Karen Davis

Americans’ Health Care – Seen With 20/20 Vision, Part II

VTR Date: October 5, 2012

Karen Davis discusses the American health care system.


GUEST: Dr. Karen Davis
AIR DATE: 10/06/2012
VTR: 09/13/2012

I’m Richard Heffner, your host on The Open Mind. And today’s guest – quite appropriately, given our intense focus at election time on fostering a truly comprehensive and realistic health care plan for all Americans – is once again Dr. Karen Davis, a nationally recognized economist with a distinguished career in public policy and research, having served as Chair of the Department of Health Policy at the Johns Hopkins School of Public Health and as Deputy Assistant Secretary for Health Policy in the U.S. Department of Health and Human Services.

Now since 1995, Dr. Davis has been President of The Commonwealth Fund, a national philanthropy working toward a high performance health system for America. She retires as the Fund’s chieftain at the end of this year…but not before I pin her down – as I did last week and shall do again today – for another stellar analysis of what we must do to move our nation’s health care system from perhaps among the least effective and most expensive to among the best-performing and most cost-effective.

Now, a dozen years ago my guest and I did the first of what became a long series of Open Mind conversations on this vital area of national concern.

And I took for our theme at that time what Dr. Davis had called “A 20/20 Vision of Health Care”…where Americans’ health care system should be – has to be! – by the year 2020.

And she identified five vital elements to that vision: Automatic and affordable health insurance coverage for all. Access to health care for all. Patient responsive health care. Information-driven health care. And commitment to quality improvement.

All of these to be achieved by 2020 for America truly to be a world leader in this most important indicator of a civilized society.

Last week I asked Dr. Davis again, as I did a dozen years ago, whether the first and foremost part of that 20/20 vision remains for her affordable health insurance coverage for all…and asked how this year’s election promises or threatens to impact upon that Holy Grail.

Today, I want to move on to the other health care elements that my guest considers so vital to her vision of Americans’ health care in the year 2020.

We’ve touched on those elements, Dr. Davis, but which among them do you think are most important or can you possibly tease out of those important elements of a good health care system, the most important.

DAVIS: Well, I think the number one issue on everybody’s mind is health care costs and how that cost translates into the Federal budget crisis that we know we face. Or state ability to, to have a balanced budget or employer’s ability to, to afford health benefits for their workers.

So, the real question is how do we tame the health care cost beast? How do we bend the health care cost curve and achieve genuine savings over time while insuring that everybody is covered, everybody has access to care, they get all essential care and they get the quality of care and health outcomes that we really want for ourselves, our families and, and our neighbors.

And it’s kind of playing out, particularly in the Presidential election, in the debate over the future of the Medicare program.

Medicare covers people age 65 and over and those who have been disabled for two years or more. And there are two fundamentally different strategies that are being advanced. These have already been proposed in the House of Representatives, often lead by Congressman Paul Ryan, Chairman of the Budget Committee to convert Medicare to what’s called a voucher program or a premium support program that would say instead of you’re being covered for a defined set of benefits, like hospital services, physician services … here’s a fixed amount of money … you use that to buy coverage on your own and if it costs more than that amount of money than you’ve got to make up the difference and, and hoping that that would lead to competition for those vouchers that would hold, hold premiums down to that amount.

It basically puts the onus on Medicare beneficiaries to control costs. It wouldn’t apply to current beneficiaries, it would really only apply to people who are now 55 years of age or younger. So it wouldn’t really kick in until the 2023.

But what it would do is take what Medicare now spends on healthcare, index that over time with the growth in the consumer product … ah, price index. But unfortunately that goes up slower (laugh) than health insurance premiums and health care costs.

So by 2023 when this kicks in the Congressional Budget Office estimates that a new person subject to this new Medicare system would have to pay $6,400 of their own money to make up the difference between what the voucher is worth and what it really costs to have, have coverage.

You know, to put it another way, right now Medicare pays 70% of the expenses of Medicare beneficiaries. They still have to pay premiums and some deductibles and cost sharing … hearing aides, other services that aren’t covered.

But 70% is covered. Under this House budget proposal that’s been supported by Governor Romney and Congressman Ryan, it would only cover 32% of the expenses of Medicare beneficiaries by the year 2030.

So by taking a fixed amount of money, capping it, indexing it with something like the CPI, it just doesn’t quite go far enough to provide the same kind of benefits that we have under the current program.

HEFFNER: Aren’t you being restrained? When you say it doesn’t quite go far enough?

