President Obama plans to radically reform our health system, and few would disagree that it needs it. But bringing change to such a complicated entity is no easy task. How will the new administration succeed where others have failed?
“We will wield technology's wonders to raise healthcare's quality and lower its costs”
-President Barack Obama
A president is elected partly on the promise of healthcare reform. He makes a rousing speech on the subject, to near universal acclaim. He then sets in motion a process to rebuild our health system from the ground up. Sound familiar? I’m describing President Obama and recent events in Washington, but I could just as well be talking about Bill Clinton’s health proposals back in 1993, or Harry Truman before him. And we all know how that turned out. Can Obama do what Clinton and Truman could not?
On a cold January day, punctuated by applause and shouts of “Obama! Obama!”, the new President gave his inaugural address in customary inspiring fashion. In amongst the talk of challenges and vision, the state of our healthcare system was not neglected. In Obama’s words, “Our healthcare is too costly . . . We will restore science to its rightful place and wield technology’s wonders to raise healthcare’s quality and lower its costs.”
Since then, the new government has overseen the passage of the economic stimulus bill, which sets out, among other things, an increased federal medical assistance package for Medicaid; $1 billion in funding for research the comparing effectiveness of treatments funded by Medicare, Medicaid and SCHIP; $2 billion in extra money for Office of the National Coordinator for Health Information Technology; and $1 billion in funding for community preventative health campaigns, vaccination programs and healthcare-associated infection reduction strategies.
On February 5, Obama also signed into law a bill to expand government-funded health insurance to cover an additional four million children, a $32.8 billion expansion of the State Children’s Health Insurance Program. The money to pay for the expansion will reportedly be generated by raising the federal tobacco tax.
So far so good. But history has shown that it’s one thing to have a vision, and quite another to make that vision reality.
In 1993, shortly after being elected to his first term as President, Bill Clinton created the Task Force on National Health Care Reform. Its core element was an enforced mandate for employers to provide health insurance coverage to their employees through regulated health maintenance organizations. The plan initially met with a positive response, but controversy arose when Clinton appointed his wife, Hillary Rodham Clinton, to chair the task force, giving her an unprecedented level of responsibility for a president’s spouse.
The plan drew litigation relating to its processes and Hillary’s role, and became an easy target for criticism from Republicans, who called it unnecessarily bureaucratic and said that it restricted patient choice. Predictably, the health insurance industry was also critical of the plan, and, more surprisingly, a number of Democrats broke ranks and produced competing plans of their own. The whole thing descended into chaos, and in August 1994 a compromise bill aimed at enshrining at least some of the original plan’s ideas into law was declared dead.
Clinton wasn’t the first American president to attempt major healthcare reform. In November 1945, seven months into his presidency, Harry S. Truman gave a speech to Congress proposing a new national healthcare program. Truman’s plan was to address a number of healthcare-related issues, including the lack of doctors, dentists, nurses and other health professionals in lower-income areas of the country and the lack of quality hospitals in rural counties. Truman proposed the establishment of a board of doctors and public officials that would create standards for hospitals and ensure that new hospitals met these standards.
The most controversial aspect of Truman’s plan was its proposed national health insurance plan. The fund was to be open to all Americans, but would remain optional, with participants paying monthly. The plan also aimed to provide a cash fund to replace wages lost due to illness or injury.
When the proposals came before Congress. they were vociferously opposed by the American Medical Association, which called the bill an example of ‘socialized medicine’, therefore tying it to the fears of communism that dominated public consciousness at the time. Organized labor, one of the bill’s main supporters, had also lost the goodwill of the American people thanks to a series of disruptive strikes. When the Korean War broke out, Truman was forced to abandon his bill completely.
Will things be different this time around? President Obama is starting from a good place: he has a tremendous groundswell of popular support, and widely regarded as a man of intelligence and vision. And the timing seems to favor him as well: our healthcare system is in the worst shape it’s ever been, there’s been a cultural shift toward government activism, and the opposition seems to be in disarray.
