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Friday, March 27, 2009

Health care reform: Share the responsibility, share the love

Two of the more significant health care financing reforms of the last few years happened in California and Massachusetts. Massachusetts successfuly passed requirements that all residents have insurance and provided vehicles and incentives. While the reform in California was not successful, it used similar principles and could be lessons for future efforts. A series of articles was released in Health Affairs that analyzed the results and lessons (no subscription required). They are fairly detailed and wonky as I had to read them twice to fully grasp what they did. This further underscored how complicated a grand compromise of US health care reform can be.

Some of the current buzz words to describe reform are "single payer", "get everyone under the tent", "Medicare E (for everyone) and "clusterf#ck (at least what some are thinking privately)". However, "shared responsibility" is the model that worked in Massachusetts and fell to California's legislative process which can be as cumbersome as a double pad locked chasity belt.

The principles of shared responsibility involve everyone giving up a little to get a little. In summary:
  1. Individuals are required to purchase health insurance in exchange for more affordable options
  2. Employers are required to contribute towards health insurance purchasing by either offering health insurance or paying for a government purchasing pool
  3. The government assumes responsibility for providing health care for those who could not afford it.

The steps that it took to achieve this were as follows:

Make the Individual purchasing market viable: I have previously commented on how the individual insurance market is deeply dysfunctional. The government required insurance companies to offer a variety of plans for each type of purchaser based on how much health care they wanted or how sick they were. This was similar to my proposal in a previous post. As part of making the individual market viable, an insurance plan couldn't have a deductible lower than $5000 for example. There were rules around what constituted a viable insurance plan so carriers wouldn't introduce plans that excluded coverage for entire body parts.

Low income pool and floor for insurance benefits: The government offers subsidized insurance for those who qualify usually based on an income of 250-300% of the Federal Poverty Level ($25,000-$30,000/year for a single person). There were also other participation requirements in place to ensure that groups wouldn't steer sicker individuals to this pool.

Keep the incentive for employers to offer insurance: This is a key part of the plan. If employers have to pay more for health insurance than dropping coverage, contributing a fixed amount towards a pool, and telling their employees to get insurance on their own could be an attractive option. Some of the rules to counter this involved workers not being able to participate in the low income pool. This is a very key and complicated part of any health care reform and I didn't understand all the details.

Demographics were a big difference with the California and Massachusetts approach as California had a higher number of low income residents who would need to access the government low income pool. Massachusetts also had very high individual insurance premiums as they required all insurance carriers to offer insurance to everyone. Finally, covering California's immigrant population proved to be a 3rd rail.

At the beginning of the post, I called this health care financing reform as the changes mainly involved who pays for health care and how to ensure that all contribute fairly and get a reasonably equal benefit. A true shared responsibility with shared love would involve the health care delivery system. The costs of Massachusetts health care program are not sustainable. For this model to work nationally, there must be shared responsibility for those who provide health care. For example:

  1. Providers: The gap in pay and reimbursement between specialists and primary care must be reduced. This will help shift more medical school graduates to primary care and reward more cost-effective care. Ideally, specialists pay would be lowered more than primary care pay would be raised.
  2. Hospitals: Hospitals purchase a lot of technology and build infrastructure to attract patients. They often overbuild so they won't have to turn patients away. Hospitals needs to shift their purchasing towards cost-effectiveness and away from consumer-effective. Services, such as colonoscopies with massage, color photos to take home, and anesthesia so cool that it could be an awsome street drug, are more for marketing than actual cost-effective care
  3. Medical Device and Pharmaceutical: The same principle above applies, too. Ultimately payments from insurance companies and payments in general are going to drop so these companies will have to figure out how to make new products with less revenue opportunity. This will require some cuts, possibly in marketing as well as research and development. However, if there is a clear target of what kind of treatments are needed and will be paid for, the innovation will follow the money.

Shared responsibility has potential as a platform for health care reform. It would start with sharing responsibility of how health care is paid for but needs to move towards how health care is delivered. This might be the next phrase that we hear thrown about by pundits but I would suggest an improvement. Sharing responsibility sounds like we all have to do more and reflects are proverbial national protestant work ethic. Let's try calling it sharing the love! I have been on a streak with MBA on MBA dating posts, comparing leadership training to sex acts, so let's keep the hedonism rolling!

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