The Structure Of Healthcare Reform Emerging

By: Click Broker Friday, May 15, 2009 5:07 PM

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Bloomberg’s “House Democrats Consider Mandate for Employer Health Insurance” gives us some strong hints on the emerging structure of healthcare reform. Readers can go directly to Bloomberg for the he said/she said, but the compromises are pointing to a laddered (3 layer) approach to making health insurance available to all Americans. The key word seems to be available, not mandated which is consistent with Obama’s presidential campaign.

The foundation will continue to be employer provided health insurance and all employers would be required to play or pay. This would be enforced through a payroll tax. Small employers would be able to purchase insurance though a national exchange from the start. Employees of larger firms that don’t offer health insurance will have access to the national exchange at some unspecified time after the start.

The government will set guidelines for the product offerings and price levels of the exchange plans. Non-employee consumers, otherwise known as the individual market, might not have access to the national exchange.

The second layer will be the expansion of Medicaid to more lower-income people. The third layer is what the private health insurance industry calls the nuclear option, the government plan. Pricing will vary by geography and coverage levels, but the government will set the standards of coverage. Whether private insurers can participate in the government plan similar to Medicare Advantage, has not been disclosed.

Bloomberg’s stating “the public option would be available to some consumers lacking insurance and would operate separately from the health exchange” implies the government plan should be viewed as insurance of last resort or high risk pool. The bipartisan comprise is to move the highest risk applicants to the government plan, allowing private insurers to still medically underwrite, and not enforcing any individual mandates.

The insurance industry appears to have won on their threat of no enforceable mandate means no guaranteed issue. The political will for an individual mandate is waning. Private insurers also have a partial victory with the tight limitation on access to the government plan.

With this more or less business as usual, there is little chance of cost reduction. The New York Times’ “Health Care Leaders Say Obama Overstated Their Promise to Control Costs” is reporting medical service providers are already backing down on their commitment to reduce the growth in healthcare inflation by 1.5%. If the removal of high risk applicants from the private insurers’ pools does not reduce premiums, look for a cram down on healthcare providers after healthcare reform gets started.

