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Coverage And Cost Containment: Both Are Needed

March 10th, 2008

Editor’s Note: This post continues the conversation in the Health Affairs Blog roundtable on the unsuccessful health reform effort in California. Below, Lucien Wulsin responds to the ideas expressed in the first round of California posts, which appeared last Wednesday and Thursday. You can also read and comment on response posts appearing today from Rick Curtis and Ed Neuschler and Patricia Lynch. Watch for an additional response post from Rick Kronick coming up as well.

In our respective commentaries, we have not yet done adequate justice to the interlinked issues of cost containment, quality improvement and ultimately voter approval of the California reform effort. To finance expanded coverage in California, California policy makers had and will have no choice but to go to the ballot for several reasons: the two-thirds super-majority for new revenues and spending; the state’s pre-existing labyrinth of hurdles, such as Prop 98 that guarantees 40% of all increased General Fund revenues to the state’s under-funded educational systems; and the maze of Howard Jarvis inspired rules on state and local taxes, spending and county mandates. How would we have fared on the ballot?

Most of the state’s regular voters already have some form of health insurance. Some wrongly believe the uninsured are mostly undocumented workers; others mistakenly think the uninsured include many seniors. Few recognize the uninsured are overwhelmingly a population of workers and their family members with citizenship or legal permanent residence status, and fewer still think the issue of six and a half million uninsured impacts their daily lives, except when a hospital emergency room or trauma center closes in their neighborhood. Most are satisfied with their own doctor and plan. They do want better options and choices, and as Marge Ginsburg has pointed out, they are willing to make trade-offs as long as they get to make the trade-off decisions.

So what was in the bill for them? The state’s policy makers learned from the defeat of President Clinton’s health reform proposal and left many issues well enough alone. This was not a “big government” proposal. No one who was insured would have had to change their doctor or change their plan. Those with individual coverage who were locked into a plan due to a pre-existing condition would have the right and opportunity to change their plan and coverage. Those who wished to upgrade their coverage could do so in steps. Issuance and renewals of coverage were guaranteed, and job lock would have disappeared. Affordability issues were resolved for many, and those with hardships exempted from the mandate. The proposed financing package did not increase the tax burdens on individuals with health insurance.

The skeletons left largely undisturbed in the closet were the overall growth in health spending; the increases in co-pays, deductibles and co-premiums; growing gaps in covered services; increasing numbers of providers who refuse to accept even private insurance; difficulties securing an appointment and navigating the health care non-system; challenges in comprehending medical bills when hospital charges bear no relationship to fiscal reality and rigidity; and unresponsiveness of providers and plans to patient and subscriber complaints. These are issues that business, labor and insured voters really care about.

The bill made a good start on some urgently needed health reforms with its provisions on electronic medical records and e-prescribing; transparency of provider price and quality information; pay for performance; limits on health plans’ non-benefit spending; and its focus on prevention, primary care, wellness and better treatment of diabetes and other chronic conditions. But it had no blockbuster provisions (though maybe there are none) to control rising health costs, whether through concepts like global budgeting for hospitals or a statewide pharmacy benefit manager for prescription drugs.

Rick Kronick points out that the goal of the cost containment aspects of health reform must be to bend the health cost growth curve to a rate closer to the increases in worker wages and overall GDP. Peter Lee suggests that the right framing for this issue is value purchasing, which increases quality and enhances system efficiency in producing better health outcomes for the dollars devoted to coverage.

In California, we have been past pioneers in managed care, selective contracting and managed competition, each of which succeeded here for a time. We need to now make a sustained public and private commitment to health IT, transparent and reliable data, pay for performance with strong outcome incentives, better management of patients’ costly chronic diseases, tested clinical efficacy and other promising systemic approaches.

