It's The Consumer, Stupid!!

All is quiet on the health care reform front- for a little while. Things will heat up again when Congress returns from the break and we’ll likely have some type of health reform signed by the President over the next several months.

We all know something needs to change in the way we finance and deliver health care in our country. In some respects we’re thankful Obama made it an issue. It needed to be an issue. But, we are disappointed with the product, the result.

The 2000+ page Senate Bill and the 1000+ page House Bill are loaded with pilot programs, regulations, and requirements. The infrastructure that will be required to put this all in place will be huge. And, most estimates don’t even predict a break in the costs we will be paying for health care in the coming years. Employers will pay more, consumers will pay more, and government will pay more. Those providing care will receive less. And, insurance, pharma, and medical device companies will all contribute to the kitty to offset some of it. It’s not that complicated.

There are some good ideas in both bills. They aren’t all bad. But, the good ideas are overshadowed by the bureaucracy that will need to be created to implement them. It’s really quite sad. We hope it works, but we have very serious doubts.

And, through all of the debate we continue to neglect one of the primary reasons we have such an expensive “sickness-based” system in the first place- we live unhealthy lives. We live like we want to live, and expect the health care system to fix us when things go wrong. As Archelle Georgiou M.D of Fox News. so accurately put it, we have delegated our health to the health care system.

As part of the Healthy People initiative the CDC determined that approximately 50 percent of premature mortality in this country is directly related to individual lifestyle and behavior, about 20 percent is related to environmental factors, an additional 20 percent is directly related to one’s inherited genetic profile, and only about 10 percent is related to inadequate access to medical care.

Both bills include segments on health and wellness and everyone agrees that creating a healthier culture is a key to confronting the fact that 80% of our health care costs are being spent on chronic conditions- many created by the lifestyles we lead. We continue to focus our efforts only on the physical health of the individual- and nowhere do we talk about the emotional, spiritual, intellectual, or social health aspects that contribute to the physical aspects of our health.

Employers are trying to make health, wellness, and prevention part of their health care strategies- but they have a trust issue to overcome with their employees. The government “education campaigns and web sites” are a good idea but not many folks don’t have a lot of trust in the government right now either. Health plans are trying to do the same- and they have an even bigger trust issue to overcome.

It’s when a trusted resource is created for the individual consumer to guide and support a healthy lifestyle in all aspects of life that true health care reform will occur. This resource must be separate from but subtly linked-to the confusing, mistrusted system we have today. Real health care reform will occur when the individual consumer is involved.

We just don’t see this as part of the direction we’re heading today.

Meeting a Christmas Deadline

As we expected, the Senate moved forward with hitting their self-imposed “Christmas Deadline” to passing their own version of health care reform legislation. Some pretty interesting “sweet deals” were cut to get to the 60 votes Harry Reid needed to prevent a Republican filibuster. Now, they have to reconcile this legislation with what was passed in the House in order to send a final bill to the President for signature. That’s going to be interesting.

CBO released its own estimates of the financial impact of this legislation a few days ago. We’re going to be hearing about the $132 billion in net deficit reduction that will result from this legislation for momentum from the politicians to move this thing forward and justifying their actions. While the CBO is allegedly non-partisan, we just have a difficult time reconciling the numbers with reality.

We’ve also posted CBO’s correction to the letter that softens the savings impact estimated in the original letter for the 2020-2030 time-period. We don’t hold much confidence in estimates 20 years out anyway- but we’re sure the Republicans will likely jump on the error for some political leverage.

Here’s our take on some of the points of the Senate legislation based upon what we’re reading from the original CBO letter:

1. Net deficit reduction of $132 billion between 2010 and 2019 (sounds good- but we still question the reconciliation with reality)

2. The deficit will actually increase in 2010 because the legislation won’t really kick in until later. (If this occurs- this will be a major talking-point for the Republicans in the 2010 elections)

3. Health care premiums for employers and individuals will continue to increase in 2010 and the legislation actually won’t have significant impact on health insurance premiums throughout the 2010-2019 period. Even though federal tax credits may be available, they won’t do much for the employer or individual consumer in assuring that we are really doing something to address rising costs when they continue to increase. (This is another talking-point for the Republicans in 2010)

4. Most of the savings will come from the provider side and hospitals and physicians they will take a significant hit. We certainly agree that to deal with costs you have to go to the source but continuing to focus on fee-for-service savings when a new reimbursement model is needed for real reform is simply a mistake. (Providers- be ready)

5. The CBO didn’t include the “discretionary costs” of the IRS and HHS that will be required to put this in place. They currently estimate between $10 billion and $20 billion will be required, which would take the net deficit reduction down to between $122 billion and $112 billion if the numbers hold. (We think it will be more- and the IRS and HHS need to go to Congress to get this funding- which will be tough)

6. The unfunded mandates required for state and local governments are huge with this. The federal government will help for a time, but state and local governments are going to have to eventually pony-up to assist with Medicaid and SCHIP financing (with the exception of Nebraska); Hopefully, our economy is going to be at a better place when the state financing requirements kick in.

7. The public option idea is now replace by an “OPM Managed Exchange” that will be administered by 2 national or multi-state insurance plans- one which must be non-profit. (We’ll be relying on the same stakeholders Congress has vilified to now provide coverage through an exchange- an interesting turn-of-events).

As we have said from the beginning, we absolutely support the need for reforming our existing health care system. We just believe it should occur first by re-organizing care delivery as opposed to reforming the insurance/financing method. We have enough examples to know that covering everyone without reforming delivery only results in higher costs. And, costs are increased, and citizens are being hurt by the delivery system that is in place today.

We encourage all citizens to become much more informed with what is taking place. Our views are only our views and intended to provide a perspective to consider. The American people need to become informed about how this system works as they will be dealing with the results.

Regardless of the outcome, this is a historic time for health care. It’s just unfortunate we’re relying on legislation to make the changes we need. There are some good things included in the bills presented to help the average citizen but we had hoped the market would make the changes on its own. It didn’t, and now we have to deal with it at a different level.

Merry Christmas

It Had Better Work

Within the next couple of weeks something is going to come out of Congress regarding health care reform. We still don’t know what it will look like, as most of this is now behind closed doors negotiating specific details to solidify the vote. We know this may be democracy at work but can’t believe our Founding Fathers would support the idea of passing a major piece of social and economic legislation to meet a deadline. The approach is simply wrong for our country.

Despite all of the numbers being thrown around by CBO and the others, we really have no idea of what the ultimate costs of this endeavor will be. Unless things changed behind the closed doors, we find it hard to reconcile how this approach will “change the cost curve” we are experiencing in health care today. We just don’t see it.

According to Gallup, Congressional approval remains at an all-time low. If this legislation passes and still includes the hefty price tag we think it does, American’s will be looking for results. They aren’t a patient lot right now. If citizens (especially the independent voters) don’t see some improvement in the health care numbers or results early in the year, many Democrats may be looking for consulting and speaking gigs after they are replaced in next year’s mid-term elections. From a political perspective, getting on board behind this legislation is a huge risk.

There has never been a public strong public mandate to pass legislation this year. There has been a strong public mandate to fix what we’ve got but we expect it to be done right.

Gallup’s November 30th poll indicated that currently 49% are against the legislation while 44% are for it. A recent ABC/Washington Post poll indicated that 53% feel we will pay more individually, 55% feel we will pay more nationally, and 50% feel the quality of care would be better if we just kept the way things are today. These numbers don’t resemble anything close to a mandate.

Senator Harry Reid said on Monday, “I’m confident that by next week we will be on our way toward final passage of a bill that saves lives, saves money, and saves Medicare.”

He’d better be right. If he’s wrong he’ll be doing something else this time next year. And, so will many others in his party.

Some Reform Comments; December 8, 2009

We didn’t intend for this blog to be all about health care reform, but it is so fascinating to watch and follow we’re going to keep posting periodic updates. This is a historic time for our health care system and in our opinion putting a legislative solution in place still has a ways to go.

