Cover Thy Neighbor: Moral and Economic Imperatives

for Health System Reform

Len M. Nichols, Ph.D.Director, Health Policy Program

New America Foundation

Illinois Adequate Health Care Task ForceChicago, Illinois

November 4, 2005

2

Overview

• Linked problems of our health care system

• Why incremental reforms can’t work

• Pathways to comprehensive reform

3

Linked Problems

• Low Value for Dollar

• Uneven quality

• Inequitable access to care

4

Premium Payments v. GDP Growth Rate

0%

2%

4%

6%

8%

10%

12%

14%

1999 2000 2001 2002 2003

esigdp

Source: NIPA, BEA/Commerce Dept.

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Uneven Quality

• Beth McGlynn

• Dartmouth

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Percent of Recommended Care Adults Get

0

10

20

30

40

50

60

70

80

Overall Cancer(B)

BP Diabetes UTI Alcohol

Source: E. McGlynn et al. NEJM, 2003;348:2635-45.

7

Annual Number of Excess Deaths

• Medical Errors in Hospitals: 98,000

• Poor Quality: 42,000-79,000

• Diabetes (for comparison): 73,000

Source: IOM, NCQA, and CDC

8

Inequitable Access

• Uninsured and IOM

• Income-based rationing

9

What IOM concluded

• Cost of uninsurance cost of coverage expansion, $65-130B per year

• 18,000 premature deaths annually• Acutely and chronically ill receive fewer timely

services and have worse morbidity, days lost, etc. than similar insured patients

• 60 million suffer financial insecurity each year• People in high uninsured areas suffer from lack of

health resources available to them

10

Percent of median family income required to buy family health insurance

7.7

18

02468

101214161820

1987 2004

Source: Author’s calculations, using KFF and AHRQ premium data, CPS income data.

11

Result of our incremental approaches

• Health insurance as we know it is out of reach of a growing share of our workforce

12

Why Incremental Reforms Don’t Work

• No sense of urgency– We continue to accept the unacceptable

• Key incentives remain unchanged and perverse

• Excessive individualism

• Problems are LINKED

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Linkages Among Problems

CostQuality

Access

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Linkages Between Universal Coverage and Cost Containment

• Uncompensated care costs are shifted to … ?

• Lowest quality care is practiced on uninsured– Late in disease progression

– Financial barriers to patient compliance

– Lack of information on what patient needs, has had

• How can state of the art info system succeed if 1/6 to 1/4 of population falls or remains out of it over time?

15

Myths That Impede Progress

• Uninsured get all the care they need

• America is rich and can afford unfettered medical technology growth

16

What Do We Need?

• Moral case

• Economic case

• Delivery system “culture of value”

• Credible policy design– 3 dimensions of credibility

• Stakeholders, politicians, people

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Moral Case

• Feed the Hungry– Gleaning, the community, and the stranger

• Health care joins food as an indispensable commodity

• IOM clarifies that the lack of health insurance leads to excess death

• Therefore, to deny insurance is to deny food• Stewardship over health care resources is also

essential

18

Economic Case

• Health costs are reducing wages, profits, investments

• Jobs are being lost due to lack ofcompetitiveness

• Middle class preponderance is not guaranteed

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Health System Culture of Value

• Information infrastructure to support quality improvement

• Safe harbors and value-enhancing incentives (for all) for service limits

• Comparative technology assessment as countervailing power between medical technology and coverage/use decisions

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Credible Policy Design

• Require individuals to buy private health insurance– Make it possible for them to do so

• Subsidies for low income• Purchasing vehicle for those who need it• Maintain existing employer system where possible

• Create delivery system culture of value• Set evidence-based limits on collectively financed

benefits in “American” benefit package (ABP)• Tie subsidy, tax exclusion, and dedicated revenue to

coverage decisions, ABP• Preserve liberty and choice

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Sequence of Policy Steps

• Create political space– Articulate moral case, explain economic facts and risk

• Institute cost growth containment policies

• Create purchasing requirements, venues, subsidies

• Link dedicated tax revenue appropriation to evidence-based coverage decisions over time

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Winners and Losers

• Winners:– Providers who can prove clinical value added

– Payers and patients who use them

– Politicians who created enabling conditions

• Losers:– Providers who try to hide behind opaque aura

– Payers and patients who reject information institutions

– Politicians who define freedom as individual provider autonomy

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Coalitions of the Willing• Those who care about their fellow citizens

• Employers who shrink from the future they see

• Governors and state legislators who shrink from the futures they see

• Providers who want to lead and prosper

• Workers who know access has cost and value

• Politicians who want to lead