Roland Benjamin: A Response to RI Health Care Experts

The Providence Journal reported the responses of health care experts around the state to President Obama's speech on reform to Congress a few weeks ago:

Five Rhode Islanders with expertise in health care were among the many who watched President Obama's speech Wednesday night. A professor, a doctor, a hospital president, a businessman and a government official each offer a unique perspective…

Most of the responses in one way or another commended the President on his efforts to transform our health care system. With one exception, though, they seemed skeptical about the upside to the details.

For many individuals, inflation of care and plan costs is of paramount concern. The nonstandard inflation in health costs has eroded coverage as insurance prices push individuals out of the market. That said, two of the experts are not convinced that ideas will do anything in this regard.

Rhode Island Health Insurance Commissioner Chris Koller states:

Nothing in the president's proposal last night directly gets at changes in the way we use medical care services, which are what's driving our cost increases.

And Chairman of the Rhode Island chapter of the Smaller Business Association of New England Grafton Willey is concerned that businesses would pick up the price tag:

Mr. Obama said it would not be funded through tax hikes, but Willey worries that small businesses could end up paying.

If costs are to be contained, and there is only marginal indication that this is a goal of the reform, two other experts hint from where cuts will come.

The President of South County Hospital, Lou Giancola, expressed concerns that providers will bear this burden.

Giancola worries that cost control, as often happens, will come down to simply paying providers less. Reductions in Medicare reimbursements have already been proposed…

Professor James Munroe at Brown University, a political science expert and coauthor of a new health care reform book, offers little relief to the concerns of the provider community with a more pragmatic reality check on how cost containment might be achieved.

Once everyone is insured and the government is at risk for the costs, he said, the government will clamp down — by paying less to providers.

So the Rhode Island experts agree that either costs will continue to rise, requiring a necessary tax or premium increase, or providers will pay through diminishing reimbursements, ultimately affecting quality of care. But if the reforms are not designed to contain costs, where is the upside? Naturally, the ambiguous goal of insuring the uninsured might be coercively achieved, by requiring millions who do not see the value of insurance to buy it. But that is a revenue grab to force tens of millions of folks who already have access to insurance, but choose not to pay for it, to fork over their resources for the common good.

Beyond insuring the uninsured, the president promised to provide more consumer protections for those already covered. Commissioner Koller acknowledged that much of these reform elements already exist in the State:

Most of the insurance reforms that President Obama is proposing in his health-care plan, such as bans on preexisting-condition exclusion, are already part of Rhode Island law, Koller said. The state has a robust set of consumer protections passed by the legislature over the years.

This probably has little correlation to the fact that Rhode Island has higher family plan premiums than 42 other states and is only 3% less than the highest premiums in the country. Ask any employer whether these consumer protections have contained premium inflation rates.

The one Rhode Island expert that was completely supportive was Dr. Elizabeth Lange, President of the Rhode Island chapter of the American Academy of Pediatrics. She marginalized the opinions of those outside of the health field:

"I don't think nonmedical people understand what a crisis the system is in," Lange said. "What we're doing now is unsustainable. We have to make a change."

Of course, doctors, hospitals and pharmaceutical companies are on the receiving end of a vast majority of dollars pumped through the insurance process. The natural tendency of these groups is to protect what they have. Mr. Giancola is obviously cognizant of that and Dr. Lange seems more the purist in her beliefs that expanding primary care to everyone will make for a better society. In both instances, there is a bias towards increasing cost without any increase in overall quality care.

Once again, the true failure of the reform debate comes in the diagnosis of the problem. The patient is virtually completely insulated from the direct financing of health care purchases. This by itself has produced the unnatural inflation that has made much of health care, and now insurance premiums, unaffordable. Regardless of payer, reform that diminishes this insulation is the only path to cost containment that coincides with quality improvements.

Consumer Driven Health Plans do just that. A May compilation analysis from the American Academy of Actuaries found the following:

• First year savings of CDH implementation of 12% to 20% compared to traditional plan offerings.
• Inflation trends after the first year run 3% to 5% less than traditional plans. i.e. Normal inflation.
• All of the studies show increases in preventative services and most showed that participants were as or more likely to follow recommended care for chronic conditions while providers were more likely to follow evidence based protocols. i.e. Better quality of care.
• Premium cost shifting from employer to employee is not incurring. i.e. Employers are forwarding premium savings from higher deductible plans directly to the employees.

These real numbers are the exact results needed from reform, but the ideological left will not acknowledge these solutions. Our own Senator does not understand that premium savings fund health care spending. In Wednesday's speech, our President promised to "place a limit on how much you can be charged for out-of-pocket expenses". Both comments reveal fundamental misrepresentations of economics and health care. And in a study published in the American Journal of Managed Care last year, [emphasis mine]

…on a mail-in survey of 528 physicians… less than half (48 percent) said they felt ready to discuss medical budgets with patients, and 43 percent said they had little knowledge of how consumer-driven health plans work. About one-third said they had scant understanding of how health savings accounts function.

So it should be little surprise that Dr. Lange, Rhode Island's own primary care expert, does not see the value in consumers playing a role in their own health care financing:

If you have a plan with a $5,000 deductible, Lange said, "That makes you essentially uninsured as well. You're not going to be seeking medical care."

Of course, I know plenty of people with deductibles that high. This includes my family with a plan I chose deliberately. I had an appointment with my primary care physician last week. I have never had a better relationship with my children's pediatrician, nor have I spent as much with her. Anecdotally, I can give you dozens of examples that directly contradict what Dr. Lange believes. Empirically, the studies analyzed by the Academy of Actuaries contradict Dr. Lange's belief with significant data.

The real solution is to encourage a migration of health care financing to individuals. This is already being done and must be enhanced through tax policy. But when some of the stakeholders do not understand the basic economics of the solution, the ideas get pushed off the table. Couple this with the ideologically dominant progressive Democrats calling the shots, an idea that strays towards individual liberty is about as likely as the left extending the 2001 and 2003 tax cuts.