According to Charlie Whelan, Director of Consulting in the Healthcare Practice at analysts Frost & Sullivan, Obama has learned from Clinton’s mistakes. “Obama’s strategy is very different to Clinton’s. He has prepared the vision and the parameters to frame the argument and put it on the back of Congress to hash out the details.
“He’s essentially said, ‘These are the objectives, this is what we are trying to achieve, and we are allocating X dollars to fund these particular objectives, whether they are EMRs or comparative effectiveness studies or money to improve NIH research grants.’ The strength of Obama’s plan is that it is open-ended, and puts the responsibility of hashing out the details on the shoulders of Congress, who scuttled Clinton’s plan a decade ago.”
Mike Thompson, Principal in Pricewaterhouse Coopers’ Global Human Resource Solutions Group, agrees: “In retrospect the way that the process was handled last time was done in a very closed-door, take it or leave it approach. This time it’s being done in a more open and collaborative way. It’s also important to note that he proposals that are on the table today will not affect 85 percent of Americans, in contrast to last time which was to re-engineer the entire system. History suggests that health reform is more successful when it is more incremental and less revolutionary.
“Healthcare is one of those areas that everyone holds near and dear to their hearts, and if what they have is threatened, this creates a built in resistance to change. The great majority of Americans already have coverage and healthcare they are satisfied with, and it’s easy for them to buy in to reform that improves the lot for the people who are less fortunate.”
Obama’s plan does have some acknowledged strengths: specifically, prohibiting insurance companies from determining price or denying coverage based on health status; expanding provision for children from low-income backgrounds; requiring large and medium-sized employers to enroll employees in health insurance plans and make a contribution toward the cost; and providing subsidies to low-income people so that they can afford coverage under the National Health Insurance Exchange.
But these strengths can also be weaknesses. Take for example, the notion that insurance companies should treat all people in a given community the same, regardless of any pre-existing health conditions they may have. This idea will only work if everyone is required to enroll; otherwise healthy people will wait until they become sick before buying insurance – why buy it when you’re healthy if you know the insurer is bound by law to cover you regardless of circumstances? Unless the entire country signs up to an insurance plan voluntarily, we will need a mandate that requires everyone to join – and the lack of a mandate was one of the key points in Obama’s pre-election platform.
There will also be opposition to the proposed changes from a number of obvious sources, including pharmaceutical companies and manufacturers of medical devices because some of the funding for the changes will come from trimming their revenues.
The proposed move to expand access to generic medicines, for example, understandably has many pharmaceutical companies up in arms. Shortly after the details of the stimulus bill were announced, pharmaceutical giant AstraZeneca released the following statement:
“As policymakers consider further comparative effectiveness research measures in the context of health care reform, we encourage them to keep clinical effectiveness at the forefront, recognizing the differences in the efficacy, safety and tolerability of treatment interventions among individual patients. A narrow focus on cost-effectiveness can compromise patients' access to needed medicines and stifle innovation. In addition to providing information on the benefits and risks of our medicines, AstraZeneca is committed to helping people who have difficulty affording the medicines they need.”
While at first glance this reads like an endorsement of the proposals, on closer inspection it contains a thinly veiled argument for retaining the status quo when it comes to patent protection for branded drugs – a battle that could become protracted and nasty, given the power and influence of the big drug companies and what they stand to lose.
Even hospitals and physicians may find themselves on the wrong side of the fence: if money is clawed back from savings made in more effectively managing chronic care, for example, this could cut their revenues. What some see as waste, others see as essential income.
Improving health IT has been touted as one method of cost containment, which is why the universal adoption of electronic health records is being promoted so heavily, with funding to the tune of $20 billion. Yet while putting medical records online will undoubtedly improve care for patients in the short term, actual cost savings are more of a long-term goal. According to the Congressional Budget Office, “Approaches such as the wider adoption of health information technology or greater use of preventive medical care could improve people’s health but would probably generate either modest reductions in the overall costs of healthcare or increases in such spending within a 10-year budgetary window.”
