A Health Reformer’s Online Diary

It's Time for Deep Reform

Mainstream proposals for reforming health care take a superficial approach to the central role of our care delivery system in driving up costs and obstructing change. But some health policy experts suggest much more radical approaches to reform. These ideas, which collectively might be called “deep reform,” address the need for systemic changes in health care that go far beyond insurance coverage or quality incentives. Recognizing the inadequacy of the financing-focused measures that pass for reform today, these thinkers propose alternative methods of structuring the delivery system and reimbursing providers. While their ideas differ in many important ways, they could form the basis for a grand compromise between the left and the right.

    Deep reform encompasses the entire political spectrum. For example, Arnold Relman, MD, former editor of The New England Journal of Medicine and author of the book A Second Opinion: Rescuing America’s Health Care, wants us to switch to a single-payer insurance system in which care is delivered by competing group-model HMOs. He rejects the conservative idea of “consumer-driven health care,” regarding it as a way to shift more costs to consumers while motivating poorer patients to skip necessary care. In contrast, Michael Porter and Elisabeth Olmstead Teisberg, the authors of Redefining Healthcare: Creating Value-Based Competition on Results, favor the consumer-driven approach. In their model, specialized teams of providers would compete on the basis of their outcomes for particular procedures or episodes of care. These teams would be independent business units, rather than part of the large, prepaid multispecialty groups that Relman supports. But like Porter and Teisberg, Relman would have his physician groups vie for patients on the basis of published quality reports.

     In my own book Rx for Health Care Reform, I advocate replacing competition among insurance companies with competition among primary-care groups, which would set their own budgets for professional services. Similarly, Harvard Business School professor Regina Herzlinger, in her new book Who Killed Health Care?, writes, “In a consumer-driven health care system, providers will be free to create focused factories and to name their own price…[Thus] the doctors will regain the freedom to provide the kind of medical care they feel is appropriate.”

     While many more examples could be provided, the point is that deep reform has aspects that transcend ideology. Whether the proposal is coming from Relman, Porter, Herzlinger, George Halvorson, Alain Enthoven, Len Nichols, Victor Fuchs, Arnie Milstein, Donald Berwick, Tom Daschle, Alice Gosfield,  Francois DeBrantes, or Kathleen O’Connor of CodeBlueNow, the core message is the same: we need to overhaul health care financing and delivery.

     All of these thinkers, regardless of their political orientation, also believe that market competition is essential to reform. In this respect, their analysis differs from that of the “Medicare-for-all” proponents, who maintain that a government takeover of health care would solve our problems. Relman, despite his espousal of the single-payer approach, observes that this is insufficient: “Any reformed system that stands a chance of controlling costs, while still providing universal coverage and improving the quality of care, must change not only the present insurance system but also the organization and style of medical practice.”

     Deep reform views our health care crisis from a perspective that stands outside the current political debate. Instead of asking “how do we reach universal coverage?” or “how do we reduce insurance costs?”, deep reform poses a more fundamental question: How do we rebuild the system so that it delivers high-quality care for everyone at a cost we can afford? It might seem that our system is too big and complex to reconstruct it without destroying it. But in fact, it can be done, and there is no other way to save U.S. health care.

     This is not to say that significant reform cannot be achieved within the current system. Deep reformers are already busy in a number of areas. The leading example is the work of Donald Berwick, MD, president of the Institute for Health Care Improvement. Best-known for his efforts to improve patient safety in hospitals, Berwick also launched a campaign to reengineer primary-care practices, which led to the currently fashionable “patient-centered medical home.” Berwick’s writings and statements clearly show that he believes in the need for systemic change. For example, he is one of the principal authors of the Institute of Medicine’s epochal Crossing The Quality Chasm, which calls for a complete reorganization of health care around chronic disease management.

     Another example of a deep reformer who is trying to change particular aspects of the system is Joann Lynn, author of Sick to Death and Not Going to Take It Anymore! Reforming Health Care for The Last Years of Life.  Lynn, who understands end-of-life care as few others do, offers a comprehensive plan to make that care more humane and effective while relieving some of the burden on family caregivers.

    So far, deep reform concepts have had little impact on the political establishment. But as the health care crisis deepens, and as it becomes clear that our political leaders don’t know how to halt our system’s slide into chaos, more people will start to discuss these ideas. They might even lead to some legislation that has a chance of being passed and implemented.

