Friday, September 25, 2009
Sunday, September 6, 2009
Measuring the Wealth of Society
In talking to a friend about what I see on the streets and why health care must be reformed (see the prior post), his answer was swift and direct. “I don’t like to see sick people on the streets either but how much are you willing to pay?
Arianna Huffington (http://www.huffingtonpost.com/arianna-huffington/so-we-cant-have-single-pa_b_276644.html) writes:
“What I see on the other side of the mountain is a single-payer education system.
“In a single-payer health care plan, the federal government provides coverage for all U.S. citizens and legal residents. Patients don't go to a government doctor -- they just have the government pay the bill.
“And that's how it would work with education. In a single-payer education plan, the federal government, in conjunction with the states, would provide an education allotment for every parent of a K-12 child. Parents would then be free to enroll their child in the school of their choice.
“In a single-payer health care plan, all citizens would be free to select the physician and hospital of their choice. And, unlike in our education system, no one backing single-payer health care ever suggested that patients can only see a doctor in their own district or can only be operated on at the hospital down the street. If we don't hold people's health hostage to the health of their property values, why do we do this with their children's education?
“The single-payer health plan would be financed by a payroll tax. In education, the annual cost per child -- equalized for urban and suburban school districts across each state -- would come from the current education funding sources.”
The seduction of the single-payer system is that the cost, spread among many, seems to be much less significant. It is the cumulative effect of this thinking that can be alarming. How much am I willing to pay? But there is something more to the objection to the single-payer system.
I read Atlas Shrugged and liked it. Much of what I hear in conservative thinking comes from the John Galt monologue in that book. The philosophy of objectivism as espoused by Galt in the monologue is essentially that a pure free market system would allow the geniuses of society to carve out the progress of our culture and civilization in the most efficient and rewarding way. It is a compelling and accepted part of our governmental philosophy – essentially the less government interference and regulation, the better. But this philosophy has not focused on the incompetent and weak in our society? Private charity has not been an answer. What responsibility does society have for those who cannot or will not take care of themselves?
There is a balance upon which Ayn Rand and the philosophy of objectivism does not provide answers. Is our society about creative thought and progress or is it about improving the lives of its members? There is perhaps an analogy to a family.
Members of a family constitute the roles from being a burden to being the primary support of the family. In most families the desire is to facilitate a life for each family member that as much as possible allows them the pursuit of happiness. This goal is within the framework of the need of the family members to live on a reasonable basis. As Jay Hughes points out in Family – The Compact Among Generations:
“The vision and mission underlying a system of family governance must be to preserve the family wealth – that is, its human, intellectual, and financial capital – over the long term and to achieve that preservation by enhancing the pursuit of happiness of each individual family member as part of the enhancement of the family as a whole.”
We understand that in a family not all will contribute to the financial wealth of the family, but there will be contributions, individual and a part of each individual family member pursuing happiness. I do not see the pursuit of happiness as a guaranty of a state of comfort or satisfaction. Satisfaction or happiness is a fleeting thing, and it is the opportunity of pursuit, not a satisfied or complacent state that must be preserved.
Let us not ignore the most important concept: the wealth of a family is not measured merely by financial wealth but by its human, intellectual, and financial capital. As our creative geniuses make progress in all areas (human, intellectual, and financial), we are enriched and our wealth - human, intellectual, and financial capital – is increased.
Going from the family to society, if we understand that human achievement must be measured in a variety of ways involving the growth of human, intellectual, and financial capital, we see contribution as being something other than financial contribution. Given that financial contribution is essential, how is it best provided with the understanding that other contributions (human and intellectual) are also important?
Where there is a single payer funded by that part of society that is financially productive, it has been stifling, not enabling, to increasing the wealth in human and intellectual as well as financial terms. With the power of payment comes the ability to control. This is what goes awry in single-payer systems. Those who can contribute financially are not efficiently able to distribute payment. Whether this is provable as a fact, it is a part of our culture and an emotional factor that will affect acceptance of reform.
In the 1930s, liberals imagined a universal right to health care tied to compulsory insurance, like Social Security. Johnson based Medicare on this idea, and it survives today as the “single-payer model” of universal health care, or “Medicare for all.”
The alternative proposal, starting with Eisenhower, was to create a market for health care based on private insurers and employers; that legislation locked in a tax break for employee health benefits. Nixon came up with notions of prepaid, competing H.M.O.’s and urged a requirement that employers cover their employees. Everything since has been a variation on one or both of these competing visions. The plan now emerging from the White House and the Democratic Congress combines an aspect of the first (the public health care option) with several of the second (competing plans and an employer requirement to “pay or play”). The so called “public option” provides government sponsored health insurance to compete with private health insurance plans.
If we provide health care by requiring employers to purchase health insurance for employees we cover employees, but we do not accomplish health care for non-working or self-employed society members. Rand Corporation studies have established that universal health care coverage cannot be accomplished through employer plans. Analysis of current plans shows that a mandate requiring individuals to obtain health insurance — an option in various current legislative proposals — would increase the number of Americans with coverage by 9 million to 34 million, while a mandate requiring employers to offer insurance would boost the figure by 1.8 million to 3.4 million. See the Rand web site at: http://www.rand.org/news/press/2009/08/24/health-reform-reduce-uninsured.html.
There will be inertia to push against reform. See the astute comments of James Surowiecki on this topic at http://www.newyorker.com/talk/financial/2009/08/31/090831ta_talk_surowiecki.
True universal health care coverage will not be obtainable. A sole-payer system similar to Medicare will not be possible because of our cultural heritage. The public option involves negotiation about malpractice reform, interstate access to insurance, and other issues apparently dealt with in the San Francisco program (see prior post). At the bottom of all of this are the unmet issues of increasing medical costs and the increasing federal deficit.
We must evaluate our society as we should evaluate our families. How do we increase the true wealth of our society? We must increase the human, intellectual, and financial capital of society – this includes education and health care with a concern for the well being of all members of society and cannot ignore realistic financial constraints. May this perspective be a part of the health care and educational debate and legislative negotiation.
Arianna Huffington (http://www.huffingtonpost.com/arianna-huffington/so-we-cant-have-single-pa_b_276644.html) writes:
“What I see on the other side of the mountain is a single-payer education system.
“In a single-payer health care plan, the federal government provides coverage for all U.S. citizens and legal residents. Patients don't go to a government doctor -- they just have the government pay the bill.
“And that's how it would work with education. In a single-payer education plan, the federal government, in conjunction with the states, would provide an education allotment for every parent of a K-12 child. Parents would then be free to enroll their child in the school of their choice.
“In a single-payer health care plan, all citizens would be free to select the physician and hospital of their choice. And, unlike in our education system, no one backing single-payer health care ever suggested that patients can only see a doctor in their own district or can only be operated on at the hospital down the street. If we don't hold people's health hostage to the health of their property values, why do we do this with their children's education?
“The single-payer health plan would be financed by a payroll tax. In education, the annual cost per child -- equalized for urban and suburban school districts across each state -- would come from the current education funding sources.”
The seduction of the single-payer system is that the cost, spread among many, seems to be much less significant. It is the cumulative effect of this thinking that can be alarming. How much am I willing to pay? But there is something more to the objection to the single-payer system.
I read Atlas Shrugged and liked it. Much of what I hear in conservative thinking comes from the John Galt monologue in that book. The philosophy of objectivism as espoused by Galt in the monologue is essentially that a pure free market system would allow the geniuses of society to carve out the progress of our culture and civilization in the most efficient and rewarding way. It is a compelling and accepted part of our governmental philosophy – essentially the less government interference and regulation, the better. But this philosophy has not focused on the incompetent and weak in our society? Private charity has not been an answer. What responsibility does society have for those who cannot or will not take care of themselves?
