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A Cloudy Crystal Ball For Election-Year Health Politics

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.

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1 Response to “A Cloudy Crystal Ball For Election-Year Health Politics”

  1. Arvind Cavale Says:

    Excellent observations, Rob. Wish this point of view is presented to the Presidential contenders, and honest answers demanded.

    As far as UHC is concerned, they lost revenue because of poor service and loss of several million accounts. If they don’t learn that arm-twisting physicians and hospitals and creating insurmountable obstacles to effective delivery of healthcare is bad business, they will continue to lose ground, as they should. Just as Geisinger did, we actually lost significant revenue because we decided to use our own efficiency model for chronic disease care for our diabetics for several years. We received a complement as from one of our local insurers for having the best diabetes control with the highest disease burden for only average cost (as compared all similar speciality practices in the local 5-county area and the whole of the neighboring state). But no monetary reward. Obviously, we took a hard look at what we were doing and decided to scale down the program so that we can at least get paid for our efforts.

    The fundamental problem of the current “arrangement” of purchase of health coverage is that the financial transaction of buying insurance coverage (between employers & insurance companies) runs a parallel course with the delivery and receipt of care (between physician/hospital & patient). Unless this perverse process is broken down and simplified, we can neither achieve adequate universal coverage nor quality care nor cost savings.

    The only logical solution is to break down purchase of care into several components, such as office visits, lab tests/radiology, hospitalisations, etc. and allow individuals and families to purchase such coverage as per inidividual/family needs, with employers being allowed to reimburse for this or individuals being allowed a tax incentive for it. The other component is to allow physicians to directly contract with employers and/or patients for services, getting rid of federal mandates that disallow such contracting at present.

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