It sounds like Congress is trying to “water-down” the whole public option debate by introducing an approach similar to the Federal Employees Health Benefits Program (FEHBP) offered to federal employees. The Office of Personnel Management (OPM) would be involved for oversight- but a government-run/Medicare-like approach wouldn’t be part of the picture. This seems to have traction for some of the more moderate legislators on both sides- but those on the far left may not be as receptive. The details of how this would all work is still pretty sketchy but would be delivered through insurance exchanges of private non-profit organizations. We'll need to see more of the details before formulating an opinion.

The big issue of the day surrounds the topic of abortion. This topic may very-well determine whether health care reform legislation becomes a reality. The majority is dealing with a very fragile and fragmented constituency and the outcome of this high-profile topic could very well tip the momentum of reforming the system one way or another.

We spent some time reviewing the CBO’s estimates of the impact on insurance premiums of the Senate Bill (3590) as it is currently written. We remain skeptical of the impact this legislation will have on the primary issue facing health care today- the costs.

Kaiser Family Foundation recently determined that the average annual premium for individuals with single and family coverage was $4,800 and $13,000 respectively in 2009. According to the CBO estimates, these prices would increase to $7,300 and $20,000 under the legislation- roughly a 9% increase each year. This is the same increase (or a little higher) employers have been experiencing over the past 10 years. We really don't understand the benefit of the legislation related to moderating health care costs as it is laid out today.

As we have said numerous times in the past, the focus should be on efficiency, integration, consumer engagement, and cost-management in order to reform health care. Putting all the emphasis on reforming the insurance marketplace may address access, but doesn't do much for the costs (sounds like the Massachusetts experience).

Despite the goal of presenting legislation to the President before the end of the year- Congress still has a long ways to go. And, unfortunately they continue to focus on the wrong things. And, most consumers tend to agree right now.

We wish they would listen.

Do Over !!!!

We’ve obviously been asked about our reaction to the procedural vote that took place on Saturday to allow debate and discussion to proceed for HR 3590. In a nutshell- we’re very concerned.

We’ve tried to remain bi-partisan throughout the process. We’ve been slightly biased as we’re more “in the center” than the proposals submitted by either side. We’ve always supported a more organized system (probably through a light intervention of government simply due to the make-up of the existing system) and one focused more on organized delivery and efficiciency. We’ve recognized the unfair reality of the current system that leaves a significant portion of our population with limited or no access to care but always felt that issue can be addressed as the delivery system itself becomes more efficient. The heavy involvement of government and the focus on covering everyone out of the shoot (insurance reform) as the primary goal just doesn’t make sense.

The talking points were clear as we watched the debate unfold on Saturday. Democrats were demonizing the insurance industry and were doing all of this to protect the poor consumer and Republicans were appalled with the size of the legislative monstrosity that was sitting on the table in front of them. While we certainly understand being critical of the lack of consumer focus of our health care industry, as consumers, we leaned more toward the Republican side on this one.

If you don’t want to read all 2074 pages of HR 3590 you can get a pretty good idea of the content and implications by reading CBO’s scoring of it. You can get it by going to the Resource Library on our site, or by clicking here. CBO’s letter is another “caution flag” for us considering all of the qualifications they had to use to come up with the numbers. There was certainly some creative accounting involved and we think the numbers provided are all on the low side. Remember, Medicare blew out its budget within the first two years after it was enacted in the mid-60s.

We seriously question the ability to our country to finance such a massive piece of social legislation without further adding to our national debt (despite the numbers provided by the CBO). We seriously question the feasibility of setting up co-ops or public option alternatives to be competitive in an already fragmented market (these folks have obviously never been in negotiating sessions between health plans and providers). And, we question the ability of establishing a government-based infrastructure to address the real issues of prevention, wellness, care coordination, efficiency, and patient-centered care.

In a previous posting we recommended Obama and the legislative process slow down and do this right. We can only reiterate that here but don’t think it’s going to happen. You can read a letter sent to Obama from Newt Gingerich and a host of others that reflects our views by clicking here. Unfortunately, the Democrats are now more focused on a deadline of getting this done before the end of the year as opposed to doing it right. The Republican votes are already lined up no matter what takes place in the debate over the next few weeks. Once again, it’s going to be the Blue Dog Democrats who will determine the outcome.

Our economy is still on the precipice and our unemployment rate remains high. We have two wars that need to be appropriately funded to protect the men and women who are sacrificing their lives to protect our freedoms. These should be the priorities of focus and deserve the appropriate financial resources. We will reiterate- “government-light” not “government-run”.
We wish someone would call a “do over” on this one

Health Care Reform- Continues To Focus On The Wrong Issues

It’s looking more likely that we will have some type of health care reform legislation enacted in our country. It’s also looking more likely that the legislation that will be enacted- will not address the fundamental issues facing our health care system. Politics wins.

A new poll conducted by Stanford University with the Robert Wood Johnson Foundation found that 43 percent of Americans oppose the health care plans being discussed in Congress while 41 percent are in support. 15 percent remain neutral or undecided.

These numbers have remained relatively consistent over the past month but the opponents have stronger feelings on the issue than do supporters. Seniors justifiably remain more skeptical than the younger generations.

Americans are worried about the fine print included in the health care overhaul. With the House Bill (3962) weighing-in at 1990 pages, who can blame them. You would have thought that the House would have learned from the Clinton Reform effort of the 90’s that coming out with a monstrosity of legal jargon that the average citizen is not going to comprehend is going to lead to skepticism of its content. But, the Democrats have the numbers on their side (at least in theory) that could tip the discussion their way anyway. That’s what we’re afraid of.

Unfortunately, the reform discussions continue to focus on the wrong things. The primary focus continues to be centered on “providing health care for the uninsured", when the focus should be about reorganizing care delivery, improving communication and consumer awareness, coordinating care more effectively, improving system efficiency, and developing new payment methods to assure a quality health care system is available to all citizens.

One of the frightening facts of the recent poll finds that consumers are afraid of the increases in their current costs because “people in poor health who’d been shut out of the insurance pool would now be included, and they would get the medical care they could not access before”. These individuals need to realize somebody is already paying with the system we have today- and it’s more expensive than if all individuals had access earlier in the game rather than waiting for an emergency.

Instead of focusing on “insurance reform” (public option, mandates, etc.) we need to focus on changing the current trajectory of health care costs for individuals who already have health care coverage. There is more than enough waste in our current system to provide for those not “insured” by developing a more organized and collaborative structure than we have today. There is no reason why people in poor health in our country should be shut out from access to appropriate medical care. This is inexcusable. We need to address both.

We just believe the current reform models being discussed in Congress are going about it the wrong way.

What Is Our Definition of our Health Care System?

Carl Bialik posted an interesting article in the Wall Street Journal a few weeks ago. Grab it Here If You Want. The article, “Ill- Conceived Ranking Makes for Unhealthy Debate” discussed the flaws in the data used by the World Health Organization nearly a decade ago to come up with the infamous “37th in the world” ranking we’re all familiar with. I actually think he got his title backward, it should read “Ill-Conceived Ranking Makes for Healthy Debate.”

One of the primary objectives of the World Health Organization when they released the study was to “stimulate debate and focus on health systems” as opposed to just focus on individual components. The data and methodologies weren’t perfect, but it provided a benchmark. We all knew we could do better particularly when the cost is added to the formula. No matter what the final ranking actually may be we all know we can do better than we’re doing today. And, we’re talking about it so it achieved its original purpose.

But, that wasn’t the issue that caught my attention.

When explaining the decline in the country’s ranking in child mortality and life expectancy since 2000 the article stated, “But some researchers say that factors beyond the control of the health-care system are to blame, such as dietary habits.”

And, Alan Garber, an economist and professor of medicine at Stanford University closes the article by saying, “We might get more bang for the buck by setting aside some of our health-care money to support novel approaches to improve nutrition, education, exercise, or public safety.”

