It’s coming back!

The health care reform debate is only through the first round. In a few years, as early as 2013 or 2014, we are likely to see another round, with at least as much whacked-out drama as this one. But the cry will not be, “Bring back the good old days!” The cry will be, “These costs are killing us! Do something! Now!” This next round will be entirely focused on draconian cost-cutting.

The push for reform was about three things: Cost, quality, and access. Well, one out of three is not bad. The bill we got will eventually do a pretty good job on access, but it does little substantive or forceful about the other two. Quality is not a political issue with any grip; despite what we wonks and practitioners know, the public still doesn’t think that quality is a big problem. But cost? Big time.

Look at the trends: Health care inflation continues unchecked (the cost of each item continues to rise faster than general inflation). The Baby Boom is hitting its 60s (I turn 60 this year, and I am a pretty good marker for the pig entering the python), so utilization will rise rapidly – we will each use more health care items, and there are more of us at the age of increasing usage. Obesity and other markers for chronic illness continue their decades-long rise. Medicine is increasingly able to save us from death, but not cure us, meaning we need decades of continuing care that our great-grandparents did not live long enough to need. Meanwhile, even as they have saved themselves from annihilation or even serious government competition, the private health plans have entered a slow “death spiral,” as even those who have insurance increasingly back away from high-cost comprehensive plans in favor of ever-skinnier high-deductible plans. As costs rise, individuals (that is, voters) are more and more personally exposed to those costs, even deferring needed treatment because of costs. The forced inclusion of sick kids (though a great thing) will also add to the costs.

But…but…all those new people!

Full implementation of the act in a few years will bring tens of millions of new rate-payers into the system spreading the cost over more people. But that may actually add to the pressure for cost reform. There are, roughly, three chunks of uninsured. One chunk has been priced out or tossed out because they have a serious health problem. They will certainly welcome coverage. A second chunk is poor or near-poor. They will certainly welcome the subsidies to help them get coverage. The third chunk, though, are not necessarily poor or unemployed. They work for themselves or for an employer who does not offer insurance, and they have made a rational economic decision that the benefits of health insurance are not worth the cost, because they are, for instance, young, healthy, and childless. They are likely to feel dragooned into paying for something that they already decided is not worth it. And the new rules will have a leveling affect: If you can only charge the near-elderly three times what you charge the youngest, those youngest (the ones most likely to feel they don’t need health care coverage) will be paying considerably more than they would have under the old regime.

So the next few years will see a “perfect storm” of factors pushing up the costs of health care – particularly as expressed through private insurance premiums.

Is our political system capable of real cost reform?

That’s a good question. Any way you cut costs cuts into someone’s livelihood and someone else’s gravy train. Nobody thinks of what they are doing is “waste.” Nobody. And much of the public has what Ian Morrison calls a “Pimp My Ride” attitude toward healthcare: Bring on all that magic stuff! Don’t you dare take any away before I get mine!

So the political difficulty is quite real. But the pain felt by the public is also quite real, and will become more real and obvious as the months go by.

What if the Republicans regain power? What if the Democrats lose their majority in the House or the Senate, or lose the White House? That is not really a problem for this scenario: The underlying forces are so great that whoever is in power will have to at least appear to be doing something about the cost of health care. The Republicans will frame it as fixing the mess the Democrats made.

The clash between the public demand for cost reduction and the public demand to “Pimp My Ride” will mean that the cost-cutting legislation will not be shaped as across-the-board, government-imposed cost controls. Instead, it is more likely to be shaped in a complex of measures that allow politicians to take credit for “doing something” about costs while distancing themselves from what is actually being done. The measures would include such things as:

• a Medicare rate commission with teeth, able (like the military base closure commissions of the last decade) to make decisions that can only be overturned by Congress en masse, not piece by piece.
• Mandated bundling: Call it “beyond DRGs” – all common, definable interactions, procedures, goods, and services bundled into packages: A compound fracture of the tibia, an uncomplicated birth, a diabetes care subscription, a medical home.
• Mini-caps: Certain services, especially ones dealing with wellness, prevention, or chronic illness, not only bundled into subscriptions, but priced by the year in a kind of mini-capitation: Well-baby care, diabetes services, pregnancy and birth.
• Common carrier rules: As in transportation and telecommunications, the provider can set whatever prices and offer whatever inducements and discounts and special offers they want, but they must give the same price, the same special deals, to all comers, large or small.
• Real and transparent prices: A prime reason to establish bundling and common carrier rules is simply that you can’t have competition on price and quality if you can’t know what the price is. So put up a menu: Having your baby here costs this much, a cholecystectomy that much, a new knee this other amount, the whole thing, soup to nuts, diagnosis to rehab to drugs to scans.
• Real quality transparency: You also can’t have competition on price and quality if you can’t tell how good the product is. Put up a scoreboard: How many hearts did you do? How many came back to pump? How many infections? Unless you’re Michael Jordan, nobody really likes a scoreboard hanging over their head. But we need scoreboards, or we (individuals, employers, health plans, government) can’t possibly be smart shoppers for healthcare.
• Comparative effectiveness research with teeth: Today, a procedure, drug or device can be reimbursed if it is safe and effective. We may get to a point where a procedure, drug or device can be reimbursed if it is safe and cost-effective. If your elaborate billion-dollar surgical/genomic/interventional/whatever scheme turns out, after a great deal of study and evaluation, to be 5 percent more effective than rest, aspirin, and yoga, the Medicare rate board will say, “That’s nice, but you’re on your own. We’re not going to pay for it.” And private health plans, under that cover, are likely to follow suit. Such schemes will become like cosmetic surgery: legal, perhaps even somewhat common, but paid for by Visa.
• De-tortified malpractice: Now, the only way to be compensated for a medical mistake is to pin the blame on someone, sue, win, and win big enough to give a big chunk to the lawyers. And there is little to no evidence that suing doctors improves their skills. Take malpractice claims out of the tort system altogether into a medical compensation scheme like other countries use, and you will help more wronged patients, run the rare incorrigibly “bad” doctors out of the system, and help the rest improve – at about 10% of the cost of our current system.
• Regional bidding to health authorities: Consider one detail of the Canadian system. The government does not simply say, “Here’s how much we will pay for diabetes services, or long-term care services, or emergency services.” Instead, each province establishes a set of regional health authorities. A metropolitan area may have half a dozen or more. These authorities take bids: Organizations (many of them not-for-profit or religious) step forward and say, “We can provide (for instance) diabetes services for X thousand patients per year for Y dollars, and here is our track record, our quality statistics, our patient satisfaction numbers.” They compete on price and quality. Cost down, quality up. Can the system be gamed? Certainly. But our system comes pre-gamed.

There are probably many other possibilities for fine-grained cost reductions, when the time comes that the public is howling enough for help. For us in the industry, now is the time to get ahead of this curve by figuring out how we can get control of our own processes and drive down our own costs.