Karen Davis

Reality-Based Health Care for Americans, Part I

VTR Date: June 4, 2010

GUEST: Dr. Karen Davis


GUEST: Dr. Karen Davis
AIR DATE: 10/24/09

I’m Richard Heffner, your host on The Open Mind.

And this is the first of two programs on reality-based health care for Americans that we record early in October, 2009 … even as health care reform measures continue to wend their way through the Congress with what many fear as considerably less than all deliberate speed.

Indeed, one wonders what it is about us, about our political system, about our ultimate concern – or lack of it – for the public interest that finds America still facing a higher cost of health care than anywhere else in the world, with US health care at more than twice the per-person cost in other major industrialized countries … and still with scores of millions of Americans nevertheless uninsured or underinsured?

In a Congressional presentation just a week ago, today’s Open Mind guest, marshalling facts and figures as she always does, dramatically pointed out that failure to act in this crucial area has had severe long-term consequences.

“On the three major occasions in the last thirty … fifty years, Presidents Nixon, Carter and Clinton all proposed comprehensive health reform,” she testified.

And had they succeeded, by now the savings to government budgets, to employers, and to households – we ourselves – would have been in the trillions and trillions of dollars.

Presumably, too, value added to our personal and collective health would have been immeasurable.

Now my guest, of course, isn’t new to facts and figures relating to reality-based health care matters.

President of the Commonwealth Fund, a major philanthropy engaged in research on health and social issues, Dr. Karen Davis is a distinguished economist with a long career in public policy research, having served earlier as Chair of the Health Policy Department at the Johns Hopkins School of Public Health and as Deputy Assistant Secretary in the United States Department of Health and Human Services.

Now, Dr. Davis first joined me here a decade ago, setting forth then what she called “A 20/20 Vision for Healthcare” – a plan I dare say now almost at the 2010 midpoint remains quite similar to what she recently called for in Washington as forging a health reform consensus. And Karen I wonder whether this notion of consensus is going to carry us through now.

DAVIS: I think at the core there is a lot of consensus. Obviously we focus on the differences as Bills work their way through Congress. But when you really look at what’s under consideration … everybody agrees we can’t continue on our current course.

And that health insurance needs to be affordable for families. When the average family premium is $13,000 a year, even moderate income families can’t afford to pay that without help from their employer or some kind of premium assistance from the government.

HEFFNER: So your assumption is that a common approach is going to result in something in the next few months.

DAVIS: Absolutely. I think we see that in the proposals at the heart there is a commitment to three goals.

Making coverage affordable for those who now have it, to make sure they don’t lose it and that it really helps them pay their bills and get the care they need.

Secondly, closing the gaps in insurance coverage with almost 50 million people uninsured. Making sure that they have coverage and good choices available.

And third slowing the growth in health care costs. As you say we spend twice what other countries spend on health care and health care is consuming a greater and greater proportion of our economic resources.

So there’s agreement on the goals and I think there’s also agreement on the basic approach, the basic strategy.

HEFFNER: I don’t want us to go on today saying everything is great, because that isn’t true, is it?

DAVIS: Well, there are obstacles. Otherwise it wouldn’t be going through this intense democratic process of deliberation.

Certainly there are concerns from those in the industry that their revenues will be affected.

So insurance companies are concerned about new choices that would increase competitive pressure on them. To really real … yield … real value added to the health care market to slow the growth in costs.

There’s concern, legitimate concern on the part of hospitals and doctors that maybe they won’t have the same amount of money they have currently.

But I think the basic truth is that as we cover more people, it will eliminate bad debts and charity care that, that now exist in the system and, and they can achieve certain improvements in productivity and eliminate a lot of waste that’s in the health care system, to slow the trend in health care costs. So, there’s concern, but I think they can be addressed.

HEFFNER: Well, I gather from reading what you’ve been writing for all these many years, that affordable coverage for all is your principle point.

Getting people into health insurance plans. And I was fascinated that as recently as yesterday, turning to my computer and getting another of the Commonwealth Funds e-alerts, you write here about improving care and reducing costs by … actually by expanding coverage and it isn’t just a matter of the cost of bringing so many more millions into our health plans, but rather the savings that are involved. Would you explain that to me?

DAVIS: Well, we have a very fragmented, complex system. People are changing coverage all the time and we pay a lot in the form of just administrative costs. In fact we spend more than any other country as proportion of our health spending just on insurance administration.

If we spent what the lowest three countries spend, we could save 90 billion dollars a year. And I think everybody would agree that that’s waste.

