A System in Collapse
Picture this: Pennsylvania Governor Ed Rendell comes to the nation's capital to tell a gathering of health care advocates, health industry representatives and health writers...
Picture this: Pennsylvania Governor Ed Rendell comes to the nation's capital to tell a gathering of health care advocates, health industry representatives and health writers about his plan for near-universal health coverage for residents of his state. He ticks off how his plan is different from Massachusetts' universal-coverage law (it does not mandate that all citizens be insured) and what it has in common with California's proposals (to impose a fee on the profits of businesses that don't provide insurance). Then he adds this zinger: "If all we do is extend coverage to Pennsylvania's uninsured, it will be a Pyrrhic victory. If you have unrestrained health care costs, the system will collapse."
Here's another snapshot: Health Affairs, a respected health-policy journal, convenes a briefing at the Urban Institute in Washington, D.C., to address the question of whether Medicaid is sustainable. The authors of "Toward Real Medicaid Reform" - Alan Weil, executive director of the National Academy for State Health Policy, and John Holahan, director of the Health Policy Center at the Urban Institute - discuss possible restructurings for the program. They end their presentation with an additional comment - one that goes beyond their research paper but addresses the pertinent question of the briefing: The cost of Medicaid, they say, is a direct reflection of the cost of the health services it provides. Health care is expensive, and it's growing faster than the rate of inflation. And that is what's unsustainable.
The country's $2 trillion health care industry is in trouble. It's eating up public programs and the profits of American companies, and yet it continues to grow and expand. There have been many attempts to shift costs from one payer to another, but there has been little concerted effort to tame the system's real cost-drivers. While the public debate on health care has, for past two or three years, centered on insurance coverage - namely, the lack of it for 47 million people - there are signs that the debate will be shifting to the ground beneath the insurance problem: In addition to tinkering with insurance, we should be overhauling the parts of the system that drive up costs.
There are many signs that several government-based groups or governments themselves are willing to put up capital - real or political - to get at some of those root causes.
The California Public Employees Retirement System, the country's largest public pension fund, is investing $700 million to back companies that work on cutting-edge technologies that could make the health care system more efficient. It is backing systemic reforms rather than new treatments for diseases, the more usual direction for a health care investment. CalPERS, which is partnering with David Brailer, the former chief of health care information technology for the Bush administration, is intent on finding ways to shave those systemic costs to bring down its overall costs. CalPERS spends $5 billion a year to buy health insurance for 1.2 million government workers and retirees.
Medicare, the federal program that pays the medical bills for those over 65 years of age, is also making a move on the cost-reduction front. In the past, most of those actions have centered on lowering reimbursements for providers. But this time, the Centers for Medicare & Medicaid Services is proposing that it stop paying that piece of the hospital bill that covers care provided to patients whose stays are extended because of hospital mistakes. For instance, it might no longer pay for costs incurred from hospital-acquired infections. Such infections account for $4.5 billion in extra spending each year, according to the U.S. Centers for Disease Control and Prevention.
That's why Ed Rendell is targeting hospital-acquired infections as well. He points out that the average cost of a hospital stay is $131,000; with a hospital-acquired infection, it's $181,000, meaning a hospital stay for a hospital-acquired infection is an additional $50,000. He notes that a hospital in Pennsylvania - the Pittsburgh VA - has come up with a strict protocol for dealing with the hospital processes that can cause the problem and has cut its infection rate in half.
As part of his health reform bill, Rendell is asking the Pennsylvania legislature to make VA-like protocols mandatory for all Pennsylvania hospitals. And if he doesn't succeed with the legislature, he plans to insist on reduction of infection rates as a condition for re-licensing a hospital. "I intend to suspend hospital licenses," he says.
"Cost containment is not as sexy as universal access," he adds, "but it's key." A lot of other players are starting to agree.