Challenges Facing Healthcare Reform

Report by Jim Nathan
President of Lee Memorial Health System

“30% Uninsured in Lee County”

In the fall of 2000, I served on a panel for a program in Cape Coral sponsored by the Cape Coral Chamber of Commerce.  The focus was on health care.  There were seven panelists including three elected officials at the state level.  Each panelist was given an opportunity to share health care issues and concerns through their own eyes.  After a brief break we returned to the tiered auditorium for a Q&A session.

Virtually every head and eye became fixated on the three elected officials as they were rapidly bombarded by a series of questions which were more like personal observations, requests and demands such as:

• “You need to make cost of insurance more affordable!”
• “You need to make the cost of health care more affordable!”
• “You need to help me get the drugs I need!”
• “How do I get access to care for my spouse who is seriously ill?

The political leaders responded wisely:

• “That sounds like a federal not a state issue.”
• “I do not serve on a health care committee but if something comes up for debate on the floor, I will welcome your input.”
• “Please send a note to my office.  I will have someone look into it.”

Then a lady in the front row asked, “Why is no one mentioning universal coverage?”  The audience response was instant with some of the same people making demands on our elected officials rising to their feet and yelling, “We don’t need any of that damn Hillary Care!”  How interesting it was for me to observe the demands on government by the same people who were already mostly on a government health plan (Medicare) and yet opposed to exploring options to expand coverage.

This chamber program occurred roughly six years after the failure of large scale health reform at the national level.  It would be another eight years before it would even remotely be politically acceptable to discuss serious comprehensive reform of the delivery and financing of health care for our nation.

As recently as 2004, a key Florida political figure shared with me, “Any politician who chooses health care for his or her mantra is a damn fool; and, by the way, you health care people just don’t get it … the health insurance companies pay us a lot more for our campaigns than you ever will!”

Now, once again our nation finds itself torn, confused and angry over the entire health care debate.  We have become a sound bite nation that wants simple answers to complex problems.  Health care financing and delivery certainly fits at the highest degree of complexity because of the economic, political, social, philosophical, ethical, personal, and cultural issues that intertwine with the complexity of the science and the art of medicine.

When our Board met in June, I thought it was important to review the key elements that were emerging as possible reform consensus and possible financing mechanisms.  The goal in late June was to have plans in place by mid to late July.  While that was only two months ago, it is almost light years ago in the “life” of health reform.  The national debates have intensified making the emotions of that forum in Cape Coral look tame and the shoe throwing incident that President Bush encountered last year in Iraq as a yawning moment.  Education and information have ceded to misinformation and name calling.  Thee are more and more individuals questioning whether reform is necessary and even wanting to put it on hold for a while.

Regardless of any of our personal political and philosophical beliefs, it is important to step back and remind ourselves why there is a push for and need for comprehensive health reform.

Bankruptcy of Medicare

Medicare is funded through payroll taxes.  When it was in its early days, there were at least four to five workers to help fund for one Medicare eligible retiree.  Prior to the recent economic decline and America’s rapid movement toward 10% unemployed, Medicare’s funding demise was already predicted for bankruptcy in 2017.  That is almost tomorrow in the reality of finding solutions and funding.  Medicare, which presently accounts for 14% of the federal budget, is expected to go from 40 million to 78 million enrollees by 2031.

MedPAC, the national advisory board for Medicare payments, has been working to identify ways to stop this rapid demise.  MedPAC has proposed such concepts as improving funding for primary care; altering economic incentives so that providers of care would find models of collaboration designed to improve clinical outcomes while reducing unnecessary tests, procedures and readmissions; reducing payments to insurance companies exceeding usual and customary costs for Medicare in each region of the US; and strengthening negotiations for major medical supplies and drugs utilized by Medicare eligible individuals.

MedPAC recommendations have been incorporated in some ways into many health reform initiatives; however, lost in a lot of the rhetoric is that Medicare is going bankrupt at a faster pace than previously anticipated due to the current loss of jobs and economic decline.  If nothing else happens, Medicare must have revisions and what happens with Medicare is often a driver of change for most major health insurers.  Absent incentive changes, improved negotiations for drugs and medical supplies, and a reduction in Medicare payments to insurance companies, the only solution is to reduce payments to physicians, hospitals, nursing homes, rehab facilities, etc., … the people who actually provide the care.