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5/16/2009 1:40:37 AM Healthcare Reform by Robert Westafer M.D. Real Healthcare Reform: Changing Priorities, Incentives and the Rules of the Game; Creating an Electronic Health Record for Every Citizen Who Wants One If you have the financial resources of Bill Gates or Warren Buffett you needn’t pay money to a health plan each month, since if you get sick or injured – even very seriously - you have more than enough money to pay all your medical bills yourself. But those of us who have significantly less financial resources must find some other means of dealing with the thousands or even hundreds of thousands of dollars or more of medical expenses that we might incur should a serious illness or injury be our fate. Enter the concept of “health insurance”. Large numbers of individuals and/or their employers pay some money each month into one or another big pot called a “health plan”. Those individuals who remain essentially very healthy for many years and then suddenly die or perhaps leave a particular health plan for some other reason – if they have put more money into the pot than was taken out to pay all their medical expenses - wind up helping to pay the medical bills of those members of the health plan who become seriously ill or injured and incur a lot of medical expenses. Many Americans covered by some form of health insurance don’t seem to fully understand or perhaps choose to ignore the fact that if they become seriously ill or injured, for the most part their medical bills will be paid by the members of their health plan who have remained healthy. Keeping members of a health plan healthy by preventing illness and injury is critically important, but is something not currently given the high priority and attention it deserves. Some Americans believe that healthcare should become a “right” of every American citizen. If a nationalized single payer health plan were enacted, every American citizen who became ill or injured - for any reason whatsoever - and incurred significant medical expenses would for the most part have his or her medical bills paid by U.S. taxpayers. Many Americans oppose such a system for America recognizing that significant difficulties such as long waiting periods and rationing of care exist in such types of all inclusive government healthcare systems that currently operate in other countries such as Canada and the United Kingdom. For any health plan to work which has a large number of people pooling their money to essentially pay the medical bills of whichever members of the plan become seriously ill or injured, rules must be established as to when and how much money may be taken out of the pot e.g. “legitimate” doctor bills and hospital bills. Equally important is keeping track of the amount of money that is being put into the pot each month in premiums paid by health plan members or their employers. If too much is being paid out in expenses as compared with the amount being received in premiums, the pot will soon become empty and the health plan will go broke. As previously mentioned, the monthly premiums paid by individuals or their employers go into a health plan’s big pot from which “covered” healthcare expenses are paid. But also from this pot are paid all the health plan’s administrative expenses including what may be big salaries and golden parachutes for CEO’s and other “healthcare executives” – individuals who may be paid to find technicalities of one sort or another in the health plan’s agreements so the health plan can deny or reduce payments, raise premiums, cancel insurance, or in one way or another minimize or exclude “bad risks” from the health plan. All such questionable business practices are done to enable the health plan to make a profit and remain in business. Currently we are experiencing continual increases in healthcare costs that are unsustainable and which, if unchecked, will soon seriously threaten the future of the entire American economy. Healthcare costs must be controlled, but how? If a healthcare system made up of health plans is going to have a chance of both meeting the needs of health plan members and simultaneously develop the ability to keep costs under control, priorities, incentives, and the rules by which the game is played all must be changed. The good news is that a lot of illnesses and many injuries are actually preventable. But how will prevention ever become a top medical priority when doctors, hospitals, and other providers get paid largely for diagnosing and treating illness and injury, not for preventing it? Although health promotion and disease and injury prevention receive fashionable and socially acceptable lip service, the fact is that most of the participants in what should be more appropriately called our “sickness and injury care system” actually have no significant financial incentive whatsoever to spend any significant time and energy in genuinely promoting health and helping to prevent disease and injury. Much to the contrary. Other than the actual members of a health plan – patients and potential patients - and their employers and perhaps the employees of some health plans, most participants in our sickness and injury care system - because of the way they are paid - have an enormous (if unspoken) financial incentive for massive amounts of disease and injury – much of which is preventable – to continue to occur in America. Strictly from a financial point of view, for those whose incomes come solely from the treatment – not the prevention - of illness and injury, the more illness and injury that occurs, the better. And if the illness or injury is serious and requires perhaps many expensive tests, multiple surgical procedures, and other very complicated prolonged treatment in an intensive care unit, so much the better; just as long as those unfortunate individuals who happen to be ill or injured are “covered” by “good insurance”, i.e. health plans that are reliable bill payers. This is not to say that there are not some excellent very dedicated and hardworking doctors and other health professionals - although they are paid on a fee for service basis to care for illness and injury – who nevertheless attempt to essentially work themselves out of a job by making health promotion and disease and injury prevention a top priority with their patients. It should also be recognized that some existing health plans – e.g. Kaiser and Group Health - combine insurance, doctors, and hospitals into a single entity in such a way that provides everyone - including all the health plan’s doctors - a real incentive to spend time and effort with patients on health promotion and disease and injury prevention as well as on early diagnosis and treatment. But unfortunately the above examples represent only a small part of the sickness and injury care system that currently exists throughout America. For the most part - because of the way they are compensated – the majority of doctors and other professional providers, acute care hospitals and long term care facilities, pharmaceutical manufactures and pharmacists, medical and surgical equipment manufacturers and personal injury and malpractice attorneys - among others - depend mightily on massive amounts of disease and injury occurring in America; and these participants in our sickness and injury care system would be significantly negatively impacted if a lot of the preventable illnesses and injuries were actually prevented. This must be changed. Unless the incentives and rules are changed to give as many participants as possible a real financial stake in health promotion and disease and injury prevention, in early diagnosis and treatment, and in maximizing health and minimizing disease and injury, healthcare costs in America will never be brought under control. Making appropriate changes in the incentives and the rules of the game is the real task and challenge of “healthcare reform”. What about financial incentives for individual health plan members? Should individuals receive a financial incentive to be healthy? It is well recognized that engaging in regular exercise, abstaining from tobacco, and eating moderately so as to maintain a reasonably normal body weight are all significant factors in helping to promote an individual’s health and wellness. These healthy behaviors can all be confirmed by simple tests performed or ordered in a doctor’s office. Why shouldn’t those individuals who practice these health promoting behaviors and comply with recommended immunization schedules and appropriate preventive screening examinations such as for colon cancer and breast cancer pay significantly less in premiums to their health plan each month than those who don’t? To really reform healthcare we must find ways – through changes in incentives and the rules of the game - to actually prevent what is preventable, to maximize early diagnosis and treatment, and minimize disease and injury with all its associated cost. We must find ways for participants to be part of our “healthcare system” and not just a part of our “sickness and injury care system”. Significant changes in the rules of the game for our legal system – tort reform – is also critically important so that the gaming of the system now being done by personal injury and malpractice attorneys and their clients can be ended and so that the exorbitant costs to physicians and other professionals for malpractice insurance can be dramatically reduced. Truly transforming our “sickness and injury care system” into a “healthcare system” by making significant changes in the incentives and the rules of the game may seem to be a formidable task and one that probably has never really been done before on a large scale anywhere in the world. But it is a worthy task and a critically important task for the future of America and its people. One significant part of this process is developing the capability of creating an electronic health record for every American citizen who wants one. We need a standardized framework that will allow every American citizen to have an individual electronic health record – a computerized medical record - that can be accessed by all the doctors who care for a particular individual, regardless of wherever on the planet the doctors or the patients happen to be. It would be like having your own personal online banking account that only you have the password to, but which you can share with the doctors who are caring for you, wherever you or they may be. I applaud those who are using their energy and expertise to upgrade our deplorable current paper medical records system and bring medical records in America into the 21st century. Developing a standardized framework for an electronic health record - for every citizen who wants one – created by your doctor with your assistance, with proper security and safeguards - is something that our national government can and should do as a part of healthcare reform. If done well, electronic health records will be transformational in helping doctors efficiently and effectively care for patients and will save an enormous amount of time, effort, and money which is currently wasted on needless and frequently inaccurate duplication. And having an accurate electronic health record for an individual will also facilitate appropriate health promotion and disease and injury prevention for that individual. Like the telephone and the computer, someday we will all wonder how we ever got along without individual electronic health records. But all this requires action, not just words. Now is the time for Americans and their leaders and doctors and other health professionals to step up to the plate and begin the process of transforming our “American Sickness and Injury Care System” into an “American Healthcare System” that is worthy of our great country. Robert Westafer M.D. Reply Rating: (0) (0)

