Shape of Things to Come

Shape of Things to Come?
A look at Tom Daschle’s 2008 book on the healthcare crisis may offer a glimpse of the healthcare-reform debate about to take place.

Editor’s Note: The following articles should be viewed as analysis by JHC editors and contributors, and not construed as an endorsement by JHC or the section sponsor for any particular candidate or piece of legislation.

Consider the Federal Reserve Board. It’s a group of politically appointed individuals who have been granted the authority to make important – and often unpopular – decisions about the nation’s money supply and interest rates. Now imagine an analogous institution – the Federal Health Board – which, with the consent of Congress, could also make important – and often unpopular – decisions about the nation’s healthcare system, at least for that portion of it provided by private payers. For example, which drugs and devices should be covered? What limits should be placed on the marketing of medical devices and pharmaceuticals? Which areas of the country need more imaging equipment, and which need less?

Tom Daschle, former congressman and senator from South Dakota, believes such a Board is what this country needs. And his views are worth listening to, even though he withdrew his nomination as Secretary of Health and Human Services. Although he is out of the picture, chances are, his ideas for a Federal Health Board and universal healthcare are not. After all, it was then-Senator Barack Obama who wrote this blurb for Daschle’s 2008 book on healthcare reform: “The American health care system is in crisis, and workable solutions have been blocked for years by deeply entrenched ideological divisions. Sen. Daschle brings fresh thinking to this problem, and his Federal Reserve for Health concept holds great promise for bridging this intellectual chasm and, at long last, giving this nation the health care it deserves.”

Thus to get a good look at what’s on Daschle’s mind, one need only pick up his book, “Critical: What We Can Do About the Health-Care Crisis”, which was published last year by Thomas Dunne Books/St. Martin’s Press, New York.

What’s wrong with the current system?
Daschle is not at a loss for words when describing the shortcomings of today’s healthcare system. Basically, he believes it provides so-so-care to too few people at too high a cost.

Our current system – in which some people are covered by private payers, some by government payers, and some 44 million by neither – leads to some absurdities, he says. For example, the uninsured – those least likely to be able to afford healthcare – often wind up getting charged full freight for their treatment, as providers try to recover what they’re losing from Medicaid and, to a lesser extent, Medicare and private payers. It’s a shell game, says Daschle. “Every player in our healthcare system is intent on shifting costs rather than reducing them.”

The current system is also expensive. Over the past 10 years, the cost of healthcare to business has increased 140 percent, says Daschle. Since 2000, the cost of premiums for employer-based plans has outpaced wage growth nearly fivefold. In another irony, it is often the smallest employers – again, the ones least able to afford it – that end up incurring the highest costs, because they lack leverage with insurers. “No wonder small-business employees are one of the fastest-growing segments of the uninsured, and now comprise about one-fifth of the total,” says Daschle.

In fact, the 50- or 60-year-old bulwark of American healthcare – employer-provided insurance – is already starting to crumble, maintains Daschle. The percentage of Americans covered by employer-sponsored plans has dropped from 70 percent in the mid-1970s to 64 percent in 2000 to less than 60 percent in 2006.

Who’s getting hurt?
The Institute of Medicine estimates that the lack of health insurance leads to 18,000 unnecessary deaths a year. And while some recoil at the words “healthcare rationing,” the fact is, such rationing already exists, though it’s on the basis of income, insurance status and illness, maintains Daschle. In 2004 and 2005, nearly 82 million Americans were without insurance for at least part of those two years, he says. Studies show that people with deductibles of $1,000 or more skip needed treatment. And then there’s the problem of insurers denying coverage to the very people who need it the most – those with existing illnesses.

The federal system of healthcare is just as crazy as the private sector, says Daschle. Why is it that the child of a Marine typically gets better coverage than that of someone in the National Guard?

Top dollar for mediocre results
Some argue that despite these shortcomings, the United States still has the best healthcare in the world. Not so, says Daschle. In terms of common measures such as infant mortality, asthma mortality rates, survival of certain cancers, and other indicators, the United States lags behind other countries. Treatment for mental illness is given short shrift by many payers.