There is a balance upon which Ayn Rand and the philosophy of objectivism does not provide answers. Is our society about creative thought and progress or is it about improving the lives of its members? There is perhaps an analogy to a family.
Members of a family constitute the roles from being a burden to being the primary support of the family. In most families the desire is to facilitate a life for each family member that as much as possible allows them the pursuit of happiness. This goal is within the framework of the need of the family members to live on a reasonable basis. As Jay Hughes points out in Family – The Compact Among Generations:
“The vision and mission underlying a system of family governance must be to preserve the family wealth – that is, its human, intellectual, and financial capital – over the long term and to achieve that preservation by enhancing the pursuit of happiness of each individual family member as part of the enhancement of the family as a whole.”
We understand that in a family not all will contribute to the financial wealth of the family, but there will be contributions, individual and a part of each individual family member pursuing happiness. I do not see the pursuit of happiness as a guaranty of a state of comfort or satisfaction. Satisfaction or happiness is a fleeting thing, and it is the opportunity of pursuit, not a satisfied or complacent state that must be preserved.
Let us not ignore the most important concept: the wealth of a family is not measured merely by financial wealth but by its human, intellectual, and financial capital. As our creative geniuses make progress in all areas (human, intellectual, and financial), we are enriched and our wealth - human, intellectual, and financial capital – is increased.
Going from the family to society, if we understand that human achievement must be measured in a variety of ways involving the growth of human, intellectual, and financial capital, we see contribution as being something other than financial contribution. Given that financial contribution is essential, how is it best provided with the understanding that other contributions (human and intellectual) are also important?
Where there is a single payer funded by that part of society that is financially productive, it has been stifling, not enabling, to increasing the wealth in human and intellectual as well as financial terms. With the power of payment comes the ability to control. This is what goes awry in single-payer systems. Those who can contribute financially are not efficiently able to distribute payment. Whether this is provable as a fact, it is a part of our culture and an emotional factor that will affect acceptance of reform.
In the 1930s, liberals imagined a universal right to health care tied to compulsory insurance, like Social Security. Johnson based Medicare on this idea, and it survives today as the “single-payer model” of universal health care, or “Medicare for all.”
The alternative proposal, starting with Eisenhower, was to create a market for health care based on private insurers and employers; that legislation locked in a tax break for employee health benefits. Nixon came up with notions of prepaid, competing H.M.O.’s and urged a requirement that employers cover their employees. Everything since has been a variation on one or both of these competing visions. The plan now emerging from the White House and the Democratic Congress combines an aspect of the first (the public health care option) with several of the second (competing plans and an employer requirement to “pay or play”). The so called “public option” provides government sponsored health insurance to compete with private health insurance plans.
If we provide health care by requiring employers to purchase health insurance for employees we cover employees, but we do not accomplish health care for non-working or self-employed society members. Rand Corporation studies have established that universal health care coverage cannot be accomplished through employer plans. Analysis of current plans shows that a mandate requiring individuals to obtain health insurance — an option in various current legislative proposals — would increase the number of Americans with coverage by 9 million to 34 million, while a mandate requiring employers to offer insurance would boost the figure by 1.8 million to 3.4 million. See the Rand web site at: http://www.rand.org/news/press/2009/08/24/health-reform-reduce-uninsured.html.
There will be inertia to push against reform. See the astute comments of James Surowiecki on this topic at http://www.newyorker.com/talk/financial/2009/08/31/090831ta_talk_surowiecki.
True universal health care coverage will not be obtainable. A sole-payer system similar to Medicare will not be possible because of our cultural heritage. The public option involves negotiation about malpractice reform, interstate access to insurance, and other issues apparently dealt with in the San Francisco program (see prior post). At the bottom of all of this are the unmet issues of increasing medical costs and the increasing federal deficit.
We must evaluate our society as we should evaluate our families. How do we increase the true wealth of our society? We must increase the human, intellectual, and financial capital of society – this includes education and health care with a concern for the well being of all members of society and cannot ignore realistic financial constraints. May this perspective be a part of the health care and educational debate and legislative negotiation.
Thursday, September 3, 2009
10 Steps to Better Health Care
An article from the New York Times by Atul Gawande, Donald Berwick, Elliott Fisher, and Mark McClellan (available at http://www.nytimes.com/2009/08/13/opinion/13gawande.html?_r=1):
WE have reached a sobering point in our national health-reform debate. Americans have recognized that our health system is bankrupting us and that we have dealt with this by letting the system price more and more people out of health care. So we are trying to decide if we are willing to change — willing to ensure that everyone can have coverage. That means banishing the phrase "pre-existing condition." It also means finding ways to pay for coverage for those who can't afford it without help.
Both of these steps stir heated argument, not to mention lobbyists' hearts. But what creates the deepest unease is considering what we will have to do about the system's exploding costs if pushing more people out is no longer an option. We have really discussed only two options: raising taxes or rationing care. The public is understandably alarmed.
There is a far more desirable alternative: to change how care is delivered so that it is both less expensive and more effective. But there is widespread skepticism about whether that is possible.
Yes, many European health systems have done it, but we are not Europe. And evidence that places like the Mayo Clinic in Minnesota or the Cleveland Clinic are doing it is likewise dismissed because their unique structures (for example, their physicians work on salary rather than being paid for each service) make them seem as far from Middle America as Sweden is.
Yet in studying communities all over America, not just a few unusual corners, we have found evidence that more effective, lower-cost care is possible.
To find models of success, we searched among our country's 306 Hospital Referral Regions, as defined by the Dartmouth Atlas of Health Care, for "positive outliers." Our criteria were simple: find regions with per capita Medicare costs that are low or markedly declining in rank and where federal measures of quality are above average. In the end, 74 regions passed our test.
So we invited physicians, hospital executives and local leaders from 10 of these regions to a meeting in Washington so they could explain how they do what they do. They came from towns big and small, urban and rural, North and South, East and West. Here's the list: Asheville, N.C.; Cedar Rapids, Iowa; Everett, Wash.; La Crosse, Wis.; Portland, Me.; Richmond, Va.; Sacramento; Sayre, Pa.; Temple, Tex.; and Tallahassee, Fla., which, despite not ranking above the 50th percentile in terms of quality, has made such great recent strides in both costs and quality that we thought it had something to teach us.
If the rest of America could achieve the performances of regions like these, our health care cost crisis would be over. Their quality scores are well above average. Yet they spend more than $1,500 (16 percent) less per Medicare patient than the national average and have a slower real annual growth rate (3 percent versus 3.5 percent nationwide).
Caveat: Because we relied on Medicare data for our selections, it is possible that some of these regions are not so low-cost from the viewpoint of non-Medicare patients. But overall data strongly suggest that most of these regions are providing excellent care for all patients while being far more successful than others at not overusing or misusing health care resources.
So how do they do that? Some have followed the Mayo model, with salaried doctors employed by a unified local system focused on quality of care: these include Temple, where the Scott and White clinic dominates the market, and Sayre, where the Guthrie Clinic does. Other regions, including Richmond and Everett, look more like most American communities, with several medical groups whose physicians are paid on a traditional fee-for-service basis. But they, too, have found ways to protect patients against the damaging incentives of a system that encourages fragmentation of care and the pursuit of revenues over patient needs.