    One example is the Minnesota health care reform bill that was first vetoed and, in a modified form, later approved by Republican Gov. Tim Pawlenty. This enlightened legislation, passed overwhelmingly by the Democratic legislature, allows provider groups to set their own budgets for “baskets of care” for such chronic conditions as coronary artery and heart disease, diabetes, asthma, and depression. They can then compete for patients on the basis of published cost and quality data. (The groups may also be eligible for coordination of care payments from insurers.) Corporate, labor, health care, and insurance leaders supported the measure, which aims to cut the state’s uninsured rate while lowering costs by 12 percent within the next seven years.

     A report from a state-appointed panel that helped devise the legislation proposed an even more radical change: Physician groups and “care systems” would take financial responsibility for the total cost of care. Insurance companies would still take overall financial risk, but wouldn’t negotiate prices or manage care. Their role would be limited to helping consumers navigate the system and manage their own health.

     Of course, the opposition of the national health care, pharmaceutical, and insurance industries to any change that threatens their profits should not be minimized. It will not be easy to mobilize the kind of public and corporate support that will be needed to overcome the objections of those whose incomes would be imperiled by real reform. But over time, I believe that even these self-interested parties will come around to the view that the biggest threat to them is the continuation of the status quo.

    To increase the chances of deep reform ideas being adopted, we reformers should come together, exchange ideas, and find out what we have in common. We might discover that we have a lot to offer one another, and that we can cross political divides that continue to separate politicians and policy makers. This is important work. Let’s get to it.

How Much Would Universal Coverage Cost?

At last count, 47 million Americans were uninsured. Those people paid for part of their own care, and the rest of us paid for the “free” services they received in emergency rooms and hospitals in the form of higher insurance rates and taxes. If you deduct those outlays from the cost of covering the uninsured in good private plans, a 2003 study estimated, it would cost about $69 billion to insure them. Uwe Reinhardt, a health economist at Princeton University, said that estimate was too low for several technical reasons I won’t go into here. He figured it would cost around $100 billion to cover everyone. Since U.S. health spending has increased by about 30 percent since then, we can assume that universal coverage would now cost around $130 billion.

    (It would be more accurate to update the calculation using the cost per capita. But with the number of unemployed growing twice as fast as the population, the cost of covering them would be at least this high.)

    The Presidential candidates’ estimates are in the same ballpark. Former candidate John Edwards says his universal coverage proposal would cost up to $120 billion per year, and Hillary Clinton estimates hers would come in at $110 billion. Barack Obama’s plan would cost half as much, but he doesn’t claim it would achieve universal coverage in the short term. John McCain isn’t seeking to insure everyone.

    One problem with all of these estimates is that they’re based on current, not future health care costs. So they’d be obsolete as soon as we covered everybody. The very next year, health spending would grow seven or eight percent, and we’d either have to raise insurance premiums and taxes or cut benefits to maintain universal coverage.

    Also, estimates like these don’t consider how many people are underinsured: that is, they have some insurance, but still have trouble paying their medical bills. Using rigorous standards, experts have calculated that 16 to 19 million people are underinsured. But, given how much deductibles and copayments have risen in recent years, the real number might be much higher. According to a new AFL-CIO survey, more than half of people in insured families say their insurance doesn’t cover all the care they need at a price they can afford.

     Finally, let’s not forget about the 43 million people on Medicaid. Most states pay providers so little for these patients that many physicians won’t see them. So while Medicaid recipients—most of them poor women and children—have insurance, they don’t have good access to care.

     To provide comprehensive coverage to everyone—which is what’s required to guarantee access—will cost a lot more than $130 billion. How large that price tag might be isn’t clear, and won’t be until we start facing facts.

      

The Fly in Wyden-Bennett's Ointment

In “Health Care’s Odd Couple,” Ezra Klein’s insightful piece in The American Prospect, he correctly points out that health care reform is impossible without bipartisan action. He’s also right when he notes that the bipartisan coalition of 12 senators assembled by Ron Wyden (D-OR) and Bob Bennett (R-UT) is moving in the right direction to achieve that goal. And finally, I couldn’t agree more that the Wyden-Bennett bill is more radical than anything that Obama, Clinton, or McCain have proposed on health care reform.

     The only problem is that their solution won’t work.