Until we all get on the same in our definitions the health care system will continue to struggle. In our view, nutrition, education, and exercise (and many others) are not “novel approaches”, but fundamental participants in the health care system that is evolving. And, dietary habits should be included in any research as they are critical in evaluating the whole-person and determining the approaches or strategies to improve the health of an individual.

We obviously define “health-care” different than others.

As long the majority continues to define health care as the “diagnosis-focused insurance financed” system we have today (as indicated in this article) instead of including health, wellness, and lifestyle as critical components; we might end up even lower than 37th- no matter what flaws may be in the data.

Independent Voters Will Make The Difference in Health Care Reform- And Everything Else

Independent voters (those independent of political affiliation of the two major parties) have always been a part of our political landscape. Both political parties target the “independents” during election cycles as the only way to assure victory because neither one can seem to acquire the numbers they need on their own.

From all of the talk in Washington, you would think health care reform is all about Republicans or Democrats- it’s not. It’s what the independents want that will make the real difference. For the first time in a long time, independent voters outnumber those affiliated with either major political party.

The Pew Research Center provides an interesting visual of the history of individual affiliation with our political parties over the past 70 years. You can link to it by clicking here.

Starting back with Franklin Roosevelt in 1939, independent voters made up 18% of the electorate. At that time, Democrats made up 41% while Republicans were at 35%.

As we all know, party affiliations change with the times. Democratic affiliation peaked at 51% in 1964 after the Kennedy assassination and Republicans dropped pretty substantially to 25%. Independent voters increased to 23%.

Since that time, the affiliations of both major political parties have continued to erode. With the exception of a brief spurt during the Reagan years, the Republican Party has had a tough time solidifying a base. Democrats have not had much more success.

Beginning in 1991, under Bush I, the Republicans, Democrats, and independents have all been competing as equals in addressing the needs of the American people. And, in 2009, independent voters now make up 36% of the electorate, Democrats have 35%, and Republicans 23%.

So as we continue on with all of the partisan politics that’s taking place in Washington regarding reforming our health care system, both parties better realize it’s not those that are affiliated with them that will be their staunchest advocates or most vocal critics. It will not be a Democratic or Republican agenda that will make a difference. It’s the independent voter that will have the biggest impact. Congress (both sides) had better listen.

And, from what we’re seeing, we can expect the independent ranks to grow even larger in the future. Because we don't think that they really are.

Consumers Value Health Care Different Than Health Care Values Health Care

I had the opportunity to speak at Life University’s homecoming over the weekend. Many thanks go out to the folks at Life, and particularly Dr. Stephen Bolles for making it a really enjoyable experience.

My topic was centered on “delivering value” in health care, not from a clinical standpoint or a health plan standpoint, but from a consumer perspective. We haven’t heard much about the consumer’s perspective of what they are searching for in the health care debate (except through the emotional interaction of the Town Hall meetings over the past few months). I'ts about time we started to listen.

I felt it was important for the audience at Life University (clinicians) understood the brutal realities of the health care market they are part of. We all know the numbers, we spend too much, our results aren’t what they need to be, and there is a very real possibility that the whole financial model could crash if we don’t do something about it. Consumers don’t trust the health plans, they don’t trust their employers, and they certainly don’t trust those in Washington making the decisions to “reform” the system we have today (I’ve written enough on my views on what’s going on with the whole reform fiasco). Due to the lack of trust, consumers get a lot of their information today via the internet. Eighty-eight percent of them validate the information they receive on the internet with their health care providers. Eighty-eight percent of those people then validate the validation they received from their health care provider with family and friends. Health care information is a social phenomenon.

The definition of “value” in health care from a consumer perspective (from the outside) has a very unique context around it. Value from a consumer’s perspective is something they can trust, is personally relevant to them, delivers the results they expect, and can help them navigate through the mess we have today when they need to navigate through the mess. Value is very personal when looking at it from the consumer’s eyes.

The definition of value for those inside health care is totally different. Value is based on outcomes and cost. Value is about following the right protocol or the right formula in delivering care. The value of health care is transactional- not personal. And, as we all know, our health care system has become a system based on a series of transactions- not relationships.

My argument has been that until we start to recognize and appreciate the definition of value from a consumer perspective, we’re never going to get them involved. They will continue to be merely participants aimlessly following the confusing rules and processes we have laid out for them. Yes, they might be “nudged” along by incentives (another transaction) to get them to do the right thing- but they are not going to engage and do the things we will need them to do to be truly engaged and active participants in their health and in the health care system itself until a relationship is established. We have a long ways to go.

Our health care system has become a fragmented array of individual self-interests focused very narrowly on individual points of view. To really reform our system will require a change in perspective for many of the individual self-interests to work in a more focused and integrated manner than they ever have before. And, while not discarding the health care system’s definition of value, they will need to focus much more on the definition of value from the perspective of those receiving care. Patients are not a transaction- they are a person.

Did anyone really hear my message at Life? I don’t know, but it felt good getting it out there for others to think about.

State Health System Performance- Confirming What We Already Know

The Commonwealth Fund just released its state scorecard on health system performance. We posted it on our site under the “Health Systems” section in our library at http://www.collaborationhealthcare.com/ or you can grab it by clicking here.

The study looked at a number of indicators to determine its rankings of the states. In 2009, Vermont, Hawaii, Iowa, Minnesota, and Maine/New Hampshire came out on the top and Florida, Louisiana, Nevada, Texas, Arkansas, Oklahoma, and Mississippi came out on the bottom.

The main message once again pointed to the significant variation between the states that continues to exist in access to care, quality, costs, and outcomes for individuals. Even those states at the top of the list had some room for improvement.

Perhaps most striking is the amount of dollars that could be saved in the system we have today simply by organizing care more effectively and dealing the costs associated with the unhealthy lifestyles of our population:

$5 billion for unnecessary re-admission to hospitals or nursing homes

$37 billion “outlier” Medicare costs

$193 billion for tobacco-related health care costs

$147 billion for obesity

So as we continue to move through the health care reform debate, we’ll continue to argue that the issue is not whether we have a public option, or co-ops, or whatever else we want to throw in there. The issue is not making the health plans, the doctors, or the hospitals the “bad guys”. The issue is how this system is organized and how care is delivered and paid-for in the system we have today. Until we deal with the fundamentals, the rest is simply irrelevant.

The Commonwealth Study only reinforced what we already know. I just hope we do something about it.

A Local Conversation for Integrative Health

We were pleased to take part in an event the other day hosted by Northwestern Health Sciences University and co-sponsored by the University of Minnesota's Center for Spirituality and Healing, School of Nursing, and LifeScience Alley. The theme; Integrative Health: Implications for Patients and Purchasers was designed to be a "local conversation about healthcare reform".

The event was well represented by many of the key health care stakeholders throughout the Twin Cities area and was indicative of the interest the market (or at least some key stakeholders) is beginning to show for integrative health care approaches and the role it can and should play in the new system that is evolving. The attendance was also indicative of the need for more of these types of discussions to share ideas, collaborate, and simply provide a venue to let everyone know what is going on in a changing world.

Mary Jo Kreitzer, PhD, RN (Director, Center of Spirituality and Healing) summarized the evolution of integrative health care from the beginning to where it is today. She pointed out that integrative health care has moved from "alternative" to a position to where it can and should play a much more integral role in health care delivery.

Charles Sawyer, DC (Sr. VP, Northwestern Health Sciences University) reviewed the escalating health care cost statistics we are all so familiar with today.

Patrick Geraghty (President and CEO of Blue Cross and Blue Shield of Minnesota) discussed the changing culture of his health plan from being a "health insurer" to a "health company" in response to the changing market expectations and demands.

Carolyn Pare (CEO of the Buyers Health Care Action Group) outlined the expectations of the employers in the new health care market and their interest in "value" not just new gimmicks or "stuff".

Frank Cerra, MD, (Dean of the Medical School at the University of Minnesota) discussed the changing roles of the providers, and emphasized that real health care reform needs to come from the providers and those delivering care.

