Health care reform: More chatter or change ahead?

If interest in the movie "Sicko" is any indication, insurance woes are moving to the forefront of public concerns. Will we soon see real reform that gives the 45-million Americans with no insurance coverage a safety net? Probably not, according to W. P. Carey School health care experts Marjorie Baldwin and Bradford Kirkman-Liff.

As of July 10, 2007 — three weeks after its release — the movie "Sicko" was among the top 10 moneymakers in U.S. movie theaters. Produced by filmmaker Michael Moore, this controversial look at healthcare in America shared top-ten bragging rights with such flights of Hollywood fancy as the "Transformers,""Ratatoullie," "Evan Almighty" and "Knocked Up." Some reviewers called "Sicko" a call to action. Some said that, like the others, it is sporting plenty of movie-land fantasy.

Still, when a documentary makes the top 10 list, and a recent Wall Street Journal headline declares, "healthcare no longer makes politicians leery," it's time to wonder if the day of change has finally come for the U.S. health insurance marketplace. Will we soon see real reform that gives the 45-million Americans with no insurance coverage a medical bills safety net? Probably not, say industry watchers. But, that circumstance doesn't negate the very real need for significant change.

Talking point or tipping point?

Marjorie Baldwin is an economist and director of the School of Health Management and Policy at the W. P. Carey School of Business. She's been watching health insurance issues with interest, and she doesn't see major change "until after the next election." She has one primary reason for this belief: "Some of the decisions that need to be made are really tough. They're going to be unpopular on one side or the other."

Likewise, Baldwin's colleague, Bradford Kirkman-Liff, a W. P. Carey School professor of health policy and biotechnology, views quick change as unlikely. "The status quo will continue for the next several years until we reach a crisis point," he says. According to him, that won't come until the number of uninsured Americans rises from 45 million to about 80 million.

"When people are uninsured, it doesn't mean they're not getting healthcare," Baldwin notes. "It means they have no health insurance and may not be able to pay for the care they receive." And that means that when it comes to hospital stays or catastrophic illness among the uninsured, the rest of us foot the bill.

According to a study conducted by Families USA, a non-profit agency in Washington, D.C., the cost to cover medical bills left unpaid by the uninsured added $922 to premiums for a worker and his or her family who were insured by an employer throughout 2005.

In six states, un-reimbursed costs added at least $1,500 to the price of a family's insurance coverage. Individuals — or their employers — paid an extra $341 in health-insurance premiums to cover the uninsured. In eight states, that add-on topped $500. Not only do the uninsured raise healthcare premiums for everyone else, they also use healthcare services in ways that increase costs in general.

Baldwin notes that the uninsured don't get preventative or early-diagnostic care. "They don't get routine checkups. They don't get screenings," she says, adding that such measures help people avoid costly emergencies. "As an entire healthcare system, we're using our resources inefficiently."

Following the script

Kirkman-Liff agrees, saying the system needs more "disease management. We have to help patients learn to manage their illnesses." He points out that healthcare providers today know many ways to help people control diabetes, asthma, chronic obstructive pulmonary disease and other ailments.

Often, this requires asking patients to "take the right medications, exercise appropriately, eat the right foods and live a healthy life." So, do doctors have an incentive to counsel such actions? Not a financial one. "Physicians get paid so much when they do a diagnostic test or a surgery. They get paid so little when they actually spend time talking with a patient," Kirkman-Liff says.

"Counseling patients is under-rewarded, and that's unfortunate. It causes incentive for physicians to spend more time testing and less time teaching patients to manage their own health issues." Then again, physicians themselves don't always follow recommended protocols. Although many conditions have prescribed standards of care, Baldwin says the data show only a percentage of patients actually receive the best-practice treatments.

As an example, she points to a recent study that reviewed data from Health Plan Employer Data and Information Set (HEDIS) records. Developed and maintained by the National Committee for Quality Assurance, HEDIS is an evaluation tool used to track performance of health-insurance plans. "People with diabetes should have an annual eye exam, as well as a whole prescription of care to control the symptoms of their disease and make sure it doesn't become more disabling," Baldwin notes.

If you look at the percentage of people who actually are getting that care, it's way below 100 percent.