     The reason why is transparently obvious: If employers give their workers a raise equal to the amount they’re spending on health insurance today, that money won’t buy insurance tomorrow. The difference between that raise and the cost of insurance will be borne by consumers. Their employers, in contrast, will not have to spend a plug nickel more than they agreed to pay in year one. In essence, this is a buyout of their healthcare obligation similar to—although not the same—as the automakers’ buyout of their retiree obligations.

      Of course, the Republicans, representing the employer class, would love to see everybody buy their insurance individually. In fact, the idea of fixing the amount of employers’ health care payments is also what’s driving consumer-driven care: They give you, the consumer, a fixed amount to put into your health savings account, and you have to pay more every year for health care.

      Health care reformers from every corner of the political spectrum would like to move away from our employer-based insurance system, and that makes eminent sense. But there’s a right way and a wrong way to do it. Consumers should have the ability to buy their own insurance, or to choose among competing provider groups—as I propose in my book Rx For Healthcare Reform. But the money for them to do that must come from employers and the government, as well as from consumers, and employers must pay their fair share, rather than continuing to heap more of the burden on their workers.

      By the way, even if the Wyden-Bennett proposal would save $1.4 trillion over 10 years, as the Lewin Group estimates, that’s a drop in the bucket. We’re expected to double the current $2.3 trillion annual cost of health care within the next decade. Yearly savings of $140 billion hardly make a dent in that. To achieve real cost control and real universal health care, we need deep structural reform in our health delivery and financing system.

    

Universal coverage: a three-legged stool

Health care reform failed in California partly because some legislators believed that requiring everyone to buy insurance would overburden individuals and families. Yet hard on the heels of that defeat, a group that lobbies for the health care interests of large employers released a reform proposal that calls for an individual mandate. This proposal wouldn’t require employers to cover their workers or pay into an insurance fund, as the California plan did.

The National Business Group on Health said that if consumers were allowed to deduct the cost of insurance, they’d have the same ability to buy it that employees of companies that offer coverage do. Unfortunately, that isn’t true.

For starters, big employers usually pay 75-80 percent of the insurance premium. While many economists regard this as money that would otherwise be paid to employees in the form of wages, that’s an idealistic assumption. Actually, we have no way of knowing whether workers would ever see those funds if their employers didn’t purchase insurance. One might suppose that if this were the case, employees performing similar work in other firms that don’t offer coverage would be paid more; but there’s no evidence of that. So the only tax break that employees get is on their share of the premium, which is paid with pretax money. If their employers dropped coverage, they’d have to pay the whole premium themselves out of the same wages.

Second, individuals have to pay much more for insurance than people who obtain coverage through their employers, especially large companies. That’s because they’re not part of a large pool that includes mostly healthy people, and also because administrative costs are higher for individual policies. While the NBGH advocates a pooling mechanism akin to what some Democratic politicians have proposed, a purchasing alliance wouldn’t reduce insurance costs unless everyone were required to join it. Otherwise, the pool would attract too many sick people, and the healthy could buy insurance more cheaply elsewhere.

As things stand today, individual insurance is out of the reach of most people, even if they’re healthy—and those with health problems aren’t often eligible. In a survey by the Commonwealth Fund, 89 percent of those who’d thought about buying or tried to purchase individual policies never did. The reasons: they found it difficult or impossible to find affordable coverage, or they were turned down or charged a higher price because of a preexisting condition. So, whatever big business says, an individual mandate alone will not lead to universal coverage—and would be politically unpopular.

It’s hard to tell what will happen when real penalties kick in in Massachusetts for those who don’t buy insurance; but a large chunk of the uninsured had to be exempted because they couldn’t afford coverage. And, while a greater number of people than expected did enroll in state-subsidized plans, the result will be a big tax increase. Interestingly, the California plan demanded far more of employers than Massachusetts did: It required employers to cover their workers or pay up to 6.5 percent of payroll into a fund. Yet if you run the numbers, the cost of insurance still would have fallen disproportionately on consumers.

A realistic plan to attain universal coverage would require contributions from individuals, employers and the government. But, considering the high cost of health care, even that wouldn’t be enough. The only effective solution is to overhaul our health care delivery system from top to bottom. By eliminating waste and inefficiency, experts say, we can reduce costs by 30-40 percent. There’s no better time to start than now.

