Presidential Candidates’ Healthcare Proposals: Public Insurance & Single Payer Plan

In my last post, I discussed whether the U.S. needs universal coverage. In this post, I examine the candidate's proposals concerning how universal coverage can be achieved. A key strategy involves the deployment of new and expanded public insurance programs, which includes a heated debate about a government run single-payer system.

All the Democrats propose universal healthcare (coverage for all Americans). Only Kucinich supports HR 676, which is a single-payer, "Medicare for All" plan that gives everyone comprehensive coverage. Gravel also proposes a single-payer solution, but through use of federally funded vouchers. All the other Democrats propose a public Federal Employees Health Benefits Program (FEHBP) type program and/or Medicare, Medicaid, SCHIP, which are supported by subsidies (e.g., through tax credits or vouchers) to low income persons.

Republicans, on the other hand, do not propose new public programs, the expansion of existing public programs, nor universal coverage. Instead, they all propose market-based private insurance solutions through tax deduction/credit subsidies to lower insurance premiums and deduct medical expenses from the taxes of lower income persons. Other strategies include increasing competition, tort reform, and payment changes to providers.

New and Expanded Public Programs

All Democrats (and no Republicans) propose new public programs.

v Comments about Public Insurance in General

Consider the following:

Public insurance programs offer the greatest potential for automatic and continuous enrollment and the ability to cover everyone. Enrollment could be facilitated through local Medicare or Social Security offices. Those failing to enroll could be signed up when they seek health care services or coverage could be verified as part of income tax filing. With everyone eventually enrolled at birth in an expanded Medicare, people would automatically be enrolled and stay enrolled across their lifespans. Most proposals would establish a minimum standard benefit package modeled on the typical plan offered to members of Congress or to employees of large firms. For those proposals requiring enrollees to pay cost-sharing or a portion of premiums, a ceiling on out-of-pocket costs and premiums as a percentage of income would be established to ensure affordability. Some proposals modeled on the Canadian health system, for example, would not include patient cost-sharing for basic services and would be financed by federal and state taxes.
Given Medicare's low administrative costs and broad risk pooling, substantial savings could accrue in an expanded Medicare approach through a reduction in administrative costs. Other sources of savings would likely arise from paying providers Medicare rates that are lower, on average, than private rates.

The proposals modeled on the current Medicare program would provide choice of plans, including the private plan options currently available to Medicare beneficiaries and the program's self-insured plan.

The public insurance approaches to health insurance reform would create dislocation, with people moving from their current coverage to coverage through Medicare or another public plan. However, people would still likely keep their same set of providers. Proposals that would allow employers to continue offering coverage would be less disruptive initially, although it is anticipated that most employers would ultimately prefer to pay a part of the Medicare premium rather than private coverage premiums, which would probably be higher.

These proposals would allow the nation to develop and utilize common quality metrics, gather data on the health care outcomes of the full population, and evaluate and improve the performance of providers based on a large pool of patients not fragmented by insurance type. They also would allow for the creation of uniform provider payment systems that reward high-quality care, standardization in health information technology, and the creation of universal processes to improve safety systematically across health care institutions.

Financing is likely to come largely from federal income and payroll taxes or new taxes, such as a value-added tax or consumption tax. This would be less administratively complex than providing premium subsidies based on income. The distribution of financing is most likely to be more progressively related to income than either individual insurance market or mixed private–public group insurance proposals. [Reference]

Single-Payer Government-Run System

Kucinich is the only candidate proposing a single-payer government run system (HR 676), which gives each person their own healthcare card.

v Comments about Single-Payer Government Run System

The case for universal healthcare was discussed above. But should it be a government run single-payer system?
The primary arguments in favor of a single-payer system center on cost control issues.
Here are views about how it would reduce administrative costs:

The most obvious difference between [European] health care systems and ours — that their governments provide universal insurance — certainly plays a big role in the cost differences. Look behind the receptionist at your doctor's office, and you will very likely see a staff of people filing claims to different insurance companies. The insurance companies, meanwhile, employ a small army charged with figuring out how to avoid covering the unhealthy. The administrative costs of our patchwork bureaucracy eat up about 25 percent of health spending… Even in Europe's single-payer systems, administrative costs account for about 15 percent of health spending [italics added], once everything is included, according to the Lewin Group, a consulting firm…. Medicare, which has administrative costs roughly as low as those of other countries' universal plans. Younger Americans, by contrast, have private insurance, with all its inefficiencies. Yet elderly Americans' share of national health spending is similar to that of the elderly in other countries, as Arnold Kling, an economist, has noted [source].
Private insurers spend large sums fighting adverse selection, trying to identify and screen out high-cost customers. Systems such as Medicare, which covers every American sixty-five or older, or the Canadian single-payer system, which covers everyone, avoid these costs. In 2003 Medicare spent less than 2 percent of its resources on administration, while private insurance companies spent more than 13 percent … Although it's rarely described this way, Medicare is a single-payer system covering many of the health costs of older Americans. (Canada's universal single-payer system is, in fact, also called Medicare.) And it has some though not all the advantages of broader single-payer systems, notably low administrative costs. [source].

Here's a discussion of how a single-payer system would control healthcare delivery costs:

…the evidence clearly shows that the key problem with the US health care system is its fragmentation. A history of failed attempts to introduce universal health insurance has left us with a system in which the government pays directly or indirectly for more than half of the nation's health care, but the actual delivery both of insurance and of care is undertaken by a crazy quilt of private insurers, for-profit hospitals, and other players who add cost without adding value. A Canadian-style single-payer system, in which the government directly provides insurance, would almost surely be both cheaper and more effective than what we now have. And we could do even better if we learned from "integrated" systems, like the Veterans Administration, that directly provide some health care as well as medical insurance. … 

[Another] source of savings in a system of public health insurance is the ability to bargain with suppliers, especially drug companies, for lower prices. Residents of the United States notoriously pay much higher prices for prescription drugs than residents of other advanced countries, including Canada. What is less known is that both Medicaid and, to an even greater extent, the Veterans' Administration, get discounts similar to or greater than those received by the Canadian health system. 

We're talking about large cost savings. Indeed, the available evidence suggests that if the United States were to replace its current complex mix of health insurance systems with standardized, universal coverage, the savings would be so large that we could cover all those currently uninsured, yet end up spending less overall. That's what happened in Taiwan, which adopted a single-payer system in 1995: the percentage of the population with health insurance soared from 57 percent to 97 percent, yet health care costs actually grew more slowly than one would have predicted from trends before the change in system [source].

And the following argues that a single-payer system is the only way sensible solution:

A mere shift of power from Republicans to Democrats would not, in itself, be enough to give us sensible health care reform. While Democrats would have written a less perverse drug bill, it's not clear that they are ready to embrace a single-payer system. Even liberal economists and scholars at progressive think tanks tend to shy away from proposing a straightforward system of national health insurance. Instead, they propose fairly complex compromise plans. Typically, such plans try to achieve universal coverage by requiring everyone to buy health insurance, the way everyone is forced to buy car insurance, and deal with those who can't afford to purchase insurance through a system of subsidies. Proponents of such plans make a few arguments for their superiority to a single-payer system, mainly the (dubious) claim that single-payer would reduce medical innovation. But the main reason for not proposing single-payer is political fear: reformers believe that private insurers are too powerful to cut out of the loop, and that a single-payer plan would be too easily demonized by business and political propagandists as "big government." 

These are the same political calculations that led Bill Clinton to reject a single-payer system in 1993, even though his advisers believed that a single-payer system would be the least expensive way to provide universal coverage. Instead, he proposed a complex plan designed to preserve a role for private health insurers. But the plan backfired. The insurers opposed it anyway, most famously with their "Harry and Louise" ads. And the plan's complexity left the public baffled. 

We believe that the compromise plans being proposed by the cautious reformers would run into the same political problems, and that it would be politically smarter as well as economically superior to go for broke: to propose a straightforward single-payer system, and try to sell voters on the huge advantages such a sys-tem would bring. But this would mean taking on the drug and insurance companies rather than trying to co-opt them, and even progressive policy wonks, let alone Democratic politicians, still seem too timid to do that [source]. 

Two important lessons can be learned [from the Massachusetts Health Reform Law]. First, we need to sever the connection between healthcare and employment. People need continuous, portable coverage that is affordable, comprehensive, and equitable. Second, we cannot depend on the private insurance industry to provide this for us.
Piece-meal reform such as the new law will not work. Both employers and the public support the concept of single-payer healthcare. Big business is starting to realize that a single payer system will be the only affordable way to cover everyone. When will our politicians understand that their political futures will depend on supporting this kind of comprehensive reform? [source] 

The reason we spend more and get less than the rest of the world is because we have a patchwork system of for-profit payers. Private insurers necessarily waste health dollars on things that have nothing to do with care: overhead, underwriting, billing, sales and marketing departments as well as huge profits and exorbitant executive pay. Doctors and hospitals must maintain costly administrative staffs to deal with the bureaucracy. Combined, this needless administration consumes one-third (31 percent) of Americans' health dollars. 