The physicians and hospital leaders from Cedar Rapids told us how they have adopted electronic systems to improve communication among physicians and quality of care. Last year, they decided to investigate the overuse of CAT scans. They examined the data and found that in just one year 52,000 scans were done in a community of 300,000 people. A large portion of them were almost certainly unnecessary, not to mention possibly harmful, as CAT scans have about 1,000 times as much radiation exposure as a chest X-ray.
"I was embarrassed for us," said Jim Levett, a cardiac surgeon and the head of a large physician group. More important, the area's doctors and clinics are turning that embarrassment into change by seeking out solutions to reduce the expense and harm of unnecessary scans.
That number of scans in Cedar Rapids may seem shocking, but there is nothing surprising about it. Nationwide, we do 62 million CAT scans a year for 300 million people. So Cedar Rapids's rate was actually better than average. But all medicine is local. And until a community confronts what goes on in its own population — to the point of actually seeking the data and engaging those who can solve the problem — nothing will change.
The team from Portland told us of a collaboration of doctors, state officials, insurers and community leaders to improve care. For more than four years, physicians have been tracking some 60 measures of quality, like medication error rates for their patients, and meeting voluntary cost-reduction goals.
Asheville, after gaining state support to avoid antitrust concerns, merged two underutilized hospitals. In Sacramento, a decade of fierce competition among four rival health systems brought about elimination of unneeded beds, adoption of new electronic systems for patient data and a race to raise quality. Sacramento also went from being one of America's high-cost areas for health care to being among the low-cost elite.
In their own ways, each of these successful communities tells the same simple story: better, safer, lower-cost care is within reach. Many high-cost regions are just a few hours' drive from a lower-cost, higher-quality region. And in the more efficient areas, neither the physicians nor the citizens reported feeling that care is "rationed." Indeed, it's rational.
Many in Congress and the Obama administration seem to recognize this. The various reform bills making their way through the process have included provisions to protect successful medical communities by incorporating payment approaches that reward those that slow spending growth while improving patient outcomes. This is the right direction for reform.
There is a lot of troubling rhetoric being thrown around in the health care debate. But we don't need to be trapped between charges that reforms will ration care and doing nothing about costs and coverage. We must instead look at the communities that are already redesigning American health care for the better, and pursue ways for the nation to follow their lead.
Atul Gawande directs the Center for Surgery and Public Health at Brigham and Women's Hospital in Boston and is a staff writer at The New Yorker; Donald Berwick is the president of the Institute for Healthcare Improvement in Cambridge, Mass.; Elliott Fisher directs policy-reform efforts at the Dartmouth Institute for Health Policy and Clinical Practice; and Mark McClellan is the director of health care reform policy at the Brookings Institution. All are physicians.
WE have reached a sobering point in our national health-reform debate. Americans have recognized that our health system is bankrupting us and that we have dealt with this by letting the system price more and more people out of health care. So we are trying to decide if we are willing to change — willing to ensure that everyone can have coverage. That means banishing the phrase "pre-existing condition." It also means finding ways to pay for coverage for those who can't afford it without help.
Both of these steps stir heated argument, not to mention lobbyists' hearts. But what creates the deepest unease is considering what we will have to do about the system's exploding costs if pushing more people out is no longer an option. We have really discussed only two options: raising taxes or rationing care. The public is understandably alarmed.
There is a far more desirable alternative: to change how care is delivered so that it is both less expensive and more effective. But there is widespread skepticism about whether that is possible.
Yes, many European health systems have done it, but we are not Europe. And evidence that places like the Mayo Clinic in Minnesota or the Cleveland Clinic are doing it is likewise dismissed because their unique structures (for example, their physicians work on salary rather than being paid for each service) make them seem as far from Middle America as Sweden is.
Yet in studying communities all over America, not just a few unusual corners, we have found evidence that more effective, lower-cost care is possible.
To find models of success, we searched among our country's 306 Hospital Referral Regions, as defined by the Dartmouth Atlas of Health Care, for "positive outliers." Our criteria were simple: find regions with per capita Medicare costs that are low or markedly declining in rank and where federal measures of quality are above average. In the end, 74 regions passed our test.
So we invited physicians, hospital executives and local leaders from 10 of these regions to a meeting in Washington so they could explain how they do what they do. They came from towns big and small, urban and rural, North and South, East and West. Here's the list: Asheville, N.C.; Cedar Rapids, Iowa; Everett, Wash.; La Crosse, Wis.; Portland, Me.; Richmond, Va.; Sacramento; Sayre, Pa.; Temple, Tex.; and Tallahassee, Fla., which, despite not ranking above the 50th percentile in terms of quality, has made such great recent strides in both costs and quality that we thought it had something to teach us.
If the rest of America could achieve the performances of regions like these, our health care cost crisis would be over. Their quality scores are well above average. Yet they spend more than $1,500 (16 percent) less per Medicare patient than the national average and have a slower real annual growth rate (3 percent versus 3.5 percent nationwide).
Caveat: Because we relied on Medicare data for our selections, it is possible that some of these regions are not so low-cost from the viewpoint of non-Medicare patients. But overall data strongly suggest that most of these regions are providing excellent care for all patients while being far more successful than others at not overusing or misusing health care resources.
So how do they do that? Some have followed the Mayo model, with salaried doctors employed by a unified local system focused on quality of care: these include Temple, where the Scott and White clinic dominates the market, and Sayre, where the Guthrie Clinic does. Other regions, including Richmond and Everett, look more like most American communities, with several medical groups whose physicians are paid on a traditional fee-for-service basis. But they, too, have found ways to protect patients against the damaging incentives of a system that encourages fragmentation of care and the pursuit of revenues over patient needs.
The physicians and hospital leaders from Cedar Rapids told us how they have adopted electronic systems to improve communication among physicians and quality of care. Last year, they decided to investigate the overuse of CAT scans. They examined the data and found that in just one year 52,000 scans were done in a community of 300,000 people. A large portion of them were almost certainly unnecessary, not to mention possibly harmful, as CAT scans have about 1,000 times as much radiation exposure as a chest X-ray.
"I was embarrassed for us," said Jim Levett, a cardiac surgeon and the head of a large physician group. More important, the area's doctors and clinics are turning that embarrassment into change by seeking out solutions to reduce the expense and harm of unnecessary scans.
That number of scans in Cedar Rapids may seem shocking, but there is nothing surprising about it. Nationwide, we do 62 million CAT scans a year for 300 million people. So Cedar Rapids's rate was actually better than average. But all medicine is local. And until a community confronts what goes on in its own population — to the point of actually seeking the data and engaging those who can solve the problem — nothing will change.
The team from Portland told us of a collaboration of doctors, state officials, insurers and community leaders to improve care. For more than four years, physicians have been tracking some 60 measures of quality, like medication error rates for their patients, and meeting voluntary cost-reduction goals.
Asheville, after gaining state support to avoid antitrust concerns, merged two underutilized hospitals. In Sacramento, a decade of fierce competition among four rival health systems brought about elimination of unneeded beds, adoption of new electronic systems for patient data and a race to raise quality. Sacramento also went from being one of America's high-cost areas for health care to being among the low-cost elite.
In their own ways, each of these successful communities tells the same simple story: better, safer, lower-cost care is within reach. Many high-cost regions are just a few hours' drive from a lower-cost, higher-quality region. And in the more efficient areas, neither the physicians nor the citizens reported feeling that care is "rationed." Indeed, it's rational.
Many in Congress and the Obama administration seem to recognize this. The various reform bills making their way through the process have included provisions to protect successful medical communities by incorporating payment approaches that reward those that slow spending growth while improving patient outcomes. This is the right direction for reform.
