Better More affordable Health Care
Colorado Democratic Leadership Council, New Democrat Update - July 2009
Colorado Democratic Leadership Council
New Democrat Update - July 2009
BETTER, MORE AFFORDABLE HEALTH CARE
Similar to what individuals and the private sector are experiencing, health care expenditures are increasingly eating up Colorado’s state budget. One national estimate projects that within 10 years, without reform, health care will consume one-half of state revenues and almost one-half of federal revenues.
The health care system is in slow-motion collapse. No one is happy with it - not doctors, not nurses, not hospital administrators, and surely not patients. In 1999, those in the middle class with private insurance paid about $1,543 for their share of premiums, if they had an employer-provided family policy. In 2008, they paid $3,354. In 1999, their employers contributed about $4,247 toward premiums for a family policy; in 2008, they contributed $9,325.
As much as one third of the nation’s health care spending is wasted on care that does nothing to improve patients’ health and sometimes even harms them. Tinkering around the edges of the system will not fix it - or slow down its growing impact on anyone’s budget. The problems are all too familiar.
First, its core purpose is to treat symptoms, not to sustain health. We spend most of our energy and money responding to illness, rather than preventing it. Additionally, because Colorado’s marketplace is so fragmented - with a striking lack of cooperation among medical practices, hospitals, and insurance companies - it produces an inconsistent level of care and generates enormous waste. Complex administrative processes consume 25-30 percent of all health-care dollars.
Finally, the fee-for-service payment system has perverse incentives. Providers make more money by performing more services. For example, if a hospital makes a mistake or omits something important and the patient has to be treated again, that hospital makes more money than it would have if the procedure had gone well.
Washington must help but Colorado and other states can do their part by reforming their health care insurance marketplaces. Costs can be curbed without sacrificing quality or restricting consumer choice. Because the state is such a large player, what it does (or does not do) will strongly influence the entire marketplace.
Better care at a better price is possible by encouraging state health plans to shift from fee-for-service payments for procedures to the prepayment of annual fees for patient care. Other payment approaches that reward meeting quality benchmarks and "bundle" reimbursement should be considered as well. For example, hospitals would have an incentive for high-quality outpatient care if the cost of the hospitalization included a period of time after the patient was released.
Additionally, health care is a team sport - integrated, comprehensive care is of higher quality and much more cost-effective. Professionally-led integrated delivery systems are able to provide the full continuum of patients’ needs, while having strong incentives to invest in primary and preventative care.
Specifically, Colorado should create a large statewide purchasing pool, including public and private employers to encompass a significant portion of the market. In the average state, Medicaid, the State Children’s Health Insurance Program, government employees and public sector retirees equal 21% of the market.
Wisconsin's insurance program for state employees offers an example of how states can use a purchasing pool to encourage prepayment policies and more price competition among health plans. It defines a basic benefit package, asks health plans to submit bids specifying the annual dollar amount they would charge for the package, and then ranks those bids.
The Wisconsin program uses price and quality measures to define three tiers. Plans in tier one, which are low in price and high in quality, cost the least for state employees. If they prefer a more expensive plan - because their family physician is not part of a tier-one plan, for instance - they are free to choose it and pay part of the difference. But the vast majority of members choose tier-one policies, and that creates an incentive for health plans to lower their prices for policyholders in that market. (Members can switch plans once a year.)
Wisconsin put this three-tier approach into effect in 2003. In Dane County, which includes Madison, the state employee plan covers 25-30 percent of the private (non-Medicare and Medicaid) market. By 2006, costs for individual and family plans had fallen 14 percent below the statewide average and 30 percent below the most expensive regions. Wisconsin's experience in Dane County has also shown that both patients and doctors can be satisfied in such a system, as long as they have choices.
When Colorado bids out this work, the proposal should also encourage medical service providers to form (if they have not already) integrated, high-performance, comprehensive-care systems to get the best combination of quality and price. Such systems will have the financial resources to create Electronic Health Records, which reduce both waste and error rates. They will also have a built-in incentive to prevent disease, because prevention brings down their overall costs. They will have both the resources and incentives to use best practices ("evidence-based standards of care," in industry lingo). Finally, they can use a more cost-effective mix of personnel - fewer doctors, more nurse practitioners, pharmacists, midwives, medical assistants, and nutritionists.
These systems also prevent more patients from falling through the cracks. In the fragmented world of most private practices, when a physician refers a patient to a specialist, there is often little or no coordination.
For patients with complex conditions, this can lead to problems. For instance, a specialist might provide a prescription that interacts badly with medications the patient is already on, because the specialist is unaware of the patient's medications and/or the patient has forgotten to tell him or her. These high-performance, comprehensive systems typically require that every member have a medical "home" - a physician who acts as his or her primary caregiver and is responsible for coordinating his or her care. Colorado could require that every person in the state purchasing pool have a medical home.
In addition, large, multi-specialty group practices - that produce quality, comprehensive care at a total per-person fee (premium and out-of-pocket) - cost considerably less than independent practices. Research at Dartmouth Medical School published last year found that if all doctors practiced to the standard of Intermountain Healthcare in Salt Lake City (which has been a consistent national high-quality provider for years), Medicare would cost 40 percent less.
Similarly, a Rand Corporation study published in 2006 has shown that Seattle's Group Health Cooperative (a prepaid group practice) delivered high-quality care for 28 percent less than the cost of traditional medicine. Other cost-effective examples include Denver Health, Kaiser Permanente in Colorado, the Mayo Clinic in Minnesota and Geisinger Health System in Pennsylvania, to name a few.
In many of these organizations, doctors work for fixed salaries, with bonuses based on their success in adhering to "best practices," avoiding errors and keeping patients healthy. These operations have a style of practice that better organizes and compensates doctors and emphasizes teamwork and excellence in outpatient care, which leads to less hospitalization.
Experience has revealed that if consumers are offered an option between a small, costly, uncoordinated practice and a less costly, organized delivery system, and are allowed to keep the full savings generated by their choice, a high percentage will choose the organized second system. When Stanford University employees were given this choice, 81 percent chose the coordinated delivery system.
Coloradans need higher quality, more affordable health care. Paying for results would focus health care professionals’ efforts on what works best for patients, while avoiding waste. The payment system could be a big help if it starts rewarding better, less expensive care - not more unnecessary services.
