Reality-Based Health Care for Americans, Part II

GUEST: Dr. Karen Davis
AIR DATE: 10/31/09

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

And this is the second program 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.

And my guest once again is Karen Davis, President of the Commonwealth Fund, a major philanthropy engaged in research on health and social Issues.

Now, Dr. Davis is herself 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 of the United States Department of Health and Human Services.

Now, I, I began last time we were doing our program by wondering out loud just what it is about us, about us Americans, 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 with scores of millions of Americans nonetheless uninsured or underinsured.

And I must admit that I have no trouble once again posing that fundamental question to my guest. What IS our national problem that we’re so far behind. As I read the Fund studies, we are so incredibly far behind other countries.

DAVIS: Well, we are. We’re … the US is the only major industrialized country that doesn’t have a system of health insurance for all.

So this is really a historic opportunity for the Congress and for the President to remedy what is the greatest deficit in our health care system, and that’s to make sure that everybody has health insurance coverage.

But to also make sure that that’s good coverage. The proposals that are being considered really build on our current system, so they don’t take a radical new approach and “let’s adopt the Canadian system. Or let’s adopt the Dutch system.”

It’s a uniquely American system, building up what we now have. The most important feature is that it retains employer health insurance coverage. So 160 million Americans get health insurance from their employer. 166 million Americans will probably still get their coverage from their employer under this new reform.

So where it’s working well, it leaves it in place, although it may set some standards on what’s an essential benefit package and it may increase the choices that, that people have available.

What doesn’t work in our current health care system is coverage for small businesses. And for individuals who don’t have access to health insurance coverage.

So some of these proposals say employers should offer coverage. And they would try to make it more affordable for small businesses.

They would do that in a couple of ways. First of all they would set up a health insurance exchange that’s kind of a marketplace where all of the insurance products would be offered. You could go on the Internet, look at what they cover, see what the premiums are … so instead of being a worker in a small firm … you know, retail trade store … that maybe has no options or one option … you would have a variety of choices available to you. And that’s going to create some competition and, and lower some of the administrative overhead.

Right now small businesses have to pay brokers large fees to help them find a policy for their employees. Now you could have a number of choices, very clearly laid out … could go on the Internet, make choices … so … about what works for you.

So, creating the insurance exchange in and of itself would pool risk … make you a big buyer just as a large company is a big buyer and that, that gets you a better premium and the fact that you can really see what’s a good deal and what isn’t will also lead people to pick plans that offer real value for what they’re offering.

In addition, most of these proposals would provide some financial support, some tax credits or premium assistance to, to very small businesses who are doing this … maybe for the first time to make it easier to start providing that coverage.

HEFFNER: Well, you talk about options and choices. What’s happened to the public option?

DAVIS: That’s a very important feature, it’s certainly been one of the most controversial and that’s whether the government, either the federal government or the state governments ought to be offering an additional choice beyond those that are offered by private insurance companies.

In some ways the Medicare program offers its own public plan, but also offers some private choices. And that’s, that’s worked reasonably well … it gives people a choice. We’ve also learned from that it’s important to have a public plan because sometimes the private plans decide to pull out of the markets, when they’re not making as much money as they would like to make, or they get some bad risks.

So, having a guaranteed option there that would always be available, that would be stable and it wouldn’t have high premiums. In fact the Congressional Budge Office estimates its premiums would maybe be ten percent lower than private plans because it wouldn’t need to make a profit. And it wouldn’t be paying commissions or advertising. But would just be a solid option that’s available. Nobody has to take it, if they don’t want it. But it, it would be there. So I think that’s a very important component.

The other thing … it lowers the federal budget costs. Basically these Bills have been developed … what we’re seeing is we’re covering about thirty to thirty five million people who are now uninsured. The plans don’t really cover all 45 million uninsured … but nearly … a big chunk of those … 94 or 97 percent of the population would get covered.

But where would they get coverage? Right now they constitute bad debts when they do get care for, for many hospitals, many doctors. And you want to make sure you are getting a reasonable premium for that coverage and, and offering a public plan, lowers the federal budget costs maybe 80 billion, 100 billion dollars over ten years. So that’s real money.