DAVIS: Well, when it drops from covering 70% of your bills to 32% of your bills …

HEFFNER: That’s something.

DAVIS: … that’s a gulp.

HEFFNER: Now do you think people understand this? Do you think the average American understands this difference?

DAVIS: I don’t. I, I think there needs to be a lot of explaining. First of all, it’s just not the case that the average beneficiary can do a lot about what doctors are charging or what hospital costs turn out to be.

So to think “Well, if they have to pay with their own money, they’ll be more cost conscious”. I don’t think there’s a lot of evidence that that will really work to control costs.

But second of all, people have to understand that Medicare beneficiaries have quite modest income, half of them have incomes under $22,000. And they’re already paying 22% of that income for their own health care expenses. And even under the current program that’s going to go up to 29% in about 15 years.

So they’re paying a lot and so then to make them pay more on top of that is very, very hard to imagine how that would be affordable because retirement security is very much in question for an awful lot of, of older people and to add to that financial burden is, is really, I think, just unthinkable.

HEFFNER: What’s the basic philosophy behind the voucher system?

DAVIS: You know the basic philosophy is that private insurance and the marketplace are more efficient than government.

HEFFNER: Marketplace …

DAVIS: … and yet, you know, the evidence shows that’s actually not the case. It’s hard to understand and hard to swallow, but the Congressional Budget Office has estimated that private insurance would be 11% more costly to cover the same benefits as people now have under Medicare, covering under private insurance.

And furthermore that that’s going to grow faster over time than the traditional Medicare program. So you get less for your money buying it privately. And that’s for two reasons.

One, the administrative costs and the profits are higher in private insurance. Medicare administrative costs are about 3% … there are no profits effectively.

With private insurance it can be 10%, 15% … so substantially more of the premium dollar goes for overhead.

But the other fact is that private insurance, negotiating with doctors and hospitals wind up paying more than Medicare pays. About 20% more because they’re not a big buyer. There are about 50 million people in Medicare so when Medicare is buying coverage, no doctor is walking away from participating in the program and they agree to, to the rates that, that Medicare sets because they need the revenue, need the Medicare patient.

But that all makes private insurance … now truthfully there have been some revisions that Congressman Ryan, for example, has said, “Okay, I’ve got a new idea. I’ll let you keep traditional Medicare. You’ve still got this fixed amount of money, which may not be enough to cover traditional Medicare, but you still have that as an option”.

But even that is a bit worrisome because as you fragment the program you can easily see that healthier people would go the private insurance route and the sicker people would stay with traditional Medicare and our ability to adjust for that and to prevent the strong economic incentive that private insurers have to choose healthier patients and encourage sicker patients to dis-enroll (laugh) and go back to the traditional Medicare program are, are very strong.

I also worry a little bit that it would undermine Medicare’s purchasing power and leverage in the health care market. As some go off into various private plans, doctors may say “I don’t really want to take care of Medicare patients in the traditional plan. I get paid more if I just practice in the private plans that Medicare beneficiaries use”.

HEFFNER: Many are saying that now.

DAVIS: Yes. Well, truthfully, if you look at the numbers nearly all doctors practice in … take Medicare patients. They often say, “I’m not going to, or I’m not going to take new patients”. But the numbers show that over 90% of all physicians do participate in, in Medicare. It’s a big part of their practice and they need that coverage and they’ve had those patients for a long time and don’t really, really want to walk away from them.

So, it’s troubling to, to take what is a good program, that’s very satisfactory to beneficiaries … in fact the surveys the Commonwealth Fund has conducted find that Medicare beneficiaries who are in the traditional Medicare program are more likely to be satisfied with the coverage.

Only 6% would rate their coverage as “fair/poor” whereas 15% of Medicare beneficiaries that are in private plans now rate their coverage as “fair/poor” and those that are in private plans are more likely to have access problems, finding a doctor, going to the doctor, affording the specialist tests and, and referrals that they really need for their conditions.

So Medicare is very popular, but it’s also very successful with beneficiaries in meeting their needs, helping them get access to care and protecting them from the financial burdens of, of health care bills.

HEFFNER: Karen, what about the other points that you made a dozen years ago about where we have to be in 2020? In terms of information, in terms of the conduct of medicine generally?

DAVIS: Well, I think Medicare, private insurance, the whole health care system has to be re-vamped to support change.

I would put up there, very high, health information technology, a modern health information system.

Before the Affordable Care Act was enacted there was an economic stimulus bill that was enacted very early in President Obama’s term.