When you reflect on the total context of these individual discussions it is very clear that the health care market is already changing. Relationships are changing and many of the delivery models that exist today won't be around a few years from now. Integrative health care with a "whole person focus" has a wonderful opportunity to play a much, much, larger role in health care delivery than it does today. We just need to develop the innovative approaches and the business models to make sure it happens.

The time is right.

Do We Need to Reform The Cost of Health Care? You Do The Math

The Kaiser Family Foundation and the Health Research and Educational Trust published its 2009 Employer Health Benefits Survey. We posted it on our site you can get it by clicking here.

For those who are questioning any need for reforming the cost structure of our health care system- let’s just do a little math exercise:

In 2009, the average cost for family coverage increased to $13,375 for family and $4,824 for single coverage. As a reference the average cost for family coverage was $5,700 in 1999. The cost increase from 2008 to 2009 was relatively stable for single coverage, and family coverage increased a modest 5%. But, keep in mind these pricing changes are likely softened by the increased cost-shifting to individuals through higher co-pays and deductibles- we pay more, the health plan pays less.

Employers continue to pick up most of the tab by contributing 74% of the cost for family coverage- we pay $3,477.50 and the employer pays $9,897.50.

The study then provided some other background information comparing 2008 to 2009:

Individuals with deductibles over $1000 increased from 18% to 22%

21% of the employers increased co-pays or reduced benefits

15% of the employers increased the contribution requirements of employees

60% offered benefits in 2009 (compared to 66% in 1999). Only 46% of small businesses offered benefits in 2009 compared to 56% in 1999.

I believe we can safely assume that if things don’t change more of the costs of health care will continue to be shifted to the individual (through high-deductibles, copays, benefit cuts, or increased contributions) or the benefits will simply be dropped because they are too expensive.

The study then projects that if things don’t change and the cost of family coverage increases 8.7% over the next decade (as it has in the past), the cost of family coverage will exceed $30,000 per year. Assuming the same contribution levels between employee and employer, this means individual families will need to double-down what they are paying today for their health care benefits (to $7,800 per year) and employers will need to kick-in over $22,000 per family.

Eighty-percent may be satisfied with the health care coverage they have today. But, we wonder if the same people will be as satisfied when all these projections become a reality.

You do the math.

Opportunities for Complementary and Alternative Medicine (CAM)

In the 1990s, Dr. David Eisenberg and collegues at Harvard created a little stir in the health care discussion when they published the results of several studies regarding the use of (and estimations of the dollars spent on) “Complementary and Alternative Medicine” (CAM) by consumers. The definitions of the services included in “CAM” for the study were a little loose- (not taught in traditional medical schools) and some of the categorization may have been a little confusing but the bottom-line was very real: Over $27 billion was estimated to have been spent on CAM services, most of it was cash, and most medical doctors were unaware of the use of these services.

The $27 billion number caught the attention of the insurance industry. Since most of these CAM services were outside the traditional benefit structure of a health plan, the insurance providers began to try to figure out ways to capture some of the dollars. Affinity networks were all the rage for awhile as insurance payers simply developed networks as a “value-add” to a health plan member. They would provide access to CAM providers to members at a discount from normal charges and collect an administrative fee for coordinating the efforts and providing the access to their members. Very little was done to actually integrate these services further into any health care plan for an individual patient. In the 90s, creating a “health and wellness culture” in health care was still an altruistic vision to most insurance payers (still is to some); they remained focused on managing illness and paying claims. Offering CAM networks was a product decision by the marketers, not a clinical one.

No doubt, some progress has been made since 1997 but the health care system we have today still has a long way to go to integrate the services included in the CAM definition, into a clinical delivery structure that focuses not only on improving the physical health, but the quality of life of each individual.

The Department of Health and Human Services, Centers for Disease Control and Prevention recently published some updated numbers which shows there continues to be a strong demand for CAM services.

The study, “Costs of Complementary and Alternative Medicine (CAM) and Frequency of Visits to CAM Practitioners: United States, 2007” estimates that nearly $34 billion was spent out-of-pocket by consumers for a variety of CAM products and services in 2007. The vast majority of this cost ($22b) was for “self-care purchases i.e. products, classes, and materials; and nearly $12 billion was spent on practitioner visits.

The methodologies between Eisenberg’s approach in the 90s and the approach used in this updated study are so drastically different you have to take some of the comparative conclusions made with a tad of skeptisicsm. We all know that developing consistent definitions and comparisons in health care has not been one of the industry’s strengths.



Nonetheless, this updated study projects an even larger expenditure for CAM services than Eisenberg estimated in 1997. This continued growth creates opportunities for CAM products and services to play a more visible role in the health care system that is evolving.

This study shows that individuals continue to seek more holistically focused (and yet safe) methods to address health issues, and more important, look to these services to maintain their health and quality of life.

As the health care system gravitates toward health, wellness, and quality of life even more, we hope the clinicians (and not the marketers) take the steps necessary to integrate appropriate access to CAM services and make them an even more important component of health care delivery in the future.

Town Halls, Emotions, and Doing Nothing

Well, we've certainly made it interesting again. The health care debate has moved out of the realm of practicality, and right to the emotional. Any discussion or debate about changing the health care system is inevitably going to have some emotional charge to it. But, as we've said in previous posts- the emotions are now driving the decision-making, instead of doing what is right.

So far, over $57 million has been spent on ads both for and against health care reform. As expected, and as good advertising is supposed to do, some of them went right to the gut. And, also as expected, some cross-the-line to achieve what they intend to achieve; to scare the public. The advertising buzz-words of "Death Panel", "Pulling the Plug on Grandma", and "Rationing" have hit the mark with the general public (whether true or not) creating the scenes we've seen at the Town Hall meetings. And, quite honestly, those defending the ideas have not done a very good job in defending them.

The Center for Responsive Politics indicates just 5 health-care related organizations dumped another $8 million into the lobbying effort in 2008 to influence (or nudge) the legislative process. In 2006, the combined spending for health care lobbyists was the largest of any of the industry segments spending almost $200 million. We're sure that's going to double at least for 2009.

The result- We have an angry public, a partisan country, and a health care system that continues to deteriorate financially.

We honestly don't know what is going to happen with reforming our health care system. Public support has deteriorated, the economic outlook (deficit) has not surprisingly deterioriated, and we have a partisan divide in this country that has grown bigger instead of smaller. As we've said in the past, Obama has lost control of the message and the process.

We're hearing from one side that reform may not happen at all. We're hearing from the other side that they may start to use the legacy of Senator Kennedy as the platform to revive the public support for health care reform. We'll know more when Congress returns next week. From what we've seen so far, it's not going to be pretty.

It's pretty obvious that the structure of the current legislation (HR 3200) is not where the country wants to go. But, as we said in our HR 3200 Cheat Sheet, the legislation does address most of the structural challenges facing the health care system today. We're hoping the Senate can come up with some bi-partisan compromise that makes sense and starts to address the challenges facing our system and ultimately the challenges facing our country.

We need a solution that maintains the individual liberties our country is founded on and still protects the economic foundation of the country for all. We're on the wrong trajectory today. Quite frankly, I'm tired of hearing "we have the best health care system in the world and should just leave it alone." We may have the best health care- but we absolutely do not have the best health care system. Doing nothing is really not an option- we've got to strike a balance.

We need to remember (and the real message should be): This isn't about where we are today- this is for our children and our grandchildren- they are the ones that will be really paying the bill.

Let's Not Blow It

Last March we wrote a newsletter outlining 6 things we felt President Obama would need to master in order to move our country toward real health care reform. Back then he was positioned pretty well. He’s gone downhill since then.

We closed the March newsletter with the comment, “He’ll need to execute flawlessly with his team to make it happen, and he’ll need to maintain the public support to come up with a plan that balances our individual freedoms with the social responsibility that is expected in our country today.” He hasn’t delivered on this one.