There are two possible avenues to health reform in our state: The first is stakeholders and policy makers achieving policy consensus, and the second is a strong push from a well-versed electorate. We will have to pursue both. Big spending opponents can make approval difficult on the ballot, but in past ballot fights California voters overrode well-funded opposition. Strengthening the reform provisions that aim to slow the rise in health costs could bring stronger support into play from insuring employers, insured voters and labor. In the past year, we were fortunate and unique in having excellent leadership from the Governor, Assembly Speaker and Senate President, but to a surprising degree reformers failed to coalesce, and that is another story.

In California and nationally, we must achieve coverage for all combined with greater system efficiency and improved patient and population outcomes. These reforms do appeal to different constituencies, and there is a high potential for conflicts that will need to be reconciled. While California efforts to-date have concentrated on coverage expansion, financing and insurance reforms, with good progress achieved, the need now is to better incorporate “value purchasing”. This means more attention to the legitimate and very fixable health system issues bedeviling those with and those paying for coverage.

Good health policy can make good politics.

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1 Trackback for “Coverage And Cost Containment: Both Are Needed”

  1. Farmanux News
    March 21st, 2008 at 11:02 am

2 Responses to “Coverage And Cost Containment: Both Are Needed”

  1. James C. Robinson Says:

    If only good health policy made good politics. It seems rather that everyone wants reform, but differs in what that means, and prefers the status quo to someone else’s reform.

    And as for combining measures to moderate costs with measures to expand coverage, is not this the prime example of how good policy makes terrible politics? Remember, someone’s costs are someone else’s revenues. I hear no one saying that they are paying too little or being paid too much in health care. Let’s check. Employers want to pay less, not more. Individuals do not feel “empowered” by higher copayments and resent any restrictions on their ability to freely spend someone else’s money on their health care. Taxpayers don’t want to pay higher taxes for health care, regardless of any economist’s cost-benefit analysis. Physicians feel underpaid. Hospitals feel underpaid. Drug, biotech, and device manufacturers feel they need high reimbursement rates in order to continue financing innovation. Brokers feel they add value by managing complex health benefits for small employers, while the big consulting firms feel the same about managing health benefits for large employers. Did I forget anyone? Maybe we should let all these sleeping dogs lie, or at least as many of them as possible.

    Hats off to all those willing to compromise on their first best option and coalesce around the only proposal that had any realistic chance. Hats on to those who preferred the status quo.

  2. DavidMoskowitz Says:

    Lucien Wilson is absolutely right. Quality improvement (QI) and cost-containment are the key issues in health care. What good is universal access if the access is only to manure?

    Let me give a personal example of how perverse the incentives are. I’ll close with a way to fix the system.

    About 15 years ago, my group realized that a well-known enzyme, which has had safe drug inhibitors in use for 30 years, was behind most common diseases (2). In other words, we had stumbled on a safe and already available treatment for most common diseases. Five and a half years ago, I published a paper, described by one authority as “beautiful,” showing that 90% of kidney failure could be prevented (1).

    Here’s what happened next:


    Nobody in the media picked up the story. Medical reporters told me they couldn’t evaluate the paper for themselves; they needed a medical authority to tell them whether the paper was credible. (If the public never hears about cures because the press is incompetent, that’s a BIG problem).

    Nobody in the renal community was willing to support my paper. This was not all that surprising coming from private nephrologists, who make $10-15K off each dialysis patient. But it was surprising coming from academic nephrologists and academic transplant surgeons. Who hasn’t heard about the chronic shortage of kidneys?

    It was also surprising coming from non-profit organizations like the National Kidney Foundation. The Executive Director of a British charity for stamping out kidney disease wrote me a note, in gorgeous penmanship, saying how her organization didn’t get involved in things like “that”–disseminating news of a cure.

    So nobody wants to follow the example of the March of Dimes, and remove their raison d’etre. Surely, health plans would be interested? They’re always talking about lowering cost. And dialysis patients are the most costly patient out there, at $100K a year.