And it provided financial help to doctors and hospitals that adopt modern information systems and make meaningful use …

HEFFNER: Did they?

DAVIS: Yes, and not just have the computer on the desk, but actually use it to improve quality of care, notify patients that they’re overdue for preventive services and we’re seeing a response to that.

The Commonwealth Fund has supported international surveys and shown that the U.S. physicians have lagged way behind physicians in other countries, in adoption of that.

But that’s beginning to change now. We started out only about 25% of primary care physicians reported such systems of … about nine years ago … most recently we’re finding that about 60% of physicians now have such, such coverage.

HEFFNER: And the exchange among them? Is that developing?

DAVIS: Well, I wish I could be as optimistic about all the doctors talking to each others and their computers talking to each other. That was not at the heart of the requirement. The first thing was just get it …

HEFFNER: To get them.

DAVIS: … get it in place, use it to improve the care of your patients, maybe it’s going to say “Hey, doctor, please don’t … think again before you prescribe that drug. This patient’s allergic to that medicine”.

So warning systems, suggestions about how they might deal with the situation a little bit differently.

It did fund what are called “Beacon Communities”, so a kind of a grass-roots … from the ground up … there were certain communities across this country that said, “We’ll develop not only a system where each doctor and hospital has a computer and information system, we’ll make sure they all talk to each other”.

They share their information … so there’s a way, if you show up in the Emergency Room – that the doctors there, with your permission can get access to the information from your own doctor or maybe a hospital records that you had in another, another community.

So, in certain … I would call it “pilot communities” … these are called “Beacon Communities” those systems are being tested and I hope they’ll spread over time. They’re quite common in other countries, where …

HEFFNER: I was just going to ask you, how do we look … I’ve commented on the business of the overall financing of health care system there and here … what about these modern techniques?

DAVIS: Well, certainly we’re behind … but we’re catching up … that’s the good news.

So in other countries about 90% of physicians are now on these systems and in countries like Denmark they do have … they use the Social Security number basically. So all of the information on a patient is in the record, under this number.

All their medications, all their labs tests, all their doctor visits. All of there specialist consultations, any hospital episodes … it’s all there.

Now you worry about privacy and they worried … the Danes worry about that as much we do … but first of all the patient can go on there and get this information.

They can see who has accessed their record and any physician accessing the record has to say, “I … check off, you know, ‘I had explicit permission from the patient to look at this record’ or I didn’t … for the following reason … it was an emergency, they were unconscious … I went ahead.”

But, so they’ve got safeguard and if patients want to blind certain sensitive information, they also can, can do that.

So, they’ve managed to do it. And overcome that privacy issue in a way that has met people’s concerns.

And most people are really … our own surveys show, that 90% of Americans want all of their medical information available in the same place and available to all the doctors and nurses are taking care of them”.

HEFFNER: Do they know what pitfalls lie therein?

DAVIS: Well, I think we all worry about information being erroneously sent to the wrong party. But, you know, that can happen today … that, that with paper records … that they can get into the wrong hands as well. Or, I know it’s always an issue when a celebrity’s hospitalized that people are curious.

But with an electronic health information system, actually they know an employee who was unauthorized who went on to that system and it can be, can be sanctioned. So there’s much better security, truthfully, under such a system than under the current paper records.

HEFFNER: I, I understand that, but let me ask you this question. Do you think that our concerns for privacy will be undermined …and by that I, I mean that we will, ourselves, come to change our attitudes toward privacy, under the pressure of understanding how important it is for there to be this medical doctor to doctor, doctor to hospital exchange.
DAVIS: No, I think we will. First of all in the broader community I think we’re getting more used to our information … credit cards and …


DAVIS: … in lots of ways being more public … on FaceBook, being more publicly available.

But I think the frustration that people have of having to repeat their medical information over and over and over and one doctor not knowing that the other doctor is doing and maybe even ordering prescriptions that they shouldn’t’ be taking together.

Nobody’s coordinating their care, nobody’s talking to each other. And that leads to some serious medical errors as well as frustration … delay on the part of the patient, they have to go around collecting all of the records and taking them to the, to the specialists, or having to have the test done over because nobody can find the results from the other study.

So I think as we’re beginning to see how wonderful it is to have the doctor have the information and even reach out to us to remind us that we’re overdue for something. That that’s a very … and getting the lab tests, instead of waiting forever … and then maybe never hearing what the result of the lab test was … to get it and be able to go on line and get it yourself.