Our system is archaic from an information-systems point of view, he adds. Patient information “is dispersed in a collection of paper records that are poorly organized and often illegible, and frequently cannot be retrieved in a timely fashion, making it nearly impossible to manage many forms of chronic illness,” according to the Institute of Medicine.

“Healthcare is a complex topic, but we have to face a simple truth: We’re paying top dollar for mediocre results,” says Daschle.

The history of health reform
Healthcare reform has occurred several times over the past century, but it has always been hard-fought. And there’s no reason to believe reform – if it is attempted this year or next – will come any easier this time around.

The movement toward free medical care and compulsory insurance began in the 1910s. Even then, doctors feared that third-party payers, especially the government, would regulate their fees. Meanwhile, private insurers feared that government health insurance would put them out of business. During World War II, employers began offering health insurance as a way to attract scarce workers. The government’s decision to exempt health benefits from personal income taxes accelerated the trend toward employment-based insurance. In the mid-1950s, 45 percent of all Americans had hospital insurance. By 1963, it was 77 percent.

As World War II ended, the House and Senate introduced national insurance bills. But the proposals died in the face of opposition by the American Medical Association. The U.S. Chamber of Commerce opposed sweeping change as well, fearing it would force employers to purchase group insurance plans for their workers. At the same time, though, other employers saw purchasing plans as the best way to head off any push toward national insurance. A favorite weapon of healthcare reform opponents was their characterization of reform as “socialized medicine,” which carried much weight as fears of Communism swept the country in the 1950s and 1960s. Today, opponents of reform still trot out the term as needed, says Daschle.

By 1962, during the Kennedy Administration, there existed strong public support for a program for the elderly. The AMA opposed it, calling it “socialized medicine,” but hospitals and insurers saw the need for a Medicare-type program, as they found a growing number of elderly unable to pay for their care. In July 1965, President Lyndon Johnson signed legislation creating the Medicare and Medicaid programs.

Because the programs were set up on a cost-plus basis, hospitals and doctors did well under Medicare, says Daschle. “Before Medicare, doctors typically charged what they thought a patient could afford,” he says. “Now, many of them were charging the government as much as they possibly could.” Predictably, costs zoomed out of control. In the 1970s, calls arose once again for a national health insurance plan. President Nixon came up with a plan which, in retrospect, sounds similar to the one proposed by Barack Obama during the recent election. Nixon’s National Health Insurance Partnership Act would have preserved the private insurance market while requiring employers to either cover their workers or make payments into a government insurance plan, explains Daschle. But Nixon got tangled up in Watergate, and opponents of the plan played the “socialized medicine” card.

Presidents Ford and Carter advanced, unsuccessfully, their own plans for meaningful reform. But when Ronald Reagan assumed office in 1981, with his promise of limited government, any hope for reform was quashed, says Daschle. And that was a tragedy, he says. Between 1970 and 1982, gross domestic product grew 208 percent, while employer spending on health benefits increased 700 percent, he says. Non-union employers began charging their employees more for co-payments and premiums. Some pushed their employees toward generic drugs. But these efforts accomplished little, pushing Americans to seek new answers. One such answer came, in the form of managed care.

Managed care or managed cost?
Managed care plans were designed to promote aggressive prevention and disease management, and at first, they did just that, says Daschle. But in the late 1990s, HMOs came under attack for compromising patient care in the pursuit of lower costs. The irony was that costs continued to rise. So did the number of uninsured, which reached 36 million people by 1991.

The economic recession of 1990-1991 renewed Americans’ thirst for reform. Daschle himself proposed the American Health Security Act of 1992, which would have included an employer mandate, purchasing pools, and a regulatory infrastructure modeled after the Federal Reserve System. Many other plans were floated, most of them falling into one of three categories: 1) market-oriented plans, which would expand the private, individual insurance system; 2) publicly financed single-payer plans, in which the government or quasi-government agency would pay all the bills; and 3) play-or-pay hybrids, in which employers would either insure their workers or contribute to the cost of their coverage.

Democrats became enamored of a concept called “managed competition,” which called for private insurers and healthcare providers to compete for the business of health-purchasing alliances. It was this kind of plan that Bill Clinton supported during his run for president in 1992.