If you have the financial resources of Bill Gates or Warren Buffett you needn’t pay money to a health plan each month, since if you get sick or injured – even very seriously - you have more than enough money to pay all your medical bills yourself.

But those of us who have significantly less financial resources must find some other means of dealing with the thousands or even hundreds of thousands of dollars or more of medical expenses that we might incur should a serious illness or injury be our fate.

Enter the concept of “health insurance”.

Large numbers of individuals and/or their employers pay some money each month into one or another big pot called a “health plan”. Those individuals who remain essentially very healthy for many years and then suddenly die or perhaps leave a particular health plan for some other reason – if they have put more money into the pot than was taken out to pay all their medical expenses - wind up helping to pay the medical bills of those members of the health plan who become seriously ill or injured and incur a lot of medical expenses.

Many Americans covered by some form of health insurance don’t seem to fully understand or perhaps choose to ignore the fact that if they become seriously ill or injured, for the most part their medical bills will be paid by the members of their health plan who have remained healthy. Keeping members of a health plan healthy by preventing illness and injury is critically important, but is something not currently given the high priority and attention it deserves.

Some Americans believe that healthcare should become a “right” of every American citizen. If a nationalized single payer health plan were enacted, every American citizen who became ill or injured - for any reason whatsoever - and incurred significant medical expenses would for the most part have his or her medical bills paid by U.S. taxpayers. Many Americans oppose such a system for America recognizing that significant difficulties such as long waiting periods and rationing of care exist in such types of all inclusive government healthcare systems that currently operate in other countries such as Canada and the United Kingdom.

For any health plan to work which has a large number of people pooling their money to essentially pay the medical bills of whichever members of the plan become seriously ill or injured, rules must be established as to when and how much money may be taken out of the pot e.g. “legitimate” doctor bills and hospital bills. Equally important is keeping track of the amount of money that is being put into the pot each month in premiums paid by health plan members or their employers. If too much is being paid out in expenses as compared with the amount being received in premiums, the pot will soon become empty and the health plan will go broke.

As previously mentioned, the monthly premiums paid by individuals or their employers go into a health plan’s big pot from which “covered” healthcare expenses are paid. But also from this pot are paid all the health plan’s administrative expenses including what may be big salaries and golden parachutes for CEO’s and other “healthcare executives” – individuals who may be paid to find technicalities of one sort or another in the health plan’s agreements so the health plan can deny or reduce payments, raise premiums, cancel insurance, or in one way or another minimize or exclude “bad risks” from the health plan. All such questionable business practices are done to enable the health plan to make a profit and remain in business.

Currently we are experiencing continual increases in healthcare costs that are unsustainable and which, if unchecked, will soon seriously threaten the future of the entire American economy. Healthcare costs must be controlled, but how? If a healthcare system made up of health plans is going to have a chance of both meeting the needs of health plan members and simultaneously develop the ability to keep costs under control, priorities, incentives, and the rules by which the game is played all must be changed.

The good news is that a lot of illnesses and many injuries are actually preventable. But how will prevention ever become a top medical priority when doctors, hospitals, and other providers get paid largely for diagnosing and treating illness and injury, not for preventing it?

Although health promotion and disease and injury prevention receive fashionable and socially acceptable lip service, the fact is that most of the participants in what should be more appropriately called our “sickness and injury care system” actually have no significant financial incentive whatsoever to spend any significant time and energy in genuinely promoting health and helping to prevent disease and injury.