Single-payer financing is the only way to recapture this wasted money. The potential savings on paperwork, more than $350 billion per year, are enough to provide comprehensive coverage to everyone without paying any more than we already do.
Under a single-payer system, all Americans would be covered for all medically necessary services, including: doctor, hospital, long-term care, mental health, dental, vision, prescription drug and medical supply costs. Patients would regain free choice of doctor and hospital, and doctors would regain autonomy over patient care.
Physicians would be paid fee-for-service according to a negotiated formulary or receive salary from a hospital or nonprofit HMO / group practice. Hospitals would receive a global budget for operating expenses. Health facilities and expensive equipment purchases would be managed by regional health planning boards. 

A single-payer system would be financed by eliminating private insurers and recapturing their administrative waste. Modest new taxes would replace premiums and out-of-pocket payments currently paid by individuals and business. Costs would be controlled through negotiated fees, global budgeting and bulk purchasing [source]. 

Single payer, universal health care administered by a state public health system would be much more democratic and much less intrusive than our current system. Consumers and providers would have a voice in determining benefits, rates and taxes. Problems with free choice, confidentiality and medical decision making would be resolved [source].

The primary arguments against a single-payer system center on concerns about:

• Loss of options or increased expense to those who currently have employer-paid plans
• Rationing of care
• Stifling of innovation
• Long wait for care.

Regarding the first two bullets, consider the following:

Most lucky Americans with good insurance are doubly isolated from financial reality. They don't pay for their health care and they don't even pay for most of their insurance—their employers or the government pays. …[With a single-payer system, the government would have to start] saving money by simply not providing effective treatments that cost too much. …Should people be allowed to opt out of [such] rationing if they can afford it? That is, if the system (private or single-payer) won't pay for the $100,000 pill, should you be able to pay for it yourself? …There are the makings of a deal here. Better-off or better-insured people could be told, individually or as a group: Give up your health-care subsidy [i.e., buy insurance or healthcare with your own money] and you may opt out of any rationing-type restrictions that the system imposes [source]. 

In a Single-Payer system, everyone has an EQUAL access to insurance coverage. But it doesn't mean that everyone is able to access all the care that they want or even believe they need. …Since users of the system don't pay for care directly, the only way to control costs is to limit utilization & access to medical technology. A single-payer system's economic success is …to limit access to services, as well as access to the most sophisticated and expensive types of medical treatment and services. …Significant savings in single-payer systems come from limiting the supply of medical services to curb demand (rationing of treatment and technology)… 

Residents in countries with single-payer systems pay significantly higher taxes…Canadians are currently paying 40 percent more taxes than Americans, and Europeans are paying 60 percent more than we are! [source]

A counter argument is that our system needs to increase value to the consumer, so that everyone gets the safest, most cost-effective care possible. That will only happen when (a) we know what care gets the best results for the least cost for each person (which is a problem in its own right) and (b) there are mandated rewards for delivering such high-value care and punishments for not. Single-payer system countries are working diligently to identify the most cost-effective tests, treatments and prevention methods, and to minimize over-testing, over-treating and use of expensive drugs and procedures when more cost-effective options exist. The U.S. healthcare system, on the other hand, does just the opposite: More profits go to providers, pharmaceutical companies and medical device manufacturers when patients get sick, receive more tests and treatments, especially when they're expensive; this does not bring high value to the consumer [see this link]. This means that we've got to transition from "pay-for-volume" to "pay-for-value"—instead of arguing that waste is "a benefit" private insurance allows—and a single-payer system can help drive such value.

Nevertheless, what if certain consumers want to throw their money away for expensive care with little evidence of efficacy? Or what if they want to pay more than is necessary for care when there are less costly options that are just as good? If they are willing to pay for it out of their own pocket for it—through costly private insurance or cash—then shouldn't they have that option? Should our government refuse them access to overly expensive or ineffective care? Well, this depends on whether allowing people to opt out of the single-payer system drains so much money from the system that it cannot survive. This issue is discussed later in the mandates section.
Anyway, here's a discussion of why rationing makes sense:

Americans seem to be less willing [than Europeans] to take no for an answer and more willing to try almost anything, no matter how expensive or how slim the odds, to prolong life. … It has made us obsessed with medical advances and turned this country into the world's research laboratory. …But much of it is simply wasteful. Expensive procedures…are often no more effective than basic ones, according to research. Yet doctors can keep on getting reimbursed for the expensive ones. "Basically, anything that doesn't kill patients is paid for by Medicare and insurance companies," said Jonathan Skinner, a health care researcher at Dartmouth College. …We Americans tend to treat any rejection of a health claim as some conspiracy by insurance companies, the government, doctors and the pharmaceutical industry. In other countries, people have arrived at a better understanding that health care necessarily involves economic triage [reference].

The argument that switching to a single-payer system would stifle innovation is based on the fact that since the U.S. spends so much more on healthcare than other nations, it enables researchers to obtain superior financial compensation, which leads to more medical discoveries in our innovation-rich environment. The counter-argument states that there isn't any proof:

…that it is the difference in health care systems that has caused the agglomeration of research facilities in the U. S. Even if the U.S. were a single-payer system, drug companies, etc. would still do research and it is likely that much of it would be carried out in the U.S. just as it is now. In addition…much of the research that is done here is funded directly or indirectly by the government. [And,] given that European countries can free ride on this research, comparing the amount spent in the two countries may not accurately reflect European willingness to fund health care research since the two figures may not be independent. If the U.S. spent less, European countries might be induced to spend more [source].

When it comes to waiting for care--while people in the US go without needed healthcare because of cost more often than people do in the other countries--waiting time for specialized healthcare services (e.g., elective surgery) is typically shorter in America than in other countries, at least for insured Americans. However, the US ranks low when it comes to the prompt accessibility of appointments with primary care physicians, often waiting six or more days for an appointment, and having trouble making an appointment on weekends and evenings [ reference ]. So, waiting time for non-emergency care is an issue in countries with universal healthcare. Nevertheless, things are improving in many of them [ reference ]. In other words, there are problems with both systems and the question is whether access to excellent primary and specialist care, even if there's a longer wait for elective surgery, is a better option than not being able to afford excellent care.

Federal Employees Health Benefits Program (FEHBP)

Biden, Clinton, Dodd, Obama and Richardson want the new program to be based on the Federal Employees Health Benefits Program (FEHBP).

v Comments about FEHBP Model

Biden, Clinton, Dodd, Obama and Richardson want insurance coverage to be modeled after the FEHBP, but this may not be realistic. The least expensive FEHBP coverage for a family appears to cost at least $10,000 per year, and most plans cost $12,000 or more. The government (taxpayers) pay only 75% of that amount on behalf of employees leaving the employee to cover 25% of the premium plus copays and deductibles out of his or her own resources. It is highly unlikely that low income people would be able to afford that much. At the same time, to provide an adequate subsidy or limit the individual's out of pocket exposure for premiums, deductibles and copays to some acceptable percentage of income (6.5% has been suggested) would likely be a tough sell when the staff and Congressional Budget Office try to estimate the overall cost to taxpayers. While less than perfect, defining minimum creditable coverage as a high deductible insurance plan would be considerably less costly and more feasible. If we can develop ways to save money by safely driving down utilization of healthcare services, we could always expand coverage later.

Vouchers

Gravel proposes the federal government issue annual vouchers to individuals based on projected health care needs, which they would use to pay for their care.

In the next blog post, I will discuss the thorny issues of allowing private insurance, mandating that everyone has access to coverage through individual and/or employer based requirements, and the use of insurance pools.

Presidential Candidates’ Healthcare Proposals Comparative Analysis

This post presents a small part of the Presidential Candidates' Healthcare Proposals Comparative Analysis, which is still in development. After studying the details of the candidates' proposals, it seems that the main issues relate to these two questions:

1. Should all citizens have healthcare coverage (universal healthcare)? If so, what's the best way to do it?
2. Should healthcare value be improved? If so, how?

Following is an introduction to answering the first question.

To help answer this question, key points are presented followed a commentary and brief overview of the candidates' proposals. In my next post, I will give the details of their proposals, along with comments.