The Clinton debacle
Many theories exist regarding the rise and fall of President Clinton’s health reform plan. Some blame his wife, Hillary, who was in charge of drafting it. Others blame the insurance industry, with its “Harry and Louise” ads depicting the dangers of reform. Daschle has his own theory.

First, the Clintons assembled a task force of more than 360 people, in 34 working groups, to work out a proposal. That offered too many opportunities for too many people to feel snubbed if they weren’t included. Too many enemies can kill the best plans, says Daschle.

Second, the plan was too long and detailed for many people to understand. When presented to Congress in November 1993, it weighed in at 1,342 pages. It called for the creation of 90 new councils, commissions and other bodies. Its very length presented a big – huge – target for attack. There was something for everyone to get bent out of shape about. For example, the insurance industry opposed regional healthcare alliances and caps on premium growth, and employers opposed the employer mandate provisions.

Like the marlin in Hemingway’s “Old Man and the Sea,” Clinton’s plan was slowly devoured. “For more than a year, the voices of the people harmed by the current system had dominated the debate,” writes Daschle. “Now they were being drowned out by special interests.”

The Clinton forces simply were outflanked by detractors, he says. While proponents spent an estimated $15 million to support it, detractors spent more than $100 million to sink it. By the summer of 1994, health reform was “hopelessly bogged down,” he says. “Everybody agreed that the system had to change. But when it came down to the details, few groups were willing to tolerate provisions that might harm them, to swallow new regulations, or to sacrifice some profits for the greater good.”

Who will do the dirty work?
What do you do when you’ve got a situation that’s too hot to handle, but needs to be handled anyway? You find someone to do the dirty work. The demise of the reform was proof of that, says Daschle. Healthcare needs its own “enforcer.”

There is precedent, he says. After the Vietnam War, the Pentagon knew it needed to close as many as 500 military bases. But lawmakers blanched at the number of jobs in their constituencies that would be lost. The issue festered for a decade. Finally, in 1988, Congress and the Pentagon formed the Base Realignment and Closure Committee to do the deed. And it did.

Other models exist, some in healthcare, Daschle points out. The Food and Drug Administration has been evaluating the safety of drugs since 1931. And beginning in 1987, the U.S. Public Health Service has established task forces to gather evidence on preventive services and create practice guidelines for physicians. Some states, such as Massachusetts, have created agencies to determine which benefits insurers must provide.

“But unlike other industrialized countries, the United States doesn’t have a single entity tasked with recommending treatment and coverage policies nationwide,” writes Daschle. Even the vast majority of Medicare coverage decisions are made by roughly 50 fiscal intermediaries and insurance carriers scattered around the country.

“In many cases … U.S. doctors employ new procedures or use expensive high-tech equipment even when there is little scientific evidence that the benefits to the patient will be worth the costs,” he says. Some analysts believe that 30 percent of care delivered today is unnecessary. Then there’s the problem of doctors providing treatment to avoid lawsuits, and prescribing drugs because they have received compensation from pharmaceutical firms. Hospitals compete with each other to get the newest technology, which doctors might not learn how to appropriately use for years hence.

Daschle argues that now more than ever, some kind of impartial body is needed to make tough healthcare decisions. Great Britain has its National Institute for Health and Clinical Excellence, which provides guidance on the use of new and existing drugs, treatments and procedures; and weighs what it calls “economic evidence” to determine how well a medication or treatment works in relation to how much it costs. The Institute’s Centre for Health Technology Evaluation reviews clinical evidence and conducts 30 to 50 appraisals every year. Its Centre for Clinical Practice issues advice on the best treatment and care of people with specific diseases and conditions, to which all providers must adhere, and on which all doctors must be trained.

In Germany, the Federal Joint Commission performs many of the same functions. And in Switzerland, “any medical service that is added to the basic benefits package that all Swiss insurers must offer has to meet standards of clinical effectiveness, appropriateness and cost-effectiveness.”