And, and so it’s important not to just say “We’re going to go from having no coverage to having the most costly form of coverage provided by private insurance plans.” But to get a little bit of a deal, a little bit of a discount off of those … there are very high premiums.

But it would also be beneficial to small businesses. Our estimates are that currently 15% to 35% of the premium for small businesses is going for administrative overhead. In a, in a public plan that might be five or six percent, plus maybe another 3% for the cost of operating the exchange. So you’d be talking about paying nine cents on the dollar for administrative instead of paying 35 cents on the dollar for administrative overhead.

So those are savings that are very important to business and they’re very important to families.

Our own studies show the average family would save $2,300 per family in the year 2020 if a strong, robust public plan were offered through this insurance exchange and we had the kind of reforms that really would get value out of the health care system.

HEFFNER: There’s someone into who’s pocket that saving would not go and that must the source … (cough) … excuse me … of opposition to the public option at this time. Do you think that opposition will prevail?

DAVIS: Well, obviously there are concerns that come from private insurers … that come from medical device manufacturers and, and other parts of the sector.

But I think we have to realize we’re now spending 17% of the gross domestic product. We’re projected to spend 21% a decade from now. And even with reform we’ll still be spending 18% or 19%, so there’s going to be more money.

We estimate we will go from spending $2.6 trillion dollars on health care in this country today to spending $5 trillion dollars if we do nothing.

But even with a strong plan and a public plan in the mix, that’s still probably going to be $4.4 trillion. So everybody is going to be fine in, in this … but we can achieve economies, we can offset some of the federal budget costs by achieving those economies.

And what we really need is to transform from a very wasteful, very costly, fragmented health care system to one where we really do get value for the money we’re spending on health care.

HEFFNER: You know, I … one of the comments that you and your colleagues have made … “Front and Center, Ensuring that Health Reform Puts People First” … at the very end of it you write “Too often the voices heard in the halls of Congress speak for those who have a strong financial stake in the $2.5 trillion dollars now spent on the health care system.”

Are you optimistic that that voice … those voices will be less compelling in the months ahead before the President presumably is faced with a bill to sign?

DAVIS: I think those voices do need to be heard. This is not just a money story. This is a human story. And the loss of life that comes because people don’t get preventive care, can’t have the medications that really work to help their conditions stay under control, it’s just unacceptable.

The US ranks 19th out of 19 countries on mortality amenable to medical care. The Institute of Medicine estimates that over 18, 000 people die every year as a direct consequence of being uninsured. So when that blood pressure isn’t controlled you’re at risk of having a stroke, dying or at best being impaired in some way so that you need care.

These stories need to be told. I think all of us know someone, in our family, in our community, some one who serves us when we go into a store, who’s without health insurance coverage. And many times cancer’s not detected at an early stage, struggling not only with the illness, but struggling with the bills that come when they have no, no coverage. So it’s, it’s a human tragedy.

And in the end I think this nation will recognize we simply can’t continue the way we’re … we are on right now. Certainly the downturn in the economy, the loss of jobs and with that the loss of health insurance are causing real hardships for American families. And it’s, it’s time to step up and make sure that all of us have a basic safety net … that we don’t have to worry about bills when a family member is sick, we can worry about that family member and helping them get better and enjoying life.

So, that’s really what this is all about in the end. It is putting people first and making sure that nobody is in this situation of not being able to get the care that they need or being wiped out financially from health care bills.

HEFFNER: I do wish we could just replicate what you, what you just said with you’re saying it. That it is a matter of people.

You talk about the bankruptcies that have … we’ve heard so much about that … bankruptcies and many of them haven’t even occurred yet in this recession … as being health care cost based. Is that something you’ve tracked?

DAVIS: Absolutely. We do do studies every two years on medical bills, medical deaths. We find people putting their medication bills on their credit cards, so then they can’t pay their credit cards off. Some have even taken out loans on their homes to pay medical bills. And, and that’s part of the bankruptcies and foreclosures on, on homes because people … when they’ve had a serious illness are not protected or covered.

But this is not just a problem for low income people. I think for a long time we thought this was very poor people who were left out of the health care system, they weren’t working.