Much to the contrary. Other than the actual members of a health plan – patients and potential patients - and their employers and perhaps the employees of some health plans, most participants in our sickness and injury care system - because of the way they are paid - have an enormous (if unspoken) financial incentive for massive amounts of disease and injury – much of which is preventable – to continue to occur in America. Strictly from a financial point of view, for those whose incomes come solely from the treatment – not the prevention - of illness and injury, the more illness and injury that occurs, the better. And if the illness or injury is serious and requires perhaps many expensive tests, multiple surgical procedures, and other very complicated prolonged treatment in an intensive care unit, so much the better; just as long as those unfortunate individuals who happen to be ill or injured are “covered” by “good insurance”, i.e. health plans that are reliable bill payers.

This is not to say that there are not some excellent very dedicated and hardworking doctors and other health professionals - although they are paid on a fee for service basis to care for illness and injury – who nevertheless attempt to essentially work themselves out of a job by making health promotion and disease and injury prevention a top priority with their patients.

It should also be recognized that some existing health plans – e.g. Kaiser and Group Health - combine insurance, doctors, and hospitals into a single entity in such a way that provides everyone - including all the health plan’s doctors - a real incentive to spend time and effort with patients on health promotion and disease and injury prevention as well as on early diagnosis and treatment. But unfortunately the above examples represent only a small part of the sickness and injury care system that currently exists throughout America.

For the most part - because of the way they are compensated – the majority of doctors and other professional providers, acute care hospitals and long term care facilities, pharmaceutical manufactures and pharmacists, medical and surgical equipment manufacturers and personal injury and malpractice attorneys - among others - depend mightily on massive amounts of disease and injury occurring in America; and these participants in our sickness and injury care system would be significantly negatively impacted if a lot of the preventable illnesses and injuries were actually prevented. This must be changed.

Unless the incentives and rules are changed to give as many participants as possible a real financial stake in health promotion and disease and injury prevention, in early diagnosis and treatment, and in maximizing health and minimizing disease and injury, healthcare costs in America will never be brought under control. Making appropriate changes in the incentives and the rules of the game is the real task and challenge of “healthcare reform”.

What about financial incentives for individual health plan members? Should individuals receive a financial incentive to be healthy? It is well recognized that engaging in regular exercise, abstaining from tobacco, and eating moderately so as to maintain a reasonably normal body weight are all significant factors in helping to promote an individual’s health and wellness. These healthy behaviors can all be confirmed by simple tests performed or ordered in a doctor’s office. Why shouldn’t those individuals who practice these health promoting behaviors and comply with recommended immunization schedules and appropriate preventive screening examinations such as for colon cancer and breast cancer pay significantly less in premiums to their health plan each month than those who don’t?

To really reform healthcare we must find ways – through changes in incentives and the rules of the game - to actually prevent what is preventable, to maximize early diagnosis and treatment, and minimize disease and injury with all its associated cost. We must find ways for participants to be part of our “healthcare system” and not just a part of our “sickness and injury care system”.

Significant changes in the rules of the game for our legal system – tort reform – is also critically important so that the gaming of the system now being done by personal injury and malpractice attorneys and their clients can be ended and so that the exorbitant costs to physicians and other professionals for malpractice insurance can be dramatically reduced.

Truly transforming our “sickness and injury care system” into a “healthcare system” by making significant changes in the incentives and the rules of the game may seem to be a formidable task and one that probably has never really been done before on a large scale anywhere in the world. But it is a worthy task and a critically important task for the future of America and its people.

One significant part of this process is developing the capability of creating an electronic health record for every American citizen who wants one. We need a standardized framework that will allow every American citizen to have an individual electronic health record – a computerized medical record - that can be accessed by all the doctors who care for a particular individual, regardless of wherever on the planet the doctors or the patients happen to be. It would be like having your own personal online banking account that only you have the password to, but which you can share with the doctors who are caring for you, wherever you or they may be.

I applaud those who are using their energy and expertise to upgrade our deplorable current paper medical records system and bring medical records in America into the 21st century. Developing a standardized framework for an electronic health record - for every citizen who wants one – created by your doctor with your assistance, with proper security and safeguards - is something that our national government can and should do as a part of healthcare reform.

If done well, electronic health records will be transformational in helping doctors efficiently and effectively care for patients and will save an enormous amount of time, effort, and money which is currently wasted on needless and frequently inaccurate duplication. And having an accurate electronic health record for an individual will also facilitate appropriate health promotion and disease and injury prevention for that individual. Like the telephone and the computer, someday we will all wonder how we ever got along without individual electronic health records.

But all this requires action, not just words. Now is the time for Americans and their leaders and doctors and other health professionals to step up to the plate and begin the process of transforming our “American Sickness and Injury Care System” into an “American Healthcare System” that is worthy of our great country.

Robert Westafer M.D.

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