Right-sizing Health Care

Happy New Year to all six of you who will read this blog entry. I commend you for your pursuit of the neglected and the arcane.

     Today I’m going to talk about two recent commentaries on health care reform. The first is an Op-Ed article in The Baltimore Sun by Jim Jaffe, an official at the Center for the Advancement of Health, a Washington think tank. Jaffe sees a shift in the reform debate presaged by a recent New England Journal of Medicine piece by CBO Director Peter R. Orszag and his colleague Philip Ellis. Arguing that the primary driver of cost growth is not the aging of America, but our overconsumption of health care, Jaffe quotes Orszag as saying that we need to find out what works best in medicine. “Then stop doing all the things that don’t work, increase costs and put patients at risk.” Jaffe himself says. “If less were done, cost pressures would ease. Fewer tests and operations would force spending down.”

     Health care quality improvement guru Dr. Donald M. Berwick and Dr. Howard Hiatt, former dean of the Harvard School of Public Health, express a parallel but subtly different view in The Huffington Post. Noting that the mainstream proposals to reach universal health care are illusory because of rising costs, they point out that the real way to reduce costs is not by decreasing the amount of care provided but by delivering the right care to each patient.

     The difference between these two statements is not as great as it seems. Basing their arguments on the decades-long studies on regional cost variations by the John Wennberg team, both Jaffe and Berwick/Howard are saying that we need to deliver more appropriate care to patients. But determining what is appropriate—let alone finding a way to get physicians and hospitals to supply that care only—will not be easy.

     First, we can’t wave a magic wand and suddenly fill in all the gaps in the evidence base. A number of politicians and policy experts have proposed a national institute for evidence-based research, and that would be a good step forward. But it would be many years before it made significant progress in distinguishing effective interventions from ineffective ones. And as Wennberg found out to his distress in the ‘90s, stepping on powerful toes can lead to the termination of such research. Also, Orszag’s proposal that we look hard at the relative cost-effectiveness of different interventions is going to provoke even more resistance, from patients as well as providers. Remember the Oregon Plan? Having health plans use cost-effectiveness research to determine which interventions they’ll pay for would provoke a renewed backlash from the public, which doesn’t believe insurance companies have the authority to deny care.

    Both commentaries stress that changes in the amount and/or type of care provided to patients—if they do succeed in containing costs—will reduce the income of individual providers and entire communities that depend on the health care industry. Therein lies the chief obstacle to any kind of reform. It’s exactly why prepaid approaches to care have been so unpopular among physicians. And we all know how easy it is to close a hospital that’s no longer needed. Without some kind of national industrial and retraining policy, health care reform of any kind will be exceedingly difficult.

     There are some ways to get around these problems. For example, the agreement among the health care players in Rochester,NY, to restrain unnecessary facility construction and redistribute the patient load from hospital closings shows how local control can change the dynamic of health care restructuring. And practical clinical trials involving thousands of physicians with electronic health records could vastly speed the process of determining what works and what doesn’t. But nobody’s talking about these things today.

    Jaffe, Orszag, and Berwick all have one thing right: To solve the health care puzzle, we need to focus on the delivery of care, not on insurance. But if we want to cut costs by ensuring that everyone receives the right care, the process is going to be vastly more difficult than having Medicare budget the same amount per beneficiary for Miami that it does for Minnesota. And we can’t get there by telling physicians what to do, or by giving patients information about medical interventions that they don’t understand. Instead, we’re going to have to change the incentives throughout the system so that physicians will have a direct stake in providing the right care to the right patient at the right time.

    

The individual mandate: Could coverage be a mirage?

         

         

Kudos to Adam Thompson of the Stateside Dispatch for raising the issue of individual insurance mandates that don't include all out of pocket expenses in figuring affordability. “Measuring affordability must consider more than just the cost of premiums and take into account the real-world financial realities of already financially stressed Americans,” he points out.