Universal Healthcare: Key Points

The case for universal coverage based on the philosophy that it is shameful for our wealthy nation to have approximately 47 million uninsured plus 16 million people underinsured, a number that's been growing constantly, along with the rising healthcare costs [reference]. Some argue that everyone in our nation should be covered since it is our moral responsibility, i.e., it's about communal spirit. And some claim that having a healthy, well cared-for population is a strategic imperative since you can't have a strong nation with a large percent of people at risk for serious illness and death due to lack of access to good, affordable care. That means, to the extent possible, it is in our country's vital interest to help our people lead longer, healthier, and more productive lives.

Of course, some argue that it is not their responsibility to sacrifice their hard-earned money for the well-being of others. These folks tend to be young, healthy or wealthy and resent having to pay more in taxes for publicly funded healthcare programs just because others have done irresponsible things in their lives that have made them sick or unable to afford good care. In other words, they don't deserve the care they need because they were not responsible and failed to make wise decisions. In addition, some opposed to universal coverage justify their position by claiming that the uninsured just don't want insurance, that the American system relies primarily on private enterprise to support health care, and that it's only the liberals and the urban poor who want a stronger public sector in health care. To help make sense of these arguments, consider the following commentary.

Universal Healthcare: Commentary

It is certainly understandable how young and healthy Americans do not want their tax monies going to help pay for the care of an older person with chronic illness. This kind of self-centered mind set is promoted in our culture. People in most other countries, where universal coverage is the norm, are willing to pay more in taxes to cover their needy. It's a cultural and moral issue, of which many Americans have been conditioned to think in terms of "me" rather than "we." Nevertheless, there is something to be said about personal responsibility.

To be responsible, people ought to take good care of their health by, for example:

• Eating foods lower in fat and carbohydrates, not smoke tobacco, avoid drinking much alcohol and using dangerous drugs, breath clean fresh air, stay out of the sun, exercise, etc.
• Earning good money, invest it wisely and save in order to afford treatment should they someday have a catastrophic or chronic condition.
• Rejecting short-term pleasures that have a potential negative health consequence.
• Going to the doctor, dentist, therapist, etc. only when necessary and selecting providers and treatments that are the most cost-effective.

And, it is only sensible that our culture, government, and economic system more likely that our citizens do such responsible things by making radical changes, such as:

• Making junk food more expensive than high-quality food
• Making tobacco and alcohol extremely expensive, while discouraging advertising to young people
• Putting businesses that blatantly pollute our air and waters out of business
• Down-playing the vanity of a sun tan
• Stopping the use of TV as the opiate of the masses, which creates so many "couch-potatoes," and start promoting more physical activity
• Rewarding healthcare providers for delivering high-value (cost-effective) care and preventive services, and insurers for offering high-value policies, as well as enabling consumers to select them through robust transparency of quality and cost
• Being role models of responsible money management, such as balancing the Federal budget rather than pushing incredible debt onto our children
• Making wise investing something that anyone can do rather than making the system so complicated and full of underhanded practices that it's so easy to get ripped off and make poor financial decisions
• Encouraging business to focus on long-term societal benefits rather than short-term investor returns
• Increasing the incomes of the working poor, so they have a chance to save for the future and purchase health foods, etc.
• "Leveling the playing field" so the disparity between the haves and have-nots aren't so drastic (the top 5 percent currently have more wealth than the remaining 95 percent of the population combined)
• Linking profit to value for the patient/consumer
• Putting at least some of the money currently being spent on political pork (estimated to be over $50 billion per year) and war (now about $500 billion and expected to go to $2 trillion) into improving our healthcare system.

Unfortunately, our nation often does just the opposite, so it's no surprise our citizens are often irresponsible. Under these destructive forces, does it really make sense to punish ill people for not taking good enough care of themselves? For more, see: Are you worthy of health insurance and high-value care? and Three stories about the dilemma modern consumers face in this era of "personal responsibility"

Also consider the myths--recently disputed by the Centers for Disease Control and Prevention (CDC)--that may affect one's point of view (quoted from New CDC Report: The Nail in the Coffin for Health Care Myths).

Myth: If people don't have health insurance or get medical care, it's because they don't want it.

Reality: Actually, the big issue with access is cost. According to the CDC report, more than 40 million Americans—almost one in five Americans over the age of 18—have foregone one of the following in the past year because they couldn't afford it: medical care, prescription medicines, mental health care, dental care, or eyeglasses.
It's not that uninsured people don't understand the value of coverage. Last year a study from the Urban Institute found that less than 3 percent of uninsured adults and children have never had insurance or report having no need for insurance. That same report also found that the high cost of coverage alone explained over 50 percent of those cases where people are uninsured

And even when the uninsured cite job-related difficulties as the reason why they can't access employer sponsored coverage, the problem isn't just that they can't get it through work—it's also that they can't afford individual policies. (Individual policies are much more expensive than group policies, and in many states private insurers can charge individuals astronomical premiums if individuals have any "pre-existing conditions.) According to the Urban Institute, for 79 percent of adults and 74 percent of children who are uninsured because of job-related problems, the high cost of individual insurance is a major problem.

Myth: The American system relies mostly, if not exclusively, on private enterprise to support health care.

Reality: Yes and no. While the U.S. does have the biggest private sector share of health expenditures in the world, making up 55 percent of our funding, personal health care expenditures (i.e. spending on actual patient care) is mostly public. The CDC reports that in 2005 the federal government and state and local governments combined paid 45 percent of personal health care expenditures; private insurers only paid 36 percent, with 15 percent coming from out-of-pocket payments. …

There's also a bigger public sector coverage presence than many would like to admit. Though two-thirds of insurance policyholders have private coverage, a Census Bureau report from earlier this year noted that more than one quarter of Americans (about 27 percent) are covered by government insurance. The [current] American model is much more of a private-public mix…

Myth: East coast liberals and the urban poor are the only ones who want a stronger public sector in health care.

Reality: Health care reform is often stigmatized as being something that only socialist, bleeding hearts dream of...But in fact, one particular area that could greatly benefit from a more proactive public sector is Middle America.

The CDC report notes that 4 percent of counties across the nation have no physicians. None. And more than 90 percent of these physician-less counties are non-metropolitan, i.e. do not contain a town of at least 10,000 people. In fact, across the nation only 9 percent of all of the nonfederal patient care physicians in the U.S. are located in these rural counties.

These sparsely populated locales are pretty much where you'd expect them to be: the Plains states and the Southwest (think Texas, the Dakotas, Oklahoma, Alaska)—home to many good old fashioned middle Americans. Initiatives to connect patients in these regions with physicians have come from the government, not the private sector...
[Both liberal and] conservative folks across the nation could benefit from a revitalized public sector [that makes] care accessible to regions where the medical market is non-existent.

Another report outlines questions American should consider when evaluating healthcare reform proposals. It contrasts proposals built around these three distinct philosophies, which assesses proposals "based not only on their ability to achieve universal coverage, but also on their potential to move the nation's health care system toward high performance …

1. Tax incentives for individual market insurance. Proposals that rely primarily on individuals' responsibility for obtaining coverage, with tax incentives to subsidize purchase of insurance in the individual insurance market.
2. Mixed private–public group insurance with shared responsibility for financing. Proposals that build on our current mixed private–public system of health insurance with shared responsibility for financing coverage by government, employers, and households.
3. Public insurance. Proposals that would cover nearly all Americans under public insurance programs, such as Medicare, with everyone covered through the same public system.

…both the mixed private–public group insurance and the public insurance reform proposals have the greater potential to move the health care system toward high performance. Both approaches have the potential to provide everyone with comprehensive and affordable health insurance, achieve greater equity in access to care, realize efficiencies and cost savings in the provision of coverage and delivery of care, and redirect incentives to improve quality. From a pragmatic perspective, however, the mixed private–public approach would cause far less dislocation by allowing the more than 160 million people who now have employer-based health coverage to retain it, instead of asking them to enroll in a new program. This approach would build on the best features of our current system while addressing its most serious shortcomings: gaps in coverage and the absence of the incentives, organization, and infrastructure required for a high performance health system.

…Extending health insurance coverage to people who currently lack it is a necessary, but not sufficient, condition for achieving high performance. The way in which a universal coverage system is designed will have a deep impact on its ability to make sustainable and systematic improvements in access to care, equity, quality of care, efficiency, and cost control. With these goals in mind, the following are some key principles policymakers and the public should consider in developing or evaluating health reform proposals:

Access to Care

• Provides equitable and comprehensive insurance for all.
• Insures the population in a way that leads to full and equitable participation.
• Provides a minimum, standard benefit floor for essential coverage with financial protection.
• Premiums, deductibles, and out-of-pocket costs are affordable relative to family income.
• Coverage is automatic and stable with seamless transitions to maintain enrollment.
• Provides a choice of health plans or care systems.