But now we’re finding out the middle class is effected by this. In fact, the greatest increase in medical bill problems and medical debts is among middle income families. It’s obviously higher for lower income families.

But you take the number of people who have insurance that it’s not good enough to protect them from medical bills. That’s about 25 million people. That’s up 60% over four years. And a lot of those people are families making $40,000, $50,000, $60,000. When an average premium is, is $13,000 a year … no family, even of average means is able to really take care of, of those premiums, those expenses on their own.

HEFFNER: Is this, do you think, are you satisfied that we understand the dimensions of the problem?

DAVIS: I think the country is going through a big educational debate. And I think that’s healthy. Everybody has their stories. Everybody has their experiences. That the opportunity to, to hear from others is very constructive. And certainly I think as, as this goes through Congress and gets signed by the President and I think it will be signed by the President … people will come to understand that this is a major advance. And long overdue.

If we had done this 40 years ago, whether when President Nixon proposed it in the early ‘70’s or President Carter proposed it in the late ‘70’s or even when President Clinton proposed it in the early ‘90’s, if we had done it then, we would be so much better off.

We wouldn’t have 50 million people without health insurance coverage, we’d have coverage for everybody. We wouldn’t have the bankruptcies and medical bills and medical debts that, that so burden American families. And we’d be spending less as a nation.

Our studies show that we could be saving a trillion dollars in 2010 out of that two and a half trillion that we’re spending on health care if we had acted thirty, forty years ago. So, delay, inaction is not an option. Failure is not an option.

We simply cannot continue on our current course and, and we need to come to grips with, with fundamentally … reforming our health insurance and our health care delivery system.

HEFFNER: All right. Now I, I’m sure that someone watching now will want me to ask … again, going back to the question of choice … to the question of option … the public option … how meaningful is the suggestion that has been made that the public option can be substituted for by cooperative plans?

DAVIS: Well there are a variety of options that have been put, put forward. And you’re right in, in the Senate the notion of a private health insurance co-op plan as an option has been advanced.

Well, what does that mean? It means non-profit. So it, it gets away from some of the for-profit incentives that are in the insurance industry. But it also means consumer control.

So the way it works in a co-op is that those that buy the insurance, elect the Board of Directors, who obviously selects the management and, and oversees the management. So, management gets the word that what members want is good value for what they’re paying.

They don’t want premiums going up fifteen, twenty percent a year the way they’ve been going up. And they don’t want waste. They want high quality care. They don’t want rationing, they don’t want substandard care; they want good care.

But they want management to hold the line on, on premium increases and adopt new innovative practices that can lower costs by lowering hospitalization.

And some of the best models in the US … there’s a health cooperative in Minnesota, called Health Partners. There’s one in Seattle, called Group Health Cooperative. They’ve had both an insurance plan, but also their own doctors, their own hospitals that deliver the care. And they figured out in their delivery system how could we better manage diabetes. How can we keep these patients from winding up in the hospital? And that’s the way they save money. And that’s better for everyone. So there’s a lot of advantage of, of private co-ops.

Unfortunately, I’ve mentioned the two big ones that have over half a million …

HEFFNER: The successful ones.

DAVIS: … members. And they’ve been around for fifty or sixty years. And these are very hard to develop and, and grow.

So I think there’s a benefit long term of trying to have more organizations like those models. But I think we can’t wait another fifty or sixty years to, to get those kinds of, of savings and those kinds of good care … high quality care.

So I think we need to, right now, build on the experience, for example, of the Medicare program. That is, after all, a public plan. And to make that type of lower cost premium, but comprehensive coverage to which all doctors and hospitals, pretty much, participate, available to everyone, but particularly to uninsured individuals and to small businesses that really need an affordable option available to them.

HEFFNER: Dr. Davis, in just the few minutes we have remaining … let me ask you about … over the past … this, this fact that over the past decade or so there have been a number of time when we have done programs here, thanks to your own participation, the Commonwealth Fund’s studies … and we’ve done programs that have been based upon the work that has been done under the aegis of the, of the Fund.

Do you think real changes will be made if we manage to do what we should be doing now as a nation?