There is a lot of troubling rhetoric being thrown around in the health care debate. But we don't need to be trapped between charges that reforms will ration care and doing nothing about costs and coverage. We must instead look at the communities that are already redesigning American health care for the better, and pursue ways for the nation to follow their lead.
Atul Gawande directs the Center for Surgery and Public Health at Brigham and Women's Hospital in Boston and is a staff writer at The New Yorker; Donald Berwick is the president of the Institute for Healthcare Improvement in Cambridge, Mass.; Elliott Fisher directs policy-reform efforts at the Dartmouth Institute for Health Policy and Clinical Practice; and Mark McClellan is the director of health care reform policy at the Brookings Institution. All are physicians.
Saturday, August 22, 2009
A Public Option that Works
An article from the New York Times by Willian H. Dow, Arindrajit Dube, and Carrie Hoverman Colla (available at http://www.nytimes.com/2009/08/22/opinion/22dow.html?th&emc=th):
Two burning questions are at the center of America’s health care debate. First, should employers be required to pay for their employees’ health insurance? And second, should there be a “public option” that competes with private insurance?
Answers might be found in San Francisco, where ambitious health care legislation went into effect early last year. San Francisco and Massachusetts now offer the only near-universal health care programs in the United States.
The early results are in. Today, almost all residents in the city have affordable access to a comprehensive health care delivery system through the Healthy San Francisco program. Covered services include the use of a so-called “medical home” that coordinates care at approved clinics and hospitals within San Francisco, with both public and private facilities. Although not formally insurance, the program is tantamount to a public option of comprehensive health insurance, with the caveat that services are covered only in the city of San Francisco. Enrollees with incomes under 300 percent of the federal poverty level have heavily subsidized access, and those with higher incomes may buy into the public program at rates substantially lower than what they would pay for an individual policy in the private-insurance market.
To pay for this, San Francisco put into effect an employer-health-spending requirement, akin to the “pay or play” employer insurance mandates being considered in Congress. Businesses with 100 or more employees must spend $1.85 an hour toward health care for each employee. Businesses with 20 to 99 employees pay $1.23 an hour, and businesses with 19 or fewer employees are exempt. These are much higher spending levels than mandated in Massachusetts, and more stringent than any of the plans currently under consideration in Congress. Businesses can meet the requirement by paying for private insurance, by paying into medical-reimbursement accounts or by paying into the city’s Healthy San Francisco public option.
There has been great demand for this plan. Thus far, around 45,000 adults have enrolled, compared to an estimated 60,000 who were previously uninsured. Among covered businesses, roughly 20 percent have chosen to use the city’s public option for at least some of their employees. But interestingly, in a recent survey of the city’s businesses, very few (less than 5 percent) of the employers who chose the public option are thinking about dropping existing (private market) insurance coverage. The public option has been used largely to cover previously uninsured workers and to supplement private-coverage options.
Through our experience working on health-care-reform efforts in California and Washington (one of us worked for President George W. Bush’s Council of Economic Advisers), we have seen how concern over employer costs can be a sticking point in the health care debate, even in the absence of persuasive evidence that increased costs would seriously harm businesses. San Francisco’s example should put some of those fears to rest. Many businesses there had to raise their health spending substantially to meet the new requirements, but so far the plan has not hurt jobs.
As of December 2008, there was no indication that San Francisco’s employment grew more slowly after the enactment of the employer-spending requirement than did employment in surrounding areas in San Mateo and Alameda counties. If anything, employment trends were slightly better in San Francisco. This is true whether you consider overall employment or employment in sectors most affected by the employer mandate, like retail businesses and restaurants.
So how have employers adjusted to the higher costs, if not by cutting jobs? More than 25 percent of restaurants, for example, have instituted a “surcharge” — about 4 percent of the bill for most establishments — to pay for the additional costs. Local service businesses can add this surcharge (or raise prices) without risking their competitive position, since their competitors will be required to take similar measures. Furthermore, some of the costs may be passed on to employees in the form of smaller pay raises, which could help ward off the possibility of job losses. Over the longer term, if more widespread coverage allows people to choose jobs based on their skills and not out of fear of losing health insurance from one specific employer, increased productivity will help pay for some of the costs of the mandate.
The San Francisco experiment has demonstrated that requiring a shared-responsibility model — in which employers pay to help achieve universal coverage — has not led to the kind of job losses many fear. The public option has also passed the market test, while not crowding out private options. The positive changes in San Francisco provide a glimpse of what the future might look like if Washington passes substantial health reform this year.
Two burning questions are at the center of America’s health care debate. First, should employers be required to pay for their employees’ health insurance? And second, should there be a “public option” that competes with private insurance?
Answers might be found in San Francisco, where ambitious health care legislation went into effect early last year. San Francisco and Massachusetts now offer the only near-universal health care programs in the United States.
The early results are in. Today, almost all residents in the city have affordable access to a comprehensive health care delivery system through the Healthy San Francisco program. Covered services include the use of a so-called “medical home” that coordinates care at approved clinics and hospitals within San Francisco, with both public and private facilities. Although not formally insurance, the program is tantamount to a public option of comprehensive health insurance, with the caveat that services are covered only in the city of San Francisco. Enrollees with incomes under 300 percent of the federal poverty level have heavily subsidized access, and those with higher incomes may buy into the public program at rates substantially lower than what they would pay for an individual policy in the private-insurance market.
To pay for this, San Francisco put into effect an employer-health-spending requirement, akin to the “pay or play” employer insurance mandates being considered in Congress. Businesses with 100 or more employees must spend $1.85 an hour toward health care for each employee. Businesses with 20 to 99 employees pay $1.23 an hour, and businesses with 19 or fewer employees are exempt. These are much higher spending levels than mandated in Massachusetts, and more stringent than any of the plans currently under consideration in Congress. Businesses can meet the requirement by paying for private insurance, by paying into medical-reimbursement accounts or by paying into the city’s Healthy San Francisco public option.
There has been great demand for this plan. Thus far, around 45,000 adults have enrolled, compared to an estimated 60,000 who were previously uninsured. Among covered businesses, roughly 20 percent have chosen to use the city’s public option for at least some of their employees. But interestingly, in a recent survey of the city’s businesses, very few (less than 5 percent) of the employers who chose the public option are thinking about dropping existing (private market) insurance coverage. The public option has been used largely to cover previously uninsured workers and to supplement private-coverage options.
Through our experience working on health-care-reform efforts in California and Washington (one of us worked for President George W. Bush’s Council of Economic Advisers), we have seen how concern over employer costs can be a sticking point in the health care debate, even in the absence of persuasive evidence that increased costs would seriously harm businesses. San Francisco’s example should put some of those fears to rest. Many businesses there had to raise their health spending substantially to meet the new requirements, but so far the plan has not hurt jobs.
As of December 2008, there was no indication that San Francisco’s employment grew more slowly after the enactment of the employer-spending requirement than did employment in surrounding areas in San Mateo and Alameda counties. If anything, employment trends were slightly better in San Francisco. This is true whether you consider overall employment or employment in sectors most affected by the employer mandate, like retail businesses and restaurants.
So how have employers adjusted to the higher costs, if not by cutting jobs? More than 25 percent of restaurants, for example, have instituted a “surcharge” — about 4 percent of the bill for most establishments — to pay for the additional costs. Local service businesses can add this surcharge (or raise prices) without risking their competitive position, since their competitors will be required to take similar measures. Furthermore, some of the costs may be passed on to employees in the form of smaller pay raises, which could help ward off the possibility of job losses. Over the longer term, if more widespread coverage allows people to choose jobs based on their skills and not out of fear of losing health insurance from one specific employer, increased productivity will help pay for some of the costs of the mandate.