Quality, Efficiency, and Cost Control

• Health risks are pooled across broad groups and over lifespans; insurance practices designed to avoid poor health risks are eliminated.
• Fosters efficiency by reducing complexity for patients and providers, and reducing transaction and administrative costs as a share of premiums.
• Works to improve health care quality and efficiency through administrative reforms, provider profiling and network design, utilization management, pay-for-performance payment models, and structures that encourage adherence to clinical guidelines.
• Minimizes dislocation; people can maintain current coverage if desired.
• Simple to administer.
• Has the potential to lower overall health care cost growth.

Financing

• Financial commitment to achieve these principles.
• Financing should be adequate and fair, based on ability to pay, and is a shared responsibility of federal and state governments, employers, individual households, and other stakeholders.

…Conclusion
Ultimately, we must move the health care system to high performance using goals and properly aligned incentives that orient all participants in the same direction: toward improved access, quality, equity, and efficiency. The most important feature of any health insurance reform proposal is whether it can succeed in providing health insurance and access to care to all. In addition, proposals should be examined for their ability to produce better access, higher quality, and greater efficiency. Whenever possible, we must seek synergy between coverage expansion and reform that will move the U.S. to a high performance health system.

Achieving universal coverage will require engaging everyone in a debate on values, our commitment to a healthy and productive life for all, and the merits of different strategies for achieving improved coverage and better performance from our health system. …Serious reform will require broad consensus and a significant financial investment by federal and state governments, employers, households, and other stakeholders. A shared responsibility among all stakeholders will be needed to achieve the goals of reform in a way that is effective and fair.

Brief Overview of the Candidates' Proposals

All the Democrats propose universal healthcare (coverage for all Americans). Only Kucinich supports HR 676, which is a single-payer, "Medicare for All" plan that gives everyone comprehensive coverage. Gravel also proposes a single-payer solution, but through use of federally funded vouchers. All the other Democrats propose a public Federal Employees Health Benefits Program (FEHBP) type program and/or Medicare, Medicaid, SCHIP, which are supported by subsidies (e.g., through tax credits or vouchers) to low income persons.

Republicans, on the other hand, do not propose new public programs, the expansion of existing public programs, nor universal coverage. Instead, they all propose market-based private insurance solutions through tax deduction/credit subsidies to lower insurance premiums and deduct medical expenses from the taxes of lower income persons. Other strategies include increasing competition, tort reform, and payment changes to providers.

The strategies related to universal coverage, which are discussed below, include:

• New and expanded public programs
• Allowing private insurance
• Mandates for individuals and businesses
• Insurance pooling (community ratings)
• Changes in Private Insurance
• Subsidies/tax credits/deductions for individuals and businesses
• Funding it through taxes and savings

In my next post, I discuss whether government can be trusted to run a single-payer system.

Patient-Centered Life-Cycle (PCLC) Value Chain--Process Reform: Universal Health Coverage and Personal Responsibility

Having affordable insurance and comprehensive coverage is a cornerstone of the PCLC Value Chain. Nevertheless, one of the issues generating the greatest debate concerns universal health coverage (i.e., healthcare for all), along with the related issue of "personal responsibility." The argument tends to center on whether the young and the healthy should help pay for care that older and ill persons need, how much they should pay, and the degree of responsibility people have for staying healthy and paying for their care when they get sick. In an earlier series of posts, I made the case that all Americans are worthy of health insurance, and that personal responsibility is a complex issue we must address, but for which there are no quick fixes.

Well, I recently corresponded with two individuals who have ideas about this topic, which I present below.

Person 1 wrote:

Just an idea, but since some here are so determined that Health Care for Everyone should be equal (but not equally paid for) and that everyone is as "deserving" of "good" health care as the next person, and that EVERYONE should pay for this based (somehow) on his or her income (those with more income should pay more than those with less income but EVERYONE should get the same care) I would suggest that these folks move to Canada or Denmark, or Switzerland, or any one of several other countries the next time they need heart surgery.

While we, in this country, do not have the PERFECT health care system, we still have the best. Yes, some of us have better care than others because we PAY more for it than others. But, let me see now... some of us also have better housing than others because we pay for it, some of us have better cars because we pay for it, some of us have better educations because we paid for it, and etc, and etc, and etc.....

I will be the first to admit that there are differences in the level of care provided in this country. But, I do not know of ANY person that has been refused treatment at the emergency room because of lack of insurance or lack of money. No, they do not get individual rooms in the hospital nor do they usually get the services of the most highly qualified and educated doctors and nurses. But they DO get better care than 95% of the rest of the world and that is pretty darn good.

I, like millions of others in this country, have worked very very hard for what I have and I have gone through periods in my life when I did not have much of anything at all. But, I never went without basic health care and I am in pretty good shape for my age. I did, however, work very hard to improve upon my circumstances and succeeded very well. Not as much as many many other people, but everything is relative. I have a nice home, a nice retirement, and well educated and well behaved children and grandchildren. We have our differences, of course, but we have a work ethic that I hope most other Americans have. We truly believe we totally deserve what we have because we have EARNED it. Do I feel sympathy for those that do not have a private room in the hospital or a family doctor that they can see on very short notice just about any time and all of the other things that we pay for? Sure I do. But NOT enough sympathy to want to see the health care system in this country (warts and all) made "universal" and forced to fall down to the systems of much of the rest of the world.

I think we (ALL of us that are willing to work for a living) have it pretty doggone good. And for those that are not willing to work for it, I feel sorry for you but not sorry enough to give up what I have so you can have what you want. Not hardly pilgrim!

I Replied

A logical argument …but I only wish it were so simple. Let's start by examining the premises upon which your case is built.

You wrote: America has the best healthcare in the world.

Here's a quote from a recent article in a leading healthcare journal titled, "Mirror, Mirror on the Wall: An International Update on the Comparative Performance of American Health Care," which refutes your premise:

"Despite having the most costly health system in the world, the United States consistently underperforms on most dimensions of performance, relative to other countries. This report…includes data from surveys of patients, as well as information from primary care physicians about their medical practices and views of their countries' health systems. Compared with five other nations-Australia, Canada, Germany, New Zealand, the United Kingdom-the U.S. health care system ranks last or next-to-last on five dimensions of a high performance health system: quality, access, efficiency, equity, and healthy lives. The U.S. is the only country in the study without universal health insurance coverage, partly accounting for its poor performance on access, equity, and health outcomes. The inclusion of physician survey data also shows the U.S. lagging in adoption of information technology and use of nurses to improve care coordination for the chronically ill." (Here's the link).

Other convincing data shows that the US lags behind many industrialized countries in delivering primary care, access and quality. See, for example, the data from this research: "New National Scorecard--U.S. Health Care System Gets Poor Scores on Quality, Access, Efficiency, and Equity, which is available at this link.

You wrote: People who work for a living have it good.

Well, this is a big: IT DEPENDS. Consider the following:

• "Over 8 in 10 uninsured people came from working families - almost 70 percent from families with one or more full-time workers and 11 percent from families with part-time workers.
  
• The percentage of people (workers and dependents) with employment-based health insurance has dropped from 70 percent in 1987 to 59.5 percent in 2005. This is the lowest level of employment-based insurance coverage in more than a decade.
  
• Nearly 40 percent of the uninsured population reside in households that earn $50,000 or more. A growing number of middle-income families cannot afford health insurance payments even when coverage is offered by their employers." (Here's the link).
  

And there are many reasons for people not having coverage, including:

• Health insurance is unaffordable to many, including individuals who are unable to get affordable individual coverage due to cost or pre-existing medical conditions.
  
• Many employers do not offer health insurance coverage.
  
• People who lose their jobs often lose their health insurance.
  
• Some workers are not eligible for health insurance offered by their employer.
  
• Workers and individuals do not take-up coverage that is available.
  
• People may be poor but not eligible for public coverage, for example, childless adults are generally ineligible regardless of income.
  
• Individuals are eligible for public programs, but are not enrolled."
  
(references: Why are people uninsured #1 and Why are people uninsured #2).

And to make matters worse, the uninsured who do pay are typically charged much more for the same procedures and medications than insured folks because they cannot negotiate discounts, which insurance companies do.

About getting care in emergency rooms, about 20 percent of the uninsured (vs. 3 percent of those with coverage) say their usual source of care is the emergency room (Here's the link).

This is not solution to the problem of the uninsured because, for example:

• Uninsured diabetics go years without any preventive care because lack of ability to pay, but once their feet become necrotic and they're rushed to the ER in need an amputation, we'll pay for the operation in the ICU.
  