But there … our surveys of the population show … they’re often getting duplicitous care. About 20% of the public says there’s been a time when they’ve had a test repeated because the doctors couldn’t find the records or they just wanted to do their, their own tests. So we could eliminate that kind of duplication.

We find that there’s a gap in care coordination. One doctor doesn’t know what the other doctor knows. So we don’t have a modern information system that helps us make sure the records are available when they’re needed. And we don’t have costly administrative costs of filing records, retrieving records. And we don’t repeat care unnecessarily … tests and, and other types of procedures.

HEFFNER: Now do you see these problems as being cared for in … to any considerable degree by the legislation that is now being considered?

DAVIS: Absolutely. I think what’s being considered will take us a long way toward the path to a high performance health system.

Congress already started with the economic stimulus bill, called the American Recovery and Reinvestment Act. And it put substantial funds into helping doctors and hospitals adopt modern health information technology systems. So that will help.

In addition they funded to the tune of 1.1 billion dollars research on the scientific evidence of what really works. Which drugs are better than others. Which treatments are better than others.

So that’s an important first step that’s laying the foundation for health reform.

But the proposals themselves would build on that foundation and start to change the way we pay doctors and hospitals. To reward them for doing the right thing and getting the best results.

Right now we reward them for lots of procedures, lots of services … so every time you show up at the Emergency Room they get more money. Every time you get re-admitted to the hospital they get more money. Every time they see you … do a test … do a procedure … they get more money.

What the Bills before the Congress would do is to move to what are called “bundled” methods of payment … but what that really means is a global fee for the treatment of … say, a, a hip fracture. Or a coronary by-pass operation. It’s almost like care with a warranty … you get paid once and that covers everything that you need … and so there’s an incentive then for the hospitals and the doctor to avoid complications, make sure people don’t have to come back and have the surgery again or come back to the hospital for a complication following treatment. So …

HEFFNER: Doesn’t …

DAVIS: … it would fundamentally change the way we send out incentives in the health care system.

HEFFNER: Well, I was just going to say it’s such a fundamental change. Is that really provided for in the Bills that now stand the greatest chance of coming through and ending up on the President’s desk?

DAVIS: I would say it lays the foundation. Both the House and Senate called for creating a Center on Payment Innovation within the Medicare program and it would test these new methods of paying doctors for being what’s called “the medical home” or “health home”. Which means the doctor gets paid more if he keeps your diabetes and your asthma and your congestive heart failure under control.

And it would test these new methods of paying a global fee for certain surgical procedures, including not just the surgery, but the anethesialogist bill, the radiologist bill, and any follow up care you need for say, say 30 days.

And it would also promote the growth of what are called “accountable care organizations”. But those are, say, large position group practices or integrated delivery systems that also have a hospital, and they would get a fixed amount and share in the savings if they slowed the grow in, in costs.

But the main thing is they would be accountable for the results to the patient. Making sure the patient gets the best care, has the best outcome, has the best chance of enjoying high quality of life.

HEFFNER: You know, when that has been written about and I’ve read it and heard it … I’ve had an uneasy feeling of what … how I would react to that, had I been smart enough to become a doctor. Now, how are the doctors reacting to this?

DAVIS: I think for the primary care physicians … your internist, pediatricians, family physicians … this is practicing medicine the way they’d like to practice medicine.

So, rather than being worried about bills … and I get paid if I see you … but I don’t get paid if I talk to you on the phone; I don’t get paid if I sent you an e-mail; I don’t get paid as much if I have all my patients come in and meet with an educator about how to control their, their diabetes.

In fact they would get a certain amount every month for every diabetic patient in their practice. Every patient with asthma, every patient with high blood pressure. And they would get bonuses on top of that if those conditions are controlled and if patients are getting early cancer screening and all the preventive services that they could receive.

So it shifts the whole focus away from “I need to have you come in and see you. I need to do these tests, otherwise I don’t generate enough revenue for my practice to say I’m getting paid a reasonable amount for the primary care of my patients and I can provide that in a way that works for patients.”

Busy patients may prefer to do a certain amount on the phone or by email. Others need to come in and they need to spend a lot of time with me. But I can afford to do that because I’ve been changed and changed the way that I get paid, and I get paid for providing good care. And I think a lot of primary care physicians welcome that.

HEFFNER: You say “primary care physicians”. Do you think this will re-direct the flow of medical students from specialization back to the general practice that we knew in the past?

DAVIS: I absolutely think we have to do that. Right now the compensation levels are two to three times higher for specialists than they are for family physicians or pediatricians or, or internists. And it’s not surprising that more and more doctors now are deciding “I’d rather be a dermatologist and have regular hours and I’d have more take home pay. So I’d rather, rather do that.”

