The new NEW DEAL

by William DeMarco, January 8, 2009

The healthcare “deal” for the near future is firming up to represent threats and opportunities for health plans and providers.

Franklin D. Roosevelt offered a “New Deal” after the Great Depression. It took 25 years after the stock market crash of 1929 and the subsequent large market crash of 1937 to begin to achieve pre 1929 levels. It worked because once people went back to the fundamentals of infrastructure repair, sharing resources and returning to the hope work brings, the economics ramped up and the vision of the nation being able to defend itself against the determined and expanding German nations and the sudden incursion of Japanese into SE Asia and eventually Pearl Harbor signaled the greatest manufacturing boom in history.

We now have before us a new President and a very deep and growing recession/depression. Every industry from housing to banks to automobiles to retail is being affected, and certainly health care insurance companies and provider organizations are feeling the tightening of capital and a large hole left in their investments as this crisis will require belt tightening. Have we learned how to do that? Is the plan the government offers going to correct all of this? It will take time. In that time we need to share resources, repair our infrastructures and recognize the fundamentals of how care management works. We apparently have not done a good job in answering the public’s question, “What is it that managed care was trying to do?”

In fact the “blueprint” discussed in the incoming HSS Secretary’s book has a very different take on what managed care was trying to do.

In reading Daschle’s book we see no mention of the early HMO movement and success still enjoyed by Greater Marshfield, Geisinger, Kaiser, Health Partners and others that established much of the industry’s PURE or Classic HMO operations and efficiency. These plans are still expanding their ideas in literature as truly integrated provider sponsored plans. (Please refer to MCOL’s managed care museum for an accurate description of the industry history.) Instead the Book goes on to say Blue Cross established the entire health industry and that what we need is a national health board similar to the Federal Reserve.

Neither is there mention of the rapid consolidation of Blue’s plans to obtain cash as for-profit entities nor a discussion on the fundamentals of the Elwood Enthoven goals of coordinated care. Their original writings and proposals to Congress emphasized quality first and price last, but insurers and third parties saw the opportunity to bring in the price and cost issue and, to this day, left most of the medical management and issues of quality as optional components when they were the core of care cost reduction. Much of coordinated care linked the providers to one another, as well as payers to one another, so there was a full integration of both delivery and financing.

This exchange of data and service value for money and time spent was focused on a highly concentrated provider-payer linkage and this is what the Value Based proposition began with and may still endure as employers become interested in managing benefits and managing benchmark sets locally that were never corrected by insurance companies.

Why would an insurance company want to have less utilization? What would they want to correct the unnecessary care, which translates to less premium and less stockholder value?

Although we can agree that the Clinton plan went down the road with little legislative input and eventually pitted the AMA and the AHA against one another, we can also agree the plan’s complexity and attempts to oversimplify the process caught many potential supporters flat footed and unable to truly defend good parts of the plan the Clintons had worked on for so many months.

My own discussions with White House press secretaries and several of the Ira Magaziner staff showed me it was understood that while the plan made sense, Congress and others were going to offer no support as they saw it as too detailed and complicated to explain and implement. By the time Harry and Louise appeared in commercials as a campaign to sell Fear Uncertainty and Doubt ( FUD) politicians and lobbyists had taken the ideas to stunning misunderstandings, the program was over and everyone returned to production driven medicine.

Now we see the out of control costs of utilization, introducing the era of “Thelma and Louise” ready to drive over a cliff into a one-size fits all program.

The Federal Health Board concept of offering several layers of authority over the workings of a complex, structurally broken system that has perverse incentives, may offer the “fresh idea” of centralizing this system of separate fiefdoms and uneven, underfunded resources, but the ultimate questions remains, “How long will this take?” The sad truth is that many forecast the number of underinsured will exceed the number of uninsured by next year.

Who will be on this board? Will politicians be at the switch again to hold back changes that need to be made because the polling data says people do not understand the true urgency of the situation? How will existing providers fit? How will insurers fit? Will consumers use the system correctly or fill EDs with the “worried well”, forcing hospitals to assure expensive 24/7 trauma care, trained professionals to take care of sore throats and colds?

The larger issue here is that while the debate over policy and funding continues from last year (SCHIP and Physician compensation to name a few), the aging population is aging faster and faster and the uninsured ranks are sure to follow.

The simple truth is there is no funding available. This means dollars to pay for this 75 billion dollar a year MOVE TO Universal Health Care will need to come out of funds that are now in place. It has been estimated one third of this cost will be paid for by funds now going to hospitals for the uninsured. The rest could come for repealing tax cuts, raising taxes or putting caps on spending.

In exchange 30 million uninsured could become insured, of which 40% would get their care paid for by employers. Another 4.5 million would trade their current private coverage for the government subsidized program of “Medicare like” benefits.

This sounds like a plan where many will be affected and, if successful, could at least straighten out the issues of coverage and some access concerns, but are we really getting to the question of “Why does this health care cost so much”?

There are some studies conducted by the Medicare demonstration project on disease management that say improving productivity will not reduce costs. Yet last week Health Partners announced 100 million dollars (will be???) saved through improved productivity of physicians and their staff.

Other proposed funding of electronic medical records and a health info technology will take time but may be part of the answer. This, along with the value base purchasing plans, will reduce office costs and allow proficient doctors to be rewarded for superior performance, but we still have this delivery system issue of how to actually shift from a production of procedures environment to a standardized cost and quality environment. The CSC report of Health Plan CEOs mentioned earlier by Clive Riddle in his opening comments on this blog, says that medical management progress will be cut with dollars going elsewhere. Are we really understanding the fundamentals of this business if we abandon this critical means to reduce premiums in favor of acquisitions or other growth options?

If health plans can change the environment to refocus their mighty databases and tiering capability in the direction of medical management, the move to a comparative economic framework will indeed reveal why this thing called health care is so expensive. If the Chronic Care models and productivity can be measured long term, we can get this efficiency and effectiveness planning that has been so long debated moving in a forward direction.

Many plans are already moving in this direction, forming cooperative models of data and guideline development to share among local competitors as is done in St. Paul and Minneapolis. Several plans are being directed by their employer coalitions to share data to get a clear understanding of what costs so much and what they can do as purchasers to redesign benefits that will change patient behavior. Five of the largest health plans in St. Louis have a good chance to do this in conjunction with their employers. If this is done, the management of populations, sick or well, young or old, can be done as well.

The alternative will be stricter underwriting and discrimination against those with illnesses who cannot qualify as individual policy holders and are liabilities to employer groups, who will look for ways to remove them from the workforce.

We see the products all moving to consumer driven and think that the days of the large networks are dead and that local networks will prevail. This means much of this action will still require LOCAL planning and leadership to create a better system of care before financing can really see a difference.

Health plans and physicians and hospitals have the incentive not to wait and see but to find ways to collaborate regionally or locally to get at the means to reduce chronic care cost s and compare the current pathways to best benchmarks ands see if productivity really can improve. Plans and Providers can help one another and, in so doing, help the national health policy efforts as many in Washington still do not understand what Health Plans do and why it is done the way it is done. Many consumers are a bit suspicious of companies that grew so fast with other people’s premiums.

To let this be tied up in a legislative contest is probably the worst outcome we can see.

Instead, local experiments and collaboration towards reducing costs and improving productivity is. We must get past the walls of competition. Pricing is not the issue. Doing the right care for the right person at the right time is. If we can do this we are doing the right thing for the customer, our patient/ member.

There will never be a better time for this change to happen.