• Emergency room care does not include treating cancer with chemotherapy or many other life saving therapies.
  
• The "charity care" ERs are required to give is money hospitals try to recover by raising costs for all of us, e.g., through higher insurance premiums, deductibles, co--pays, and other out-of-pocket expenses.
  

Consider the following study showing that, despite access to the ER, the uninsured do NOT get care when they need it:

"Adults without coverage go without needed care. The uninsured are much less likely to receive preventive and routine care, such as mammograms, pap smears, or screenings for colon cancer. Only 18% of uninsured patients reported receiving a screening for colon cancer, compared to 56% of insured patients. While they can obtain care at the emergency department or a community clinic, uninsured adults are more likely to lack a regular source of care and more likely to forgo needed care. According to the Commonwealth Fund Biennial Health Insurance Survey, almost half of uninsured individuals will not seek care when they have a medical problem, compared to just 15% of insured individuals.

Adults without coverage have worse health outcomes. The Institute of Medicine reviewed 130 studies published in the past 20 years and found that uninsured patients consistently have worse health outcomes. For example, compared to patients with private insurance coverage:

• Uninsured patients with breast cancer have 30 to 50% higher mortality rates;
  
• Uninsured patients with colon cancer have 50 to 60% higher mortality rates; and
  
• Uninsured accident victims have a 37% higher mortality rate.
  

Other studies have found that uninsured patients with chronic conditions are almost twice as likely to visit an emergency department or be hospitalized as insured patients.

Short-term stabilization is not the same as long-term care health management. Because uninsured patients lack routine care, their chronic conditions are often poorly managed, increasing the likelihood of serious, acute complications. Once hospitalized, they receive treatment for acute needs but probably don't receive appropriate follow-up care, resulting in worse health outcomes over the long term.

Uninsured children also lack access to care and experience worse health outcomes. Because uninsured patients lack routine care, their chronic conditions are often poorly managed, increasing the likelihood of serious, acute complications. Once hospitalized, they receive treatment for acute needs but probably don't receive appropriate follow-up care, resulting in worse health outcomes over the long term.

The Bottom Line

Health coverage matters. Children and adults without health insurance can receive care from California's safety net or in an emergency situation. However, studies consistently demonstrate that California adults and children without insurance have difficulty accessing needed care and are more likely to have worse health outcomes." (see this link).

Person 1 responded:

There are VAST differences between the overall economies and populations of the countries you name and the United States. Universal health care stands a much better chance of succeeding and actually working in countries with relatively small populations such as Australia and New Zealand. Even Canada and the United Kingdom have systems that are NOT totally "universal" in nature. Private care in these countries is readily available if a person is willing to pay for it. But the horror stories of people that cannot afford it waiting for MONTHS to get in to see a (usually) lower tier health care professional are rampant. THAT is why so many well to do and middle class people from these countries come to the United States so often when quality health care is needed.

Your second point deserves some discussion too. "employment-based health insurance has dropped from 70 percent in 1987 to 59.5 percent in 2005." Probably true although I have seen some reports that dispute these numbers. But, granted, the numer of people with EMPLOYMENT based health insurance has dropped. That does NOT mean that those people that have lost their company health card do not have access to health care that, in most cases, is just about as cheap as what they were paying for before. Think about it, MOST people in this country do NOT require expensive and long range health care so therefore must pay for only those routine matters that come up from time to time. Again, granted that those that DO require expensive and/or long term care and DO NOT have employer paid insurance and have chosen to spend their money on other things than private health insurance face formidable obstacles. I would argue, however, that even these people are not thrown out on the street when they go to the emergency room at our hospitals. As I said before, they get care, just (perhaps) not the highest quality care. As far as those households that earn $50,000 or more, just how does this compare to the income levels of families 50 years that did earned enough to have an equivilant standard of living? One of the BIG differences is, of course, the PERCEPTION of what is REQUIRED to live these days. Two cars (or actuallly 2.5 cars), 3 TVS, Cable TV, significantly more expenditures on WANTS rather than NEEDS, and many other similar expenditures. I can argue that the LACK of health care (if it exists at all) is a result of personal CHOICE. Fifty years ago these "middle class families" had a greater sense of what was important and budgeted accordingly. This argument could, of course, be the topic (and it has) of many professional papers and conferences.

The above arguments can apply to the rest of your post as well. In short, much of the problem with health care availability can be attributed to PERSONAL CHOICE. Not ALL, of course. There ARE a lot of people that have legitimate problems, NOT OF THEIR OWN MAKING but our safety nets generally provide a basic level of care. For those whose problems are of their own making (deadbeats, drug addicts, alcoholics, people that refuse to work at ALL, and others) I, and MILLIONS of others, do not feel it is MY obligation to pay for their problems that result from their own personal choices.

I wrote back:

Note that when I refer to universal healthcare, I’m not necessarily speaking of a single-payer system. I believe that in the US a combination of private insurers and expanded public programs is probably most feasible solution to dealing with the uninsured since the 170 million or so people (including family members) currently with comprehensive health insurance--paid in large part by their employers--would be unlikely to give it up for some untested universal healthcare system.

Anyway, when it comes to waiting for care, while people in the US go without needed healthcare because of cost, more often than people do in the other countries, waiting time for specialized healthcare services (e.g., elective surgery) is typically shorter in America than in other countries, at least for insured Americans. However, the US ranks low when it comes to the prompt accessibility of appointments with primary care physicians, often waiting six or more days for an appointment, and having trouble making an appointment on weekends and evenings [ reference ] .

So, waiting time for non-emergency care is an issue in countries with universal healthcare. Nevertheless, things are improving in many of them [ reference ]. And why “medical tourism” to the US is a way for them to get such specialized care more quickly, Americans are going abroad for their care because it’s so much less expensive and the quality is just a good. In other words, there are problems with both systems. I contend that access to excellent primary and specialist care, even if there's a longer wait for elective surgery, is a better option than not being able to afford excellent care.

On to your good point about what people can afford based on their priorities and perceptions.

This is how Jeff Goldsmith, president of Health Futures Inc--a firm specializing in corporate strategic planning and forecasting future health care trends--explains the issue of households earning $50,000 or more and not having insurance:

“Families with incomes above $50,000 a year account for an improbable 93% of the 2.1 million increase in the uninsured, and now represent 38% of the total uninsured in the United States. Two-thirds of the 2005-2006 increase was actually in families with incomes above $75,000! How far up into the middle class these incomes put someone obviously depends on where they live. In Manhattan, $75,000 a year is not a lot of money (consider that just parking your car, if you are foolish enough to own one, can cost $500 a month). In Topeka, Kansas, however, it’s upper middle class.

What we don’t know (and need to know) is exactly why nearly 18 million people whose families earn more than $50,000 a year lack health insurance. We can speculate that some of them are young, and have made what seems to them to be an intelligent gamble to “go bare” and spend the money on other things. Others not so young may be scrimping on health coverage in order to make their car payments, or to afford the suddenly more expensive jumbo mortgage payments on their homes, or cover their installment debt and energy bills. These data could indicate that worsening family cash flow is changing how the health benefit is viewed. The fact that relatively well-off households are having trouble remaining covered is deeply disturbing. It would be helpful to know more.

The average US household presently spends about 6% of its disposable household income on healthcare; the above average income household spends much less. In 2005, Americans spent about $250 billion out of pocket on health services and had another $190 billion taken out of their paychecks for health insurance premiums. In 2005, we spent a comparable amount, about $440 billion, on Christmas presents and about $470 billion on restaurants and fast food. How important is health coverage for middle and upper middle class households in their mix of spending priorities? However stressed financially, these families are not among the hundred neediest cases. …Is it important enough to merit public subsidy?”

…Aging Boomers are a surprisingly large part of the uninsured population. Almost one quarter of the 47 million uninsured are between the ages of 45 and 64. Despite the large reservoir of public sympathy for “the kids”, this older group of uninsured people may be the most expensive and scariest subpopulation because they are aging into the region of expensive chronic illnesses. Their emergency room visits are far more likely to be of the $25,000 variety and lead to hospital admissions. (A surprising 541,000 thousand people over age 65 lack health insurance, despite the smug assumption that we’ve achieved universal coverage for the elderly).

This older group of uninsured is bewilderingly diverse. It comprises homeless people, people who are widowed and divorced, laid off factory workers and computer programmers, free-agent knowledge workers, early retirees and those normal retirees whose companies either dropped retiree health coverage or went broke. (The disabled people in this age band are, of course, eligible for Medicare, though many do not enroll).

