Monday, May 21, 2007

Health Care CEOs Pushing Fundamental Reform?

The Journal Sentinel ran an interesting "Crossroads" section yesterday on health care reform. The feature article was an excerpted transcript of the roundtable discussion of a panel that included top executives from the big health systems in the Milwaukee area and a couple of academics.

To be honest, I was a little taken aback by some of the points that I read. Not only were the academics pushing for fundamental health care reform that would result in restructuring the system and providing universal coverage, but a few of the execs did the same.

In the words of Froedtert Hospital CEO William Petasnick:
We've had 14 years of basically market-driven solutions. And market-driven solutions work up to a point, but I think the outgrowth of the failure of market-based solutions is . . . the 45 million Americans who are outside of the market.
Here's Columbia St. Mary's CEO Leo Brideau:
If you take a look at a dollar spent on health care premiums today, about 70 cents of that gets spent on health care. The other 30 cents of that goes to shareholders in those insurance companies or to administrative costs.

And it seems to me that when the government can manage the Medicare and Medicaid program for about 3% or 4% administrative costs, we ought to be asking insurance companies . . . why is it costing them 30%?
And Medical College of Wisconsin CEO T. Michael Bolger:
I think the health care system is broken in America. And . . . this country has not made a fundamental decision, and that is whether health care is a right of citizenship in a Jeffersonian democracy or whether it's a privilege for those who can afford to pay for it. . . .

Until we do answer that question, we will not be able to derive a health care system that is going to be fundamentally fair and equitable to the people of this country. I think that the current system of an employer-based reimbursement system in our country is unsustainable. . . .

The failure of market-based solutions, excess administrative costs, government efficiency, health care as a right, the need to end employer-based insurance -- I thought for a bit that I was reading some reincarnation of Pravda!

Part of this, of course, was just plain old finger pointing. Aside from a couple of swipes at drug companies and medical equipment manufacturers, the bulk of the target practice -- at least that of the execs -- was aimed at the insurance industry.

This is an interesting outcome considering most observers put the health system industry right alongside the insurance industry in the fight against fundamental reform. You can bet that just about any of the three proposals being considered by the legislature will have an opponent in both the Wisconsin Hospital Association and the Coalition for Sensible Health Care Solutions (an umbrella group for the insurance industry in the state).

I have little doubt that if the JS invited just insurance industry execs along with a couple of academics to the talk, the finger pointing would've been aimed at the big health systems that have been raking in near double-digit profit margins -- in spite of their non-profit status -- along with increasing their oligopoly status and, as a result, their negotiation position against payers through heightened consolidation in recent years.

As an article in the Denver Business Journal documented last August, all of the major players -- providers, insurers, Big Pharma, etc. -- are making lots of cash in our current system, and so all of them aren't going to jump at the chance to fundamentally change it.

Which brings us back to the question: So why did the provider industry execs not only point the finger elsewhere, but also sound like true reform proponents in their roundtable talk?

Part of me wants to believe that they do truly see the benefit in fundamental reform. Sure, they're making money now, but their industry is also under constant criticism, which inherently breeds instability. And getting the system as a whole on solid footing doesn't mean profits need to -- or even should -- evaporate.

But there also could be a subtle opposition within the verbal support for reform. After all, it's not a lack of public will that's preventing fundamental reform -- surveys show enormous support for doing away with our existing system. Rather, the same disease that's killing the system is killing reform: fragmentation.

The mere fact that there are a number of major players in the current system assures that any reform plan is not only going to be attacked from multiple sides, but also attacked from multiple sides by organized groups with plenty of special interest cash to do their convincing. It's easy enough for one segment to talk the talk of reform -- and save face in the process -- knowing that it would require far more than just talk to actually get anything done.

At one point in the roundtable talk, Aurora exec Sue Ela harked back to the early 1990s when special interests killed the Clinton health care reform plan, and she wondered if there would be enough political will to get something accomplished this time around.

She should really be asking the special interests that represent her organization and others at the table why so much political will is necessary when so much public will is already there.



Blogger Dad29 said...

And it seems to me that when the government can manage the Medicare and Medicaid program for about 3% or 4% administrative costs,...

I seriously doubt that the figure is actually 3 or 4%; or better put, perhaps that number excludes another set of numbers. The benchmark of transfer payments is usually around 25%--comparable with what's given as the "cost" of insurance companies.

Hospital execs don't like insurers; there's a continuing low-level shootin' war b/c insurers don't like to pay hospital invoices without an occasional audit.

Finally, the "45 million" number is a bit speculative. There's a range--with the low-end being 25 million and the high end around 50 million.

