Solving Medicare costs and the budget deficit: primary care, cost-effectiveness, and universal health coverage

.
According to the New York Times, “Here is a basic truth about the deficit: In the long run, it cannot be fixed, without reining in spending on Medicare and Medicaid.” In a December 11, 2010 editorial titled “Health Care and the Deficit”, the Times lets us know that Medicare, Medicaid, and S-CHIP (the Children’s Health Insurance Program that covers low-income children whose families are too “rich” for Medicaid) account for more than 20% of federal expenditures, more than Social Security or national defense; and that, if unchecked, will rise to 40% by 2035. To the editorialist this is obviously unacceptable, and s/he reviews the proposals of the two recent “bipartisan” commissions that have made recommendations to reduce spending on these programs.

Overall, the editorial is good in that it is very critical of the recommendations of both commissions. “The most disturbing element of both reports is that, in their efforts to show quick savings, they shift much of the burden from the federal budget to individuals or, in some cases, to states. That may make the federal deficit look better, but it is a shell game that produces no real reduction in the cost of health care.” Bowles-Simpson (the conceived-of-as-a-deficit-reduction-but-changed-into-a-tax-cut panel, previously addressed in my blog of December 12, 2010 Tax Breaks for the "Masters of the Universe" or for the rest of us? ) wants mostly to save money by having greater “cost sharing” by Medicare beneficiaries.

While, as the editorialist points out, there is something to be said for people with any type of insurance not being completely insulated from the cost when they opt for probably-unnecessary expensive tests, the fact is that the fault is much less often on the part of the patient than on the part of the doctors who recommend these tests. This is particularly true when those doctors have a financial interest in doing the tests because they are highly-reimbursed for them. If this is the problem, then regulation should address it directly, by having Medicare, Medicaid, and other insurers use cost-effectiveness criteria rather than taking the real risk that “people on modest incomes might forgo needed care.”

The other panel, Domenici-Rivlin (another “bipartisan” group headed by a conservative Republican and a conservative Democrat), also recommends cost sharing, and goes even further by taxing the cost of health benefits that workers receive. It relies on the idea that, with cost sharing, beneficiaries will restrain their own spending. They are likely to – even at the cost of their own health. It also resurrects the idea of vouchers for people on Medicaid.

Yes: Medicare, Medicaid, and the entire US health system spend too much money; and yes: the cost of what is called “health care” is squeezing out spending on other critical social programs, such as education. But the recommendations of these two commissions, essentially capping spending while continuing to reward private health insurers through their “market-based” solutions, will only exacerbate the problem.

Meanwhile, following on the heels of Massachusetts’ experience in not having enough primary care doctors – or other providers – to meet the health needs of its increased number of insured citizens, California is experiencing the same problem, without even having a state-wide health reform. Documented in the PBS News Hour report aired November 18, 2010, “In California, facing down a family physician shortage”, residents of that state cannot find the primary care doctors they need to provide cost-effective care, and it is anticipated to get “worse” with health reform. Paul Leight, a health economist at the University of California Davis, states “So, we have more than 20 million Americans who now don't have health insurance who will have health insurance. And once they get health insurance, naturally, they're going to want to see a primary care physician.“ Naturally. And we don’t have nearly enough of them.

But, of course, as has been it seems endlessly documented on this blog and by study after study, including for example the Commonwealth Foundation’s 2010 report “Mirror, Mirror on the Wall: How the Performance of the U.S. Health Care System Compares Internationally, 2010 Update”[1], the US spends far more (2-3 times more!) and gets worse health outcomes than all other developed countries. Commonwealth’s 2008 report shows that the US, in terms of health outcomes, did worse than in its original report of 2006, and spending has continued to increase. The biggest reason for the excessive cost in the US is that it is based in a system geared to profit, by insurers, drug and device makers, and health care providers (including hospitals, doctors, nursing homes, etc.) As I have pointed out (for example, in A Modest Proposal: Bribe the Insurance Companies, August 23, 2009), it is not simply the profit itself that causes the grossly bloated cost of US health care, but the inefficient system built to ensure the continuation of that profit. To suggest solutions based on increasing the role of private, profit-incented, players as a method of controlling costs is illogical. Increasing profits will come either from increasing costs or from decreasing access to care. This is not the way to go.

The goal must not be simply reducing costs, but increasing quality. The wonderful thing about health care is that our system is so bloated and inverted in its incentives and outputs – and in having far more tertiary than primary care -- that this seeming contradiction, reduce costs and increase quality, can be achieved. Different groups push for more primary care, limitations on high cost technical procedures, and a more rational health system based upon universal access and elimination of profit. Unfortunately, taken alone, each is inadequate. Here is what the evidence shows will work:

More Primary Care. We need a system based upon primary care, so that Massachusetts, California, and the rest of the country, can have the primary care providers they need. This is the focus of the Patient Centered Primary Care Collaborative (PCPCC). This means completely changing the financial incentives at every level that lead to production of more subspecialists. The “encouragements” for increasing primary care contained in ACA are inadequate. The key issue is the inverted reimbursement system in which procedure-based subspecialists make many times the income-per-hour of primary care doctors. The reimbursement system used by Medicare (upon which all other insurers base their reimbursement), currently controlled by a specialist-dominated advisory group, needs to change entirely so that potential income is eliminated from the specialty-choice decisions of medical students, and so that procedure-based profit is eliminated from the decision of hospitals about what kind of care and specialists they wish to support.

Cost-effectiveness payment. Tied to changing the mix of primary and sub-specialty providers and their reimbursement is for Medicare and other payers to not pay for, or not pay as much for, unproven high-cost therapies, whether those are new drugs or devices or unproven procedures. This does not mean denying access to some procedures or drugs across the board to all patients; it means appropriately selecting those who are most likely to benefit. This is a complex science, but an easy concept: what is likely to be cost-effective for me may well not be for you, because we are different, in disease, disease stage, intercurrent conditions, underlying reserve, etc.

Universal not-for-profit health insurance system. This is the sine qua non, the single necessary element for improving the health of all our people. It is not sufficient in itself, but without it there is no chance to control costs, or to implement reimbursement reform, or to effectively limit the use of high-cost, low-effectiveness and/or unproven technologies.

These will work, but need to all be done. Expanding primary care and limiting expenditures on high-cost procedures will not improve everyone’s health unless we have a university health insurance system that is not based upon profit; a universal health system without increased primary care or cost-effectiveness criteria for procedures will not achieve either goal of improving America’s health or saving money. They are all necessary legs for the stool of cost-effective, high-quality, universally-accessible health care to stand up.


[1] K. Davis, C. Schoen, and K. Stremikis, How the Performance of the U.S. Health Care System Compares Internationally 2010 Update, The Commonwealth Fund, June 2010.
.