    The Blue Cross/Blue Shields promptly passed. So did Anthem/Wellpoint et al. It was pointed out to me that health plans have such high turnover–at least 20% a year–that they spend nothing on prevention. Why should they make the patient healthier for the competition?

    So I assumed Kaiser Permanente, who has patients for life, would be interested. Nope. Too experimental. No interest whatsoever, not even in a pilot project.

    I started to get the feeling that maybe the private healthcare sector just wanted revenues, and didn’t care about patient outcomes. Surely the feds would be interested in saving 90% of a $25 billion annual cost!

    When I spoke to Sean Tunis, Medical Director for CMS/Medicare, and his staff, including Sandy Foote, in October, 2004, they evinced zero interest. They accused me of “bad att” for saying that nephrologists were too self-interested to support my paper. They referred me to “their man” at the NIDDK, a PhD who let the subject quietly die. I had been impressed over the previous decade at the lack of interest at the NIDDK for removing the “K” from their name.

    Of note is that there’s an office, paid for by taxpayers, at the NIDDK called the NKDEP (National Kidney Disease Education Program) which would be perfect for educating patients with a serum creatinine less than 2 mg/dl that their kidney failure needed to be prevented then, and that it would soon be too late to keep them off dialysis. For that matter, the National Kidney Foundation’s outreach program to patients would have been perfect, too.

    What can I conclude from this? That the healthcare system wants to preserve the status quo, and can easily do so by keeping its mouth shut about new cures. Sins of omission are the easiest to commit, as we all know.

    How to fix the system? How to raise quality while cutting cost?

    Simple: just mandate reporting of outcomes.

    So far, there is absolutely no reporting of how diabetics or hypertensives do. How many go on dialysis from Kaiser Permanente? Who knows? In this respect, just extend the US Renal Data System to all Medicare and Medicaid patients, not just those on dialysis.

    And, #2, preserve competition. Do NOT go single-payer. The VA, where I worked for 11 years, had absolutely no interest in my patients’ outcomes. The last thing we need is a single, monopolistic system that is totally unaccountable. It is telling that neither the Canadian nor the British National Health Systems have yet expressed any interest in my “recipe” for preventing 90% of end-stage renal disease.

    The British NHS even has a very nice sounding institute, appropriately enough called “NICE” (for National Institute for Clinical Excellence). When I finally barged into their offices, after several years of no replies to my emails, I was told to contact the Royal College of Family Practitioners, since my “recipe” involved GP’s. In other words, the agency whom everybody told me I should talk to (a) was impossible to get a hold of, and (b) passed the buck.

    Classic Kafka. That’s why, after having been a proponent of single-payer all my life, I no longer trust bureaucracies as far as I can throw them.

    1. Mandate reporting of outcomes so patients can see what they’re getting.
    2. Have a robust public and private sector so patients can vote with their feet. Eschew single-payer.

    For a more robust public sector, give the VA back to the Public Health Service, whence it came in 1921. Otherwise, the VA will just quietly downsize by at least 50% once the last WWII and Korean War vets die off. For no extra money, the reconstituted PHS could take care of the 1/3 of the uninsured who make less than $30K a year. They won’t be able to afford the $3K a year health insurance product my company wants to offer. The cost is cheap enough for the other 2/3 of the uninsured–30 million–to afford. And because we can keep people out of the hospital for 5-10 extra years, we can make catastrophic hospitalization a profitable business.

    1: Moskowitz DW. From pharmacogenomics to improved patient outcomes: angiotensin I-converting enzyme as an example. Diabetes Technol Ther. 2002;4(4):519-32.
    PMID: 12396747. (For PDF file, click on paper #1 at:

    2: Moskowitz DW. Is angiotensin I-converting enzyme a “master” disease gene? Diabetes Technol Ther. 2002;4(5):683-711. PMID: 12458570 (For PDF file, click on paper #2 at:

    David Moskowitz MD FACP
    GenoMed, Inc.

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