LMS President’s Message – July 2018

LMS President’s Message, July 2018
Tuyen T. Tran, M.D., MBA

There is tremendous discussion regarding our current healthcare system. We all agree that the system is broken. It’s when we examine the proposed resolutions that the discussion becomes rather contentious. Specifically, there are many who want to see the US transition to a single-payer health care system. Opponents argue that a single-payer system will threaten innovation and competition. How will we finance this endeavor? If patient accountability is not included, I worry that the system will fail. Finally, why must we choose a single-payer system or not? Why can we not compromise with a plan that incorporates the best of our proposals?

The concept of a single-payer health care system dates to 1945 when President Harry Truman addressed Congress with a request for a national health care system. The American Medical Association opposed the idea so the concept was dropped. In 1965, the US revived the idea when it established Medicare and Medicaid, essentially a single-payer system for certain groups – senior citizens, young children and the poor. In 1993, Hillary Clinton led the crafting of the Health Security Act, also known as “Hillarycare.” The bill mandated enrollment in government-approved health plans. Additionally, the bill also created a National Health Board, a seven-member panel responsible for determining “an item or service that is not medically necessary or appropriate” [Section 1141(a)(1)]. The bill died before the 1994’s midterm congressional elections.

A single-payer health care system is where a single entity, such as the government (but not always), finances the healthcare and offers core coverage to all its residents regardless of income, occupation, or health status. A single-payer health care system will save the US tremendously by cutting administrative billing costs and reducing pharmaceutical prices. It will remove the middlemen (private insurance companies) and untether healthcare coverage from our jobs. Americans will enjoy economic security from catastrophes associated with ill health. More importantly, proponents argue that the US spends more per capita for healthcare, about $9,024 in 2015 (see Graph 1 for comparisons), than any other country.1 But, it does not appear that we are necessarily receiving better quality care (see Graph 2). Despite the tremendous investment in our healthcare, Americans’ life expectancy is only 79.3 years, the lowest rate among other advanced economies such as Switzerland, Australia, and Canada.

 

Graph 1. Countries with largest per capita healthcare expenditures, 2015

 

Graph 2. Number of deaths per 100,000 from preventable diseases or complications had adequate healthcare been available, in 2013

Opponents of the single-payer system express significant reservations about transferring private decisions about healthcare to a taxpayer-funded bureaucracy. They argue that the administrative savings by removing the administrative costs related to the insurance companies, regardless of methodology to calculate the projections, is naïve. In the current fee-for-service model of provider reimbursement, the government will continue to have claims forms, process these forms, assess for appropriateness, question the coding, and reimburse accordingly. If we look at other government run enterprises, such as the US Postal Service, the Department of Motor Vehicles, or the VA Medical Centers, there is little evidence that the government is very efficient at completing administrative tasks.

In 2010, the state legislature of Vermont passed a bill to implement a single-payer healthcare system. One of the major architects of the Vermont’s Green Mountain (single-payer) Healthcare Plan was Jonathan Gruber whose report assured legislators that the plan would save Vermont money. By 2014, the program was disbanded due to the inability to reconcile the tremendous increase in taxes to support it, and the concern of how much the increase would occur every year.

Healthcare costs are determined by the number of services rendered times the cost of each service. Although the government can set prices for each service, the demand (number of services requested) is more difficult to control short of rationing, which translates to waiting lists. In the case of the VA, essentially a single-payer plan run by the government, Washington controlled both the supply and demand. Dependent upon Congress’ allocated budget, there were insufficient providers / equipment to serve our Veterans. The result was that there was a waiting list. As a matter of fact, if we examine any of the other single-payer models such as those in England or Canada, waiting lists are often the cited negative consequences. Do we want the government to determine the caps to healthcare spending based upon “global budgets?”

What about the consequences of controlling the costs, decreased reimbursement to hospitals and physicians? The government enacted the Balanced Budget Act of 1997 which required health care inflation to rise no faster than the GDP. Essentially, reimbursements to physicians were reduced proportionately through the Sustainable Growth Rate (SGR) calculation. Fortunately, these reductions were not always applied due to the strong advocacy of our medical societies. Additionally, private insurers entered the market, offering more competitive reimbursements. The outcome was that hospitals and physicians preferred these privately insured patients and the government-insured patients ended up on waiting lists. Look at the differences in care provided to patients on Medicaid.

