April 29th, 2008
UnitedHealth Group officials may have been laying protective cover for themselves when they attributed poor first-quarter earnings to a sagging economy last week. But that doesn’t mean it isn’t also true, as United said, that business is bad because the company’s products are getting too expensive for a growing number of workers and companies. Coming within weeks of similar announcements by WellPoint and Aetna, United’s bad news represents a conundrum for any candidate who wants to talk about expanding coverage in 2009 — and most of them do.
The first question is whether a single-minded focus on universal coverage makes sense if we’re trying to buy everyone into a system that we can’t afford in the first place. What makes this discussion doubly awkward is that there is no political advantage to be had from making a big issue out of the need to cut spending. As the standard joke goes, there are two trillion dollars in the health economy, and every one of them is loved by someone. What is savings to a payer is income to a provider and benefits to a consumer.
Such are the facts of life. It is okay for politicians to talk about waste, fraud, and abuse. There is no policy downside to fixing problems like that. But no candidate in his or her right mind wants to stand before the voters and urge them to think about the need to cut back on overconsumption of health services. Instead, with true Yankee ingenuity, the policy community has developed a coded language for discussion of the cost problem in which the key terms are quality and value. What we talk about when we talk about quality is value. What we mean when we talk about value is cost.
Within this Foucauldian problem of semantics and the policy narrative (hopefully this arcane reference will make sense to parents of college students) lies a more intractable operational problem. From what is known about geographic variation in health service use, it is clearly possible for a smart delivery organization to achieve cost-saving innovations in care without reducing quality. The problem is that an organization that does so will be rewarded with a loss of revenue.
For example, at a recent Washington forum sponsored by the blue-chip Bipartisan Policy Center, the CEO of Geisinger Health System in central Pennsylvania, Dr. Glenn Steele, described how Geisinger’s “proven care” and other programs have resulted in reduced lengths-of-stay and readmissions for many patients. As a result, the hospitals that treat Geisinger patients lose money. Geisinger is in the unique position of having a health plan as well as an integrated delivery organization, so the health plan save on reduced hospitalizations and can afford to pay an adequate price to the delivery organization, which is otherwise exposed to double indemnity for its investments in innovation and resulting reductions in service volume. For most providers, however, cost-saving innovation is a losing proposition.
When it is convenient, politicians will continue to raise the hue and cry about entitlement spending and the ever-impending crisis of the Medicare Trust Funds. But Congress is too beholden to consumers, providers, and suppliers to do much about it. If the economy continues to droop, more employers will find coverage unaffordable, and the number of uninsured people will continue to rise. Against the danger of such a perfect storm, Medicare and private insurers are beginning to experiment with a variety of new payment approaches that seek to move away from the perverse incentives of piecework fees — a second generation of pay-for-performance initiatives that will be wrapped in a glowing new strategic formulation like “pay-for-value.” Behind the fancy concepts, finding a way to export cost-saving innovations from a few smart systems like Geisinger into the fee-for-service wilderness may be the only way to forestall the nasty weather.Email This Post Print This Post
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