Of note, the 2003 federal revisions to Medicare hastened the demise of Medicare as they did the following without any new funding source:

• Expanded drug coverage for seniors with a stipulation that the feds would not negotiate drug pricing;
• Increased payments to insurance companies over and above usual and customary fees in each market resulting in an average of paying 12% more than regular Medicare for the Medicare Advantage program in an effort to privatize the Medicare program; and
• Established a structured reduction in Medicare payments to physicians for nearly a decade.

Physician Payment Reform

Since the passage of Medicare reforms in 2003, there has been a statutory formula requiring annual reduction in physician reimbursement.  The formula has been adjusted every year because it is not realistic; however, the federal law has not been changed.  Absent a short term or long term fix, the average reimbursement to physicians through Medicare is scheduled by federal law to decline by 20.5% in January.  Fixing this complex issue will cost many billions of dollars; not fixing it will drive physicians away from treating Medicare patients and will impact future decisions by individuals choosing to spend many years in training to become a physician.  The next paragraph identifies a possible funding source to help with the physician payment issue.

Medicare Advantage and Payments to Major Insurance Companies

One of the most sought after current opportunities for government savings to help fund for some of our health financing challenges is to reduce payments to insurance companies for Medicare Advantage.  However, for the past couple years these same insurance companies have recognized this possibility and have worked hard to increase the number of Medicare Advantage enrollees.  Virtually overnight, there are millions of Medicare eligible individuals who are now utilizing the benefits of Medicare Advantage gained through the feds higher payments and are quick to lobby politicians, “Don’t take my Medicare Advantage program away from me!”

Insurance Reform is Essential

Insurance companies years ago moved away from “community rating” where actuaries would estimate the cost of health insurance based on the costs of care and the disease prevalence in a given community to determine premiums.  Community rating gave way to “experience rating” where a small employer or individual with a major health issue could dramatically impact the cost of an insurance policy and in fact become uninsurable due to cost of the policy.  Since this switch to experience rated insurance pricing, we have faced the rapid demise of small employer sponsored health insurance and few individuals being able to afford an insurance policy.  As recently as 1993, 61 percent of small employers were still providing health insurance for their employees; today, only 38 percent of small businesses offer health insurance.

In the early stages of the current reform debates, the major health insurance companies offered to modify their experience rating policies to some degree … reports vary as to what they would cover … in return for a massive expansion of universal coverage and no new public (governmental) plan.  Now that the insurance companies appear to be leaders in redefining the health reform debate, it appears less likely that experience rating will be modified.  In my opinion it is an essential part of any health reform effort.

In addition, requiring “guaranteed issue” of insurance coverage to those with serious health problems as pre-existing conditions, or those who may have exceeded payout limits, coupled with community rating in a large enough pool to spread the risk and associated costs, will allow access to more affordable coverage to many who are now denied.

The reality of the Uninsured and their Impact on Everyone Else

Very few politicians today would advocate for inclusion of undocumented immigrants in any type of health reform proposal.  There are no political polls showing support for this population.  However, the reality is that those who are insured … primarily individual policy holders and employer sponsored health plans … already pay for undocumented immigrants since if they present in a hospital emergency room and are in need of emergency stabilizing care, they will receive it.  Such care is not free and those who want to pretend it is not already a cost to our society are not willing to accept this simple fact.

But it is not just the undocumented immigrants issue, it is so much more.  The uninsured are not just undocumented immigrants and not just the unemployed poor.  They are people with jobs where no insurance is provided or where they cannot afford the insurance offered.  In fact, almost a quarter of the nation’s non-elderly are uninsured.

The “hidden tax” aspect of how we pay for the uninsured and underinsured is a reality of our nation’s principal financing being employer sponsored.  Each year as more employers reduce health benefits or drop them completely, more people become uninsured.   This causes those who remain insured or are providing health insurance to employees to pick up a larger and larger hidden tax.

