The 85% Solution and Health Costs
Reform may be bogging down over cost issues.
Blue Dogs and Republicans argue that the cost of reform is too high. Attempting to predict what large expenditures set off fiscal responsibility alarms is chancy (Financial bailout? Iraq war? Health coverage for all?). Public money should be spent wisely, but outrage at the scale of the thing — about $100 billion per year to bring equity and sense to a system that cost $2.4 trillion in 2008, and is projected to cost $4.4 trillion by 2018 — doesn’t scan well. Time lines have been stretched. The level of political energy has ratcheted up, with the President fully engaged, and business and the health industry more publicly pushing back.
It may be time to think back to a catch-phrase of the last health reform period. It was common at that time for objectors to assert that reformers were applying a 100% solution to a 15% problem — that is, that comprehensive reform was unnecessary to address a problem affecting “only” the 15% of the population without health coverage. There are glimmers of a similar argument this time, with objectors asking whether it is worth it for the haves (taxpayers) to provide for the have-nots (the uninsured). This argument would be flawed definitionally, as plenty of the working poor without insurance pay a higher total tax rate than better-off insured people. More significantly, the message should be rejected on its merits: this round of reform is necessary for everyone, and not just the uninsured.
So, what’s the 85% solution? The figure 85% pops up in a couple of interesting places in the health reform debate. First, a NYT/CBS poll last month found that about 85% of Americans believe that the American health system needs to be “fundamentally changed or completely rebuilt,” numbers that match well with an EBRI Issue Brief published earlier this month. This number demonstrates the inclination of the insured to support reform. After all, the other place the figure 85% pops up in insurance coverage rates — 85% of Americans are insured, and 85% of Americans recently told Gallup that their own health care as “excellent” or “good.” In the sharpening public debate, progressives should keep this group in focus. They’re empathetic toward the uninsured, but that empathy is doing too much work. They should be engaged, in addition, by the fact that health reform is in their direct interest. They need reform for at least three reasons: our system is fiscally unsustainable and will run off the rails in coming years without comprehensive reform; our system encourages procedure-driven medical practice that serves patients poorly, and even harms them; and the basis for competition in the private insurance market is less on quality and service, and more on seeking out “good risks,” driving into public programs or uninsurance those who most need care, inefficiently increasing taxes or health insurance premiums for the 85%. Those rallying support for reform should pay heed to these issues.
Attention to an 85% solution is not in tension with covering the 15%. Uninsurance kills people, and extending coverage to all is critical. Most Americans clearly care about universal coverage, but the negative blitz will be intense, and it will be helpful to also emphasize that reform helps the 85% as well as the 15%. Benefit to the 85% sometimes gets underplayed, allowing nay-sayers to create a divisive us-them dynamic. Today’s reform efforts are necessary because the system is broken with respect to all participants.
All of the health reform draft bills address the key issues of cost, practice reform, and risk selection to greater or lesser degrees. They could, of course, be improved in these areas. But too often, the debate tends to be reported as though sponsors are advocates only for the uninsured, while Blue Dogs and Republicans fight a rear-guard action to protect those with insurance. If the struggle is so mischaracterized, reform is unlikely to pass. We need reform that contains cost for all, restores incentives to practice humane medicine, and reduces as much as possible insurers’ incentives to avoid covering those most in need of care. Below are some quick thoughts on comparative effectiveness analysis as cost containment, in this spirit. I hope to touch, in coming days, on the need for reimbursement reform and for an end to insurance competition on the basis of risk.
Cost containment: Health Technology Assessment
There’s been a lot of talk about how to “bend the curve” of health care cost projections. Containing cost increases helps everyone, of course. It would be tragic indeed for Congress to expand coverage to all only to find in a few years that we can’t sustain the new program. One important, and controversial, aspect of cost containment is comparative effectiveness research (CER). CER is often demonized as rationing. The Institute of Medicine’s recent work in this area defines this hobgoblin, however, in terms that seem positively pro-patient:
[CER] is the generation and synthesis of evidence that compares the benefits and harms of alternative methods to prevent, diagnose, treat, and monitor a clinical condition or to improve the delivery of care. The purpose of CER is to assist consumers, clinicians, purchasers, and policy makers to make informed decisions that will improve health care at both the individual and population levels.