So we need to change the compensation. But it’s more than that, it’s changing the style of practice. Many physicians can’t really be on call 24/7. They need to be part of a larger system that has coverage on nights and weekends … urgent care centers or retail clinics are part of the system and they share medical records.

HEFFNER: Is this the pattern in other large countries, other large industrialized countries around the world? Is this the pattern that’s generally followed?

DAVIS: Absolutely. Other countries, particularly The Netherlands, Denmark have good systems of off-hours care. So you can call in the evening, you immediately get a doctor on the phone in Denmark. And they can listen to your problem, decide to prescribe a medication and you can pick it up at your pharmacy. And then they’ll e-mail your doctor and tell your doctor what care you got on the off-hour service.

In the Netherlands they use a lot of nurses to do triage in the evening. And they’ve got a system where you can get care very easily. This shows up on Commonwealth Fund surveys of people in different countries where in the US people are much more likely to say they have difficulty getting care on nights and weekends. They’re more likely to go to the Emergency Room … even for things they said their own doctor could have taken care, but they just couldn’t get an appointment … couldn’t get in quickly to see their own doctor.

HEFFNER: Now, what about the specialists? What are we finding in the halls of Congress now? Are the specialists, are the physicians who’ve moved from the family practice, from the basic practice of medicine to the higher paying specialties, are they presenting problems in getting the kind of bill you want through the Congress?

DAVIS: Well, I think it differs from one specialty to another. It does mean a different style of practice. It does mean a team approach to care. And if you’ve been used to being … an entrepreneur, solo practice doing things your own way, you’re going to have to change. And, and join together with other physicians into what are called “accountable care” organizations.

To be accountable for all the care, not just your narrow piece, but the total care of the patient so that there’s really a system and that, that care is coordinated so you’re not just … the surgeon knowing one thing, but the doctor taking care of the patient after they go home, not having that information. They’ve got to share that information and, and work together for the best of the patient.

HEFFNER: Now there was another point about all of this that I wanted to ask you about in this e-Alert that I received yesterday from the Commonwealth Fund.

The matter of improving care and reducing costs by expanding coverage … your researchers were reporting that those who were covered, those Americans who are covered adequately actually cost society much less after they reach 65 than those who have been uninsured or have too little insurance because those who have been insured have been doing the things that you need to do to be healthy, to remain healthy, to become healthy and that as a nation we will be more than re-balancing the costs of adding millions to the insured ranks.

DAVIS: Absolutely. A team of researchers at the Harvard Medical School with support from the Commonwealth Fund has found that there are real consequences of older adults being without health insurance coverage. And then by the time they turn age 65 and qualify for Medicare they have real problems that increase the cost to the Medicare program.

And that’s not, not surprising. As adults get into their fifties, into their sixties … they are much more likely to start experiencing things like high blood pressure, to have high cholesterol, to have various kinds of, of health problems that need to be attended to.

One needs to prevent diabetes, one needs to control that hypertension, that high blood pressure … so people don’t have strokes, don’t have complications of diabetes, that can include, for example, kidney failure … or even having a leg amputated if they’re, if they’re not followed closely.

So, there is a price to pay by having uninsured adults … at any age. But particularly among older adults that are prone to have many of these chronic conditions.

So, it does save money to the Medicare program to make sure that people have been getting proper care in the, the period of time, the decade or so before they entered the Medicare program.

HEFFNER: In the scare tactics that have been used by the opponents of the present drive for reforming medical care in America there has been so much written and said about “Death Panels” and about the degree to which Medicare will be disadvantaged. That they’ll be less money for the elderly. Is there a response to that that’s rational and reasonable and hopeful?

DAVIS: Well I think people have come to understand that those “Death Panels” were never part of the legislation.

There was a provision that would pay a doctor for counseling patients about end-of-live options. Right now they’re expected to do it, but they aren’t paid for doing it. So it would of, would of paid them for doing that. But there were never “Death Panels” and there were never going to be limits on care that would prevent people from get … enjoying quality of life at the end of life.

The second issue has been … that some of the savings that are used to offset the cost of covering the uninsured come from slowing the growth in Medicare outlays. So obviously beneficiaries are concerned that that’s coming out of their, their benefits.


DAVIS: But, truthfully, what the American Hospital Association … the other hospital associations have said is that they can eliminate some waste and they can achieve improvements in productivity and they can slow the rate of growth in what they’re paid by one percentage point a year … right now these outlays are expected to go up six and a half percent a year. They’ve said they can hold it to five and a half percent a year. And they agreed to knock one percent off of their “raise” every year, if you want to call it that.

And so nstead of getting a six and a half raise, they would get a five and a half raise.