And equally important as a “hidden tax” or “cost shift” to that shrinking few with health insurance is the unreimbursed cost of both Medicaid and Medicare.  Government funded health programs do not now cover the actual real costs of care for the patients they serve and these unreimbursed costs now exceed the costs of charity care in our Lee County area.

In our community with 13.2% unemployed and an economy based on small employers, we are in excess of 30% uninsured for those residents under the age of 65.  In 2007, 35% of Lee Memorial Health System patients paid for 100% of the shortfall from Medicare, Medicaid, uninsured and underinsured.  In 2008, 30% paid for these “hidden taxes” and in 2009 thus far it is 28%.  This is not unique to Lee County but with our demographics we are a major trend setter!

Chronic Disease Management

Roughly half of all Americans suffer from at least one chronic disease.  Nearly three quarters of our health costs go to five chronic conditions:

• Diabetes
• Congestive heart failure
• Coronary artery disease
• Asthma
• Depression

While one can have any of these chronic conditions or even all of them and not be obese, obesity is rampant in our nation.  We have become the fattest nation in the world.  Obesity heavily impacts all five of these chronic diseases.  As recently as 1990, there were no states in the US with a prevalence of obesity greater than 15% and only ten states exceeded 10%.  By 2007, only one state, Colorado, was under 20% while 30 states have 25% of the adult population now obese.

Health care providers are rarely compensated to help manage chronic diseases beyond episodic or crisis management.  Many individuals choose to let their potential health challenges go well beyond an easy to manage state.  Many uninsured and underinsured are often forced to seek care only at a crisis stage which may be life threatening and very expensive.  Guess who ultimately pays for this lack of teamwork in managing the high costs of chronic diseases?  Absent redirecting payment formulas and finding ways of changing our national culture, chronic disease expenses will far outdistance the overall current costs of care with our aging and fattening society.

The “Public Option” versus “Co-ops”

A government run public (non-Medicare) program to compete with private insurance has been a dividing point politically since the reform discussions began to emerge.  In fact, to try to find a bi-partisan compromise, this option appears to be virtually unacceptable.  Even many who see its value are concerned that if too many patients switch from commercial insurance where the “hidden tax” is presently being subsidized, then the government run plan will underpay doctors, hospitals and other providers just as both Medicaid and Medicare presently do.  Hence, the not-for-profit co-op option has begun to emerge as a “politically acceptable” option.  Unfortunately, while the insurance companies might like this much better than competing with the public option and it may sound better politically, the reality is they will be small with limited leverage to negotiate the best rates and can easily become the place of last resort for patients the big insurance companies do not want.  We will hear a lot more about co-ops versus the public option in the next few weeks!

The Death Panels!

This summary which clearly does not cover every key issue would not be complete without some reference to the supercharged issue of “death panels.”  This issue has had so much emotion when it was intended to be just the opposite … a calming “time out” to consider end-of-life planning on behalf of the patient.  Less than one third of adults have a living will.  Presently, Medicare does not pay for end-of-life consultation.  Some Medicare Advantage plans do.  The proposal was to make such consultations easily available for Medicare patients and their families.  Palliative care is an emerging service through hospice and hospitals and other programs providing end-of-life assistance and achieving dignity based on the wishes of the patient.  This consultative reimbursement concept was never intended to be a panel making life or death decisions.  This type of emotional rhetoric has damaged a vital dialogue with the American people.

Will History Repeat Itself

Health reform has died before due to many factors such as:

• complexity of the issues;
• ideological differences;
• the lobbying strength of special interest groups; and
• changes in the power and roles of the president & Congress over the years.

We are once again at the precipice of will we or won’t we?  Doing nothing because we feel we are happy with what we have does not acknowledge that what we think we have (such as Medicare or affordable health insurance) will change dramatically even without government intervention or new statutes.

The next few months will determine if once again we will go “underground” for another 15 years before there is the courage to have a major discussion on this supercharged, complex issue.  Thirty second sound bites and scaremongering won’t help us determine what is best for our nation.  Honest, open, educated dialogue is essential.  Partisanship rancor will not result in an effective outcome for our nation’s health.

Jim Nathan
President of Lee Memorial Health Systems