Shouldn’t we care about whether expensive new devices and procedures improve health? The scare tactics should be taken on in two ways. First, as the IOM makes clear, most CER is directed toward choosing the clinically appropriate alternative. A second, rhetorically more difficult task, is to point out (as have both my colleague Frank Pasquale and economist Uwe Reinhardt ) that “rationing” is not a swear word, but rather a description of a method for allocating scarce resources. The choice isn’t whether rationing to some degree will occur, but rather whether it will be done through a transparent process rather than on the basis of ability to pay — or on the basis of an insurer’s preference.
That good health technology assessment should be a concern for the 85% was made clear by David Leonhardt’s recent NYT piece on slow-growing, early stage prostate cancer. Leonhardt describes the five forms of treatment commonly prescribed, ranging from “watchful waiting” to proton radiation therapy. The price, he reports, ranges from “a few thousand dollars” to over $100,000. Which works best? No one knows. Remember — the question posed by the article isn’t which produces the most QALYs per unit cost; rather, it reveals that there is no real scientific basis to choose among the options. Shouldn’t we encourage research to allow us, and our doctors, to choose wisely?
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Professor Jacobi,
Thank you for your thoughtful insights regarding the status of the Health Care Reform debate.
It is profoundly sad is that there is a centrist, bi-partisan approach to health care reform, which could finally and equitably address the issue of finding the tax revenue to pay for providing subsidies to the un/under insured, that has been (for the time being) rejected at the expense of more class warfare oriented solutions.
Senator Baucus and Grassley have displayed courage to challenge our irrational tax policy relating to employee health benefits (and also systemic abuse by hospitals of their not-for profit hospital tax status). Their adoption of the concept to limit the tax exemption for health insurance would create a more fair and equitable way for society to subsidize coverage for those groups that currently do not receive subsidization.
Their proposal would limit the tax exemption to a value associated with one of the best health plans in the federal employees health plan. Those plans have a family value of $14,000. Thus, to the extent a business or collective bargaining agreement provides policies in excess of that amount, that proportion of the benefit in excess of the $14k gets taxed. Thus, the government would gain new revenue that Congress can use to provide subsidies to those individuals/groups that need it.
The rejection by the left committee chairs in the House of the Baucus and Grassley approach, and President O’bama’s modified support of a wealth surcharge (last night), is a disgraceful attempt to protect the outrageously generous health benefits that many of the unionized and executive class possess. Why should anyone’s tax dollars be spent to subsidize the dysfunctional collectively bargained benefit levels between labor and management? Why should the small business owner in Newark subsidize health benefit levels that exceed $25,000 when they can’t afford to pay for health insurance for their employees….employees who are struggling to keep it all together.
Instead, the Unions cried foul and put pressure on their Democrats. The Democrats, now including the President, have opted to play class warfare chip with the presumption that attacking the “rich” is an easy way to deflect us from the hard facts. It simply isn’t right that our tax code has virtually no bounds in how much corporations and unions can subsidize health benefits. More than just being really bad policy, the revenue that can be gained from fixing this problem is enough to close the gap on finding a bi-partisan solution to paying for “reform.”
The next issue that I respectfully suggest you are glossing over is the issue of a public plan option. What problem does a public plan option seek to solve? More specifically, why is the public plan alternative required to solve the issue of the uninsured and cost-containment?
The best arguments to date have attempted to say that we need a government run option to keep the insurers honest? What? Do we need a government run farms, oil refineries, steel plants (oh….we tried that once…), construction companies to keep all the other essential goods and services that are provided in our market oriented society?
The insurance industry has already conceded that a huge chunk of its business will shift to an almost utility like structure, by accepting greater standardization, the elimination of underwriting (assuming the risk pool balances out by requiring everyone gets in), and regulating profits. What else do people want?
