The Democrats' Approaching Dilemma

What should they do about health reform?

By Caroline Poplin, M.D., J.D.
MedPage Today, August 23, 2018

If the Democrats begin to retake control of the federal government in November -- for example, by flipping the House -- they should start thinking about their next moves on health reform.

They will have plenty of time for contemplation: President Trump and his minions will, if anything, redouble their attack on the Affordable Care Act (ACA) for the next 2 years, and the Senate (unless also flipped) will do what it can to help. Even if they regain control, all House Democrats can do, especially if the Senate doesn't flip, is block bad bills from getting to President Trump's desk. There is no compromise with this man.

The Choice

But in 2020 (hopefully) the Democrats will be at a fork in the road, and they will need to answer an important question: Should they restore and improve whatever survives of the ACA, based on 10 years of real-world experience, or should they respond to rising calls for "Medicare for All," for part or all of the under-65 population?

Now is the time to start thinking.

The debate to date is not evenly balanced. As you would expect, supporting the ACA are the large (and growing) industries that benefit -- for-profit insurance companies, large for-profit hospital chains, pharmaceutical manufacturers, and so forth. (Indeed, the ACA was designed precisely to garner their support, or at least buy their silence.) In addition, though, over the last 30 years, an extensive and powerful "policy" community of academics, consultants, economists, and highly regarded think tanks (likely some with industry funding) have developed an elaborate intellectual infrastructure to support market-based commercial healthcare.

On the "Medicare for All" side, we have Physicians for a National Health Program (that should tell you something); Gerald Friedman, PhD, an economist at UMass Amherst; and recently, some advocacy organizations. No leading think tanks that I am aware of.

Since Democrats now have a choice, perhaps instead of starting from where we have been -- the same thinking that led to the ACA -- perhaps we should start with where we want to arrive.

We should have two principal goals. First, everyone needs to get the care they need at a price they can afford -- that is to say, the objective is care, not coverage. Second, we need to get the total cost of the system down. That hasn't happened despite strenuous efforts on many sides, possibly because the policy community has been ignoring some important costs as it bears down on what we pay clinicians (of which, full disclosure, I am one).

Important Cost #1: The Sickest Patients

One of the best opportunities to reduce cost -- often overlooked in this context -- is the sick patient. In general, 5% of a population is responsible for 50% of its total health care cost. Treating these patients, who have multiple problems including depression, functional and cognitive impairment, as well as, often, limited social support or financial resources, is expensive, yes. But secondary and tertiary prevention, close follow-up, and improving patients' social determinants of health saves the system money -- mostly by keeping these patients out of emergency rooms, hospitals, in-patient rehabilitation, and nursing homes -- and improves patients' quality of life.

Commercial health insurers and risk-bearing accountable care organizations (ACOs) want no part of the sickest patients -- the way to make money is to insure and/or care for the healthy. Low cost, excellent outcomes, and numerous healthy patients mean high profits. Insurers and ACOs also seek reinsurance from the federal government, the states, high risk pools and other programs to which to transfer the costly 5%. These maneuvers allow insurers to keep their profits and socialize the losses.

Important Cost #2: Administrative Costs

The good news is, from 1990 to 2012, the U.S. healthcare workforce grew by 75%. The bad news? Ninety-five percent of that growth was in administrative staff, not physicians. By 2012, there were 16 non-doctors for every doctor. Worse, only six of the 16 were involved in patient care.

So how much value do the 10 non-clinicians contribute to patient care?

Drs. Jiwani, Himmelstein, Woolhandler, and Kahn extensively analyzed the data for 2012 and determined that expenses related to billing and insurance in our multi-payer system totaled almost 18% of U.S. healthcare expenditures that year, far more than in any other OECD country. In 2014, in The New York Times, Elisabeth Rosenthal estimated administrative costs at 20% to 30% of the total.

Today, the ratio of administrators to clinicians is probably higher, and accounts for a larger percentage of U.S. healthcare costs. Why?

First, as politicians and the policy community have pushed a market-based system, U.S. healthcare has become a very profitable business, with many participants answering to Wall Street. To stay in business, prosper and expand (those latter two are often linked), businesses need managers, and the above-mentioned consultants, to supervise marketing, identify profit and cost centers, and extract maximum productivity from the work force. Frequent negotiations between insurers and providers over prices also require businesspeople (and generate huge transaction costs).

Managers do not come cheap: John Commins points out that in 2005, CEOs made three times as much as orthopedic surgeons (the physician heavy hitters); 10 years later, five times as much. Indeed, physician compensation represented only 8.6% of total healthcare expenditures in 2012. We know how orthopedic surgeons help patients -- CEOs, not so much.

Second, hospitals, insurers, and health systems are consolidating ever more quickly, sometimes for survival, often for increased leverage with one another, and for increased profit. Consolidation of multiple hospitals or businesses requires additional administrators to manage the administrators of local systems. Or as Cathy Shoen, a senior expert at the Commonwealth Fund, put it,"[At] large hospitals there are senior V.P.s, V.P.s of this, that and the other." Whether consolidation improves quality and reduces cost, it does move important decisions further and further from the bedside.

And finally, all these managers as well as the policy community and, alas, Congress, have an unshakable faith in the ability of health information technology to "transform" U.S. healthcare, reduce costs, and improve quality by collecting and analyzing vast amounts of data about everything.

Indeed, their faith was such that in 2009 Congress promulgated the so-called HITECH Act, "encouraging" all hospitals and doctors (first with carrots, then with sticks) who received payments from Medicare to buy electronic medical records systems so that they could send their outcomes data to CMS and other interested parties, who would presumably use them to improve care and reduce cost. Under the Medicare Access and CHIP Reauthorization Act (MACRA), passed in 2015, these required reports became even longer and more complicated.

It doesn't appear that anyone has done a credible analysis of how much top-heavy management and its high-tech tools cost our system -- my guess it's become a significant percentage of the total. We need to reassess this before we design the system of the future. From my vantage point at the sharp end of the stick, expensive managers and HIT are not merely useless -- they are counterproductive and wasteful.

And quality? At least one analyst crunched the numbers and concluded that "as countries spend a larger percentage of their healthcare dollars on administration (as opposed to public health, or providing patient care, for example), things get worse for patients and healthcare providers."

What's the Answer?

The cost of healthcare in the U.S. continues to rise in an unsustainable manner, particularly if we insist, as we should, that in a country as rich as this, everyone who needs medical care should get it. In 2009, the Democrats went with market based reform, based partly on what seemed politically most feasible. Truly. Not only did it undo them politically, but it did not save money. In 2020, with a little luck, they will get another chance.

The way to reduce costs, maintain quality, and cover all is to treat the sick, simplify, and decentralize, through Medicare for all. Providers must be non-profit. Now is the time to work out the details.

Dr. Caroline Poplin is an attorney and internist in Bethesda, Maryland. She is a former staff internist for the National Naval Medical Center, and currently practices medicine part-time at the Arlington Free Clinic in Virginia. She also consults for law firms on Medicare and Medicaid fraud.