  Thompson goes on to compare the individual mandate in Massachusetts with proposals in California and other states. While depicting the considerable success Massachusetts has had in signing up lower-income residents for subsidized plans, he notes that there are problems with the coverage: 

   “While the [Mass.] Connector authority determined that premiums should not exceed between 5% and 10% of an individual's income, that affordability requirement did not include the costs of deductibles, co-pays and other cost-sharing. Deductibles go as high as $2,000 per individual and $4,000 per family and total out of pocket spending limits can be $5,000 for an individual and $10,000 for families.
   “Under the rules, an individual earning just over 300% of the poverty line ($31,000) could face total health care costs of $7,100 when you add monthly premiums to the out of pocket limit. The cheapest option for a middle-age resident is about $175 per month, with a $2,000 deductible and out of pocket limit of $5,000. In the event of a major medical crisis, like a cancer diagnosis, a personal injury, or complications from managing a chronic disease, like diabetes, the combined costs would amount to 23% of the individual's income and could quickly result in a serious fiscal crisis, if not bankruptcy.”

    In a Health Affairs Web Exclusive (June 4, 2007), “Setting a Standard of Affordability for Health Insurance Coverage,” Linda J. Blumberg, John Holahan, Jack Hadley, and Katharine Nordahl also explored the affordability of Massachusetts’ individual mandate. “If an insurance premium is low because the benefits are limited or require high cost sharing, or both, then the policy might not improve the affordability of care, which depends on an appropriate combination of premiums and out of pocket spending,” they observed. “This is especially a problem for those with chronic illness and other above-average health needs.”

     This is the essential problem for the states that are considering adoption of an individual mandate, and for Congress, when legislation requiring all Americans to buy health insurance is debated. If deductibles, copayments, and limits on out of pocket spending are set too high, it won’t matter if the premiums fall below a certain percentage of income. The dollar amounts required to access care will still be a much higher percentage of earnings for low-income people than for the more affluent. Poorer people will still have difficulty paying for doctor appointments, medications, and so on. And as Thompson notes, a serious illness could still bankrupt them.

     The only real solution is to combine an individual mandate with an employer mandate and government subsidies. This is like a three-legged stool that can’t stand without all of its legs. While it’s important not to overburden small employers with insurance costs, all companies must pay their fair share. Requiring employers to pay only $295 per employee per year if they don’t buy insurance for their workers, as Massachusetts does, is not going to increase employer coverage one iota. In fact, state-subsidized coverage will probably have the opposite effect in the long run. If employers paid for insurance as a set percentage of payroll—or perhaps on a sliding scale, as California’s Democrats propose—we could have comprehensive, universal coverage—the only kind that’s worth having..

Reply to Alan Katz's Blog on Health Costs

As Bill Robinson, Helen Darling and many others have pointed out, we must deal with the cost of care, or any effort to provide universal coverage will be futile in the long run. Single-payer proposals, unlike mainstream universal coverage ideas, do address the spending issue by imposing some kind of a national or regional budget. But that top-down approach—which is also favored by the National Coalition on Health Care in the form of price controls—won’t work, either. As we’ve seen time and again in the political battles over the annual Medicare budget, provider interest groups insist on getting the increases they feel are due to them. If they don’t get them, they threaten not to treat Medicare patients. And the majority of physicians already turn away Medicaid patients because of the low fees they receive from state Medicaid programs.

    To get the cost monster under control, we need deep, structural reform of our health care financing and delivery system. When people hear this, their first reaction is that it’s impossible. Nothing as huge and complicated as the U.S. health care system could ever be completely restructured, they say. For one thing, how would politicians be able to withstand the assault of powerful interest groups, including providers, insurers, and pharmaceutical companies? I don’t deny that this is a problem, but I firmly believe that if enough people lose coverage or find out that their insurance isn’t sufficient to guarantee them access to care, we’re going to have major systemic reform in this country. And that isn’t going to happen 20 years from now, but more likely within five to 10 years.

     The key to overhauling the system, as I explain in my book Rx For Health Care Reform, is to make two changes: First, all primary-care physicians must join groups that are large enough to take financial responsibility for professional services. And second, competition among these physician groups, based on quality and cost, should replace competition among insurance companies. In my modified single payer system, there would be only one government-regulated health insurer per region, and it would have nothing to do with negotiating prices or managing care. Instead, the physician groups would determine how much they needed to provide good care to everyone who signed up with them.

    In this model, individuals and companies would pay health care contributions (similar to insurance premiums) in proportion to their income or the size of their payroll. Consumers would use group quality and cost data to choose a primary-care doctor who would coordinate all of their care. If they picked a doctor in a higher-cost group, they’d pay a higher health care contribution.