Frost & Sullivan’s Director of Research for Healthcare, Monali Patel, puts it this way: “The intention is that there would be cost savings in the long term, because you would start to have more efficiencies in the system. You would start to reduce some types of waste in terms of time and energy, and perhaps manpower that’s going into maintaining paper records, but also potentially when a patient moves from provider to provider or insurance company to insurance company, it’s a more streamlined transition.
“In terms of when we will start to see cost savings, I don’t know that anyone has been able to outline a concrete year, or what the actual ROI would be. Over the long term there will be a lot of benefits, and some of those benefits will not just be administrative, but will be clinical as well. If you have an electronic medical record, you have better data sources. You have more clarity in terms of what’s happening with the patient, because there will be fewer errors compared to something like handwriting.
There are those who believe that IT will play an important role in health reform, regardless of whether it saves money. Clayton Christenson, Professor of Business Administration at Harvard Business School, author of The Innovator’s Prescription, and proponent of the disruptive model of innovation, has this to say on the subject: “Information technology will play two crucial roles in facilitating the emergence of disruptive business models. First, IT will be the enabling mechanism that shifts the locus of care, when this is desirable and feasible, from solution shops to facilitated networks.
“Second, the transition from medical records based on pen and paper to ones that are portable, easily accessible and interoperable will not just substantially reduce the costly paperwork that burdens today’s caregivers. It will be the primary mechanism of co-ordination among the providers in the disruptive value network.”
According to PwC’s Thompson, “It’s widely accepted that we can’t get a true handle on the healthcare system if we continue operating under an antiquated infrastructure that is not electronically based. Most of the significant improvements that have been made in other industries have been empowered by leveraging technology. It will require a significant investment upfront and may require a reconfiguration of the provider system. Much of the system is dominated by individually practicing physicians and we will see a move toward larger groups of physicians who are better able to implement these changes.
“These changes are unlikely to lead to short term savings – if anything, they will require a short-term investment. Longer term, the only way for us to turn the ship and get better control on what’s happening and reduce variation around practice patterns is to have a system that is more technology enabled, so we can understand where the variations are and gradually work to improve on that.”
Obama has promised that much of the funding for the proposed reforms will come from a 10-year fund of $634 billion in tax revenues. The trouble is, there are already many claims on this tax money, including improving infrastructure and rebuilding the military. It is also possible that it will be politically unworkable to claw back such large amounts of money from upper income earners and businesses.
Says Frost & Sullivan’s Charlie Whelan: “Other people have criticized where some of the money is coming from, and whether it’s changing the amount of tax deductions that rich people and corporations are able to take or cuts to reimbursement to Medicare managed funds. I believe they were well chosen, but are we going to be able to generate as much money from those cuts as anticipated?”
The stimulus bill legislation would impose financial penalties for those who have not adopted the appropriate health information technology strategies within six or seven years. Many large hospitals and healthcare institutions have already implemented such systems, so these requirements will not cause them any difficulties, but small organizations and offices of four physicians or few could find it challenging to comply.
Gary Gottlieb, President of Brigham and Women’s Hospital, acknowledges both the importance and challenges of moving to computerized patient records. “We believe strongly that this is critically important. We’ve endorsed it. We’ve invested in it. We’ve had very substantial funding of it internally. For other institutions it’s going to be challenging, and therefore the incentives that are in the stimulus package will be critical. You don’t want to disable small community hospitals that have frail balance sheets or urban centers that are doing their best to take care of very sick populations by causing them an additional capital cost.”
The other problem, of course, being the current state of the economy. As Whelan points out, “When the government plans its budgets, it looks into the future and says, ‘ We anticipate future revenues to be at these levels, in 2010, 2011, 2012, 2013, 2014, 2015.’ And then it says, ‘Assuming we get that amount of money back into the coffers, we can allocate some of that money to EMRs, and some of that money to provide people who don’t have healthcare insurance with healthcare insurance.’
“There isn’t a big pool of $1.5 billion in cash sitting there that they’re going to start disbursing. They’re going to be submitting IOUs to all of these parties, saying, ‘We anticipate getting these dollars in the future, and when we do, we will be funding it in such and such a way.’
