The Mess We Are In

The focus in Washington is now on jobs, jobs, and jobs.  But guess what, we have an employer-based system of health insurance in this country and employers are not hiring new workers (i.e., NO NEW JOBS) in the current climate of uncertainty.  One of the principal reasons is our failure to control healthcare spending in this country and address the exorbitant cost of health insurance.  Small business is the economic engine that drives our country, so the President is correct when he says we will not fix our economy until we fix our broken healthcare system.

Voters Send A Message

The American people delivered a message in recent elections in Virginia, New Jersey, and now Massachusetts.  The same message was delivered in the waning years of the Bush Administration.  That message is that we are a people guided by certain principles and values and we want to be governed accordingly.  We do NOT want to be governed by partisanship or extreme political ideology (right or left).  Politicians who fail to understand this phenomenon will be gone.

Democrats desperately want to deliver on their promise to the American people to pass health reform.  While some Republicans may see political advantage from not passing a bill in 2010, the truth is that a major Republican constituency, small business, NEEDS a health reform bill.  Any political advantage from the politics of obstruction will be short lived.  Both parties need to commit themselves to getting something positive accomplished for the benefit of the American people.

Starting Down The Road To Bi-Partisanship

Republicans should reach out to Democrats who have shown an interest in meaningful reform and who claim the mantel of fiscal responsibility.  There are 40 Democrats who voted against HR 3962.  There are currently 54 conservative Democrats who are members of the Blue Dog Coalition.  This is a good place to start.

If our legislators need more guidance on what to do next, we can help there too.  Read our blog called, “After Massachusetts: NOW WHAT?”   It is time for the grownups to take charge in Washington, DC.  And just in case our politicians need a little push, I would urge everyone to call their Congressman or woman, and call your two US Senators, and tell them to pass a good health reform bill, and do it NOW!!

It’s time to change directions. Though certain elements of the health reform bills under consideration were positive, the bill’s sponsors overreached at the outset, and at the conclusion, they resorted to bribery in order to obtain votes. The bill did little to address wasteful spending and the high cost of health insurance, and instead focused on covering more people into a broken system of health insurance, thereby throwing good money after bad. It was too ideological and too partisan. The Massachusetts vote was strike three. As stated in the Wall Street Journal editorial (1/19/10), “voters are rebelling even in the bluest of states against the last year’s unbridled pursuit of partisan liberal governance.”

Yet, our economy needs, and most Americans want, health reform. So where do we go from here? There are a number of principles for fixing the healthcare system on which most people agree and are not costly, and that is where we need to focus.

3-Step Health Reform

Health reform should be incremental—break the big problem down into smaller parts. For now, I would recommend the following 3 steps:

Step 1: Simple, No-Cost Reform

Prepare a short, easy-to-understand bill that accomplishes the following:

• Elimination of pre-existing condition exclusions in health insurance contracts.
• Allow for portability of coverage when an individual leaves an employer group.
• Eliminate insurance carriers’ anti-trust exemption and allow for competition across state lines.

Step 2: Important Policy “Fixes” (No- or Low-Cost)

The next phase will be somewhat more challenging, but doable:

• Consolidate health insurance purchasing for individuals and small groups through association health plans (AHPs) or exchanges, using existing programs where possible.
• Level the tax “playing field” for purchasing health insurance—end the subsidies.
• Fix Medicare Advantage to foster competition based on cost and quality—adopt a “defined contribution” approach.
• Pass meaningful tort reform.

Step 3: Analyze and Evaluate the Impact of Steps 1 and 2

For over 20 years, the non-profit Dartmouth Atlas of Health Care has done research to explain regional variations in healthcare. It will surprise no one that it costs more to take care of sick people than those who are relatively healthy. But does that account for the difference in annual Medicare costs (2006) per beneficiary in Honolulu ($5,311) compared to Miami ($16,351)?

Physicians’ Decisions Account for Most Regional Variation
According to a recent study in The New England Journal of Medicine, 70% of the differences in healthcare spending by region can’t be explained by the health status of the population. Compared to so-called “low spending regions,” Medicare beneficiaries in the highest spending regions spend more time in the hospital (average of 2.1 days vs. 1.4 days), have more frequent physician visits (14.5 vs. 10.7 per year), undergo more MRI procedures (21.9 vs. 16.6 per 100 beneficiaries), and have more computerized tomography (CT) scans (61.4 vs. 46.9 per 100 beneficiaries). The authors conclude that discretionary decisions by physicians account for most of the regional variation in spending.

The obvious conclusion: We can reduce the cost of care without sacrificing the quality of care. The economics of our current healthcare financing system inadvertently drives up utilization and cost, and it’s up to the payer to change the economics in order to yield different results.

Let me know what your experiences and thoughts are regarding regional differences in healthcare spending.