing is a thick fog.
• Attack Chronic Diseases in Medical Homes—Since 80-90 percent of health costs tie back to chronic diseases, those diseases have to be managed aggressively and proactively. The present fix-when-broken approach is backward and passive. Diabetes can be controlled; obesity can be mitigated; hypertension can be managed; depression can be treated. Payers and providers must set up systems to make sure that every at-risk citizen is surrounded by the people and tools necessary to ward off tragic outcomes. Accessible electronic health records are one such tool. Providers, insurers, and most payers have been paying lip service to this area of opportunity. Intelligent management and systemic care of chronic diseases must supersede episodic treatment. The most effective place to deliver such systematic care is in a medical home at the primary care level.
• Tilt to Generic Drugs—The expiration of patents on many major drugs has led to the introduction of a huge variety of generic pharmaceuticals, and companies and governments can take advantage of their vastly lower prices by putting in tiered incentives to drive consumer/employees toward those excellent deals. Drugs can be made free to employees if the deals are advantageous enough.
Of the $2.5 trillion spent on health care in the United States, roughly half is spent by the private sector and half by government payers. Increasingly, private payers are adopting serious reforms on the economic side of medicine. For example, more than 50 percent of companies now offer high-deductible plans. Many use tiered incentives to encourage the use of generic drugs. Most have prevention and wellness programs. The result has been containment of the hyper-inflation that once gripped those companies.
As an example, costs dropped 22 percent at Bucyrus International in the year after it adopted a consumer-driven plan. Its union concurred in the decision and there have been no grievances about the new plan. The company and union achieved what amounts to cost deflation at a local level. Combined, many such ground-level victories have undoubtedly contributed to an aggregate cooling in the volcanic cost increases in health care. While still high, and well above the country’s general inflation rates of 2-3 percent, health cost increases in recent years have averaged in the 6-8 percent range, down from the annual double-digit surges during the 1990s and early into this decade. Of course, that overall percentage includes federal health plans that use price controls to limit increases.
The general level of inflation in health care would decrease more if public payers would join in the movement away from traditional plans based on low premiums, low deductibles, and co-insurance, if they would manage health aggressively, and if they would insist on better performance from medical providers.
Most debilitating to effective cost management is the unwillingness of public administrators to engage public employees as partners, as mini-managers of the system, as responsible consumers, and as responsive public servants. Instead, they deploy top-down, paternalistic systems that keep public employees in a state of passive entitlement.
The same holds true for the major entitlement programs, Medicare and Medicaid. When people hit sixty-five, they move from being zealous consumers to a much less concerned and heavy user of care.
The economic fallout of non-engagement is horrendous. Medicare is projected to go into the red in 2017. Medicaid is busting state budgets across the country and the new health law will only add to the budget burden. School districts pay more than $20,000 per employee for health care and are headed to where health costs exceed base pay. Local budgets are strained to the breaking point by bloated health costs.
The inattention to available health care economies results in a crowding out of necessary public spending on education, infrastructure, and even public safety. School districts, for example, are laying off teachers across the country instead of managing swollen, under-managed benefit costs.
That sorry outcome is all so unnecessary. There are literally hundreds of billions of dollars to be saved if public organizations will become learning organizations—if they will learn from best practices in the private sector and, in some rare cases, the public sector.
They have to learn to manage, not just disperse funds.
As outlined earlier, Bob Ziegelbauer, the county executive with an MBA, knocked premiums down 40 percent in Manitowoc County, Wisconsin, after he benchmarked on reforms in the private sector. Everybody came out ahead, including the county’s employees and taxpayers.
Invariably, members in the consumer-driven health plans report a high level of satisfaction. They like being in control of some of the health care dollars. They like lots of choices. They like having better information. They like it when their employers invest in their health. They do a better job on prevention and wellness.
Political leaders may have tackled the access problem. Now they need to solve the cost challenge and related quality issues.
Government health care reforms have focused on how to pay for a bloated system rather than on how to fundamentally reform it. That failure to adopt successful, proven private sector reforms is a road to government bankruptcy.
Our leaders need to build on the three platforms for fundamental transformation and reform of the U.S. health care sector:
• Individual Responsibility. We need to engage every U.S. citizen as an individual actor in managing his or her own health and health care costs. No system works without individual accountability. Proper incentives, education, and engagement of employees as consumers evoke that responsibility, and costs plummet.
• Focus on Primary Care. We need to put primary care back where it belongs as the major foundation of the delivery system. Intimate primary care greatly improves health and cuts costs by as much as one-third.
• Centers of Value.We need to promote the purchase of value-based health care in both private and public plans. Some providers offer significantly higher value than others. They should be rewarded with more business.
The U.S. president needs to personally visit the great innovators in the country—places like QuadMed, ThedaCare, Bucyrus International, KI, and the Gundersen Lutheran Clinic. He needs to touch, see, and hear what works to combat health care inflation.
He is welcome any time to talk with Serigraph co-workers about what works. They have tamed the beast.