Tuesday, June 23, 2009

Prognosis: Debt; Treatment: Public Health Insurance Option + Investment in a Public Health Infrastructure

In an editorial titled, "Prognosis: Debt" Fred Hiatt of the Washington Post expresses concern over the (misleading) 1.6 trillion dollar price tag placed on health care reform, but in a way makes a compelling argument for including a public health insurance option in health reform.

He writes that President Obama (and others) have defined the major problem with our health care system as being unsustainable growth in costs, while congressional Democrats have primarily focused on expanding coverage to the uninsured:

congressional Democrats and the most involved interest groups behind them are far more passionate about universal coverage than about controlling costs. Thus Obama's political calculation: Push for health-care reform that delivers universal coverage -- and insist on as many levers to control costs going forward as possible.

He explains that this disconnect between the problem and proposed solution comes from the fact that it's easy to expand coverage but hard to control costs. He states that proposed cost saving measures, such as focusing on prevention, shifting from specialist care to primary care, and changing provider payments from fee for service, all are unproven, and he implies that expanding coverage to include all Americans would inevitably lead to more debt. He gives several suggestions to the President on how to ensure that whatever "new burden" we take on with health care reform "is really paid for".

As a physician, I do think universal coverage and equitability in our health care system is a "moral imperative" - I see patients without health insurance or with inadequate health insurance who have put off necessary care due to costs and suffered the consequences - but for the sake of argument, let us just talk about costs.

If we expand health insurance coverage without controlling costs, as outlined by Mr. Hiatt, we would have the equivalent of the Massachusetts plan. Their health exchange ("Commonwealth Connector Authority") and individual mandate to purchase insurance (with subsidies for lower income individuals and families), along with Medicaid expansion and other measures, has achieved more than 97% health insurance coverage. This initially improved access to care (more individuals had a usual source of care besides the ER and a preventive care visit in the preceding 12 months), and decreased the financial burden of health care costs on some families (with fewer people spending more than 10% of their income on out of pocket costs). However, without a mechanism to control costs, there have been challenges in limiting increases in premiums and some of the gains in affordability have been lost.

This is where the public health insurance option comes in. Massachusetts does not have a true public health insurance option. The Congressional Budget Office's $1.6 trillion estimate on the 10 year costs of the Senate Health, Education, Labor, and Pension committee's health reform bill did not include evaluation of the public health insurance option. A proposal by the Commonwealth Fund for comprehensive health system reform including a public health insurance option, provider payment reform, and investment in public health infrastructure was estimated to have a net impact over ten years of $3 trillion in savings. While the upfront costs in expanding insurance coverage may appear daunting, as long as it is coupled with a mechanism to control costs, it will be a wise investment that improves access, quality, and slows growth in health expenditures.

And the cost savings are not just wishful thinking - lower administrative costs and the ability to negotiate lower rates from providers and pharmaceutical companies would allow a public plan to offer premiums at least 20% less than those of comparable plans in private individual or group markets. This expansion of coverage would not reduce overall health care costs, but these savings are not included in the 1.6 trillion dollar price tag for the HELP committee's proposal. If employers or individuals previously with commercial insurance chose to buy into the public plan and its less expensive premiums, there could be significant savings overall.

A public health insurance plan would also likely reduce the costs of premiums of private health insurance through competition. 94% of health insurance markets are "highly concentrated" by FTC standards and most metro areas only have one or two options for consumers. This near monopoly is not good for costs or quality.

The effects of payment reform may be more difficult for the CBO to estimate, but a public plan would have a clear advantage over private insurers in shifting incentives toward prevention, care coordination, and evidence based medicine. Managed care was supposed achieve these goals in the private sector, but it has failed to control costs or improve quality. Medicare has begun to align payment with outcomes through pay for performance and nonpayment of care for preventable complications instead of simply reimbursing for the volume of care provided. A public plan would have the national scope to influence practice patterns across the country; a public plan would offer transparency and could be held accountable if cost or quality measures were not being reached; and a public plan would have the mission of disseminating effective payment innovations to other payers as a public good.

There are many other reasons why we need fundamental health care reform - most pressingly because it is unconscionable to deny sick patients necessary care because of inability to afford health care costs - but the realities of increasing health care expenditures do require a discussion of costs. While it is unfortunate that a misleading CBO estimate on the costs of one version of the health care bill have decreased momentum for reform, drawing on the lessons from Massachusetts, we can still use this information to promote meaningful change. Relying on the private health insurance industry to control costs would be a mistake. However, adding a public health insurance option is extremely popular, with 72% of Americans supporting a public plan in the most recent poll, and would provide several mechanisms to control costs. The American people are correct on this one, and our elected representatives better be listening.

Aaron Fox, MD
National Physicians Alliance
New York City - Local Action Network

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