MEMORANDUM
To: 2008 Presidential Candidate
From: Health Policy Advisor
Re: “Healthy America” health care plan
Date: March 2007 The “Healthy America” health care plan proposed herein will change the way Americans receive health care by improving both the quality and cost-effectiveness of care. By growing eligibility for state Medicaid programs using a capitation finance structure, instituting a health insurance mandate for individual citizens, demanding and facilitating the provision of cost-effective, evidence-based medicine, and promoting accountability among provider networks, we can open access to health services for millions of Americans. Arguably, the most important component of any health care plan is its mechanism to provide health insurance to the more than 46 million Americans that lack coverage. Healthy America will expand Medicaid eligibility to up to 400% of the Federal Poverty Level and make Medicaid available to the vast majority of Americans who lack insurance. [1,2] Eligible Americans will be automatically enrolled in state Medicaid programs; all Americans, both eligible and non-eligible, will pay a monthly Medicaid premium until they prove that they have some form of health insurance. This automatic premium feature provides an important trigger for the individual insurance mandate. Those not receiving health care through an employer and not eligible for a government insurance plan can join newly formed regional purchasing pools to develop broad risk pools and thereby negotiate lower premiums. Medicaid enrollees will share the cost of their care by paying premiums and co-insurance determined by a progressive means test. New legislation has allowed states to impose higher deductibles, co-pays and other forms of co-insurance; however, studies have shown that high up-front deductibles reduce necessary as well as marginal care. [3,4] Considering the clinical pitfalls associated with HDHPs, state cost-sharing strategies are limited to monthly premiums and co-insurance rates. To encourage the provision of necessary preventive care, cost-sharing levels will be substantially reduced for preventive services. States will continue to have the option to contract with managed care organizations or a state BCBS organization to administer benefits. Enrollees choose whether to sign on with the state-administered Medicaid program, the BCBS program or a private insurer. However, Healthy America includes an important proviso to guarantee all enrollees receive quality care: private insurers can only offer plans that are strictly actuarially equivalent to the state Medicaid plan so as to ensure consistent quality of care for all Medicaid patients. [5] This health care plan innovatively tackles the need to encourage optimal practice behavior by fostering more accountability and continuity in patient care. While managed care has faltered in recent years, the underlying concept of measuring performance and rewarding improvement must remain at the core of health care reform. Healthy America will require all government insurers implement utilization management (UM) and provider incentive mechanisms to monitor the quality and cost of care. The capitation finance structure will decrease extraneous care, and the measurement of providers’ adherence to evidence-based clinical protocols will improve provider practice patterns and restrain costs. Additionally, larger state Medicaid programs will lead to reduced administrative, marketing and uncompensated care costs associated with privately or uninsured patients. [6] Government insurance programs will be expressly required to collectively bargain with medical services and products suppliers to realize economies of scale savings. Medicaid, Medicare, SCHIP and other government insurers’ enhanced ability to collectively bargain will help control the escalating costs of pharmaceuticals, which have been a primary cost driver in the last decade’s rapid rise in health care expenditures and premiums. [7] Furthering the effort to rein in the costs of pharmaceuticals will be the change in federal regulations allowing the re-importation of prescription drugs to help inject extra competition into American markets. The movement from fee-for-service payment systems to capitation will mitigate the high levels of provider-induced demand seen in markets throughout the country while maintaining health outcomes. [8] Providers will be offered palpable reimbursement rate increases for providing wellness visits, implementing Electronic Medical Records and establishing longitudinal relationships with patients. The capitation system also facilitates the implementation of a Community-Oriented Primacy Care (COPC) health model in which the network is responsible for the patient’s aggregate health—for ensuring they receive vaccinations and important preventive care, for example—instead of just being responsible for a particular procedure. Health care reform must include a reconfiguration of the workforce to mitigate many of the problems caused by oversupply of clinicians in some regions and specialties, and shortages in others. A positive first step on this front would be to attach conditions to the funding that teaching hospitals receive from CMS to spur the training of more primary care physicians and decelerate the number of specialists. Federally mandated Certificate of Need programs in states will also play an important role in determining epidemiologic need for additional provider supply to limit provider oversupply and further constrain provider-induced demand. To further ensure that all Americans have access to primary care, Healthy America will reinvigorate the National Health Service Corps by increasing funding and widening the availability of scholarships, loan forgiveness and financial incentives. This program will recruit physicians for underserved rural and urban areas, but alone will not likely solve the shortage of physicians in many areas. An additional program will increase funding for community colleges and universities to expand their infrastructure and capacity to train more Advance Practice Nurses and Physician Assistants, two clinician groups empirically more likely to care for underserved and minority patients. [9,10] Part and parcel of this plan is setting capitation payments for all government insurance programs sufficiently high to foster a broad willingness among providers to participate, and equalizing Medicare, Medicaid and SCHIP reimbursement rates. CMS’ current system for establishing payment rates according to diagnostic groups compels providers to practice cost-effective medicine; however, the dearth of physicians willing or able to care for government-insured patients is a symptom of the chronic slashing of reimbursement rates. Shortchanging providers will only further undermine our efforts to provide access to all Americans. Politically, Healthy America can be expected to be well received by voters. Eight out of ten voters support an expanded government role in guaranteeing access to health care. [11] The fact that so many Americans who lack health insurance would receive subsidized care, coupled with the importance that Americans ascribe to access to care, promises that the electorate will support and appreciate the Healthy America proposal. The inclusion of private insurers and the integration of a competitive bidding process for Medicaid patients