The San Francisco experiment has demonstrated that requiring a shared-responsibility model — in which employers pay to help achieve universal coverage — has not led to the kind of job losses many fear. The public option has also passed the market test, while not crowding out private options. The positive changes in San Francisco provide a glimpse of what the future might look like if Washington passes substantial health reform this year.
Sunday, August 16, 2009
The Streets Compel Action on Health Coverage
There are some very basic axioms involved in the health care debate.
Many people do not live healthy lives. They become obese, diabetic, have respiratory problems, and lose circulatory capability.
Diseases caused by poor health habits are estimated to be 70% of all health care costs. 74% of all costs are confined to four chronic conditions (cardiovascular disease, cancer, diabetes and obesity). 80% of cardiovascular disease and diabetes is preventable, 60% of cancers are preventable, and more than 90% of obesity is preventable.
The United States traditionally has attached rights to the quirk of individual freedom that compels certain individuals to risk their lives, whether for a moment or over a long period of time. What is the difference between riding a motorcycle without a helmet and smoking or overeating? We clearly, for a variety of reasons some legal and some practical, cannot legislate healthy habits. We also, clearly, have to balance individual rights with societal rights.
Countries with a greater tolerance for socialistic solutions have adopted universal health care with success. One can argue about its efficiency, but there can be no argument that it is humane. This system absorbs into the incalculable mass of a governmental insurance scheme the contributions of individuals to their various diseases and simply pays no attention to it.
The debate in the United States over universal health care is more than a debate about money. At the heart of the debate is the right of the individual to do something that is against the common interest (live in such a way as to become ill and not have the resources to treat the illness) and the humane instinct to nurture and care for a fellow human in need. At the heart of this is the concept of self determination.
If you believe that you can control your life, plan your fortune, and be rewarded for your efforts, then you feel justified in damning those who do not exercise such prudent practice. They simply make their own beds. There is no obligation to care for them.
If you believe that we essentially have little control over our fate, whether we become rich or mentally ill, then it is cruel to damn the unfortunate. There is an obligation to nurture and care for the unfortunate.
Most of us bounce between these concepts, our judgments swayed by circumstances and knowledge of the individuals involved. Our social compact requires that we give up some measure of individual freedom for the benefit of living in a society governed reasonably. At some level the common good requires a solution for the diseased, whether mental, physical, or both. At a very human level, the United States has failed at this task. We need only look at the homeless and sick on our streets. On the other hand, we should preserve and reward the aspects of human effort that can, if not alter, at least affect the course of lives.
Insurance when it works correctly can reward the prudent over the risk takers. We should not abandon this concept. The Safeway and AmeriGas examples (see previous posts) show the course that must be taken. But there must be coverage and answers for all in medical (physical or mental) need. Whether the insurance solution is private or governmental, the insurer must not be in the position of denying coverage to make money. The motivation must be to provide care on an intelligent basis. Prudent conduct can be rewarded through intelligent use of premium payments. Some will have to pay more than they should and others will pay nothing and be a burden to the system. That should not stop us from providing advantage to those who behave responsibly and providing nurture to those who need it.
It is unacceptable for the richest nation on earth to leave its diseased dying on the streets.
Many people do not live healthy lives. They become obese, diabetic, have respiratory problems, and lose circulatory capability.
Diseases caused by poor health habits are estimated to be 70% of all health care costs. 74% of all costs are confined to four chronic conditions (cardiovascular disease, cancer, diabetes and obesity). 80% of cardiovascular disease and diabetes is preventable, 60% of cancers are preventable, and more than 90% of obesity is preventable.
The United States traditionally has attached rights to the quirk of individual freedom that compels certain individuals to risk their lives, whether for a moment or over a long period of time. What is the difference between riding a motorcycle without a helmet and smoking or overeating? We clearly, for a variety of reasons some legal and some practical, cannot legislate healthy habits. We also, clearly, have to balance individual rights with societal rights.
Countries with a greater tolerance for socialistic solutions have adopted universal health care with success. One can argue about its efficiency, but there can be no argument that it is humane. This system absorbs into the incalculable mass of a governmental insurance scheme the contributions of individuals to their various diseases and simply pays no attention to it.
The debate in the United States over universal health care is more than a debate about money. At the heart of the debate is the right of the individual to do something that is against the common interest (live in such a way as to become ill and not have the resources to treat the illness) and the humane instinct to nurture and care for a fellow human in need. At the heart of this is the concept of self determination.
If you believe that you can control your life, plan your fortune, and be rewarded for your efforts, then you feel justified in damning those who do not exercise such prudent practice. They simply make their own beds. There is no obligation to care for them.
If you believe that we essentially have little control over our fate, whether we become rich or mentally ill, then it is cruel to damn the unfortunate. There is an obligation to nurture and care for the unfortunate.
Most of us bounce between these concepts, our judgments swayed by circumstances and knowledge of the individuals involved. Our social compact requires that we give up some measure of individual freedom for the benefit of living in a society governed reasonably. At some level the common good requires a solution for the diseased, whether mental, physical, or both. At a very human level, the United States has failed at this task. We need only look at the homeless and sick on our streets. On the other hand, we should preserve and reward the aspects of human effort that can, if not alter, at least affect the course of lives.
Insurance when it works correctly can reward the prudent over the risk takers. We should not abandon this concept. The Safeway and AmeriGas examples (see previous posts) show the course that must be taken. But there must be coverage and answers for all in medical (physical or mental) need. Whether the insurance solution is private or governmental, the insurer must not be in the position of denying coverage to make money. The motivation must be to provide care on an intelligent basis. Prudent conduct can be rewarded through intelligent use of premium payments. Some will have to pay more than they should and others will pay nothing and be a burden to the system. That should not stop us from providing advantage to those who behave responsibly and providing nurture to those who need it.
It is unacceptable for the richest nation on earth to leave its diseased dying on the streets.
Thursday, July 9, 2009
AmeriGas Propane Experience
From When All Else Fails: Forcing Workers Into Healthy Habits, by Anna Wilde Mathews in The Wall Street Journal, July 8, 2009 (http://online.wsj.com/article/SB20001424052970203577304574274102603258642.html#mod=djemITP):
Last year, AmeriGas Propane Inc. gave its employees an ultimatum: get their medical checkups, or lose their health insurance.
The nationwide propane distributor took the unusual step after facing years of steep increases in the cost of health coverage for its roughly 6,000 workers. The company’s work force was aging, and many employees had unhealthy habits—the average worker is 46, and around 44% are smokers. And people weren’t getting tests or preventive care that could help them avoid heart attacks, diabetes or cancer.
AmeriGas had tried a number of voluntary wellness programs to encourage healthy habits in its employees. But the company concluded that “optional programs just don’t work,” says Bill Katz, vice president for human resources.
Then, beginning last year, the company mandated that all employees would have to get physical exams, blood-pressure checks and cholesterol and blood-sugar tests. Women also were required to get Pap smears, and mammograms for those 40 and older.
Workers and their covered spouses would have a year to complete the tests, which are covered 100%, or lose their insurance. And they’d need to keep getting the checkups at least every two years in order to retain the health benefits.
John Adams, an AmeriGas operations supervisor in Temecula, Calif., says he was initially skeptical of the company-mandated medical care. But he says he changed his mind when he learned during his required checkup that he had high “bad” cholesterol and showed early signs of diabetes. “It was a very good wake-up call,” says the 41-year-old, adding that he’s lost 36 pounds through a new diet and an exercise program.