“That’s important, because if in the future we find that we don’t have that money, if the economy doesn’t improve or there are other types of priorities that pop up, the amount of money that might go to funding some of these things might not be as high as it is now. So there’s an element of risk there.”
Thompson also believes that the proposals may run into funding problems in the long term, but that doesn’t mean they shouldn’t go ahead: “Right now the country has a willingness to spend a lot more money than it’s taking in as part of the economic stimulus, and healthcare reform is being financed as part of that. Longer term, some tax proposals are being considered, but nothing big enough to offset the cost of this implementation.
If you look at the prognosis on the expenditures of the federal government, we can’t get control of those unless we get control of healthcare costs. The problems associated with Medicare and Medicaid are so deep and immediate, that we can’t solve the overall funding issue without tackling healthcare. If we’re able to turn the ship on healthcare, that will pay for itself many times over in the long run as we look at the magnitude of the deficit we’re going to be facing if we don’t turn the ship around.”
The consensus seems to be that Obama’s vision is good, if perhaps a little overambitious, and challenging to implement. This is not unexpected – it has taken years for our healthcare system to become the tangled mass of complexities that it is. Any plan that promises to resolve this quickly or easily would clearly be either lying or severely misguided.
In historical terms, Obama has a better chance of realizing his vision than his predecessors did. But he will need to act before the momentum stalls. Otherwise we will wind up back where we started, with our third chance at healthcare reform gone completely down the drain.
On November 19, 1945, only seven months into his presidency, Harry S. Truman gave a speech to the United States Congress proposing a new national healthcare program.
Truman argued that the federal government should play a role in healthcare. He aimed to address five issues: the lack of doctors, dentists and nurses in lower-income areas; the lack of quality hospitals in rural counties; the need for a board of doctors and public officials to be created; the lack of national standards for hospitals and other health centers; the need for a national health insurance plan.
Truman's health proposals finally came to Congress in the form of a Social Security expansion bill, co-sponsored by Democratic senators Robert Wagner and James Murray along with Representative John Dingell. For this reason, the bill was popularly known as the WMD bill.
Following the outbreak of the Korean War, President Truman was finally forced to abandon the bill. Although Harry. Truman was not able to create the health program he desired, he was successful in publicizing the issue of healthcare in America.
Bill Clinton’s goal was to introduce a comprehensive plan to provide universal health care for all Americans, which was to be a cornerstone of the administration's first-term agenda.
The plan’s key element set out a mandate that would force employers to provide health insurance coverage to all employees. This would be achieved through competitive but closely regulated health maintenance organizations.
Conservatives, libertarians and the health insurance industry waged a campaign against the plan, criticizing it as being overly bureaucratic and restrictive of patient choice. Democrats, instead of uniting behind the President's proposal, offered competing plans of their own.
In August 1994, Democratic Senate Majority Leader George Mitchell introduced a compromise proposal that would have delayed requirements of employers until 2002, and exempted small businesses.
A few weeks later, Mitchell announced that his compromise plan was dead, and that healthcare reform would have to wait at least until the next Congress. The defeat gave Republicans additional ammunition in their fight to weaken Clinton.
In November 2008, Barack Obama was elected as the 44th President of the United States on a platform that place a large emphasis on healthcare reform. His plan proposed a comprehensive, standardized federal health benefits structure; a massive expansion of federal regulatory authority over health insurance; and an enlargement of federal regulatory power over health care delivery, including the definition of what constitutes quality care.
The plan also aimed to prop up the existing employer-based health insurance system and government health programs, such as Medicaid and the State Children’s Health Insurance Program (SCHIP), to expand health insurance coverage.
Since taking office, the new government has pushed through the American Recovery and Reinvestment Act, also known as the economic stimulus bill. The bill sets out, among other things, an increased federal medical assistance package for Medicaid; $1 billion in funding for research the comparing effectiveness of treatments funded by Medicare, Medicaid and SCHIP and $2 billion in extra money for Office of the National Coordinator for Health Information Technology.
On February 5, Obama also signed into law a $32.8 billion expansion of the State Children’s Health Insurance Program.