What makes health care different? Is it an attempt to assume that we have consensus that that it somehow access to health care is a right, and more specifically that all people are entitled to the same quantity of health care? Why can’t we agree to disagree on the whether health care is a right or a privilege and congratulate each other on the fact that a majority of Americans and members of Congress agree that is unacceptable for the United States to have uninsured citizens (I’m not yet sure on the non-citizens…). Let’s all declare victory and move on with the consensus that we should provide sliding scale subsidies to new classes of individuals so they can have access to quality affordable health insurance, regardless of health condition, and stop paying subsidies for coverage that exceeds a reasonable level.
Painting the center and more conservative (not including the right wing nut bags) as obstructionist is just not fair. President O’bama should embrace his more centrist elements in the party and the handful of Republicans to give him the political cover to get a deal that will root strongly. The vote counters are now determining whether to ram through a highly partisan approach using the Speaker of the House to force a vote to the floor (by discharging the Commerce committee) and using reconciliation in the Senate (only need 51 votes). Someone needs to step back and say is getting 85% of what I want (and functionally almost 100% of my objectives) at the risk of creating a new set of policies that will be a source of fundamental societal division for years to come. The Blue Dog revolt shouldn’t come as a surprise. The Democrat majority is not a big labor, leftist mandate. That is just fact.
Let’s get people covered and then begin the hard work of reforming our health care system (or non-system). It is a giant mess, as you articulate above. No one actor, including individuals are without major elements to blame. It is here where the REALLY hard work begins.
It is good to interact with you again, albeit virtually…and through a blog.
I just figured the the Seton Hall Health Law and Policy Blog could benefit from some input from its wayward son (one of the program’s originals), who dared to care about health care from a more conservative perspective.
Thanks for your interesting comment, David.
I think we can agree that government subsidies (including tax subsidies) shouldn’t flow disproportionately to the wealthy. I suspect that the skepticism regarding the elimination/limitation of the exclusion of health benefits from computation of income flows at least in part from suspicion that the limitation is intended to be coupled with demand-side pressure to move people to more restrictive plans. That is, the devil is in the details; where will the deductibility limit end up? Where will it be next year? “Leveling the playing field” is a famously chimerical concept. We could discuss the wisdom of using the tax system as a way to move down the richness of plans (for all, or for those most susceptible to fiscal pressure at that price point) — a longer discussion for another day, perhaps. But, in concept, I agree with your suggestion that fixing the subsidy systems to benefit those most in need is a good idea. Has the debate in this regard been measured and straight-forward? No – but is tax change ever discussed in those terms?
On the public plan option. My concern, as I’ve described previously, is on a particular aspect of underwriting/rating: the treatment of people with chronic conditions, who are predictably expensive. I understand (as you clearly do) that many insurers have created innovative programs to manage chronic illness. The payment for much of privately offered health coverage does, however, contain a structural misalignment between insurers’ interests and society’s interests in encouraging coverage of those most in need of care. The problem is risk selection. Harold Luft’s recent work describes this concern in some detail. It is easy to create guaranteed issue/renewal requirements, but harder to create an environment in which plans have an incentive to welcome people with chronic illness, and to build systems for their benefit. Notice, I’m not saying that no plans do – some do a good job. I’m saying that there is a misalignment between corporate mission and social goal. Risk adjustment is a partial solution, of course, and more work will be done in that regard. So, one way to look at the “benchmarking” arguments for public plans is to regard them as having public missions, and as capable of creating structures for the benefit of chronic care management that we can compare with the efforts of private plans. In theory, this benchmark for attention to chronic care management will allow for regulatory and/or market attention to be paid to private plan outliers.
Finally, I’m heartened that the (important) differences between our views notwithstanding, we’re agreeing on the central point: we must get everyone covered. As for “political courage,” I’m always leery of this concept. My guy pushing a controversial position is always courageous, and the other guy’s is always misguided – or worse. At the level of policy detail your comment touches on, there is need for more discussion. For example, cost containment should not be a partisan issue. We should all want the new system to contain costs. But the perfect can’t be the enemy….
Thanks again for your thoughts.