The US healthcare system excels in providing acute care for patients with life-threatening conditions such as heart attack or strokes. We also excel in five-year survival rate for breast cancer (89.3% compared to OECD average of 83.5%) and colorectal cancer (64.5% compared to OECD average of 59.9%) for years 2004-2009.1 The explanation is that advances in pharmaceuticals, medical equipment and many surgical techniques originate from the US. The free market incentivizes American entrepreneurs and the rest of the world relies upon our advances. If you take away that potential profit, innovation will cease.

Very intelligent people have diligently attempted to calculate projected costs of single-payer implementation and failed. The problem is that none of these calculations involve patient responsibilities. I believe patients are very capable of managing their health if they had accountability. As a doctor, I know that the patient’s lifestyle choices (smoking, exercise, healthy diet, and compliance with medical prescriptions) contribute substantially to their disease outcomes. I also believe that patients can manage their own healthcare costs, if they were given a role.   For example, people do not drive recklessly because they do not want to be in an accident which can jeopardize their life (or others), get a speeding ticket which will raise their insurance premiums, or damage their car which will result in costs to repair the vehicle. If patients can see the costs associated with their behaviors, many poor habits may stop. I want to convey this using an all you can eat buffet as an analogy. It is common to see a person fill their plate with food; but, the person rarely finishes half of the food. Surprisingly, that same individual will return to the buffet for a second plate, also heaped full of food. Again, only half of the food is eaten. And it is not infrequent that the person will return for dessert, often multiple selections. Observe that same individual at a cafeteria and the person will only select what he/she will eat. This, in my humble opinion, is a major root cause of our healthcare inflation.

I propose that instead of choosing a single-payer system or not, we incorporate the best of each system. First, we want everyone to have access to healthcare. This is very different than giving everyone insurance! Second, we want to control the unsustainable growth of healthcare costs. Third, we also want the best quality healthcare.

Healthcare originally was a market very similar to everything else (restaurant, furniture, electronics, etc.) – one paid out-of-pocket for the items/services desired. For large purchases, such as a car or house, more planning and saving were required. When another entity, such as an insurance company or the government, assumes the payment for the services/commodities, two new factors are introduced into the system. First, if a party other than the patient or doctor makes healthcare decisions, whose best interest was served by the decisions? Second, what value-added did the third party (insurance company or government) offer the patient? One can argue that without insurance, it would be difficult to afford the healthcare. And in certain situations, the healthcare cost could easily lead to bankruptcy.

We know that Americans spent about $9,000 per person in 2015. On average, the other developed nations spent about $5,000. What if the government demanded that every citizen contribute to their Health Savings Account (HSA) an amount equal to $5,000 annually. For the financially challenged, the government will subsidize an appropriate portion to the patient’s HSA each year.   The HSA belongs to the patient; but, the funds can only be used to pay for healthcare. Any unused portion at the end of the year will remain in the account for future use. And people can donate funds from their account to others; but, again the funds can only be used for healthcare. People will be responsible for the purchasing of their healthcare. Like other aspects of life, each person’s duty is to responsibly shop. The healthcare “products” will be much simpler without the complicated cost-shifting finances associated with insurances. For once, we will be able to see the actual cost of healthcare. (Currently, it is almost impossible to obtain an itemized true cost of any medical service or product.) With these funds, people will have access to healthcare and the freedom of choice. Without the complex middlemen’s contracts, rules, and regulation, the healthcare market forces will naturally find the appropriate intersection of supply and demand – cost.

My proposal is not to provide insurance; but, provide everyone the ability to access healthcare! Simplify the equation by removing insurances and government regulations. Using this model, we can accomplish the goal of providing healthcare to everyone without the complications associated with single-payer models. The model will also allow market forces to function and preserve technological innovation. By eliminating the middlemen (insurance and/or government), the administrative costs will truly decline. Per LEAN Manufacturing principles, the third-party payors (insurances and government) do not add value; thus, they were wasteful. Without burdensome forms, documentation rules, audits, Prior Authorization, credentialing, and regulatory mandates, many of the physician practices and hospitals will be simpler and cheaper to operate. And most importantly, patients will participate in the managing of their healthcare.   The healthcare relationship will be restored to patient and doctor.

Government and insurers have conflicting agendas regarding treatment; but, the patient and doctor rarely do. It’s always about the patient!

References

1 http://www.latimes.com/nation/la-na-healthcare-comparison-20170715-htmlstory.html
Retrieved June 14, 2018.

 

 

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