It’s obvious that Obama’s health care discussion is in shambles. We’ve read the House Bill and can’t agree with it (you can see our summary by clicking here). It was too expensive, complex, and confusing in our view (especially regarding the Public Option). There was a logic behind it that made some sense and there were some ideas included that are worthwhile to explore further in the context of what is needed to fix some of the structural problems existing in the system today.

When we reviewed the language we based our interpretations on our views of the challenges facing our system from our years of working in it. We did not interpret “Death Review Committees” the same as “Comparative Effectiveness Research”. We did not interpret “Encouraging Euthanasia” the same as “Advance Care Planning”. But, it’s obvious that these other interpretations and messages have hit home (despite whether they reflect the intent) and HR 3200 is not the direction the country wants to go).

We’re in the process of reviewing the “most visible” Senate bill (Kennedy Bill) so we’ll post our summary on it when we’re finished.

So, what’s the strategy going to be?

In absence of some Divine Intervention to consolidate whatever comes out of the Senate with the House bill that meets the needs of everyone, we’re going to need to (as much as I hate saying it)- slow down. Politics and the loss of public support have won this round. Ramming through a health care reform package that is not at least perceived as somewhat bi-partisan and is not supported by the American people would be political suicide for those doing or supporting the ramming. We’re certain that taking this kind of action in the hostile environment we have will also minimize the chances of success. We need to succeed on this for our country- the right way.

We need to step back, take a breath, take a look at what we have, and determine where we go from here. While deadlines are good, they shouldn’t be met at the sacrifice of achieving the overall goal. But, we also shouldn’t put this on the back-burner again. The health of our economy is going to depend on this.

The Democratic Party is now in “defense mode” and the Republicans have a wonderful opportunity to present other options. But, I honestly haven’t heard what the Republican solution would be. I’ve heard a lot of talk of MSA’s, tax credits, more competition, free market, etc. being thrown around as components- but these ideas are not going to correct the structural changes that currently exist in the system we have today. If someone has the Republican “plan” out there it needs to be more visible.

It’s already ugly and, unfortunately, will probably get uglier before we’re all done unless something changes. As we had hoped would occur from the beginning, both sides need to reach across the aisle to develop a solution that respects the principles maintained by the other and produces the result that is right for the American people for now and for the future.

We’ll say it again, “He’ll need to execute flawlessly with his team to make it happen, and he’ll need to maintain the public support to come up with a plan that balances our individual freedoms with the social responsibility that is expected in our country today."

Health Care Reform- A Classic Marketing Challenge

Let's say you are in your basic Marketing 101 Course and your instructor gives you the following statistics and scenarios:

1. 70% of the market feels your product (widgets) needs to have a major product overhaul with how it is produced. The market feels that sometimes it's a pain to buy your widget when they need it, it's confusing to use on occasion, and is starting to think your widget costs too much. But, in reality it really doesn't know for sure because in most cases somebody else is paying for it.

2. 80% are generally satisfied with the widget(s) they have purchased or have used over the years.

3. And, you (as the maker of widgets), have more than enough information to acknowledge that the way you produce and deliver your widgets today is not sustainable under your current business model and you know that you are going to have to pass more of the expenses on to your customers (the 80% that is satisfied) in order to survive; the 80% number is going to decline over time.

What do you do?

The items above provide a pretty basic view of what we're dealing with in health care. A new CNN/Opinion Research Corp. poll of Americans provided the statistics for #1 and #2; we added #3 as a pretty safe assumption.

The "marketing answer" on how to spin your position is going to depend on which side of the debate you are on.

For those who feel the health care debate is a "non-issue" and only requires some minor adjustments, you're strategy is going to be focused on relying on the "80% Satisfied" as your foundation. Why try to reform something that 80% of the market is satisfied with? Why go to all of the expense of revamping when your customers are satisfied. They like the widgets they have. You might try to keep Items #1 and #3 in the background. You'll have to acknowledge they exist to some extent, but most customers like what they have so we won't rock the boat.

For those who feel a total revamp of our system is required, you'll be focusing on Items #1 and #3. You'll have to acknowledge item #2 but the main message is going to point to all of the flaws in the system of today, probably some bad guys to pin it on, and trying to get some of the "80% Satisfied" to move in your direction.

The marketing effort of the health care debate is about to take off. The "Harry and Louise" initiative in the 90's proved that marketing can have a dramatic influence in the public policy debate of health care. And, we've all seen from the political ads of the past how far some are willing to go to get their point across, truthful or not. Whether we acknowledge it or not, the basic consumer still does not fully understand how this system works and is looking for information. The general public will be very vulnerable to the marketing messages that are created over the next few months.

We've got our views on where we think this should end up. But, we've been following it daily and studying and evaluating all of the options on the table. We believe we have come to an "informed conclusion" on health care reform based upon our views of the relevant information and research. We will listen, but won't be as vulnerable to the marketing strategies that are about to be launched from both sides.

Let's hope that the messages that are about to hit the airwaves are informative, truthful, and present all of the facts so individuals can make their own "informed conclusion" on health care reform. We hope the outcome doesn't once again boil down to who has the most money or can scare the audience the best. We hope the messages focus on the real health care issues facing our country to help the market understand and comprehend the realities we're facing.

This is too important an issue to only focus on "spin". We can't forget the substance behind the ideas.

The Economic Realities of Health Care

Adam Smith is credited as being the father of economics. He introduced the idea of the "invisible hand" where (as his thinking went) people pursuing individual self-interests simultaneously served the interest of society. He also introduced the initial thoughts related to "perfect competition" which has provided the basis for our own free-market thinking today. Perfect competition, however, had several key components required before a real free-market existed. These components included: 1. No single participant can influence prices, 2. a free-flow of information exists among all market participants, 3. There are no barriers to entering a market, and 4. There are a large number of buyers and sellers.

As our health care debate continues, and despite our preference for free-market approaches, it is fairly apparent that our health care economy isn't operating by any "invisible hand" and doesn't include any of the components of "perfect competition" so some level of intervention is likely needed. The level of that intervention is at the center of the debate today and the key is going to be striking the right balance between the two. This idea has been the centerpiece of the Collaborative Health Care System principles we established three years ago.

A study completed on behalf of the American Medical Association found that out of 314 metropolitan markets across the country, 94% are controlled by one or two health insurance companies, or fewer. In 15 states, one insurer has 50% or more of the entire market. While the insurance industry questions the methodology used in this study, other studies have supported the fact that limited competition exists in most markets for the delivery of health insurance services. And, as the consolidation of the health care market continues, these numbers will likely continue to increase. That's the reality.

On the other side, a 2006 study of hospital systems found that one or two hospitals controlled the market in 88% of the nation's largest metropolitan areas. When you have dominant carriers going up against dominant delivery systems, it's no wonder we have a difficult time in coming up with a "free-market" pricing structure that benefits the system as a whole. We're lacking the invisible hand.

We honestly don't know if a "public option" is the answer. Those supporting this approach are using the idea of introducing more competition into the marketplace as the reasoning behind it. We question whether a government injected solution is the right approach.

Once again, it's all about the message. It's not about whether we have a public option included or not. The real issue is about the need to change the basic economics of a system that desparately needs to change. Monopolies dealing with monopolies just don't work. So, if we're going to strive more closely toward a free-market, perfect competition approach, the free-market supporters had better come up with a better solution than what is being thrown around today.

We haven't heard it so far.

Health Care Reform- Public Opinion Is Changing

A new Washington Post/ABC Poll shows that public opinion on the health care reform debate is starting to change. The public's approval of Obama's efforts has dropped from 57% in April, to 49% today. Disapproval has increased from 29% to 44% during the same time period. Most of the change is the result of the change of view of the independents who make up a significant portion of our electorate today.

We now expect the "p.r. machines" on both sides to start to work to try to influence the numbers- just like in the 90's. And, it's quite sad. It is very likely that whoever comes up with the best marketing gimmicks (whether truthful or not) will get their way.