May 21, 2007  
Blogger Seth Zlotocha said...

The low administrative costs for Medicare/Medicaid comes from a number of studies, including this one from the New England Journal of Medicine (it puts Medicare at 3.8% and Medicaid at 6.8%). Even when the insurance industry tried to defend itself with an in-house analysis, the private insurance administrative costs were still 3 times the administrative costs of Medicare (5.2 percent for Medicare, 16.7 percent for private insurers).

And the animosity between providers and insurance companies is a little deeper than invoices. There's massive consolidation on the provider side that puts insurance companies at a significant disadvantage in negotiations; in fact, WPS filed a lawsuit last year against Aurora that argued that exact point. And, on the other hand, the multiple insurers creates more administrative headaches on the provider side, which is documented in this op-ed by a family practice doc from Illinois who has to hire 4 administrative workers just to handle claims from the over 300 different insurance plans his practice needs to handle.

And you can call it 25 million, 35 million, 45 million, or 50 million uninsured and it really wouldn't make much difference -- the fundamental point is that it's a big problem.

May 21, 2007  
Anonymous Anonymous said...

Health care is not a right, it is a personal responsibility. Where in the constitution does it say that health care is a right. Why is everything a right these days. So someone who eats excessively, or drinks excessively or smokes, they now have a right. Where is the personal responsibilty?

May 21, 2007  
Anonymous Anonymous said...

Seth, great posting! I think the part that really sums up the problem is the special interest money. I am 25 years old and I was in a barber shop the other week talking to an 83 year old WWII vet. He told me "America has the best democracy money can buy."
Special interest money is the bigggest killer of any meaningful reform. I truly believe that until we get publicly funded elections, our democracy will continue to struggle to represent the people. Business outspends labor 12:1 on campaign money. States like Arizona and Maine have been doing clean campagin/public funded elections and are having success getting those candidates elected.
If we truly want health care reform, education reform, energy reform, or any other major change, we have to first start with Campaign Finance reform. When we finally level the playing field between Special Interest and People Interest, we then have a chance.

May 21, 2007  
Blogger Seth Zlotocha said...

Anon 1,

K-12 education isn't in the constitution, either, but most consider it a right that should be protected for every citizen. And it's also worth noting that the constitution doesn't provide an exhaustive list of rights, but rather only those that require federal protection; the 9th amendment makes this clear.

And you shouldn't confuse health and health care. Health is a personal responsibility, but health care is not. Those two are undoubtedly related, but they're not the same.

In the end, I think everyone should have access to affordable health care, but it really isn't all that important to me if it's defined as an explicit right in the constitution (state or federal) or simply enshrined as puplic policy in our statutes (state or federal).

Anon 2,

I agree campaign finance reform is a top priority. The problem is that campaign finance reform, in itself, is both a top target of special interests and something that most elected officials are often not too keen on enacting (at least in any meaningful way). Nevertheless, you're definitely right that it's something worth fighting for -- but I'd hesitate to say it needs to be first. While the special interests will certainly line up against fundamental health care reform here in Wisconsin, the most practical problem preventing its passage is the GOP-controlled Assembly. If the Assembly flips in '08, fundamental health care reform will be passed in Wisconsin by 2010. If not, something might still be passed, but it won't be nearly as fundamental.

May 21, 2007  
Blogger CMCE Reformer said...

"Nevertheless, you're definitely right that it's something worth fighting for -- but I'd hesitate to say it needs to be first."

Seth, Anon 2 is correct. Without public funding of elections we may never see health care reform. Our politicians are on the take, though they vehemently deny it.

We need to vote out all of the Republicans and most of the Democrats and start over with a fresh group.

May 21, 2007  
Blogger Seth Zlotocha said...

I'm with you on the need for campaign finance reform, CMCE Reformer, but I think you're overstating the requirements for passing fundamental health care reform.

The Dem-controlled Senate is getting set to announce a unity plan sometime in the next 4-6 weeks that combines various aspects of the three major reform proposals (the Wisconsin Health Plan, the Wisconsin Health Care Partnership Plan, and the Health Security Act). Governor Doyle has indicated that he would sign any fundamental reform bill that makes it to his desk. That leaves the GOP-controlled Assembly as the only legislative roadblock to reform.

The special interests will be a another roadblock, but I don't see them being strong enough to flip any Dems that would be needed for a majority vote in the Senate. Where the special interests will focus their attention is on trying to sway public opinion through a concerted media campaign that tries to paint reform as socialist government-run health care. And this would happen regardless of campaign finance reform.

May 21, 2007  

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