Healthcare Lifeboats
David U. Himmelstein, MD and Steffie Woolhandler, M.D., M.P.H.
The Nation
April 27, 2009
With health reform in Massachusetts sailing through choppy waters, Governor Deval Patrick is trying to keep it afloat by throwing away the lifeboats — public hospitals and clinics.
Massachusetts’ 2006 health reform has proven far more expensive than anticipated — costing the state $1.3 billion this year according to the state’s report to its bondholders. Yet hundreds of thousands in the state remain uncovered, and the number of uninsured patients showing up at hospitals and clinics has fallen by only one-third. Moreover, according to recent surveys at least 1 in 7 state residents (including many with insurance) cannot afford care, and those directly affected by the reform are more likely to say it has hurt than helped them.
High costs and inadequate coverage are in the DNA of the Massachusetts plan. Private insurers drafted the blueprint for the reform legislation, cementing their dominant role. As a result it forfeited the savings on bureaucracy that a single payer plan could realize - $7.8 billion annually in Massachusetts alone. Instead, reform actually increased bureaucratic costs — the new insurance exchange (similar to that touted by President Obama and Senator Baucus) has added an additional 4% to private insurers’ already high overhead. Promised savings through prevention, care management and computerization (also mainstays of Obama’s plan) haven’t materialized. As a result, much of the new coverage came with unaffordable out-of-pocket costs. And the program’s cost overruns drained state funding for care of those who remain uninsured.
Now comes a recession, drying up jobs and private coverage, along with the tax revenues needed to subsidize coverage for the newly uninsured. Facing a yawning budget deficit and desperate to stay the course on the 2006 reform plan, Gov. Patrick has slashed funding to safety net providers such as Cambridge Health Alliance (CHA) and Boston Medical Center (BMC) (ne Cambridge City and Boston City Hospitals). (Disclosure: we practice at CHA, and also teach at Massachusetts General Hospital).
At CHA — a Harvard affiliate which operates three public hospitals, 21 community clinics, and more psychiatric beds than all of Boston’s big teaching hospitals combined - the cuts will shutter one hospital, 6 community clinics, the area’s only inpatient detox unit, and nearly half of the psychiatric wards. Even before these closures, suicidal patients often spent days in ERs waiting for a bed.
These cuts follow a national pattern of responding to fiscal crises by defunding hospitals that care for the poor. Chicago’s Cook County health system recently suffered massive cuts, including half of its outpatient clinic doctors. Hundreds of patients were evicted from the public long term care facility and school-based clinics were closed. Now, women with abnormal pap smears can’t get appointments for follow-up, and mammograms are no longer available.
In Los Angeles, the only hospital serving a huge area of the central city shut its doors; LA’s surviving public hospitals and clinics face a $750 million shortfall.
In Detroit (which, along with Philadelphia has already lost its only public hospital) private ones are fleeing the inner city for greener (as in money) pastures in the suburbs. That city once had 42 hospitals, now it’s down to 4.
Atlanta’s public hospital came within a hairsbreadth of closing, and faces huge deficits ahead; a proposal to force low income patients to pay 70% of their hospital bills was floated in January. New Orleans’ Charity Hospital — virtually the only provider for a wide swath of Louisiana’s poor for 250 years - has yet to reopen after Hurricane Katrina, and the public hospital in Galveston (which provided specialized care to indigent patients from all over Texas) stopped accepting the uninsured in the wake of Hurricane Ike. New York’s public hospital system has been whittled away for years, and a new round of budget cuts is on the horizon.
While safety net hospitals are withering, private ones have thrived. Hospitals nationwide showed record profits in 2007 — the most recent year for which data are available. In Massachusetts, Gov. Patrick’s deficit reduction plan will barely touch Massachusetts General (which ran a surplus of $354 million that year), or Brigham and Women’s, which racked up gains of $48 million in the second quarter of 2008 alone.
Safety net providers aren’t in trouble because they’re inefficient. In fact, Medicare data shows that in caring for comparable patients CHA is about 20% cheaper than Boston’s big teaching hospitals, while scoring as high on quality measures. And the same is true in other cities, where endangered public hospitals consistently cost less than their prosperous private counterparts.
Public hospitals are in the red because they provide vital care that other hospitals won’t because the market mitigates against it. CHA cares for one-third of the uninsured chronically mentally ill in Massachusetts — a group whose complex care brings low payments. While CHA does relatively little elective (read “profitable”) surgery, it delivers more emergency and primary (read “money losing”) care than famous Boston hospitals like Massachusetts General, Brigham and Women’s or Beth Israel Deaconess.
The pernicious market signals in medical care don’t reflect consumer preferences or invisible hands; they arise largely from government policy. Taxpayers foot the bill for at least 60% of hospital expenses - at both public and private institutions. Indeed, the average American with private insurance draws a government subsidy more than twice that received by the uninsured. In Massachusetts, little known provisions of the reform bill cut payments for primary and mental health care, while boosting fees for already lucrative specialty care and already overbuilt hi-tech facilities. Today, Blue Cross pays Mass General $838 for a chest CT scan, but safety net BMC only $418. Like an auto industry hooked on high margin SUVs, a medical system freighted with a surplus of high tech hospitals and a deficit of appropriate technology like primary care is unsustainable.
A sustainable alternative requires health planning based on needs rather than profitability, as well as jettisoning private insurers and their bloated bureaucracy. Unfortunately, Governor Patrick seems disinclined to face down powerful and prosperous insurers and hospitals. With health costs threatening to swamp reform, his only other option is to throw overboard the institutions that care for the poor.
Patrick’s dilemma should serve as warning: the Massachusetts model for reform rests on impeccable political logic, but is economic nonsense.