Rather than dissect everything that was done and discuss why each contributed to failure, I think it will be clearer to start at the beginning. How did we get here and what *should* we be doing?

The standard business transaction involves a buyer and a seller. Their goals may be different (a buyer wants to buy and a seller wants to sell), but their goals are aligned. If you accomplish the goal of either, you accomplish the goal of the other. There is one relationship between them affected by government.

The healthcare transaction also involves a buyer, the patient, and a seller, the provider. The patient wants to receive the best care and the provider wants to give the best care. Their goals are aligned. But it doesn’t end there.

There is also an employer who selects the health plan (or none at all) and when the patient can take time off. The employer’s goal, to get the best employees at the lowest cost, is not aligned with the goals of the patient or the provider. There are also insurers, both public (like Medicaid) and private, whose goals are often in direct opposition to the goals of the patient and the provider. Their stated goal is to minimize the money spent on healthcare. Unfortunately, for various legal and financial reasons, the insurers have the most power in the healthcare transaction. To add to the complexity of our healthcare system, there are 5 relationships among the parties, each of these relationships subject to government regulation. Plus, investors influence the behavior of insurers (policy changes at for-profit plans often force similar changes at non-profit plans) and tort attorneys influence provider choices.

In this maelstrom, it is no surprise that the employers, patients and providers are all losing while the insurers are showing huge profits and paying huge management salaries and bonuses.

It was wrong for our Governor to implement across-the-board 10% budget reductions without considering what was already underfunded (like Medicaid which he acknowledged needs more money). It was equally wrong to come to the reform discussion as though everyone at the table had been suffering equally. When you negotiate to the middle of a tilted table, you guarantee a solution which favors those already favored. The final bill only marginally improved our system without fixing the underlying causes and ultimately would have brought us to the same place we are today.

We want a sustainable healthcare system. We want a system which is profitable and effective like every other industry in our capitalist society. To get there, we cannot play or modify the current political game. We need a paradigm shift to define a new game. What should have been done, and needs to be done in future reform discussions is identify our principles for a functional healthcare system.

We must acknowledge and discard dysfunctional elements. We must describe first how we want a system to look which works well for all Californians and eliminates a multitude of perverse incentives which increase costs while reducing quality. Then we can look at what rules, regulations, policies and laws we currently have and determine how they need to be modified in order to implement the policies which will support our principles.

While the principles ultimately adopted may look somewhat different than these, below I share the principles adopted by the Yuba-Sutter Healthcare Council [disclosure: I am Chair]. These principles can serve as an example of what might make sense. They also should make clear some of the obvious policy choices we would make in an effective reform effort. Many of those policy choices were part of the Governor’s original outline. Unfortunately, the policies actually implemented by the reform bill were warped to the middle of the tilted table in a quid pro quo fashion.

= = Sample Principles for Effective Healthcare Reform = =

The Yuba-Sutter Healthcare Council is dedicated to continuously improving the health of the residents in our region. The Council has identified a collection of basic principles which together serve as a foundation for optimizing the use of healthcare resources in pursuit of continuously improving local healthcare. The Council believes that each principle will be self-evident to rational individuals who identify democracy and capitalism as axiomatic in American society. However, individual principles taken out of the context of the whole, may not adequately represent the view of the Council. As a result, it is the Council’s intention that all the principles be considered together as a unit in any healthcare policy discussion.

1. Everyone now living will die someday

2. Regardless of how much money we spend, we cannot change the first principle

3. The goals of healthcare should be:
* promote positive lifestyle choices
* prevent preventable illness
* screen for early treatable disease
* promote effective therapy
* provide comfort when treatment is not an option
* allow people to die in a dignified and comfortable manner

4. There is a fixed amount of money that can be spent upon healthcare, even if we choose for it to be 100% of GDP

5. We must optimize our healthcare budget in support of the goals of healthcare

6. Money collected for healthcare should maximally be spent on provision of effective healthcare services

7. Every Californian should be able to access a minimum level of healthcare services

8. No one should be precluded from paying for healthcare services that they choose to obtain in California

9. Patients should have some responsibility for their healthcare choices, so long as they are legally competent

10. Allocation of limited healthcare resources should be done in the most rational fashion that supports our goals

11. No party may dictate to another party what they may charge for their services

12. Sellers of services shall be paid by buyers (or payers) at the agreed upon rate or the seller’s price when no agreement exists

13. Buyers (or payers) who were forced to obtain services in an emergency which limited their ability to investigate other options may seek a neutral third party to negotiate a reduction in a seller’s price.

14. Provider pricing should be transparent

15. In recognition of the critical need for trained healthcare workers, some resources of the healthcare industry (insurers and providers) should be directed to support education and training for the development of the next generation workforce.

16. To ensure that a healthcare system endures in perpetuity, there must be:
* adequate financial resources to support education and training of the healthcare workforce
* enough clinical positions open to enable trainees to complete their practical training
* strong incentives to encourage those capable of becoming healthcare workers to apply to do so

More at:
http://yubasutterhealthcarecouncil.org/
http://www.DrOzeran.com/presentations/reform1-20070815.php
http://www.DrOzeran.com/policy.php