We understand that this is all part of the democratic process. We welcome the dialogue and debate that should occur between ideas to come up with a compromise solution that is best for our country. We too are concerned with the deficits that are being built-up that will be left to our children, our grandchildren, and our great-grandchildren to get us out of the mess we are in today. But, we are even more concerned with remaining with the "status-quo". The numbers speak for themselves- reforming the way health care is delivered in our country is key to our economic stability in the future.

A recent Harvard University study found that in 2007 over 60% of the bankruptcies in our country were in some way related to medical/health care issues. Numerous studies predict the out-of-pocket costs paid by individuals will continue to increase and at some point will become unaffordable. Savings built during a lifetime of participating in the work-force are being wiped-out by a single medical event. Employers will continue to struggle with the costs of healthcare as they continue to be a significant competitive disadvantage when competing in a global marketplace.

The public needs to understand that health care reform isn't about whether we have a "public plan" option or not. In many respects, it's not about the "uninsured". The public needs to understand that the model we have today will very likely lead to economic disaster in the future. The public needs to understand that we are already rationing care with the system we have. The public needs to understand that the system we have today is simply not sustainable for the future. And, the public needs to understand that there are less costly options to really reforming our health care system than some of the options being promoted today simply due to politics.

It is wonderful that public opinion carries the weight that it does in the democracy that we have. We only hope that the public is provided the truthful information it needs to be able to make an informed opinion in the first place.

At this point in the debate, we don't think it does.

Health Care Reform- Keeping The Big Picture In Mind

Last March we published a newsletter outlining our “Obama Score” of where health care reform stood from a public policy perspective. In it, we highlighted the 6 basic principles that are going to be required to make meaningful (not incremental) changes to our health care system. Obama had done relatively well up to that point and he still carried significant public support as his Administration was still new. But we had some important “wild cards” that needed to be addressed before we felt true health care reform would become a reality.

Now, we’re at the really messy part of the process. Since March, things have moved along quickly and we are glad to see that health care reform has remained near the top of the domestic agenda. But, as expected, the other significant issues our country faces have now become part of the debate and the public support, while still there, is tenuous now that we put the dollars with the ideas. In our view, the primary principle we were concerned about in March (Mastering the Legislative Process) has become weaker instead of stronger. This single principle has killed most initiatives before, and we hope Congress (and the private markets) can come up with solutions that are good for the country as a whole, and not just continue to protect self-interests as has occurred so many times before.

We’ve posted a side-by-side comparison on our site of 11 of the major initiatives currently making their way through the health care reform debate. This was put together by the Kaiser Family Foundation and you can grab it here if you want to look at it. This will likely be changing quite frequently but we believe everyone should have a basic understanding about what is being discussed with the best information available.

Unfortunately, the public perception of health care reform has become centered on whether we have a “public option” included or not. While this is an important delivery component, the average consumer should also understand the broader need for transforming the way health care is delivered in our country before making any judgements. For those that have health care coverage, and for those that do not, we need to understand and accept that the way our health care delivery is structured is not sustainable, especially when significant numbers of our population (Baby Boomers) begin to access the model we have today.

Payment reform, transparency, administrative efficiency, clinical effectiveness, wellness/prevention, and care integration are also critical elements that need to be understood and considered by the public before making any judgments.

Whether we realize it or not, the health care market is already changing. The reform outcome will certainly have an impact on the speed in which it changes, but all stakeholders (health plans, providers, and consumers) will need to appreciate these changes for participation in the future.

We believe that access to care high-quality health care for all Americans is a critical factor of the final solution and is part of what our country stands for. We just hope the real transformation we need isn’t derailed due to the politics or economic philosophies that have proven not to apply in the health care market we have created. And, let’s make sure the general public has a good understanding of all aspects of what the debate is all about in the first place- not just what we want them to hear.

Health Care Cooperatives- We're Missing the Point

We shouldn't have been surprised.

The primary focus of the health care debate is now centered on what level of government involvement is justified to deliver health care in our country. It's the same debate we've been having for the past 100 years.

While the lines-in-the-sand are now very visible, Senator Kent Conrad, D. ND; Chair of the Senate Budget Committee threw out a new idea to try "bridge the gap"(chasm) that has evolved between the two sides of the health care public policy debate. His effort was obviously a compromise in an attempt to make certain the reform efforts continue to move forward.

On the one side we have those in support of a "public option" that is supposedly built on the principles of improving availability, improving quality and efficiency, and challenging provider consolidation (read driving down prices). On the other hand we have those that feel any (and I mean any) involvement by the government is on the road to single payer/socialized medicine.

Neither side is willing to move- and we believe both sides could use some real bi-partisan compromise in their positions.

Conrad's idea is based on the concept that instead of a national public option, states could set up independent "cooperatives"; non-profit entities owned by their members to deliver health care services to the community or population. The idea was based on his personal experience with cooperatives in his home state of North Dakota, and was one idea submitted to bridge the gap that exists today. It's generated a lot of discussion in the political camps- and Chuck Grassley (R, Ia) has indicated some intrigue with the idea as a public option is out of the question and a show-stopper from his perspective.

Unfortunately, we're missing the point again. Our health care system is in the mess it is in because of the way it is organized and paid-for. It has evolved into a fragmented mess and until there is some level of organization and collaboration between doctors, hospitals, health plans, and yes, our political leaders, its going to continue to be a fragmented mess that costs a lot of money.

There are many economic arguments against introducing 50 new health care cooperatives into a landscape that is already fragmented. There are many social arguments against introducing a broad-based public option into the health care market. And, there are many more economic and social arguments against leaving the system alone and let it continue to operate the way it is today.

The debate should not deteriorate (as it has done before) into health plans vs. the world, doctors vs. the world, or government vs. everyone else. We cannot let this deteriorate into a public relations message with the winner being whoever has the most money- or screams the loudest. This is a social issue that needs to be resolved for the good of our economy and the legacies we will leave our children. The discussion should be about what is best for the American people. And, the outcome should a solution- not a compromise based upon political strategies.

Get with it guys and gals. You may only have one shot at this. Let's do it right.

Risk Segments and Funding Alignment- A Requirement for Reform

When the whole health insurance idea was introduced in the 1930's the concept was pretty simple. The idea was to insure employees and protect them from the expenses of catastrophic health events. Even though the use of the term "insurance" in its purest definition was still a stretch- the primary focus was to protect individuals from the generally predictable hospital and doctor events existing in the population. Our reimbursement methods and funding (premiums and benefit design) were established and have evolved based on these original principles.

McKinsey recently issued a really interesting study showing how the risk categories in our population have changed over the years (primarily in the last 20 years) and how our methods to pay for the care and design benefits to represent these new risk categories have not changed at all. We've posted the study on our site- and you can grab it by clicking here.

This study indicates that today over 60% of our health care costs are now not even related to the categories for which our health care system was originally designed. In addition, over 30% of our costs are directly related to the management of chronic conditions (of which a significant portion is directly related to the lifestyles we lead).

In order for us to really reform our health care system we'll also need to look "outside of the box" to design reimbursement structures that represent the risk categories that have developed (and are very real) over the years. More importantly- benefit structures for individuals should be redesigned to reflect the needs of these new categories which will ultimately benefit our overall health care model. Consumer Directed Health Plans (high-deductibles/savings accounts) were a start, but they merely shifted the costs to the individual with some tax benefit. We really need to start to look at redefining benefit structures themselves to represent the needs of the population and to provide the incentive people need to take care of themselves in the first place.

Merely adjusting copays and deductibles will not work any more. Our health care population has changed to much and the cost is too great. It's time we get current.

It's No Wonder Physican Offices Can Be Cranky

There's been quite a bit of talk about the inefficiencies of our existing health care system- here's another example.

We all know the route many of us take as patients- we go to the doctor (sometimes we have our health insurance cards, sometimes we don't). We have no clue what our benefits are. If we don't get fixed immediately (we're impatient) we go somewhere else. For those with chronic conditions, we may have to run from one specialist to another, filling out the same forms, and repeating the process all over again. We don't worry about all of the "administrative details", that's the doctor's office problem. We'll just complain when we don't understand the bill.