— Marjorie Baldwin, economist

Although numbers vary by region, only 48 to 75 percent of diabetes patients got the recommended regimen of medical attention and testing in 2001, according to a Dartmouth University study that tapped HEDIS data. That study looked at practice standards for treating many conditions beside diabetes, and uncovered a similar lack of compliance with top-quality treatment protocols. "The results for diabetes were typical" for other conditions, also, Baldwin explains.

"The researchers never found any region that came close to compliance with standards." "Many physicians still are prescribing the wrong medications for patients," Kirkman-Liff adds. "Sometimes the right medication is more expensive, and insurance won't cover it. Or the insurance doesn't cover prescription drugs, but it will cover an emergency-room visit. So, the patient gets a cheaper drug and winds up in the emergency room more often." He calls this "bad plan design."

Hide and seek

Yet, how is a consumer to know a healthcare plan is badly designed? Chances are, he won't. "If I want to buy a digital camera, I can go on the web and read product reviews, buy Consumer Reports, go to a store and look at the cameras themselves — I could study cameras," Kirkman-Liff says. "When it comes to healthcare, I can't get detailed information" about costs, procedures, doctors, insurance companies or treatment alternatives.

"Providers are very effective about withholding information from the public. Quality and outcome data are very difficult to find." Baldwin agrees that consumers often cannot get information on treatment options, and she adds this observation: "We don't know the costs because we're not paying the costs." When you don't pay the costs directly, you have no incentive to be concerned about them, she maintains.

For this reason, she supports "anything we can do to make healthcare markets more like other markets, where consumers have a stake" in the marketplace. Baldwin likes the idea of health savings accounts, in which consumers get to allocate a portion of income for healthcare, decide how to spend those dollars and, at the end of the year, keep whatever is left over. "Then, consumers would be more cost conscious."

Today, some 77 percent of people in the U.S. are part of an employer-sponsored healthcare plan. "Any time you provide insurance to any group, you risk what economists call 'moral hazard,'" Baldwin says. The term refers to the notion that if someone else is paying the bills, a person is bound to be less concerned about the costs incurred.

That might lead to over-utilization of services and waste of resources, so getting consumers to shoulder more costs might be a smart move. Kirkman-Liff is all for getting employers out of the business of providing health-insurance coverage. "With today's global economy, the idea of an employer-based healthcare system is antiquated," he says. "It presents incentive for employers to outsource work and avoid hiring."

In an editorial for The Denver Post, Colorado State Representative Claire Levy recently wrote, "The cost to employers of providing health insurance currently operates as an 8 percent payroll tax. Companies that do provide health insurance are at a competitive disadvantage to those that do not." But, shifting away from employer-based health insurance would mean abandoning a system that has prevailed for more than 50 years. Are we ready to do that?

Ready for the revolution

The public, at least, might be more ready than politicians realize. According to a poll conducted last April by the Wall Street Journal Online and Harris Interactive, almost half of U.S. adults with health insurance worry that policies will become unaffordable.

An equal number of survey respondents fear reduction or loss of their existing health-insurance coverage. What's more, 76 percent said they'd back initiatives to cover the uninsured, including government-subsidized plans and tax credits to improve the affordability of health insurance.

Some 26 percent answered "favor strongly/somewhat" to a question regarding "paying more income taxes to cover more people via Medicare or Medicaid." If interest in the movie “Sicko” is any indication, insurance woes are moving to the forefront of public concerns. In the next issue of Knowledge, Baldwin will join Kirkman-Liff in voicing views on exactly what smart steps the U.S. might take to close the insurance gap sensibly.

Bottom Line:

• Those 45-million Americans who don't have health insurance now have the nation's attention, and they should.
• Uninsured patients add around $922 to the average family's health-insurance bill. Meanwhile, the uninsured are more likely to need emergency care, because they're less likely to manage chronic illnesses, such as diabetes.
• Quality-care standards are not being practiced consistently, and some health plans actually contribute to inappropriate prescribing activity.
• Employer-based coverage leads to less conservative healthcare utilization and puts some American businesses at a competitive advantage.
• Public sentiment now supports reforms, including those that could have tax implications.