Proposed Reforms

Last month we encountered two significant proposals for health care reform in the US. California Governor Arnold Schwarzenegger has put forth a plan to cover the state’s 6.5 million uninsured through a combination of professional taxes and employer mandates. Not to be outdone, the President has called for his own set of employer mandates and, even more remarkably, new taxes for the insured to provide some of the resources needed to pay the expected increase in costs. As important as both of these proposals are, they fail to address the real problem of the US health care system: its costs.

The high cost of care, with its corresponding impact on insurance costs, is the biggest limitation to access to care. Just paying to add more people to the formal payment mechanism of a fundamentally broken system will not make the system affordable or sustainable for the employer, the consumer or the tax payer. In order for our system to perform in a way that competes with and exceeds the efficiency and effectiveness of other nations’ systems, which allocate considerably less than we do to health care, there are four broad interrelated areas that demand attention.

First is the capacity of the system. There is much talk today of the looming physician shortage and we are just recovering from a precipitous dip in the number of new nurses. The shortage of allied health workers from laboratory technicians to physical therapists actually erodes access in many areas. Our collective response will be to build more training facilities and enlarge class size. In some instances this may be warranted, but in others we should closely examine the true nature of the needs before we build the new capacity-generating resource. One gross number is instructive; in 2004 the ratio of physicians to 100,000 populations varied in the US from 187 physicians in Iowa to 411 in Maryland, and these were not the extremes on either end. What is interesting is that there are little data that reveal much disparity in the health of Iowans when compared to Marylanders. If the concentration of physicians makes for better health care it doesn’t appear to be captured in the literature.

The biggest driver of heath care costs in the country is the growing burden of chronic disease and disability. Unfortunately, most new dollars that will come into the system will be used to prop up and pay for a delivery system that remains stubbornly attached to treating acute care needs. When this happens care is expensive and often fails to meet the expected outcomes for individuals and families. But it is by and large what we have. There are many reasons for this but principal among them is the finance system in both the public and private sectors that remains fixated on short term clinic visits to physicians and in-patient hospital admissions. Reimbursement mechanisms for many alternative providers in the preventative sectors do not exist and other home and community-based approaches are still looked upon as experiments, even though they are preferred by many consumers.

Related to the reimbursement and the capacity issues is the critical role that practice organization and models play in determining the cost and effectiveness of care. The handoff from generalist to specialist is crucial for ensuring quality of care, yet most practices are still organized in ways that do not align the interests of the professionals. Prescriptions by mail order are less expensive, are of the same high quality and are more convenient for most consumers, but this doesn’t fit the practice model of pharmacists or the business model of retail pharmacies. Most nursing work is still clerical or custodial, but diversifying the nursing team is met by objections from professionals and labor organizations alike. There is an oral health epidemic raging in many parts of the country, but we blame the victim because they don’t typically seek care in the bungalow practices in the suburbs where most dental professionals practice. We need new models that take into account what consumers need, where they need it and what they are willing and able to pay, not the old models that are based on how we have always delivered the service or how we prefer to deliver the care.

The practice models are themselves misaligned, but they are a function of the larger misalignment of health care. Hospitals, physicians, pharmaceutical care, insurance companies and many other contributors all have interests in the health system. Today they negotiate with each other to gain payment and avoid risk. These transaction costs are the real administrative costs of the system and as long as the system’s stakeholders are at war with each other, there will be needless investment by every party to try to “game” the system. Over a decade ago the Clinton health reform plan called for local stakeholders to align into competing systems of accountable health plans. This would still produce competition and choice, but the parts would work together to improve quality and maintain or even lower costs. Without such alignment any fiscal reform is destined to fail because it will not have addressed the root cause of the dysfunction of our system.