[I may be a little critical on the "consumer/patient" here- but, unfortunately, it's reality. It's another part of the system that needs to be addressed- consumer understanding/education]

So, what does all of this cost the doctor's office to wade through the mess and hold our hands to deal with "health insurance"? Not surprisingly, a lot.

The May issue of Health Affairs included an interesting article summarizing a study that tried to answer the question of "what does it cost for physicians to interact with health plans today?" You can take a look at the entire article on our site by clicking here.

The study estimates our current process costs our system between $20-$30 billion dollars per year. Each physician/practice deals with over 10 very different and individual "health care programs" and spends on average 3 weeks per year trying to manage the rules of each program. Clerical staffs average almost 40 hours per week (one full-time person) simply to coordinate billings, authorizations, credentialing, and claims. And RN/MA/LPN resources eat up over 9 hours per week trying to navigate through the multiple arrangements. You can probably multiply these numbers further when you include mental health, chiropractic, physical therapy, and some of the other care providers that weren't included in this study.

That's a lot of money- and it is a confusing and frustrating process for everyone involved.

"Technology" is already entering the picture and starting to automate some of these provider/health plan interactions. That's where a lot of our projected savings are going to come from and its the right direction to go. But, getting the technology in place is going to take time.

By simply looking at the numbers, it would seem to us that moving toward some common definition of benefits, formularies, care management protocols, claims processes, and prices between all of the private payers would have the potential of saving a ton of money and reallocate the time currently being spent on "administration" to "care for the patient".

It's pretty obvious that whatever final reform structure we take- we have got to figure a way to organize the mess of programs that are currently out there. It will be better for the payers, the providers, the consumers, and the health care system as a whole.

And, those that are delivering the care to us are likely to be a lot less cranky.

Doctors and Hospitals Join In; AHIP Day 3

Today, the President of the American Medical Association and the President/CEO of a major Los Angeles hospital participated in the primary (annual) meeting of the health plans from across the country. I guarantee you, a year ago these groups wouldn't have been part of the dialogue here. It shows how things have changed.

I think I heard the word "collaboration" today more than I've ever heard it before- and in the right way. And, I heard the dialogue and discussion between diverse stakeholders much more "honest" than I've ever heard before. The fact that the doctors, the hospitals, and the health plans are even talking together shows how far things have come. We aren't at the "hugs and kisses" stage yet- but the fact that its even happening recognizes that there is some common ground that can be built upon to come as close to a win/win outcome as we can. This is what we've been talking about since we created Collaboration Health Care three years ago. It can happen, and it can be done.

This group, (and three others) sent a letter to President Obama last week and we posted it on the resource page of our site http://www.collaborationhealthcare.com/. This letter was an attempt to provide more color and detail behind strategies that would be used to support their collective committment to "bend the cost curve" in health care spending in a collaborative process. There is no doubt that we still have a ways to go- but stakeholders are recognizing that we need to break down the silos that have evolved over the years to make this work. Those that aren't willing to collaborate and dialogue are going to be left behind. It just requires a little different perspective and a little different thinking than we're used to. (And, yes I recognize I was a little skeptical when this group originally announced their committment a few weeks ago- see previous blog- but, after listening to their rationale today- I believe the intent is more sincere than I gave credit for)

We also heard quite a bit about the "Massachusetts Experiment" today. Suffice it to say, it's not going real well in Massachusetts. But, once again, I hoped we've learned something from it. We've proven the fact, once again, that if you don't address cost and access at the same time when you are designing a delivery model- it's going to break the bank (same thing we did with Medicare).

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So, the AHIP conference of 2009 is over. In summary, I'd say the attendance was about the same as in the past (maybe slightly lower), smaller (but still respectable) number of exhibitors, and a little more somber mood. We all heard some very dramatic statistics and predictions about what could happen if we don't do something- and urgently. The time for talking about it is over- too much is at stake. I think everyone at the conference would agree. And, I actually think all of the stakeholders are beginning to understand that they can't do it themselves. I don't have the answer about how much should be controlled by a "government function" and how much should be placed in the free-market. We know that too much of the controlled function is not what this country is all about and too much of the free-market just doesn't work in a multi-segmented health care structure. As we said back in 2006, it's a combination between the two. We've just got to keep talking to each other to capitalize on the commonalities and reach the right combination.

In the world of health care- this is an historic event.

We're In For Some Change; AHIP Conference Day 2

Greetings from San Diego. The sessions today carried-over from my comments yesterday. If I had to summarize the key messages they would be that some type of health care reform is coming- and we've got to get our country healthier than it is today in order for us to make anything work. The two key issues that will be the focus of the entire debate is access and cost and you'll be hearing about these two issues throughout the debate that is about to begin.

The primary discussion around health care reform centered on whether we need to have a "public option" included in the system we have today. This idea was at the center of the "health insurance exchange" concept Obama used during his campaign. Naturally, the health care industry today would rather keep the public option out. But, those in favor of it argue that this option will fill the gaps for those that don't have coverage today, and inject more competition in geographic areas that have little or no competition in the current market. (Rumor has it that Max Baucus sent a letter to President Obama today telling him the "public option" would be included in his proposal).

Former governors Jeb Bush, Howard Dean, and John Kitzhaber started the day specifically talking about the need for a public option in the health care reform agenda. Bush was against it, Dean was for it, and Kitzhaber made the most sense to me with his recommendation of scrapping the system we have today in total- and starting over. I just don't think that his option is politically feasible. But, he made some interesting and fascinating points to support his case that I hope people listen to as this process evolves.

Jacob Hacker (Professor of Political Science at the University of California at Berkley), Gail Wilensky (Economist and Senior Fellow at Project HOPE- and on the Board of United HealthGroup), and Len Nichols (Director for the New America Foundation) continued the debate later on in the day. Hacker was a strong supporter of the public option (and wrote the White Paper the Obama Administration is using to support the idea), Wilensky was against, and Nichols was uncommitted- he just wants to make sure reform happens this time around.

By the end of the day, I was concerned that most of the political debate is being centered around the need for a public option as opposed to the other key issues we need to address (some of which were presented by Deloitte yesterday). The focus on value, consumer engagement, payment reform, and IT infrastructure seemed like side-bars as opposed to key components of a reform strategy.

The other key message today is another topic we've talked about for many years- our culture is unhealthy and something needs to be done to begin to change it. We all know the statistics- 70% of all of our costs are related to chronic conditions- and with the aging of the Baby Boomers it's only going to increase. And, of these costs; 40% are related to lifestyle, 15% are related to socio-economic factors, 5% are related to the environment, 30% are related to biological factors, and only 10% are related to actual medical costs.

So, when you put it all together what we're talking about is a need to begin to create a healthier population- and then reforming the payment and delivery structure that surrounds it. It's certainly easier said than done.

Regardless of what side you are on, each and every discussion today supported the fact that the system we have today is morally and economically unsustainable. The real possibility exists of our country defaulting on our debt obligations because of the costs of our health care system. A substantial (not incremental) reform strategy is required this time- we don't have a choice. The debate is about to heat-up and (as I said yesterday) providers, health plans, consumers, and legislatures had better be ready. We're in for a whole new ball game.

What Health Plans Are Thinking; AHIP Conference; Day 1

It's amazing what a difference a year makes. When I was at this conference last year, health care reform was discussed, but most political commentators didn't think much would happen- there was interest- but not a lot of passion.

In June of last year we were talking about gas prices, then the banks started to fail, then it was the economy. But, in January of this year, the OMB made a statement that has remained at the center of where we are today- we cannot fix the economy unless we fix health care.

An interesting statistic- of the significant debt we are now assuming with the new budget- $35 trillion of that debt is Medicare- if we don't fix Medicare- we're hosed. We can't fix the economy if we don't fix health care. Finally, we're bringing the two together.

