The Public Option and Real Health Reform
Posted on May 29th, 2009 by Jason Rosenbaum in Solutions that Work
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If you haven't already, read Atul Gawande's piece on health reform in the New Yorker, largely centered around McAllen, Texas, the community in America with the highest health care costs. It's hard to quote the heart of the article, because it's so good, so I'll just quote the conclusion:
Something even more worrisome is going on as well. In the war over the culture of medicine—the war over whether our country’s anchor model will be Mayo or McAllen—the Mayo model is losing. In the sharpest economic downturn that our health system has faced in half a century, many people in medicine don’t see why they should do the hard work of organizing themselves in ways that reduce waste and improve quality if it means sacrificing revenue.
In El Paso, the for-profit health-care executive told me, a few leading physicians recently followed McAllen’s lead and opened their own centers for surgery and imaging. When I was in Tulsa a few months ago, a fellow-surgeon explained how he had made up for lost revenue by shifting his operations for well-insured patients to a specialty hospital that he partially owned while keeping his poor and uninsured patients at a nonprofit hospital in town. Even in Grand Junction, Michael Pramenko told me, “some of the doctors are beginning to complain about ‘leaving money on the table.’ ”
As America struggles to extend health-care coverage while curbing health-care costs, we face a decision that is more important than whether we have a public-insurance option, more important than whether we will have a single-payer system in the long run or a mixture of public and private insurance, as we do now. The decision is whether we are going to reward the leaders who are trying to build a new generation of Mayos and Grand Junctions. If we don’t, McAllen won’t be an outlier. It will be our future.
And he's right. If we don't get health care costs down, health reform will not work. People will still go bankrupt, we will still ration care based on ability to pay, and we will still have a health care crisis. And when you get down to it, health care costs are about how much and what medicine your doctor orders for you.
Conservatives will accuse those in favor of health reform of taking the easiest way out, in a sense. Health care costs are up? Ok, let's ration care and drive those costs down. But that's not what we're proposing. And, as Gawande so eloquently points out, driving down health care costs and increasing the quality of that care actually can be one and the same. So that's some pretty good news.
One thing about this article leaves me puzzled, though. Gawande seems to set up a conflict between advocacy for a public health insurance option and what he apparently considers "real" health care reform, which is setting up incentives for doctors to provide better care, not just more care. Maybe he's just reacting to the media coverage around health care reform, which has been largely centered around a public health insurance option. And maybe I'm biased, seeing as I've been working to shape that media battle. But I really don't think it's either/or. Actually, I think Gawande's point makes the public health insurance option more critical.
I agree with Gawande that we could end up with a public health insurance option that doesn't foster the right incentives to control costs, and that wouldn't be a big victory. But while Gawande is proposing some kind of outside board to control these incentives, I wonder if the public health insurance option isn't the place where these reforms are put into action.
Think about it: One advantage to a public health insurance option is that it is transparent. Private insurance doesn't tell you what they pay for services, how often these services are used, and whether these services have improved patient outcomes. A public health insurance option could make that data available and work with it to improve care and control costs. This data would put the public health insurance option in the perfect position to figure out why some places in America cost so much more and why their outcomes aren't any better, and how to fix that.
We must get costs down, that much is clear. We need the tools to do it. I'm pretty convinced the public health insurance option can be at least a crucial part of that toolset.
McAllen as our future model would set off further price hikes and break the current health system even further. I lived in El Paso most of my life and I can say I witnessed first hand some of these new business models taking shape. It is highly imperative that legislation is passed that would create a health care system that works for Americans.
Hi Jason,
One idea that has been alluded to by Professor Jacob Hacker and others, which is used in many other countries, and which could help solve the problem of the "level playing field," and which enables quick implementation of a payment system addressing the problems Atul Gawande notes is the all-payer approach. A government agency (or regional agencies) negotiates with each provider entity on behalf of all health plan payers to set rates for the coming year. So whether the patient is under Medicare, Aetna, the public plan, Medicaid, or pays out-of-pocket, the particular doctor or hospital charges the same rate. This is not only more fair and eliminates any cost-shifting to payers with less "clout," but it is also hugely more efficient for billing, the rate negotiation process, and for health plans as well.
Providers might be allowed to charge some separate administrative fee on top of the medical service charge to reflect billing volume with a particular payer, level of claim management interaction (e.g., the health plan's pre-authorization and case management requirements), and prompt payment discounts. But this would be a modest portion of the total provider charge, and could be relatively formulaic and routine once initially established.
The agency(ies) in charge of negotiations would operate somewhat like a public utility commission and review each provider's past record, cost structure, expansion plans, etc. against community needs (e.g., like the certificate of need process). Providers in a given location would be incented to compete with each other on quality and price as total organizations, rather than competing by discounting rates to one carrier but not another one (and effectively confusing plan enrollees). The approach would eliminate the provider network model, which aggravates patients and adds administrative complexity. Patients could go to any providers, but the plans would need to set up some out-of-pocket cost provisions to encourage use of lower cost providers who still meet certain quality standards. If desired, insurance plans could offer more expensive plans that cover some or all of the additional expenses if the patient wants to use a higher cost provider. Quality data would be published on the internet for all to see.
Finally, this approach would generate uniform cost data by provider for a national database to evaluate effectiveness, cost trends, and other analytical studies.
The Senate and House Committees may be too far along to still consider this, but if so, it might be something that could be phased in later on, if the initial reformed structure does not succeed in controlling costs.