Mandating that these folks buy their own health insurance coverage, as “individual mandate” health policies such as Massachusetts’ require, poses three practical problems: the limited number of health insurers that will offer coverage to high-risk, older people; their pre-existing medical conditions (which are increasingly numerous as one ages); and the cost, which can easily exceed $2500 a month (if coverage is available at all). Even families with $120,000-a-year incomes would struggle to pay that type of premium out of pocket. For families at or below the median income of $48,000, realistically, it’s going to be impossible without public subsidy.

This is one reason why Massachusetts’ supposedly universal health plan exempted 60,000 people who could not afford even a “stripped-down” benefit. How many more “high-risk/high-need” uninsured people could have afforded Massachusetts’ health coverage if the state had seriously addressed its expensive health insurance mandates (requiring insurers operating in the state to cover chiropractors, in vitro fertilization, and breast reconstruction after cancer surgery, etc.) will be left to a future generation of doctoral students in health policy.” [ reference]

Turing to personal responsibility. People who abuse drugs or alcohol start do so for many reasons--often due to psychological problems, bad living environments, genetic predispositions, family problems, marketing & advertising influences, peer pressure, our society’s worship of short-term hedonism and self-indulgence (conspicuous consumption that drives our form of capitalism), and other such factors related to human frailties. And these folks tend to start down that negative path when quite young and more susceptible. A similar case can be made for smokers and even obese people. This doesn’t “excuse them” for their poor decisions, but it does explain why humans sometimes act foolishly. That is, there's a heck of a lot more to it than can be attributed simply to “personal choice,” like choosing a Coke over Pepsi (or visa versa). What we should be doing is working to change the things in our culture that precipitates such self-destructive behaviors, providing more effective psychological and rehabilitative services, investing more in preventive care and ways to motivate adherence to healthy lifestyles, etc. I find it rather heartless to say: “Too bad…it’s your fault you’re sick and can’t afford excellent healthcare…we don’t care why…but since you can’t afford it, you don’t deserve the same level of care that I do!”

Now, I'm not dismissing the claim that there may be some "deadbeats" out there who are psychologically stable and able to work, but wish to live in poverty just to get free medical care and be able to sleep all day, even though their health is more likely to be worse than others and they must do without the pleasures money can buy. But since 80% of our healthcare costs are for 20% of the population (i.e., old people near end of life and folks with certain chronic conditions), I don't think the deadbeats account for much of the utilization, even though you can certainly make a case that they are "playing the system" and ought to be required to pay back any publicly funded care they receive.

And here's a related conversation I had with a second individual.

Person 2 wrote:

Any solution to the multiple facets of the healthcare problem MUST consider human nature which is that if people do not have direct control over paying for services with real money out of their pockets, they will not consider the costs. No different from anything we purchase.

The start of health care insurance out of World War 2 wage and price freezes has caused us to get to this point. Most people consider health care as something for which insurance pays. They do not look at buying food, cars, homes, rent or mortgages, vacations, clothes, college tuition, etc. as something that which some kind of insurance pays. When the money comes from the person directly, they are more involved with getting as much quality for as low a cost as possible. Health care will eventually have to go back to the status of anything else we buy.

Catastrophic health care insurance could be purchased or offered to people based on income or assets. Normal market forces would keep costs reasonable and people would have the direct incentive to care for their own health--exercise, proper diet, weight control etc., for fear of spending their own money. Any other supposed solutions will keep the problem and make it worse over time with poorer care and higher costs.

I Replied:

I agree that people should consider cost-actually, cost-effectiveness (i.e., cost AND quality). This means they must have the knowledge and tools to determine when care is needed and what kind of treatment is most cost-effective, as well as to self-manage chronic conditions. Furthermore, they must be motivated to stay as healthy as possible, be able to afford the care they need, and have access to such care when it's needed. For many reasons, this is not the case today, so my point is that each of the causes should be addressed and remedied. For example:

• Before a person can go to a cost-effective provider, he has to know where to find one, and that information doesn't exist!
  
• For people to self-manage chronic conditions, which can be quite complicated and require multiple medications and lifestyle changes, many need to be educated, counseled to change maladaptive beliefs and emotions, and assisted in other ways, as well as have the resources (money, transportation, access to specialists, etc.) to carry out their care plans effectively.
  
• We have to develop better ways to educate, motivate and enable people to take better care of themselves, despite the weaknesses of human nature (this is something my company is focusing on). Unfortunately, this is made more difficult by our culture, which makes some people wealthy by promoting poor eating habits (e.g., corn fructose excesses, hormones in animals, pesticides, etc., as well as making healthy organic foods very expensive), laziness (couch potatoes), excessive drinking of alcohol, tobacco use, etc.
  
• We have to change the way we pay providers, from pay for volume to pay for delivery of high-value care.
  
• We have to invest in better health IT systems for providers and consumers.
  

So, until that happens, healthcare is NOT like buying anything else, and thus market forces alone aren't the answer.

Providing catastrophic health care insurance to all based on ability to pay is a reasonable thing to do and wouldn't be overly expensive, but it fails to address the problems above and thus will not slow down spiraling healthcare costs or poor quality. The commercial insurance companies offer a choice of benefit packages with calendar year deductibles between $500 and $10,000, along with cost-sharing in which the covered individual pays anywhere from 20% to 50% of the cost of a service, as well as a lifetime maximum (of $1-3 million dollars). Under catastrophic health insurance plans, you tend to pay out-of-pocket for doctor's visits and prescription drugs, but major hospital and medical expenses above a certain deductible are covered. Most catastrophic health insurance plans cover hospital stays, surgery, intensive care, diagnostic, X-ray and lab tests, but not other services, like doctor's visits, preventive care, dental, vision, maternity care, prescription drugs, and mental health visits. And if you have certain pre-existing conditions, you often won't be eligible for a catastrophic health plan (or have a long waiting period). Examples of such conditions are AIDS, diabetes, emphysema, heart disease, multiple sclerosis, schizophrenia, and many more (see this link).

The problem with having only catastrophic coverage only, rather than comprehensive coverage, is that very high deductibles plus co-pays can be devastating to lower income folks, and many aspects of essential care are not covered, which means people will become more ill and thus require more costly care, and the uninsured will continue to crowd emergency rooms for care that could have been provided much less expensively in a doc's office.

---

Your comments are welcomed.

In my next post in this series, I'll discuss how the Whole-Person Integrated Care solution.

Patient-Centered Life-Cycle (PCLC) Value Chain--Process Reform: Pay for Value

Continuing the series on the PCLC Value Chain strategy [click here for the first post in the series], this post focuses on a third process in need of reform: The transformation from "pay for performance" to a "pay for value" model that rewards providers who deliver high-value to patients/consumers. Being a complex and controversial issue, this post is lengthy, but hopefully insightful.

Defining Pay for Performance

Today's Pay-for-Performance (P4P) model uses "quality" measures (metrics)--devised by insurers, government and big healthcare institutions--to judge the performance of providers (hospitals and clinicians) and pay them based on their performance. In the P4P process, monetary rewards are given to providers who follow specific evidence-based guidelines for particular types of patients and, for some conditions, who achieve certain results in patient health and well-being. And recently, the Centers for Medicare and Medicaid Services (CMS) decided to add a "stick" to the P4P "carrot," by announcing that they will cease paying for care made necessary by "preventable complications;" that is, they won't pay for certain conditions caused by medical errors or improper care--conditions that could have reasonably been avoided.

Thus, reforming healthcare via P4P "…rests on the following three principles: payers [insurers and CMS] should pay more for the treatment of conditions that require more resources and that the provider could not reasonably have prevented; they should pay more when evidence-based or consensus-based best practices are followed; and they should pay less or not at all for low-quality care. Naturally, the last will be the most controversial."[1]

While such an incentive model may affect clinician behavior [2][3], and although the number of P4P programs is growing, critics say that they increase providers' administrative burden while giving no clear evidence money will be saved or quality will be improved.[3a] Furthermore, using compliance to evidence-based guidelines as the measure of performance can be problematic for numerous reasons.[4][5]
These issues and others pose significant challenges to any P4P program.

