From the Dec 21, 2009 edition
OPINION


I can certainly excuse my business brethren for having trouble keeping up with the health reform debate still unfolding in Washington, D.C. It is only through the most persistent attention I can muster, fueled by the powerful self-interest of being part of the health care industry, that I have been able to keep up. And what a trip it has been.
Honestly, if we had to solve problems in our businesses the way Congress goes about it, none of us could survive. Short of lapsing too deeply into colorful vernacular, I am challenged to come up with an appropriate simile.
Health care is admittedly complex. Still, its most glaring problems are quite obvious to those in the field. Administrative costs are far too high, indicating too much nonvalue-added activity, most arising from arcane reimbursement and claims-processing procedures. In addition, over-utilization of services results from the fee-for-service incentive of the same reimbursement system.
It is clearly apparent that the reimbursement or financing mechanism is at the core of the problem. So who controls that?
Well, about two-thirds of our health care is already paid for by the government through the Medicare, Medicaid, Veterans Administration and other programs, and to varying degrees they have made progress on the administrative-cost issue.
The federal Medicare program is so much more efficient than the fragmented private insurance industry that the difference could fund the cost of covering all the uninsured. As far as developing alternatives for the perverse incentives inherent in the fee-for-service structure, not so much – but there are ideas.
To its credit, only the government has an objective method for actually setting fees. It is a quasi-public commission called MedPac – basically a bunch of smart academics who figure out what various procedures and services should cost.
The problem is that MedPac doesn’t set the rates. Congress does that. So when we note that Medicare appears to under-reimburse providers, it is largely because Congress has figured out hospitals and others can simply shift those costs onto the privately insured sector, avoiding what might otherwise require tax revenue.
The original intent of Medicare was to cover the elderly first, but then to expand the program to other age groups until everyone was covered. The program outsources most administrative functions to private insurers and others, and also allows insurers to sell supplementary coverage. While such a fate isn’t really Armageddon for the insurance industry, it is a prospect that looks far less profitable than their present role; hence the furious battle against reform they have been waging.
Many other special interests also have a vested financial interest in the status quo, and have combined to present considerable friction in the reform process.
Resistance to the eminently logical and seemingly obvious solution of systematically expanding Medicare until we eventually achieve “Medicare for all” has come from various stakeholder segments, each with a finely honed set of critical “concerns,” all carefully crafted to disguise them from the self-serving whining to which most could be reduced.
Fiscal conservatives cry that Medicare is already going broke. That’s not exactly true, but in any case, adding younger and healthier subscribers who would pay for their coverage would actually help sustain the program.
Hospitals and some other providers complain that Medicare reimbursement is often too low, and here there is a legitimate concern. It may sound like a leap of faith, but our health care system, and therefore Medicare, needs hospitals to survive. This will mean that as the privately insured sector shrinks, the opportunity to shift the government’s costs will diminish correspondingly. The prospect of hospitals in communities across the country being shuttered is far more politically unacceptable than any fuss the insurance lobby will put up.
The program, whatever program, will simply have to deal with this reality. For the public, the change in service payments would not represent a new cost, but rather would be a shift from private policies to public, and presumably it would include savings on the administrative end.
Medicare isn’t going anywhere. It is arguably our country’s most popular social program, enjoying near monolithic support from our most organized voting block – seniors. With this type of user satisfaction, a successful track record spanning more than 40 years, and an existing infrastructure that negates the need for any new bureaucracy, the Medicare program is clearly the most logical platform upon which to base our reform efforts. Once the now hopelessly fragmented flow of financing is consolidated, we can work on several promising ideas for reimbursement reform that could focus the incentives in the system on the needs of patients rather than on providing more services and procedures.
Clearly, the battle is not over. Indeed, the outcome is still far from certain. But as tragically comical as the process may have been, it has taught us some meaningful lessons.
If Congress fails, or if the final result of its effort is too weak to be effective, the onus will fall back upon the states, where several innovative programs are already in progress. We must be prepared to sustain the energy of the reform movement, and to build upon any federal reform to craft a solution in Rhode Island that will free our struggling economy from the shackles of excessive health care costs, stabilize and invigorate our hospitals, and build upon the knowledge industry of which they are the foundation. •
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Ted Almon is president and CEO of The Claflin Co. and is an active participant in the debate over health care reform in Rhode Island.