     If we designed a system around these principles, we’d immediately be able to cover the uninsured from administrative savings. And in the long run, savings created by the competition among physician groups would cut health-care spending by 30 percent or more. 

[To see original blog entry, go to http://alankatz.wordpress.com/2007/10/28/failing-to-address-health-care-costs-just-puts-off-the-big-accounting/.]

The Fault Line of Personal Responsibility

John Edwards said something important the other night when he was interviewed by Bill Maher on the latter’s cable show. Instead of talking about personal responsibility, he said, we should be talking about social responsibility. (I’m paraphrasing here, but that was the gist of it.) In other words, rather than emphasize the need for each individual to take responsibility for their own health behavior, we need to focus on how we can take care of each other.

The mantra of “personal responsibility” has swept the country lately. Not only are conservative pundits and talk show hosts talking about it, but so are some Presidential candidates: For example, Hillary Clinton answered a question about it during her recent Kaiser Family Foundation webcast on health care policy, and Mitt Romney mentioned it in a video taken from a Q&A session called “Conservative Principles in Health Care.” Interestingly, Hillary and Mitt both talked about the need to educate consumers and provide incentives for children to eat better and exercise more in school. (Romney also said everyone should buy insurance, although he’s distanced himself from the individual mandate in the reform bill that he signed as governor of Massachusetts.) Hillary also praised the Safeway employee wellness program that provides rewards for getting preventive care, adding that her approach to personal responsibility would include some sticks as well as carrots.

Karen Ignagni, president and CEO of American’s Health Insurance Plans, made a much bolder statement at a recent health policy conference in Washington, DC. Ignagni said that health care purchasers want to reward good health and to penalize people with chronic conditions if they don’t comply with their doctors’ orders. For example, if you have asthma and you don’t use an inhaler prescribed by your doctor, the idea is that you should pay more for insurance because your health care is going to cost more. Some insurers are taking this philosophy beyond mere talk: Clarian Health in Indianapolis, for instance, plans to tack surcharges onto the premiums of people who smoke, have high blood pressure, or have a high body mass index. 

This is not a philosophy that’s confined to insurance companies. While promoting my book Rx For Health Care Reform, I was recently interviewed on a number of AM radio stations, and the subject of personal responsibility came up many times. Even some fairly liberal talk show hosts seem to believe that people with poor health behavior should pay more.

One reason for this widespread attitude, I believe, is that the majority of people are healthy. And when you’re healthy, you don’t think about the possibility that you could suddenly develop type 2 diabetes because you’re overweight, or that you could develop lung cancer because you smoked cigarettes many years ago. No, you’re prone to view yourself as a clean-living paragon of middle class rectitude, and to see people who smoke or are obese as reckless slobs who don’t care about themselves or about the costs they’re incurring for other people.

I agree that people who smoke should try to quit, and that obese people should try to lose weight, for their own sake. But I don’t believe that they should be penalized with higher insurance premiums. Similarly, I don’t think that people who have chronic conditions and don’t comply with their doctors’ orders should have to pay more for health insurance. First of all, this would just mean that patients who have health conditions or are at risk of becoming ill are less likely to get the care they need. Also, it’s not necessarily easy to lose weight or comply with a doctor’s orders. For example, patients might not be able to afford medications or might have difficulty getting time off from work for a lab test or a mammogram. In her webcast, Hillary pointed out that in many inner-city areas, it’s difficult to buy good food, because there aren’t any supermarkets.

The debate over personal responsibility goes far beyond the immediate issue of whether non-compliant patients should pay more for insurance. It lies at the heart of the philosophical divide between left and right over who’s responsible for obtaining health care. Take the idea of consumer-driven health plans, for example. Essentially, consumers are being asked to manage a certain amount of money designated for health care, and to shop wisely for doctors and hospitals. That’s one type of personal responsibility. Beyond what’s in their health savings accounts, they’re also responsible for meeting a high deductible. So, instead of sharing the financial risk with other people, as they’d do in a conventional plan, they’re at risk for the cost of their own health care up to the deductible.

Obviously, this type of personal responsibility penalizes not only people with poor health behavior, but also anybody who has a chronic condition. In other words, consumer-driven care is just an extreme form of the prevalent mode of U.S. health insurance, which dictates higher premiums for sick people and those who employ them. And by separating their financial risk from that of healthier people, this approach makes a virtue of health and a vice of sickness.