P4P Challenges

P4P programs must deal with the following challenges:

• A provider's practice may be too small to permit valid analysis of the performance data.
• Patient population differences--in terms of health status, insurance coverage, etc.--may mean that a specific practice guideline may work well for certain patients in certain situations, but not work for others.
• Even though providers may adhere to practice guidelines tied to P4P, they may not comply with guidelines for which there is no performance assessment and financial incentive.
• Many specialties lack evidence-based guidelines, and the guidelines that exist may not be valid.
• Performance metrics must be adequately "risk-adjusted" for patients with difficult to treat problems. These risk-adjustments alter the criteria for determining "successful" care by accounting for differences in the severity of patients' conditions treated by different providers, thereby enabling fair comparisons. It can be very difficult, however, to establish valid are risk-adjustment equations.
• When a guideline is not clinically appropriate for a particular patient, a provider should not be penalized for deviating from it with minimal, but appropriate, documentation.
• P4P programs may end up costing the system more in the long run.
• If providers chase different P4P criteria developed by different payers, it can lead to duplication of services and unnecessary testing.
• Different insurer-based P4P programs often measure performance differently, which results in unnecessary administrative burdens, as well as failing to adjust for differences in patients' conditions, economics and demographics.[5a]
• Since quality metrics are largely arbitrary, different healthcare plans tend to have different performance indicators for the same disease, which convolutes the process.
• P4P could simply redirect money toward wealthier areas where patients are more likely to follow doctors' orders.
• Patient satisfaction surveys can be unreliable.
• When a patient is treated by multiple clinicians, it can be unclear who is responsible if a recommended guideline isn't followed.
• A patient's ability and willingness to adhere to self-maintenance instructions often affect outcomes, thus impacts provider performance measures.

One way P4P programs attempt to deal with such challenges is by establishing useful performance measurement standards.

Performance Measurement Standards

At least three standards are related to measuring clinician and hospital performance:

1. Process compliance standards
2. Care outcome standards
3. Care value standards.

Process Compliance Standards

Process compliance standards measure the "quality" of providers' performance based on whether they follow recommended guidelines reflecting preferred care processes. For example, typical P4P programs reward providers who perform certain predefined procedures (processes), such as doing a Hemoglobin A1c test a certain number of times each year for patients with diabetes. These standards measure the degree of compliance to such established procedures.

Some of the problems with P4P are exemplified by research showing that following recommended procedural guidelines for hospitalized patients with heart attacks--e.g., give patients aspirin and beta blockers at admission and discharge--doesn't mean better outcomes as measured by 30-day mortality rates.[6] So, after 30 days of an attack, the research shows that the health status of a patient with actuate myocardial infarction is influenced only slightly by whether or not his/her provider followed the guidelines. This is because outcomes research is still an infant science, which makes P4P premature, at best. In this case, and in many others, measures of performance are too crude (i.e., limited whether the patient died within 30 days, but ignores what happens after that time) and too narrow (i.e., aspirin, beta blockers and a few or recommended interventions are inadequate to address all of a patient's needs and problems). So, it appears that care quality is not necessarily related to guideline compliance.

Let's examine this issue a bit more deeply. Adhering to existing process guidelines are, no doubt, helpful for many patients. But numerous other things not appearing in a process guideline, and thus not used to measure the quality of care, may be as important (and possibly more important) to improving a patient's health and well-being.

For example, important processes lacking in today's P4P guidelines, and not being considered as quality metrics, include:

• Educating a patient suffering from congestive heart failure about the pros and cons of a heart operation
• Counseling and coaching the patient to make critical lifestyle changes (e.g., good eating and exercise) and to manage stress more effectively
• Implementing cost-effective complementary and alternative interventions
• Using computerized diagnostic aids, clinical pathways, continuity of care records, and electronic medical/health records.

Other important processes affecting care quality that P4P programs fail to measure include:

• How well a patient's plan of care maps to his/her primary diagnosis and comorbidities (the presence of one or more disorders/diseases that co-exist with a patient's primary disorder/disease)
• Whether a plan of care is based on a general guideline, or whether it is personalized, i.e., tailored to each patient's unique situation by taking into account patient-specific biomedical, psychological, genetic, cultural, and historical factors, as well as one's personal preferences
• How well care is coordinated among a patient's providers after discharge from the hospital
• The quality of care delivered in both inpatient and outpatient settings (e.g., whether there were errors, omissions, infections, etc.)
• The patient's ability and willingness to comply with self-management care plans to prevent complications or worsening a condition
• The appropriateness of the self-management care plans, as well as patient education and compliance counseling/coaching.

Care Outcomes Standards

Unlike process compliance standards, care outcomes standards do not focus on whether specific procedures were followed. Instead, they measure the effectiveness of whatever treatments were delivered, and whether clinical goals are achieved for patients with particular conditions. For example, a care outcome standard for diabetics is blood glucose control defined as a Hemoglobin A1c test target goal of less than 7.0%. This means care outcomes data should measure more than mortality rates (patient deaths); they should also measure a patient's physical and psychological signs and symptoms--including patient complaints, clinician observations, vital signs, lab test results, imaging studies, and quality of life (such as mental health, mobility, social functioning, role limitations, vitality, etc.).

Interpreting care outcomes data ought to take into account factors that may influence the care results, such as:

• Comorbidities and their effect on the patient
• Allergies and other things that can cause adverse reactions/side-effects
• Environment conditions (at home, in the workplace, etc.)
• Treatment history
• Family history
• Genetic markers
• Patient's attitudes and preferences
• Patient's emotional state
• Patient's psychosocial situation (e.g., degree of family support).

Understanding how to use care outcomes to measure quality, therefore, is a complex process that requires a wealth of diverse health data. Unfortunately, existing P4P programs do not use comprehensive care outcomes to assess the quality of care. Instead of obtaining and analyzing detailed lots of clinical data (signs and symptoms), they typically rely on insurance claims (administrative) data.

Claims data provide some useful measures of quality, including mortality rates, complications; and claims data provide useful information about cost. These data, however, provide grossly inadequate metrics for improving care quality and efficiency. This is because claims data do not include information necessary to determine, for example, how much a patient's signs and symptoms improved after treatment, if errors were made, if lower cost treatments of equal or greater effectiveness could have been used, if the patient was educated adequately in self-care and complied with the prescribed plan of care, and if coexisting conditions affected results. Without such care outcomes data, it isn't possible to evaluate a provider's performance accurately nor gain the knowledge needed to improve healthcare effectiveness and efficiency. So, instead of using claims data alone to measure care outcomes, they should be augmented with detailed clinical data.
Measuring process compliance, and balancing clinical and claims outcomes data are essential to assessing care quality, but rewarding cost-effectiveness require care value standards.

Care Value Standards

In contrast to care process and outcomes standards, care value standards combine process and outcome quality metrics with economic metrics to measure cost-effectiveness, which defines the value of care.

If our healthcare system was rational and guided by wisdom, a top priority of healthcare professionals and patients/consumers would be to maximize care quality and efficiency (i.e., value) by:

• Gaining valid knowledge about healthy living, the causes and diagnosis of physical and mental health problems, and the treatments delivering the best results most cost-effectively to each patient.
• Understanding how to use this knowledge to maximize value to the patient/consumer by increasing care effectiveness and efficiency, as well as improving prevention and self-maintenance of chronic diseases.
• Continuously evolving this knowledge and using it to improve care quality and lower costs continually.

For significant improvement in healthcare delivery, useful and reliable care value standards must be established for every health risk factor, illness/condition, and healthcare discipline/field; and these standards must be used to measure and reward high-value performance. Unfortunately, today's P4P programs fail to do this since, in part, measuring care quality is so difficult.

Pitfalls of Care Quality Measurement

Following are potential pitfalls of care quality measurement:

• Today's diagnostic systems often fail to point to the highest quality treatment options, which means we often don't know the what care interventions are likely to produce the best results.[7]
• Few guideline standards are specific enough to account for individual differences in patient with the same diagnosis. For example, a recent study found that a moderately high total cholesterol level is associated with higher survival in certain patients with heart failure.[8] Such specificity is needed for high quality personalized care.
• Constantly evaluating and revising evidence-based guidelines based on new knowledge is very difficult. But if they do not continually evolve, the guidelines do not promote quality since they are just "a record of the past, and little more-they should have an expiration date."[9]
• According to HHS Secretary Mike Leavitt, "Medical associations and others have begun the work of developing quality standards and cost measurement, but we have many years of work ahead of us to achieve the wide-ranging and meaningful quality standards we need."[10]
• No mater what quality measures are used, there are complex issues to be resolved, such as:
• At what point is there sufficient confidence in an evidence-based guideline that there is no longer any need to spend time or money on the continuous evaluation of its reliable and validity?
• When is a definition of quality too narrow, e.g., by focusing on cost or symptom reduction, but not considering prevention, recurrence, coordination and continuity of care, or the patient-physician relationship?
• How do you measure quality when resources are scarce and optimal care for the community may require less than "the best" care for its individual members (e.g., delegating office nurses to perform certain activities that physicians used to do)?
• What is the best way to measure quality if outcomes are more strongly affected by patient compliance than by physician orders? This may occur, for example, if certain providers have personalities that trigger greater patient compliance, and visa versa.
• Is it poor quality care if a provider follows the recommended practice guideline, but the patient is atypical and responds poorly? [11]
• Use of claims (administrative) data to measure care quality is grossly inadequate for many reasons.[12]
• As discussed earlier, assessing care quality using process data may not be valid since they do not necessarily reflect care outcomes.[13]
• One thorny issue is how to avoid political and ideological biases when determining what evidence to use as the basis for establishing the guidelines, since quality care is unlikely to be achieved unless treatments are based on objective science.[14]
• Many areas of healthcare lack care process standards and/or quality measures. That is, different healthcare disciplines and specialties require different types of data to evaluate quality. For example, it's foolish to measure the quality of mental healthcare services with data appropriate for evaluating cardiologists' performance; and the same is true for a podiatrist, dentist, chiropractor, etc.-each need different measures for determining quality, but they are often lacking.[15]

We must deal with these challenges and pitfalls before P4P incentives will lead to substantial care quality improvements. But even if P4P results in more effective diagnostic and treatment procedures, this increased higher quality care fails to address the problem of high costs due to inefficiency, which includes wasteful over-testing, over-treating, and delivery of more expensive care when less costly alternatives are just a effective, as well as inadequate focus on wellness/preventive care. Only the transformation to "Pay for Value" (P4V)--in which the most cost-effective (high-value) care is rewarded--will make healthcare more affordable and available.