As Congress ramps up the debate over health reform, efforts to prevent and manage chronic conditions like diabetes are a major focus. Such illnesses affect more than 130 million Americans and account for about three-quarters of total health spending. Already, well over half of big companies have launched initiatives to improve employee health.
AmeriGas, based in Valley Forge, Pa., is one of just a handful of companies that have mandated health testing, but benefits consultants say it is at the cutting edge of a growing trend. In a February survey by consulting firm Towers, Perrin, Forster & Crosby Inc. 45% of companies said they planned to, or were considering, adding penalties for employees who didn’t participate in wellness activities.
Many employers have steered clear of wellness requirements because of legal concerns. Mandated health tests might be “problematic” under the Americans with Disabilities Act, says Sharon Cohen, an attorney at human resources consultant Watson Wyatt Worldwide Inc.
AmeriGas’s Mr. Katz says the company’s legal department closely vetted its program before it moved forward, and ruled it was acceptable. The company doesn’t force employees to take any action based on their test results, which because of medical-privacy laws aren’t shared with AmeriGas.
Labor officials say they object to the idea of mandated health tests. “This is a personal health matter,” says Gerry Shea, assistant to the president of the AFL-CIO. “To bring it into the workplace and tie it to benefits is inappropriate. It’s like Big Brother.” Fewer than 2% of AmeriGas workers are unionized.
Among the first voluntary wellness efforts at AmeriGas was a poster campaign in 2001 that featured health tips and recipes. It offered a disease-management program from an outside vendor, which was available to counsel employees with certain chronic conditions. Other initiatives included promising discounted health-insurance premiums to nonsmokers and cash rewards for employees who filled out health-risk assessment forms. An exercise program was supposed to help workers get in shape.
Despite these efforts, Mr. Katz and benefits director Carol Guinan found themselves in April 2007 chewing over some unpalatable numbers. Besides annual health-expense increases of 10% or more, the company, which self-insures its health plan, had paid more than two dozen insurance claims in the previous year for amounts greater than $100,000. Its workers had high rates of diabetes and heart disease.
Moreover, only 6% of the adults enrolled in the AmeriGas health plan had gotten recommended cholesterol checks in the previous 18 months. Just 20% had their blood sugar tested. Among women, 44% were getting appropriate mammograms and Pap smears.
So Mr. Katz floated a suggestion: Maybe AmeriGas should require the health tests. He and Ms. Guinan conferred with other officials, including the company’s chief executive, its legal department and Aetna Inc., AmeriGas’s health benefits administrator. Eventually, they settled on a list of checkups to be included in the program, and some limitations.
Mr. Katz decided not to include colonoscopies, because they were “too intrusive,” and mandating them might “create a lot of resistance and resentment,” he says. Also, the program would include only workers who had been with AmeriGas for two years or more, since such employees tended to remain with the company for the long term. Besides making the checkups free, the plan also doesn’t charge for generic drugs for diabetes, blood pressure, asthma and cholesterol. Co-payments were reduced for brand-name medications for those conditions.
The program, dubbed Operation Save-A-Life, was unveiled in August 2007 and took effect the following January. Each worker received a DVD at home to explain the effort and discuss cost and health statistics. One fact: AmeriGas employees younger than 60 were dying of natural causes at nearly three times the expected rate for that age group based on actuarial data.
Many workers didn’t welcome company-mandated medical care. “You get rolled eyes—‘We don’t really have time for this,’ ” says Eric Rath, a sales and service manager in Temecula, Calif. The former Marine says he was used to fitness standards and didn’t object to the plan.
Dennis Price Sr., a 48-year-old propane-truck driver in the company’s Warrenton, Va., office, says he was “a little shocked” by the idea at first. “I thought it was an invasion of our privacy,” he says. Mr. Price had never gotten his cholesterol checked, and generally avoided doctors. But he decided the initiative was a good idea after he got his required physical in October and found he was healthy. Without the mandate, he says, he never would have gone.
There were some early problems with the AmeriGas program. Some employees, for example, were mistakenly charged by doctors for what should have been free exams. Such mixups made it tough to figure out which employees had completed the required medical tests. So AmeriGas decided to extend its deadline for getting the tests until May 2009. The company hasn’t yet stripped anyone of insurance.
AmeriGas estimates that more than 90% of its workers have gotten the required exams. Use of cholesterol drugs rose 13.6% in 2008 from a year earlier. For diabetes drugs, the increase was 7.7%, and for asthma medications and blood-pressure medicines, it was 7.4% and 2.5%, respectively.
The company also points to anecdotal evidence suggesting the program has helped improve some workers’ health. Jeff Blanzy, a market sales manager for AmeriGas in Fremont, Mich., says he would never have gotten the medical checkups if they weren’t mandatory. But after the 52-year-old went in for his exam, he learned he had fatty liver disease, and the doctor warned he was at risk of eventually losing his liver. “That scared the daylights out of me,” says Mr. Blanzy, who has since lost 78 pounds after changing his diet and starting to work out.
Ellen Hendren, a customer-service representative in St. Augustine, Fla., discovered she had early-stage breast cancer when she went for a mammogram last August. If the test hadn’t been required, the 63-year-old says she likely would have put it off and delayed the diagnosis by several months, allowing the cancer to grow. “It really has made a difference for me,” she says.
AmeriGas projected that the screenings would cost about $500,000 in 2008. Mr. Katz declines to give the size of AmeriGas’s health-care budget. But he says health costs in 2008 were at least 3% higher than they would have been without the program. He attributes the increased spending to the cost of additional exams and follow-up care.
Despite their popularity, many preventive health programs fail to deliver savings. Those focused solely on detecting disease are often costly to their sponsors. However, corporate wellness programs that resulted in participants making changes such as losing weight or quitting smoking have saved money.
So far, Mr. Katz says, “we still don’t know if it’s going to work.” But, he says, the company hopes to “improve the health of our employees and save money over time.”
Last year, AmeriGas Propane Inc. gave its employees an ultimatum: get their medical checkups, or lose their health insurance.
The nationwide propane distributor took the unusual step after facing years of steep increases in the cost of health coverage for its roughly 6,000 workers. The company’s work force was aging, and many employees had unhealthy habits—the average worker is 46, and around 44% are smokers. And people weren’t getting tests or preventive care that could help them avoid heart attacks, diabetes or cancer.
AmeriGas had tried a number of voluntary wellness programs to encourage healthy habits in its employees. But the company concluded that “optional programs just don’t work,” says Bill Katz, vice president for human resources.
Then, beginning last year, the company mandated that all employees would have to get physical exams, blood-pressure checks and cholesterol and blood-sugar tests. Women also were required to get Pap smears, and mammograms for those 40 and older.
Workers and their covered spouses would have a year to complete the tests, which are covered 100%, or lose their insurance. And they’d need to keep getting the checkups at least every two years in order to retain the health benefits.
John Adams, an AmeriGas operations supervisor in Temecula, Calif., says he was initially skeptical of the company-mandated medical care. But he says he changed his mind when he learned during his required checkup that he had high “bad” cholesterol and showed early signs of diabetes. “It was a very good wake-up call,” says the 41-year-old, adding that he’s lost 36 pounds through a new diet and an exercise program.
As Congress ramps up the debate over health reform, efforts to prevent and manage chronic conditions like diabetes are a major focus. Such illnesses affect more than 130 million Americans and account for about three-quarters of total health spending. Already, well over half of big companies have launched initiatives to improve employee health.
AmeriGas, based in Valley Forge, Pa., is one of just a handful of companies that have mandated health testing, but benefits consultants say it is at the cutting edge of a growing trend. In a February survey by consulting firm Towers, Perrin, Forster & Crosby Inc. 45% of companies said they planned to, or were considering, adding penalties for employees who didn’t participate in wellness activities.