Personal responsibility has been taken to a different kind of extreme in West Virginia, where the state is requiring Medicaid recipients to sign a “personal responsibility statement.” If they don’t keep their medical appointments, take their medications as directed, submit to screening tests, and participate in health improvement programs, among other things, they won’t receive “enhanced” benefits, most of which are benefits they had before Medicaid cut back on them. Initially, the Medicaid program was going to require physicians to report on their patients’ health behavior, but the state backed off after vociferous protests from doctors who didn’t want to become Medicaid “police.” Physicians also believe that the program, as currently conceived, may hurt their patients’ health. "How this new structure impacts individuals' ability to obtain needed and adequate care is clearly going to have to be monitored," says internist Greg Rosencrance, governor of the West Virginia Chapter of the American College of Physicians (see my article “Compliance: What about a crackdown on patients?” Medical Economics, March 2, 2007).

Rosencrantz believes that people should take some responsibility for their own health, and his medical society is one of ten that included “personal health responsibility” as one of their key tenets in a recent statement entitled “Principles For Reforming the U.S. Health Care System." Nevertheless, patient non-compliance is one of the main reasons why physicians have trouble with the idea of pay for performance and report cards on individual doctors. They know only too well that many patients don’t comply with their orders, and that some of them can’t. Yet employers and the government are increasingly holding physicians responsible for making sure that patients get the care they need, even if doctors have to make major (and usually unpaid) efforts to remind patients to come into the office, get tests done, and take their medications. So in this context, personal responsibility has become doctors’ responsibility—and it’s not even clear which of a patient’s doctors is liable.

As this brief circumambulation shows, personal responsibility is a slippery slope with many unforeseen and unintended consequences. So Democratic politicians would do well to parse their words carefully when they use this term or respond to questions about it. To the extent that “personal responsibility” is a Republican code word for ignoring the responsibility of all of us to everyone else, succumbing to the term’s allure will slow down the progress of reform.

SCHIP and The Health Care Crisis

Some observers still refuse to admit there’s a health care crisis, and others think that halfway measures will solve it. They believe that if we can cover the uninsured, or incrementally improve the system, all will be well. But we can’t cover the uninsured without controlling costs at the same time. Unless we rein in spending, whatever we budget for universal coverage will prove inadequate within a few years. Similarly, incremental efforts to shore up the system, like the State Children’s Health Insurance Program, will have only a temporary, partial impact. Although millions of children have received insurance through SCHIP, the total number of children without insurance actually increased to 8.7 million in 2006 from 8 million the previous year. While SCHIP was doing its good work, more children lost coverage because employers dropped it or their parents could no longer afford it.

Finally, the SCHIP debate has revealed the fact that the health care crisis, like the subprime lending fiasco, has spread from the lower class to the middle class. New York and 15 other states have raised their household income limit for enrolling children in SCHIP to 300 percent or more of the poverty level, according to The New York Times. This means that people whose income is slightly above the national median cannot afford health insurance for their kids. In New York, where everything costs more, the limit is 400 percent of the poverty level, or $82,000 a year. Now, when a family of four with an income of $82,000 a year can’t afford insurance, we have a real crisis. And it’s not just the uninsured and the under-insured who are in trouble; so is anyone (other than the rich) who could fall into one of those categories if they lost their job or their employer dropped insurance coverage.

The market forces physicians into groups

The proportion of physicians in solo and two-physician practices decreased significantly from 1996-97 to 2004-05, according to an important study recently published by the Center for Studying Health System Change (CSHSC). What the study doesn’t show—because of the time period it covers—is that the trend toward physicians joining larger groups has greatly accelerated within the last year or two.

     The CSHSC researchers, who have been tracking market conditions in a dozen representative markets for the past decade, found that the percentage of physicians in small practices dropped from 40.7 percent in 1996-97 to 32.5 percent in 2004-05. Physicians are increasingly practicing in mid-sized, single-specialty groups of six to 50 physicians, the study found.

     This trend was concentrated among medical specialists and surgeons, who tended to band together to build ancillary facilities such as imaging centers and ambulatory surgery centers. Among primary-care physicians, the researchers discovered, the percentage of doctors in solo and two-physician practices remained stable at around 36 percent. Multispecialty groups continued the decline that had begun around the turn of the century, as managed care retreated and the impetus to take global capitation faded.