Transformation to Pay for Value

Unlike P4P, P4V focuses on the relationship between diagnosis, treatment, clinical outcomes and cost to increase care value through incentives for improving care quality and efficiency, i.e., cost-effectiveness. The transformation to P4V requires that we:

• Revamp our diagnostic system to classify each patient more precisely
• Tailor treatment guidelines to patient's individualized needs and preferences by identifying and recommending the most cost-effective care for each patient, including attention to the mind-body connection and appropriate alternative and complementary interventions
• Maximizing efficiency by minimizing waste and paying strong attention to wellness & prevention
• Track patient's data across their entire lifetimes using comprehensive clinical outcomes and cost data.

If we did this, we would have patient-specific evidence-based guidelines defining the most cost-effective care tailored to each patient's particular needs. We could then reward providers for rendering such high-value care. This is the essence of P4V.

Unfortunately, our country has not been moving in the P4V direction because we fail to:

• Focus on supporting the kinds of research and information systems necessary for generating and using the kind of evidence-based guidelines providers and patients need to improve outcomes and control costs through greater quality and efficiencies
• Reduce waste and expense by selecting and implementing the most cost-effective care options and prevention strategies.

This means that today's P4P programs are built on flimsy knowledge. In essence, we are pretending that we know (a) what each patient needs to remain well through prevention; (b) when ill, what each patient needs to get well with least risk and complications; and (c) how to deliver such care with the greatest efficiently and least cost.

Let's Stop Deceiving Ourselves

Pretending we know what high-value (cost-effective) care is and how to deliver it--as we flounder in a knowledge gap dominated by ignorance and uncertainty and inadequate health information technologies--is a dangerous form of self-deception. We are deceiving ourselves into believing that rewarding providers via P4P for following current day best practice guidelines is going to increase the quality and reduce the cost of care when (a) research shows that today's guidelines are neither personalized nor focused on cost-effectiveness and (b) following the guidelines do not necessarily result in better outcomes, as discussed earlier.

So, instead of pretending, we should be obtaining and using the knowledge we need about care value by investing more in clinical research (in both lab and field) and advanced information systems that provide next-generation decision-support, collaboration, and continuity of care capabilities. This means we should be focusing on transforming our current healthcare system to a value-based system that:

• Pays for the research, collaboration and information systems needed to establish, evolve, disseminate and use high-value, evidence-based guidelines that are tailored to each patient's particular needs.
• Offers financial incentives to the providers who engage in this knowledge-building and utilization process to deliver high-value care, rather than simply rewarding those who follow today's inadequate guidelines.

Once we've established valid and reliable patient-specific best practice guidelines--which take into account both quality and cost--then we are ready to make the transformation to pay for value (P4V). In the mean time, we ought not postpone P4P initiatives, as long as:

• Clinicians who chose not to follow standardized guidelines for particular patients will also receive the reward if they have a good reason for doing things differently
• Ample clinical and financial outcomes data are collected to determine the effect of following general guidelines with particular patient types, so we are able to make them more personalized over time
• Built into the P4P methodology is an increased focus on rewarding clinicians who get good results at a good price, and decreased focus on simply following general processes
• Money spent in these early P4P initiatives do not restrict spending on research aimed at developing personalized guidelines and better decision tools
• There is an explicit strategy to move toward giving P4V rewards to multidisciplinary teams of clinicians who are involved in treating the same patient, as opposed to each individual clinician, in order to promote better continuity of care.

In other words, the transformation from today's P4P initiatives to P4V should be based on a clear strategy to:

• Improve/evolve current evidence-based guidelines to be ever more personalized
• Make financial rewards increasingly based on clinical outcomes data reflecting high-value care delivery
• Enhance collaborative efforts within teams of clinicians promoting better continuity of care.

In addition, P4V should include "shared decision making" augmented by patient decision aids for achieving informed patient choice. This strategy would promote "a new standard of practice for defining medical necessity for many discretionary treatments based on informed patient choice … [which is beneficial since] informed patients appear to demand less surgery than the amount now being performed … and the risk for serious medical error occasioned by providing an unwanted therapy is greatly diminished."[16]

Failure to do these things can do more harm than good by making us complacent in the belief that we are doing enough, whereas in reality, these early P4P models do relatively little when you realize what ought to be done in the long term to increase care value!

Bridges to Excellence

There are potentially useful P4P models being offered, which can foster the transformation to P4V. One such model, named Prometheus, is being proposed by the Bridges to Excellence organization, a non-profit group of employers, physicians, health plans and patients working to create significant leaps in the quality of healthcare. It focuses on a payment system that uses (a) "evidence-based case rates" that determine how much to pay providers based on the cost of the resources required to deliver care according to evidence-based practice guideline, and (b) a comprehensive scorecard of quality to pay more money to providers who consistently follow certain practice guideline processes, demonstrate good clinical outcomes, receive high patient satisfaction ratings, and operate cost-efficiently.[17]

In my next post in this series, I discuss the Whole-Person Integrated-Care solution.

References:

[1] Rosenthal, M.B. (2007). Nonpayment for Performance? Medicare's New Reimbursement Rule. New England Journal of Medicine; 357(16):1573-5.
[2] Ibid.
[3] Rosenthal, M.B., et al. (October 2005) Early Experience with Pay-for-Performance: From Concept to Practice. Journal of the American Medical Association, 294 (14):1788-93.
[3a] Modern Physician Online (Sep 17, 2007). P4P programs' value questioned despite growth.
[4] Garber, A.M. (2005). Evidence-Based Guidelines As a Foundation For Performance Incentives. Health Affairs, 24, (1): 174-179 Available at http://content.healthaffairs.org/cgi/content/abstract/24/1/174
[5] Cannon, M.F. (2006). Pay-for-Performance: Is Medicare a Good Candidate? Cato Institute Working Paper. Available at http://www.cato.org/pubs/wtpapers/cannon_whitepaper_2006.pdf
[5a] Minneapolis/St. Paul Business Journal (Nov 19, 2007).
[6] Bradley, E.H., et al. (2006). Hospital Quality for Acute Myocardial Infarction: Correlation Among Process Measures and Relationship With Short-term Mortality JAMA;296:72-78. Available at http://jama.ama-assn.org/cgi/content/abstract/296/1/72.
[7] Current Diagnostic Codes are Inadequate - WellnessWiki
[8] Reuters (Sep 20, 2006). Elevated cholesterol may benefit failing hearts.
[9] Gawande, A (2004). The Bell Curve. The New Yorker.
[10] Bush's Value-Driven Health Care Plan Gains Steam as More Employers Step Up (May 10, 2007)
[11] Donabedian, A. (2005). Evaluating the Quality of Medical Care. The Milbank Quarterly 83, 691-729.
[12] Use of claims data is inadequate - WellnessWiki
[13] HealthDay (July 5, 2006). Hospital Ratings Don't Fully Reflect Patient Outcomes.
[14] Healy, B. (Sep. 2006).Who Says What's Best? U.S. News and World Report.
[15] Need for specialy measures - WellnessWiki
[16] Wennberg, J.E., et al. (2007). Extending the P4P Agenda, Part 1: How Medicare Can Improve Patient Decision Making and Reduce Unnecessary Care. Health Affairs; 26(6):1564-74.
[17] Bridges To Excellence (2006). Prometheus White Paper - Paying for Excellence. Available at http://www.bridgestoexcellence.org/bte/wp_prometheus.htm