HEFFNER: But not at cost to the patient?

DAVIS: But not at a cost to a patient. That is …

HEFFNER: In care as well as well as finances?

DAVIS: … that’s simply by improving productivity. And I think most industries would like a guaranteed five and a half percent increase. And I think most American workers would like a five and a half percent guaranteed wage increase every year. So I think it’s reasonable to, to slow down what has been an extraordinarily rapid rate of growth in, in health care costs and to really insist on taking a look at operations and see if you can’t trim one percent of waste out, out of the system.

And certainly with modern information technology, with research of what is effective, what works. I think hospitals can do that.

The final issue has to do with the part of Medicare that makes choice a private managed care plans available to Medicare beneficiaries. That started back in the early 1980’s and there many good systems of care that did enroll patients in these … what are called health maintenance organizations during their working lifetime and then they, they qualified for Medicare.

So the basic idea … back then when it started … is that they should be paid a percent of what these patients would cost the Medicare … say 92% of overall costs. But right now we pay 113% …

HEFFNER: How did that come about?

DAVIS: Ah, well this was part of the Medicare Prescription Drug Act in 2003. People didn’t focus on that provision, but it was a time when people said we need more private coverage and they can do it more efficiently, so we ought to encourage them to enter the Medicare program and the way to encourage them is to pay them more than people would otherwise cost the Medicare program. They will give some extra benefits to people who enroll and now about 10 million, out of 44 million Medicare beneficiaries enroll in these private plans. But they are over-paid.

So you get better benefits if you enroll in them than if you enroll in the regular Medicare program and so … what this … most of the proposals before Congress would do, would say, “There’s really no justification for paying private insurance companies more money than it would otherwise cost us to take care of these patients” and they would trim those payments.

HEFFNER: Then in all honesty, we have to say there are going to be a lot of people who will be hurt.

DAVIS: I don’t think they’ll, they’ll be hurt … I think their … the 10 million people who enroll in private, managed care plans under the Medicare program aren’t going to get quite the supplementation they’re getting.

But those plans are also making high profits, so they can absorb some of that by just taking a little less administrative overhead.

HEFFNER: Will they?

DAVIS: I think we should insist that they do. And some of the Bills do set what are called “minimum medical loss ratios”, that means the percent of the bill … the percent of the premium that really ought to go for medical care.

Nationwide, for many of the large companies, they keep 17% of the premium in either administrative costs or on profits. And in other countries that’s five percent. So I think we’re, we’re learning that there is room to reduce some of that excess cost. Or, or even excess profit and to absorb some of these economies.

To, to really have the kind of health system we need in the US with everyone having affordable coverage … everybody’s going to have to do their part. They’re going to have to share responsibility. And that means the uninsured themselves are going to have to contribute. Employers are going to have to contribute. But we’re going to have to identify, in the federal budget, money that, that is either being wasted, excess payments to private insurance companies or excess benefits for a few that happen to, to have a particular niche in, in the market.

HEFFNER: There seems to be when you say “excess benefits … excess benefits to some individuals” and to a number of business organizations.

DAVIS: Well, what these plans would do is define for the first time an essential benefit package. So what should be covered? And what proportion of the bill should be paid picked up.

Right now there are no standards on private insurance plans. So you buy something, you think it’s going to be there when you need it. And then the bills come in and you find out, much to your horror that they aren’t covered.

And certainly our survey showed that 72 million people have problems paying medical bills, they have accumulate medical debt. And 60% of those were insured at the time that they incurred those expenses. So having a defined essential benefit package will be a very important component of this overall reform.

HEFFNER: In the minute and a half we have left to this program and then we’ll pick up on the next … but where … I wanted to ask you … what’s the major source of opposition to health care reform?

DAVIS: I think there’s a lot of support. Actually the doctors and the hospitals say … and even the pharmaceutical industry are supporting reform. It, it has caused discomfort to the private insurance industry.

Business is worried about what they would have to pay. And obviously there’s a concern about the federal budget and, and will it really, as the President says, not add a dime to the deficit.

HEFFNER: What do you think?

DAVIS: I think it is do-able. I think there’s a very practical approach now being considered that builds on what works, fixes what doesn’t’ work and finds a reasonable way to have everybody contribute something to really make it affordable for everyone.

HEFFNER: Dr. Karen Davis, thank you so much for joining me today on The Open Mind. And stay where you are so we can go on with this discussion.

And thanks, too, to you in the audience. I hope you join us again next time. Meanwhile, as an old friend used to say, “Good night and good luck.”

N.B. Every effort has been made to ensure the accuracy of this transcript. It may not, however, be a verbatim copy of the program.