In the … for instance, the medical errors. We did a program, a couple of programs … thanks to your support, thanks to the support of studies that you had done … do you think things like that will change?

DAVIS: Absolutely. I do think the quality of care will get better and we really live on the path to a higher performing health care system.

First of all, just having better data out there … performance, so that we know what the quality of care is in different hospitals and different physician practices.

What happens is it’s not just that patients pick a different hospital, but every hospital wants to be the best hospital. So when they find that another hospital got a lower surgical infection rate, they figure out what they’re doing.

They find out that administering antibiotics before the surgery as a preventive measure is a good technique. So they adopt that technique. Or they find that if you want to prevent a patient from getting pneumonia in the hospital, you ought to tilt the bed up a little bit. And so they, they institute those kinds of procedures.

So having the data, being able to identify best practices, being able to spread those practices, adopting modern information technology will all help.

But I think, fundamentally, the thing that will help the most is to change the way we pay doctors and hospitals. So that those getting the best results, providing the safest, highest quality care will get a bit more.

Everybody will look at that care and think “Well, I’d like to be a top performing institution. I’d like to qualify for those new financial incentives. And I know if I don’t change I’m going to bear the cost, but not really get the same kind of, of revenue I’ve gotten in the past.”

HEFFNER: Is that demonstrated by what happens in other countries?

DAVIS: Absolutely. Other countries have very different systems of payment. First of all the government negotiates rates on behalf of the entire population.

So you take medications, for example. They don’t just say to the pharmaceutical manufacturer, “What would you like to charge? We’d like to pay that.”

They enter into a negotiation and both parties make their case. The other thing they do in other countries is something called reference pricing. They look at the studies. If one drug is no better than another, they don’t pay more for the more expensive drug. And that pretty much brings the price down after a period of time.

HEFFNER: Would that be true here, in particular in terms of drugs?

DAVIS: Absolutely. I think that that would be a very important model to adopt. A number of the countries … Germany, Denmark very much look at the price of alternatives and figure out the price to pay based on what else is available that works just as well.

HEFFNER: Do other countries … in other countries does the pharmaceutical industry advertise as it does here in this country?

DAVIS: No, other countries for the most part, don’t permit advertising. And, as I said, they review the effectiveness of the new drugs compared with the old drugs. They look at the prices and as a result they pay half what we pay for the same drug, for the same manufacturer in their countries than we pay in our country. So …

HEFFNER: Literally?

DAVIS: Absolutely. So, the major brand name drugs, they’re selling it at a lower price abroad, so I think there’s a rationale. And the House Bill looks at this. Saying, if you accept that price in other countries … you ought to be willing to accept that price in, in the US.

So we need to face up to the fact that, that there are many instances where we’re over paying for care and many instances where we have complications that could be avoided or hospitalization that could be avoided and adopt “best practices” not just in the US, but from examples around the world.

HEFFNER: How is that faring in the Congress? Best practices, best prices?

DAVIS: There are some limited steps. Certainly the House Bill calls for drug price negotiation. The Senate Bill has not touched that issue. So that will be one to watch as it winds its way through the Congress.

But certainly the notion of getting better evidence on what works. Making that widely available to physicians and patients. That’s all part of this.

What, what we don’t do is go that extra step of saying “We won’t pay more if it doesn’t work any better than, than the other drug.”

HEFFNER: Which raises the question in … maybe happily in the minute or so we have left … the profit motive in health as the profit motive in education and in other really basic human needs. Do you think we’ll get to a point where that will be minimized at least if not eliminated?

DAVIS: Well, I think we want innovation, so certainly we want incentives for people to do better. But we need to align those incentives so that we, in fact, are rewarding what we want.

We certainly don’t want more and more drugs. “Me, too” drugs that cost more and don’t do any better. But if somebody has something that really works. A cure that really works, certainly we want to reward that.

But there are many instances, I would think particularly on the administrative side where we’re paying much higher for for-profits that are really needed to get a, a good value product.

HEFFNER: Dr. Karen Davis I am … so much welcome you’re being here again … maybe by the next time we do a program together you will, we will have achieved what you’ve described here today. Thank you again.

DAVIS: Thank you.

HEFFNER: 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.