Many employers have steered clear of wellness requirements because of legal concerns. Mandated health tests might be “problematic” under the Americans with Disabilities Act, says Sharon Cohen, an attorney at human resources consultant Watson Wyatt Worldwide Inc.
AmeriGas’s Mr. Katz says the company’s legal department closely vetted its program before it moved forward, and ruled it was acceptable. The company doesn’t force employees to take any action based on their test results, which because of medical-privacy laws aren’t shared with AmeriGas.
Labor officials say they object to the idea of mandated health tests. “This is a personal health matter,” says Gerry Shea, assistant to the president of the AFL-CIO. “To bring it into the workplace and tie it to benefits is inappropriate. It’s like Big Brother.” Fewer than 2% of AmeriGas workers are unionized.
Among the first voluntary wellness efforts at AmeriGas was a poster campaign in 2001 that featured health tips and recipes. It offered a disease-management program from an outside vendor, which was available to counsel employees with certain chronic conditions. Other initiatives included promising discounted health-insurance premiums to nonsmokers and cash rewards for employees who filled out health-risk assessment forms. An exercise program was supposed to help workers get in shape.
Despite these efforts, Mr. Katz and benefits director Carol Guinan found themselves in April 2007 chewing over some unpalatable numbers. Besides annual health-expense increases of 10% or more, the company, which self-insures its health plan, had paid more than two dozen insurance claims in the previous year for amounts greater than $100,000. Its workers had high rates of diabetes and heart disease.
Moreover, only 6% of the adults enrolled in the AmeriGas health plan had gotten recommended cholesterol checks in the previous 18 months. Just 20% had their blood sugar tested. Among women, 44% were getting appropriate mammograms and Pap smears.
So Mr. Katz floated a suggestion: Maybe AmeriGas should require the health tests. He and Ms. Guinan conferred with other officials, including the company’s chief executive, its legal department and Aetna Inc., AmeriGas’s health benefits administrator. Eventually, they settled on a list of checkups to be included in the program, and some limitations.
Mr. Katz decided not to include colonoscopies, because they were “too intrusive,” and mandating them might “create a lot of resistance and resentment,” he says. Also, the program would include only workers who had been with AmeriGas for two years or more, since such employees tended to remain with the company for the long term. Besides making the checkups free, the plan also doesn’t charge for generic drugs for diabetes, blood pressure, asthma and cholesterol. Co-payments were reduced for brand-name medications for those conditions.
The program, dubbed Operation Save-A-Life, was unveiled in August 2007 and took effect the following January. Each worker received a DVD at home to explain the effort and discuss cost and health statistics. One fact: AmeriGas employees younger than 60 were dying of natural causes at nearly three times the expected rate for that age group based on actuarial data.
Many workers didn’t welcome company-mandated medical care. “You get rolled eyes—‘We don’t really have time for this,’ ” says Eric Rath, a sales and service manager in Temecula, Calif. The former Marine says he was used to fitness standards and didn’t object to the plan.
Dennis Price Sr., a 48-year-old propane-truck driver in the company’s Warrenton, Va., office, says he was “a little shocked” by the idea at first. “I thought it was an invasion of our privacy,” he says. Mr. Price had never gotten his cholesterol checked, and generally avoided doctors. But he decided the initiative was a good idea after he got his required physical in October and found he was healthy. Without the mandate, he says, he never would have gone.
There were some early problems with the AmeriGas program. Some employees, for example, were mistakenly charged by doctors for what should have been free exams. Such mixups made it tough to figure out which employees had completed the required medical tests. So AmeriGas decided to extend its deadline for getting the tests until May 2009. The company hasn’t yet stripped anyone of insurance.
AmeriGas estimates that more than 90% of its workers have gotten the required exams. Use of cholesterol drugs rose 13.6% in 2008 from a year earlier. For diabetes drugs, the increase was 7.7%, and for asthma medications and blood-pressure medicines, it was 7.4% and 2.5%, respectively.
The company also points to anecdotal evidence suggesting the program has helped improve some workers’ health. Jeff Blanzy, a market sales manager for AmeriGas in Fremont, Mich., says he would never have gotten the medical checkups if they weren’t mandatory. But after the 52-year-old went in for his exam, he learned he had fatty liver disease, and the doctor warned he was at risk of eventually losing his liver. “That scared the daylights out of me,” says Mr. Blanzy, who has since lost 78 pounds after changing his diet and starting to work out.
Ellen Hendren, a customer-service representative in St. Augustine, Fla., discovered she had early-stage breast cancer when she went for a mammogram last August. If the test hadn’t been required, the 63-year-old says she likely would have put it off and delayed the diagnosis by several months, allowing the cancer to grow. “It really has made a difference for me,” she says.
AmeriGas projected that the screenings would cost about $500,000 in 2008. Mr. Katz declines to give the size of AmeriGas’s health-care budget. But he says health costs in 2008 were at least 3% higher than they would have been without the program. He attributes the increased spending to the cost of additional exams and follow-up care.
Despite their popularity, many preventive health programs fail to deliver savings. Those focused solely on detecting disease are often costly to their sponsors. However, corporate wellness programs that resulted in participants making changes such as losing weight or quitting smoking have saved money.
So far, Mr. Katz says, “we still don’t know if it’s going to work.” But, he says, the company hopes to “improve the health of our employees and save money over time.”
Thursday, July 2, 2009
Safeway's Health-Care Plan
What follows is a opinion article by Steven A. Burd appearing in the Wall Street Journal (http://online.wsj.com/article/SB124476804026308603.html) on June 12, 2009:
Effective health-care reform must meet two objectives: 1) It must secure coverage for all Americans, and 2) it must dramatically lower the cost of health care. Health-care spending has outpaced the rise in all other consumer spending by nearly a factor of three since 1980, increasing to 18% of GDP in 2009 from 9% of GDP. This disturbing trend will not change regardless of who pays these costs -- government or the private sector -- unless we can find a way to improve the health of our citizens. Failure to do so will make American companies less competitive in the global marketplace, increase taxes, and undermine our economy.
At Safeway we believe that well-designed health-care reform, utilizing market-based solutions, can ultimately reduce our nation's health-care bill by 40%. The key to achieving these savings is health-care plans that reward healthy behavior. As a self-insured employer, Safeway designed just such a plan in 2005 and has made continuous improvements each year. The results have been remarkable. During this four-year period, we have kept our per capita health-care costs flat (that includes both the employee and the employer portion), while most American companies' costs have increased 38% over the same four years.
Safeway's plan capitalizes on two key insights gained in 2005. The first is that 70% of all health-care costs are the direct result of behavior. The second insight, which is well understood by the providers of health care, is that 74% of all costs are confined to four chronic conditions (cardiovascular disease, cancer, diabetes and obesity). Furthermore, 80% of cardiovascular disease and diabetes is preventable, 60% of cancers are preventable, and more than 90% of obesity is preventable.
As much as we would like to take credit for being a health-care innovator, Safeway has done nothing more than borrow from the well-tested automobile insurance model. For decades, driving behavior has been correlated with accident risk and has therefore translated into premium differences among drivers. Stated somewhat differently, the auto-insurance industry has long recognized the role of personal responsibility. As a result, bad behaviors (like speeding, tickets for failure to follow the rules of the road, and frequency of accidents) are considered when establishing insurance premiums. Bad driver premiums are not subsidized by the good driver premiums.
