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posted on 12 March 2017

How The U.S. Can Resolve The Healthcare System Debate

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Dr. Deane Waldman thinks the solution to the healthcare debate is to return healthcare system management to the states. While this may rankle some who think that would be an abdication of responsibility by Washington, I would suggest the idea not be dismissed too quickly. Read on for my thinking, which may be considered radical by some.

Note: I chose this particular time to write this commentary in order to extend the discussion by Steven Hansen in his weekly review article: Trumpcare or Obamacare - They Both Suck.

Deane Waldman, MD MBA, Emeritus Professor of Pediatrics, Pathology and Decision Science, and Director of the Center for Health Care Policy at the Texas Public Policy Foundation wrote an Op Ed last week published by The Hill: California wants single payer and Texas wants free market - say hello to ‘StatesCare’. He proposes that all federal healthcare programs be abolished and the money that would have been spent by Washington forwarded to the states with the requirement that it be spent on healthcare. He wrote:

Then, let the states to decide how to structure their healthcare both for the medically needy and the general population. That means repealing ObamaCare, HIPAA, UMRA, EMTALA, parts of several Omnibus Reconciliation Acts, and Medicaid.

If a state likes ObamaCare mandates, they are welcome to reproduce all its rules and regulations at the state level. The wording is right there in the federal register, all 10,515,000 words of the ACA.

If California wants to try a single payer system for its 38 million people, that’s fine. But the Golden State ought not expect other states to subsidize their choice. California will have a large pot of federal dollars and their own tax revenue to provide care.

If Texas wants a free market healthcare system, Austin should be able to decide without Washington having veto power.

If states want to make compacts with other states for cross border services and/or insurance coverage, drug pricing, or emergency services, they should be free to do so.

Dr. Waldman excludes Medicare from the program, presuymably because that has operated differently from the other programs, supported by FICA taxes paying premiums. If it were included in the mix, the phase over would be a long and complicated process because of the long "premium" paying history.

Dr. Waldman does not get into the specifics of a key problem in the U.S., the high cost of health care compared to the rest of the world. He does address cost generally with the assertion that costs are high due to inefficiencies:

Federally controlled healthcare is dollar inefficient: more than 30 percent of all healthcare spending produces no health care! If the federal government left healthcare to the state's, spending on federal bureaucracy - estimated at one trillion dollars per year - could be used to pay for care. Americans could get a lot of healthcare for $1,000,000,000,000.

By giving over healthcare to the states and providing fixed, limited amounts for support, we can end the practice of writing blanks checks. Washington can begin to balance the budget.

Note: We will ignore the non sequitur about Washington beginning to "balance the budget". We just hope that Dr. Waldman's lack of understanding about monetary systems does not extend to his medical expertise.

Others have analyzed what it would take to bring U.S. healthcare costs in line with the rest of the world and some of the most convincing arguments come from analysis of service-based payments for medicine (inefficiently high costs) compared to outcome-based payments. A particularly good discussion was published in 2013 in the Harvard Business Review: The Strategy That Will Fix Health Care. Here is an excerpt from the introduction:

It’s time for a fundamentally new strategy.

At its core is maximizing value for patients: that is, achieving the best outcomes at the lowest cost. We must move away from a supply-driven health care system organized around what physicians do and toward a patient-centered system organized around what patients need. We must shift the focus from the volume and profitability of services provided - physician visits, hospitalizations, procedures, and tests - to the patient outcomes achieved. And we must replace today’s fragmented system, in which every local provider offers a full range of services, with a system in which services for particular medical conditions are concentrated in health-delivery organizations and in the right locations to deliver high-value care.

Making this transformation is not a single step but an overarching strategy. We call it the “value agenda." It will require restructuring how health care delivery is organized, measured, and reimbursed.

The authors have created a sytem description with an interactive process flow diagram:

Another excellent summary was presented in a 2016 article in The Wall Street Journal: 5 Prescriptions for Fixing Health Care. This article is wider in scope than the HBR article above (but there is some overlap) with five medical system experts discussing the five different areas for improvement. The five assertions discussed:

  1. It’s Time to Radically Change How the FDA Approves Drugs

  2. The Biggest Obstacle to the Health-Care Revolution is Fragmented Medical Records

  3. How Competition Can Bring Down Drug Prices

  4. Why Picking the Right Hospital Is Crucial--and Often Impossible

  5. It’s Time to Fix How Hospitals Are Rewarded

What is obvious to me is that returning healthcare management systems to 50 separate states (plus the District of Columbia) offers little chance that the systemic problems needing attention to bring healthcare costs down would be addressed. If healthcare costs are brought down in the 50 state solution, in most states it will be by reducing healthcare. Do we really want to reduce healthcare costs one unnecessary death at a time?

But that does not mean that the proposal of "Statescare" by Dr. Waldman is without merit. Just because only the largest 4 or 5 states would have the individual capacity to address healthcare delivery reform doesn't mean the other 45 (and DC) would be doomed to failure, like the small state of Vermont experienced when they tried a single payer system 2011-2014.

(By the way, the Vermont failure was a political one, not economic. See the excellent review in The New England Journal of Medicine.)

The large-systems problems outlined in the references cited above could still be addressed if the FDA continued to operate at the federal level and the individual states collaborated on two (or possibly more) approaches to providing healthcare services. Dr. Waldman suggested:

If a state likes ObamaCare mandates, they are welcome to reproduce all its rules and regulations at the state level. The wording is right there in the federal register, all 10,515,000 words of the ACA.

If California wants to try a single payer system for its 38 million people, that’s fine. But the Golden State ought not expect other states to subsidize their choice. California will have a large pot of federal dollars and their own tax revenue to provide care.

If Texas wants a free market healthcare system, Austin should be able to decide without Washington having veto power.

There could be three large states that implemented three different systems. Dr. Waldman suggested the possibility of single payer for California, "free market" for Texas, and an Obamcare knock-off for another state.

I would suggest that all other states wanting single payer could join in the system with California; all states wanting "free-market" could join with Texas. For the sake of further discussion we will leave the Obamcare system out of the picture to simplify the rhetoric.

We can anticipate that the U.S. could be divided into two healthcare coverage systems, which we might call the "Blue States" system and the "Red States" system, with obvous reference to the political designations.

This does present some logistical problem for people traveling between the two systems, but that could be managed by a reciprocity agreement. The number of individuals receiving reciprocity treatment should be quite small if deliberate or gratuitous "border jumping" was inhibited.

The efficienies of the two systems should become apparent within a few years. I would suggest that states would move from the alliance that was showing either less desirable health outcomes or poorer economic performance (or both) over time. Within a period of perhaps 10 or 15 years ideology would succumb to reality and either "single payer" or "free market" healthcare would be operative in most states.

On the outside chance that the data does not show an advantage for either system, then we will continue to be able to have ideological arguments but will know that apparently those debates are not keeping us from a better healthcare scenario for the U.S.

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