The benefits of this are great. Or even … I serve on the board of a major health system in Pennsylvania … many of their elderly patients give approval to have their adult children look at their medical records so if they’re living in Pennsylvania and their son’s in Chicago, their son can check what the doctor actually said about Mom and what she needs to do.

So it’s, it’s just a tremendous relief to people to have, have access to this kind of information.
HEFFNER: Do the hospitals … are they taking the lead in this? To any extent?

DAVIS: Yes, yes. At least half of American hospitals are now qualifying for this meaningful use … financial incentives that were in the fiscal stimulus law … so they, they see that this is coming. It, it’s more expensive for hospitals than it is for a, a physician’s office … not surprisingly.

But they’re also kind of accepting the fact that information on the quality of their care is going to be publicly available.

I remember talking about this a decade ago when hospital administrators said, “You mean somebody might know my infection rate? I don’t want my medical error information known.”

But I think there’s more acceptance and truthfully now, the Medicare program under the new affordable care act will start giving bonuses to physicians who are rated more highly by their patients … who said that their hospital controlled their pain better, while they were in there. Told them what to expect when they were discharged. Those hospitals that are really providing what we call “patient centered, patient responsive care” are actually now starting to get financial bonuses as a result of providing that kind of care.

HEFFNER: Is the development of the institution of the “hospitalist” … a new medical specialty part of this whole movement. How do you feel about that?

DAVIS: There has been a change with hospitals now starting to employ or contract with physicians to be available full time in the hospital.

That helps improve the care processes. Things happen at night, not just during the day. So really it’s helpful to have around the clock physician staffing in the hospital.

But it means that your regular doctor may not know what happens to you when you’re hospitalized, so improving that communication through electronic information systems between the hospitals … what goes on in the hospital …and particularly improving what we call “transitions” in care … making sure the hospital record gets to the family physician to care for you when you go home.

And that you have an appointment with your doctor before you leave the hospital so you will be sure and get the kind of follow up care that, that you really have. So it’s little bit troubling that we’re creating this disconnect.

But the bigger phenomenon is that hospitals realize they are going to have to be a health system. Not just provide the part of the care that happens when you’re in a bed (laugh).

But really have primary care clinics, have post-acute home health, or nursing home care. That they … and in fact, that’s part of what’s in the Affordable Care Act … is the creation of something called “accountable care organization”.

Have to be led by physicians, by providers, but they take responsibility for everything from preventive care to post-acute nursing home care, emergency care, hospital care … the whole gamut of what you need. And they have to be responsible for coordinating care, they have to be responsible for transitions in care, so mistakes don’t happen in the hand-off from one side of care to another … means sharing a health information system that has all of that information pulled together.

Today a lot of people go or are in nursing homes … they go back and forth between the hospital and nursing home. The nursing home doesn’t know what happened to them when they were in the hospital.

And so they don’t get the right medications when they go back and they wind up back in the hospital again.
So, moving toward a coordinated system where doctors are leading organizations called “accountable care organizations” and responsible for results.

They actually have to report how their patients due and they get to share in the savings, if they control costs , but they’re responsible for making sure that we’re not wasting money, not duplicating tests and people are getting the right care.

HEFFNER: You know, Dr. Davis, listening to you … this program and our previous one, I’m developing a greater and greater respect for the people who worked so hard to write that Affordable Care Act.

They seemed, I’m sure, with the help of people like yourself to have thought of a great many things most of us have never dreamed of. Is that a fair …

DAVIS: Ah, Dick, it’s built a foundation and, and it provides an alternative in the case of the Medicare program, for example to just saying to the beneficiary “You’re at risk for holding down health care costs”.

It’s really saying to the doctors and hospitals, “You’re the ones who ought to be holding down health care costs. You ought to be able to live with the same increase that other businesses in our economy live with. And you ought to be able to hold health spending to the same rate of growth that the economy as a whole. So it’s going to be your responsibility.”

And, in fact, that … the President that’s really what he said. And he set up something called an Independent Payment Advisory Board in the Affordable Care Act.

That is to make recommendations if Medicare spending were to go up faster than, than the economy as a whole by a certain … by one 1 percentage point, or a half a percentage point.

HEFFNER: You’re going to have to come back whether before or after you leave the Foundation to talk more and more and more about health care. Thank you so much for joining me again today, Dr. Davis.

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.”

And do visit the Open Mind Website at thirteen.org/openmind to reprise this program online right now or to draw upon our Archive of 1,500 or so other Open Mind and related programs. That’s thirteen.org/openmind.