Federal Reserve model
Such a system is already in place in the financial sector, says Daschle. The Federal Reserve Board was created in 1913 to formulate the nation’s monetary policy without having to deal with political and private pressure, writes Daschle. It was created as a central board with regional banks. “[The] Fed Board members are recognized experts, and they set policy based on data and analysis. Few members of Congress are trained economists. Their lack of expertise, compounded by the daily political pressures they face, would prevent them from making sound decisions in such a complicated arena.” Best of all, the Fed can make decisions that may result in short-term pain, without getting killed politically. In other words, they’re the perfect foil.

It’s true that the members of the Fed’s Board of Governors are political appointees, and that the Board derives its authority from Congress. Although Congress can overturn its decision or remove a governor, it has never done so, points out Daschle. Nor would it want to.

“Even though the Fed has to answer to the public, it is sufficiently insulated, so that its decision-making process hardly resembles what goes in Congress or the White House,” he says. “In Congress, every decision is political. It’s impossible to formulate policy without weighing the likely reactions of special interests, the other party, influential committee chairs, and the president. The next election is always just around the corner, so it’s hard to get lawmakers to think in the long term. The Fed, in contrast, can make decisions based on data and a thorough analysis of what’s best for the country.”

The new healthcare system
A Federal Health Board could do the same thing, making difficult coverage decisions without incurring political damage, says Daschle. It would establish the framework of a newly reformed healthcare system. This new system would maintain the current network of employer-sponsored insurance plans, Medicaid, the State Children’s Health Insurance Program and Medicare, which together cover approximately 80 percent of all Americans. To reach the remaining 20 percent, Daschle advocates either expanding the Federal Employee Health Benefits Program (FEHBP) or creating a purchasing pool like it.

The FEHBP is a menu of private health plans offered to federal employees and members of Congress, covering more than 8 million workers and their dependents. Daschle says it’s an excellent system, and should be made available to everyone without job-based insurance. The FEHBP would guarantee a basic set of benefits to everybody, though people could choose to get care outside it, much as parents can send their kids to private school if they want. The new program would have clout to negotiate with providers for lower costs and improved quality of care. “It could also take advantage of the administrative efficiencies, further lowering costs,” says Daschle.

People who couldn’t afford insurance – even the least expensive programs on the FEHBP menu – would get financial help on a sliding scale from the government. Employers could either keep their plans or let their employees choose from one on the FEHBP menu. However, employers could participate only if they enrolled all of their workers, not just ones with health problems.

Focus on value
In the new system, more attention would be paid to what Daschle calls the “value” of care. “Today, most health research focuses on whether a particular medicine or treatment is safe and works,” he says. “We should go further by promoting research that compares drugs and treatments to determine which ones deliver the best bang for the buck.” If Daschle’s FEHBP plan were instituted, “the federal government could exert tremendous leverage with its decisions on covered benefits and payment incentives. In choosing what it will cover and how much it will pay, it could steer providers to the services that are the most clinically valuable and cost-effective, and dissuade them from wasting time and money on those that are neither.” There would also be more emphasis on prevention and better treatment of chronic conditions, and implementation of electronic medical records.

To be sure, the Federal Health Board would have some ticklish issues to resolve, says Daschle. For example, it would develop guidelines on insurance premiums and marketing practices, implement policies to prevent insurers from shunning high-cost enrollees, and work with Medicare to develop a public insurance option for the pool to compete with the private plans on the FEHBP menu. It would also recommend coverage of drugs and procedures, and rationalize the healthcare infrastructure. As it stands, the country has too many imaging machines in some areas, and too few emergency departments in others, says Daschle. Nor does the United States have a way to direct resources to particular areas with particular problems. The Federal Health Board would even out those discrepancies.

Will it happen?
Daschle’s is the voice of experience. “My three decades on Capitol Hill taught me that nearly every piece of legislation will harm the interests of at least some people,” he writes. “The challenge is to craft a bill that creates more winners than losers, that mitigates the potentially negative effects on the losers, and that benefits society as a whole.” He believes that the Federal Health Board would do just that. “Like the Federal Reserve, it could evolve into an institution worthy of trust, a body of experts judged to be immune from political machinations.”

With the friendships Daschle has built on the Hill, he should at least get a hearing on his ideas. Whether that will translate into far-reaching legislation is another matter.