     Today, multispecialty groups are on the rise again, and the percentage of physicians who are employed by physician- or hospital-owned groups is mushrooming, according to practice management consultants, physician recruiters, and doctors.

     “There’s a huge shift in the market right now from mainly a private practice, single specialty to more of an employed, multispecialty, integrated delivery system model,” says Brian McCartie, a recruiter for Milwaukee-based Cejka Search. Bob Bohlmann, an Arlington, TX-based consultant with the Medical Group Management Association, agrees. “There’s very rapid, accelerating growth in group practice,” he says. Established groups are hiring doctors, and new groups are “rolling up” small practices in all specialties.

     Hospitals, he adds, are on the cutting edge of this development. After the financial losses they incurred by paying too much for practices during the ‘90s, hospitals avoided practice acquisitions for several years and even returned a lot of practices back to their physicians. But in recent years, hospitals have been acquiring primary-care and specialty practices at an accelerating rate. This is partly because the hospitals are competing for physicians who, under current practice conditions, are perceived to be in short supply and are increasingly mobile. So to keep their beds filled and their facilities fully staffed, they’re hiring more physicians out of residency and are acquiring available practices.

      The other reason why hospitals are buying practices—usually for no more than the value of their hard assets—is that physicians are approaching them and begging to be bought out. “In the past month, I’ve received eight phone calls from groups that are approaching hospitals” about being acquired and hospitals that are being approached by physicians, says Bohlmann. “Physicians are knocking on the doors of hospitals and saying, ‘Come take us over.’ And there’s no goodwill involved in the sales. They’re coming in from the cold and saying, ‘We don’t think we can make it on the outside because of financial pressures,’ meaning lower reimbursement, escalating costs and expectations.”

     Even good-sized specialty groups, Bohlmann and other observers say, are bailing out. In some cases, they’re finding that the costly ancillaries and surgery centers they invested in several years ago aren’t so profitable, and they’re having trouble carrying their debts. The pressure of health plans and Medicare on these groups is starting to have an impact, as the payers cut reimbursement for tests and procedures and scrutinize the need for them more closely.

     The pressure on small primary-care groups—the weakest and most vulnerable link in the health care delivery chain—is even more marked. “Small practices are very economically tenuous; there’s not a lot of profitability left in them,” notes Steve Messinger, a practice management consultant in Arlington, VA. These practices are not only getting crushed by reimbursement cuts and ever-increasing paperwork; they’re also finding that they can’t recruit new physicians because they can’t match the salaries of the larger groups and hospitals. Moreover, these young physicians prize lifestyle more than the older generation did. They don’t want to work long hours, run a practice, or take the risk that buying a partnership entails. Many would rather just have a job with set hours in a hospital or large private group. Hence, as the CSHSC study points out, the proportion of physicians with an ownership stake in a practice is decreasing. As a result, small practices are worth less, and that there may not be anybody to buy out their owners when they retire.

    “Small groups and solo practices are becoming untenable economically because there’s no way you can accumulate wealth and transfer that opportunity to the next generation of physicians and have that generation reward the founders,” Messinger points out.

    What does all of this mean for health care reform?

    I don’t believe that multispecialty groups—outside of Kaiser and the Mayo and Cleveland Clinics--are a major force yet. But even if they gain more clout, most of these groups still won’t be able to play a significant role in coordinating patient care. Unless they take global capitation from HMOs—something that neither the hospitals, the physicians nor the plans are keen on—they’ll just be agglomerations of employed doctors. The primary care doctors will be “incentivized”—on pain of losing their jobs—to refer to their specialist colleagues, even if there are better specialists outside the group.

      Of much greater importance to reform is the trend toward employment of primary-care physicians. If, indeed, the stranglehold of small private practice on primary care is starting to be broken, it bodes well for the future. As pointed out in my book Rx for Healthcare Reform, competition among primary-care groups, if they took financial responsibility for professional services, could replace competition among health plans. Moreover, these primary-care doctors could reduce costs by referring to the best, most cost-effective specialists and giving those physicians an incentive to deliver only necessary care.

     If one of the major obstacles to the implementation of such a model, and to quality improvement, is the aversion of primary-care doctors to joining groups, the economic pressures that are making private practice increasingly untenable could pave the way for real health-care reform.