So, it's going to be an interesting conference to hear what the health plans are thinking right now. I have a feeling most of it is going to be about health care reform. The tone I'm picking up (and it's only the first day so I could be wrong)- is that health plans aren't as sure of themselves as they were in years past. Health plans were the drivers in the past, now they are the passengers.

I attended a seminar put on by Deloitte Touche which was absolutely fascinating that I think is going to set the stage for the next two days. Within the next two weeks we're going to start seeing all of the proposals being developed by Congress and then the "discussion" will really begin. There are 5 major Republican proposals being developed, and 5-15 Democratic proposals. But, the consensus of the group----- something will be enacted this year (Obama wants to have it signed by Thanksgiving). What a difference a year makes.

Deloitte's model of health care reform includes 4 basic components all developed sequentially. First is establishing a solid health information technology structure that we don't have today. Second is focusing more intently on comparative effectiveness and evidence-based service delivery, third is coordinating care, and fourth is consumerism. All of these components are being discussed- but I wonder if we're going to have the time to sequentially execute as opposed to combining some of the components. The group estimated 6-10 years to put this model in place. I don't think we have that much time.

The exhibit hall seemed much smaller this year. I've used the size of the exhibit hall as a gauge of the "health of health care" in the past. I remember when the halls at this conference were immense with huge displays by some of the vendors. I didn't see that today- but I'll spend more time there tomorrow.

So, it's going to be an interesting few days here. Bottom-line- the health care marketplace is going to change and health plans, providers, employers, and consumers had better be ready.

Until tomorrow from San Diego

Value In Health Care- Can It Be Defined?

The marketing concept of "value" is being thrown around a lot in health care today. In the traditional sense, value is simply the difference between the real or perceived benefits one receives compared to the cost. When the cost exceeds the benefit- there is no value. It's really pretty simple.


Our health care system has had a tough time defining its "value proposition" in many areas. And, as we compare our health care costs with some of the basic statistics used to measure our results and the benefits we receive- we may determine we have a questionable value proposition indeed.

A new study by CVS Caremark determined that "reducing health care costs" is the number one measure of success for employers when facing the ongoing challenges of providing health care benefits to employees. It's not limiting the amount of increase (like we heard about a few weeks ago), it's reducing health care costs.

Employers are looking at all options to get a handle on the health care cost crisis. They are looking at ways to determine the value they receive from all of the dollars that they spend. And, it hasn't been an easy road because the concept of "value" while always implied, has never been a focal point of our current system.

The concept of "evidence-based benefit plans" or "value based benefits" are new methods health plans and employers are attempting to use to incent individuals to comply with care management plans or utilize the right providers. Quite simply, the concept is designed to reduce any financial barriers (through reduced copayments) for patients to access the care that has proven to be the most beneficial.

The University of Michigan initiated a study in 2006 to determine if the removal of financial barriers to patients would result in an uptick in adherence to care management plans and a more efficient use of resources for diabetic patients. This was really the first effort to measure the impact a change in the benefit structure could have on the utlization patterns, outcomes, costs, and the value gained for this high-risk population. While the results are not final, we would hope the study would help the health care industry to define the "value" these targeted services provide for the system and for the individual patient/consumer.

Dan Ariely (Professor of Behavioral Economics at MIT) wrote a fascinating book on how we (as individuals) make our decisions based upon sometimes irrational behavior. Yes, money has some influence to incent us in one way or another, but there are other "predictably irrational" influences at hand. As our health care system stuggles to determine its value, let's hope that the financial benefit designs are not the only methods we use to get people to do the right things.

It's about education, open communication, and transparency- when all three of these come together, we will have a better sense of value for our health care system- and for ourselves.

Promise or Politics?

It's amazing who you can bring together when you all have a common purpose. Our belief in the potential for collaboration in health care has been restored.

Today the strangest of bedfellows delivered a letter to President Obama endorsing a common position of "reducing the rate of growth in health care by 1.5% per year over the next 10 years". The American Medical Association, American Hospital Association, Pharmaceutical Research and Manufacturers of America, America's Health Insurance Plans, and the Service Employees International Union, all enemies at one time or another in the past, are now the best of friends and endorsing a common idea to help achieve health care reform in our country. The group received some great p.r. from many sides and are now positioned as "solid supporters of the health reform effort". Nobody wants to be the bad guy on this one.

Now, we don't want to be critical of a sincere effort. But, this one looks more like public relations and political positioning than a justified effort. But, we'll give it the benefit of the doubt for now. We'll look more at the details.

The organizations intend to achieve their goal by simplifying administrative costs, making hospitals more efficient, reducing hospitalizations, managing chronic diseases more effectively, and improving health-care information technology. Aren't these the things we should be doing anyway with the system we have? We really don't understand what's going to be different. Maybe its in the details and we're missing it.

While the potential savings being talked about is significant ($2 trillion over 10 years), we need to keep in mind that what is being proposed is only a reduction in the rate of increase that is expected- not any real reductions. Even optimistically, our health care expenses will increase to 18% of GDP by 2019 compared to the 16% we're at today. We don't understand how this is going to solve our issue. But, again, maybe its in the details and we're missing it.

But wait, there are no details- it's only a concept.

Don't get us wrong. These organizations are all going to be required to take part in any major reform efforts and it is a huge deal that they came together to write a letter like this in the first place. But, we have a hunch that (especially with the status of our economy) we're going to require more- much more than was presented today. Hopefully, it's a message that will remain intact when the tough decisions have to be made.

It was a great political move to get out in front on this one. But, as Len Nichols, Director of the New American Foundation is quoted as saying- "The heavy lifting is still on how to write down how to make it happen". And, it's when the heavy lifting starts, that the true colors start to show- especially in health care.

The organizations need to move beyond concept- and get to heavy lifting if they are going to stay out front. We've had enough of the concept stuff.

Technology is Good- But, It Needs To Work

I was in a hospital last year to be with my father-in-law when I noticed something that seemed a little unusual to me. The doctors had nurses following them around with a laptop mounted on a wheeled cart. They were entering information as the doctors dictated and moved from patient to patient. The process looked awkward and actually looked a little silly to me- but what did I know?

I asked a nurse what was going on, and she said it was the hospitals initiative to improve efficiency and to get more of their processes automated and electronic. It still seemed foolish to me to use high-price staff to follow a doctor around simply for data entry, but I assumed there was more to it than I was aware of.

I guess not. The hospital discontinued the idea a few weeks later.

The May 4 issue of Business Week has an interesting article about the coming boom in the technology side of health care that is anticipated due to the pressure the industry will be under from a number of stakeholders to get more efficient.

The article, "The Dubious Promise of Digital Medicine" mainly talks about some of the horror stories and the expenses hospitals and providers have already incurred when trying to match incompatible processes and business models to standardized technology. It's already been expensive and in some cases has been dangerous.

There is no doubt that the health care system needs to get better organized and have the systems in place to be able to communicate more effectively than it does today. But, we're afraid that all of the money that's being thrown at the cause is clouding the intent of what it's all about in the first place.

Why don't we start with those delivering the care and the patient when designing and developing these systems? Once again, the fragmented system we have today has resulted in an onslaught of technology development- with very few concepts able to cross-communicate with other stakeholders. And, cross-communication is going to be required. We're designing systems from a "corporate perspective" rather than a "health care perspective". We need to start building these things with an idea of what is good for the patient- as opposed to simply focusing only on the bottom-line.

Newt Gingerich (who created the Center for Health Transformation) stated, "Some of the vendors are more aware of the potential for dramatic change. Others are so busy trying to make this quarter's sales goal that they're not doing much strategic thinking."

We have an opportunity to do some great things in transforming the communication methods in our health care system today. Let's hope that we don't lose sight of the fact it is still the relationship and communication between the patient and provider that will have the biggest influence in facilitating the changes we need to make- and let's hope we don't take "cookbook medicine" to a new level and sacrifice quality- for the sake of "this quarter's sales goals".