should help satisfy private stakeholders who insist on a free-market approach to providing health services. Moreover, many providers who currently suffer from high uncompensated care costs would be highly supportive of Healthy America. While the benefit of forming a level playing field for all insurers is evidenced by the increased efficiency of government-run insurance programs compared to private insurers, many free-market proponents will chafe at the suggestion that an expanded government role in health care will provide better care with lower costs. Empirically, their argument is weak: the inherent asymmetry of information between physician and patient, the disconnect between patient consumption created by health insurance, and the rate of technological change are just some of the factors which create market failures in the health services market. [12] Because government insurers are able to form broad risk pools, reduce administrative costs and wield substantial bargaining power, government programs play an important role in guaranteeing access to care. Resistance from private insurers, pharmaceutical companies, and the business lobby are unavoidable; additionally, providers who rely on treating tertiary patients and those who benefit from the presence of supplier-induced demand will likely pushback against the proposal. A strategic communications plan to counter attacks against Healthy America—and the inevitable canard that Americans’ health insurance plans would be adversely affected—is critical. Earned and paid media placements and a coordinated awareness campaign utilizing federal agencies will be used to inform Americans how Healthy America will produce quality and cost-effective care and provide access to millions of uninsured Americans. Healthy America will be introduced as a packaged proposal, in a single piece of legislation, to avoid the plan’s death by a thousand special-interest cuts. Despite opposition, a proactive and comprehensiveness communications plan will succeed in convincing voters of the plan’s merit: After all, the American public is supportive and frankly expecting a government-led solution to the health care crisis. Healthy America is a bold, common sense plan aimed at ensuring that all Americans have access to cost-effective and clinically sound health care. The reduction in the number of uninsured will relieve the strain on providers burdened by high uncompensated care costs and will benefit American businesses who are straining to provide coverage. The expanded Medicaid programs will accrue the benefits of enhanced efficiency, and combined with renewed efforts to ensure insurance coverage for all Americans, enhance accountability among provider networks, and limit physician oversupply, will lead us to a more equitable, evidence-based and sustainable health care system. ___________________________________________ [1] “The Number of Uninsured Americans Continued to Rise in 2004.” The Center on Budget and Policy Priorities: August 30, 2005. This study reports that 24.3 % of Americans with incomes lower than $25,000 lacked health insurance, while that number was only %8.4 for Americans with incomes more than $75,000.
[2] “Overview of the Uninsured in the United States: An Analysis of the 2005 Current Population Survey.” ASPE Issue Brief. U.S. Department of Health and Human Services; September 2005. This issue brief reports that 89% of uninsured Americans have incomes lower than 400% of the Federal Poverty Level.
[3] Studies on high deductible health plans have reached have been inconclusive. The RAND HIE concluded that higher levels of co-insurance did not affect aggregate health outcomes, but did show poorer outcomes among chronically ill patients.
[4] Please see, “The 2nd Annual EBRI/Commonwealth Fund Consumerism in Health Care Survey, 2006: Early Experience With High-Deductible and Consumer-Driven Health Plans.” Employee Benefit Research Institute; December 2006. This EBRI study concluded that patients with HDHPs were less satisfied with their plans, missed more needed care and generally did not have preventive care costs excluded from their deductible. The study also concluded that patients in HDHPs reported being more cost-conscious.
[5] Please see Barbara Martinez’s article, “In Medicaid, Private HMOs Take a Big, and Profitable, Role.” Wall Street Journal: New York, New York; November 15, 2006. Ms. Martinez examines how states often pay HMOs less than their own costs per patient to administer Medicaid benefits to enrollees. She also notes that state Medicaid programs’ administrative costs number 4-6%, private HMOs number 15-20% and spend substantially less on medical care, prompting many provides and patients to claim that HMOs are restricting enrollees’ access to adequate services, particularly for pregnant women and very sick patients.
[6] Hacker, Jacob. “Bigger and Better: Broad-Based Insurance, After All, is Not Like Widgets.” The American Prospect; May 5, 2005. Hacker posits that private insurers are not only less efficient than governmental administrators on an allocational (Pareto) basis, but are less technically efficient because of their inability to maintain broad-based risk pools, their low administrative costs, and their relatively paltry negotiating power compared to the government. Lastly, he expresses skepticism about the “dynamic” efficiencies engendered by private insurers, stressing that these changes may adversely affect the health of the enrollees.
[7] “Prescription Drug Trends.” Kaiser Family Foundation, June 2006. The report states that prescription drugs are one of the fastest growing components of rising health care costs, increasing at levels three times the rate of inflation between 1994-2005.
[8] Lurie, et al. “The Effects of Capitation on Health and Functional Status of the Medicaid Elderly.” Annals of Internal Medicine; March, 1994. This study found no significant differences between prepaid and fee-for-service groups in the number of deaths, the proportion in fair or poor health, physical functioning, ADLs, visual acuity, blood pressure or diabetic control. It also found better health rating scores and wellness scores in the prepaid group.
[9] Kippenbrock, et al. “The distribution of advanced practice nurses in Arkansas; gaps in the care of underserved propulations.” American Academy of Nurse Practitioners; 2000 November. This study found that APNs were more likely to serve in counties with higher rates of poverty and lower education levels.
[10] Kippenbrock, et al. “Nurse practitioners providing health care to rural and underserved areas in four Mississippi Delta states.” Journal of Professional Nursing; 2002 July-August. This study found that NPs were more likely to practice in rural settings, poor citizens and minorities.
[11] Field Poll; January 2007. The Field Poll concluded that eight out of ten voters in California believe that government should be more involved in guaranteeing access to health care.
[12] Alan Sager and Deborah Socolar, "The real cost of an HMO cure," Boston Globe, Jan. 23, 2000. This article concluded that: one, a decade of price competition in the health care industry had not contained costs; two, nothing close to a free market exists in health care; and three, government financed-care would facilitate expanded coverage and controlling cost, reducing excess clinical and administrative costs. |