As with most employers, Safeway's employees pay a portion of their own health care through premiums, co-pays and deductibles. The big difference between Safeway and most employers is that we have pronounced differences in premiums that reflect each covered member's behaviors. Our plan utilizes a provision in the 1996 Health Insurance Portability and Accountability Act that permits employers to differentiate premiums based on behaviors. Currently we are focused on tobacco usage, healthy weight, blood pressure and cholesterol levels.
Safeway's Healthy Measures program is completely voluntary and currently covers 74% of the insured nonunion work force. Employees are tested for the four measures cited above and receive premium discounts off a "base level" premium for each test they pass. Data is collected by outside parties and not shared with company management. If they pass all four tests, annual premiums are reduced $780 for individuals and $1,560 for families. Should they fail any or all tests, they can be tested again in 12 months. If they pass or have made appropriate progress on something like obesity, the company provides a refund equal to the premium differences established at the beginning of the plan year.
At Safeway, we are building a culture of health and fitness. The numbers speak for themselves. Our obesity and smoking rates are roughly 70% of the national average and our health-care costs for four years have been held constant. When surveyed, 78% of our employees rated our plan good, very good or excellent. In addition, 76% asked for more financial incentives to reward healthy behaviors. We have heard from dozens of employees who lost weight, lowered their blood-pressure and cholesterol levels, and are enjoying better health because of this program. Many discovered for the first time that they have high blood pressure, and others have been told by their doctor that they have added years to their life.
Today, we are constrained by current laws from increasing these incentives. We reward plan members $312 per year for not using tobacco, yet the annual cost of insuring a tobacco user is $1,400. Reform legislation needs to raise the federal legal limits so that incentives can better match the true incremental benefit of not engaging in these unhealthy behaviors. If these limits are appropriately increased, I am confident Safeway's per capita health-care costs will decline for at least another five years as our work force becomes healthier.
The Healthy Measures program currently applies only to our nonunion work force. While we have numerous health and wellness provisions in our union contracts, we are working with union leaders like Joe Hansen of the United Food and Commercial Workers to incorporate healthy measures provisions in our union work force as well.
While comprehensive health-care reform needs to address a number of other key issues, we believe that personal responsibility and financial incentives are the path to a healthier America. By our calculation, if the nation had adopted our approach in 2005, the nation's direct health-care bill would be $550 billion less than it is today. This is almost four times the $150 billion that most experts estimate to be the cost of covering today's 47 million uninsured. The implication is that we can achieve health-care reform with universal coverage and declining per capita health-care costs.
There is a very real possibility that we will see positive transformational health-care reform in the near future. I am encouraged by the effort I see on Capitol Hill, particularly the bipartisan effort in the Senate. While some tough issues remain, if we continue to work in a bipartisan manner I believe we will resolve these issues successfully and find agreement on meaningful reform.
Mr. Burd is CEO of Safeway Inc., and the founder of the Coalition to Advance Healthcare Reform.
Effective health-care reform must meet two objectives: 1) It must secure coverage for all Americans, and 2) it must dramatically lower the cost of health care. Health-care spending has outpaced the rise in all other consumer spending by nearly a factor of three since 1980, increasing to 18% of GDP in 2009 from 9% of GDP. This disturbing trend will not change regardless of who pays these costs -- government or the private sector -- unless we can find a way to improve the health of our citizens. Failure to do so will make American companies less competitive in the global marketplace, increase taxes, and undermine our economy.
At Safeway we believe that well-designed health-care reform, utilizing market-based solutions, can ultimately reduce our nation's health-care bill by 40%. The key to achieving these savings is health-care plans that reward healthy behavior. As a self-insured employer, Safeway designed just such a plan in 2005 and has made continuous improvements each year. The results have been remarkable. During this four-year period, we have kept our per capita health-care costs flat (that includes both the employee and the employer portion), while most American companies' costs have increased 38% over the same four years.
Safeway's plan capitalizes on two key insights gained in 2005. The first is that 70% of all health-care costs are the direct result of behavior. The second insight, which is well understood by the providers of health care, is that 74% of all costs are confined to four chronic conditions (cardiovascular disease, cancer, diabetes and obesity). Furthermore, 80% of cardiovascular disease and diabetes is preventable, 60% of cancers are preventable, and more than 90% of obesity is preventable.
As much as we would like to take credit for being a health-care innovator, Safeway has done nothing more than borrow from the well-tested automobile insurance model. For decades, driving behavior has been correlated with accident risk and has therefore translated into premium differences among drivers. Stated somewhat differently, the auto-insurance industry has long recognized the role of personal responsibility. As a result, bad behaviors (like speeding, tickets for failure to follow the rules of the road, and frequency of accidents) are considered when establishing insurance premiums. Bad driver premiums are not subsidized by the good driver premiums.
As with most employers, Safeway's employees pay a portion of their own health care through premiums, co-pays and deductibles. The big difference between Safeway and most employers is that we have pronounced differences in premiums that reflect each covered member's behaviors. Our plan utilizes a provision in the 1996 Health Insurance Portability and Accountability Act that permits employers to differentiate premiums based on behaviors. Currently we are focused on tobacco usage, healthy weight, blood pressure and cholesterol levels.
Safeway's Healthy Measures program is completely voluntary and currently covers 74% of the insured nonunion work force. Employees are tested for the four measures cited above and receive premium discounts off a "base level" premium for each test they pass. Data is collected by outside parties and not shared with company management. If they pass all four tests, annual premiums are reduced $780 for individuals and $1,560 for families. Should they fail any or all tests, they can be tested again in 12 months. If they pass or have made appropriate progress on something like obesity, the company provides a refund equal to the premium differences established at the beginning of the plan year.
At Safeway, we are building a culture of health and fitness. The numbers speak for themselves. Our obesity and smoking rates are roughly 70% of the national average and our health-care costs for four years have been held constant. When surveyed, 78% of our employees rated our plan good, very good or excellent. In addition, 76% asked for more financial incentives to reward healthy behaviors. We have heard from dozens of employees who lost weight, lowered their blood-pressure and cholesterol levels, and are enjoying better health because of this program. Many discovered for the first time that they have high blood pressure, and others have been told by their doctor that they have added years to their life.
Today, we are constrained by current laws from increasing these incentives. We reward plan members $312 per year for not using tobacco, yet the annual cost of insuring a tobacco user is $1,400. Reform legislation needs to raise the federal legal limits so that incentives can better match the true incremental benefit of not engaging in these unhealthy behaviors. If these limits are appropriately increased, I am confident Safeway's per capita health-care costs will decline for at least another five years as our work force becomes healthier.
The Healthy Measures program currently applies only to our nonunion work force. While we have numerous health and wellness provisions in our union contracts, we are working with union leaders like Joe Hansen of the United Food and Commercial Workers to incorporate healthy measures provisions in our union work force as well.
While comprehensive health-care reform needs to address a number of other key issues, we believe that personal responsibility and financial incentives are the path to a healthier America. By our calculation, if the nation had adopted our approach in 2005, the nation's direct health-care bill would be $550 billion less than it is today. This is almost four times the $150 billion that most experts estimate to be the cost of covering today's 47 million uninsured. The implication is that we can achieve health-care reform with universal coverage and declining per capita health-care costs.
There is a very real possibility that we will see positive transformational health-care reform in the near future. I am encouraged by the effort I see on Capitol Hill, particularly the bipartisan effort in the Senate. While some tough issues remain, if we continue to work in a bipartisan manner I believe we will resolve these issues successfully and find agreement on meaningful reform.
Mr. Burd is CEO of Safeway Inc., and the founder of the Coalition to Advance Healthcare Reform.
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