Who Pays?

Tuesday, January 20, 2009

The subject was health care, specifically Massachusetts' entry into the everybody's-covered competition -- the Commonwealth Connector. "It's not just about an entitlement that somebody else pays for and you get," said Jon Kingsdale, executive director. Yet it's not clear who will foot the bill.

Kingsdale, an energetic and good-natured defender of what's formally known as the Commonwealth Health Insurance Connector Authority, more or less entered the lion's den the other night when he delivered the third annual Colby Hewitt Health Care Lecture, at the Harvard Club in the Back Bay.

The lecture series is a memorial to Hewitt, former chairman of the Pioneer Institute, the market-favoring Massachusetts think tank.
Kingsdale said he'd spoken previously to groups representing "the full spectrum of Massachusetts politics, from far left to dead center."

Before 200 or so gathered at Pioneer's invitation, even on a snowy night, Kingsdale acknowledged there might be some higher level of skepticism here, from a group representing "far right to right of center."

The Connector is tasked with implementing the commonwealth's 2006 Health Care Reform Act.

And many of the ideas behind it, Kingsdale said, actually came from conservatives.

The term "individual mandate," a key element of the universal (or near universal) coverage concept, he said, came from the Heritage Foundation.

"There's a lot for the right half of the political spectrum in this initiative," he said, starting with the fact that health care expenses are not paid by any one entity -- state, business, or individual -- but shared by all three.

Kingsdale offered "five numbers" he said together were descriptive of the program, the need for it, and what he views as its initial success.

-- First, 2.6 percent is the rate of uninsurance in Massachusetts, compared with 15.3 percent (in 2007, probably higher now) nationally. The Netherlands and some other countries with "universal coverage" have rates around 1 percent. More people covered is good, he said. "They are living, not dying."

-- Of the new enrollees in the state's system between June 2006 and June 2008, 41 percent have their insurance fully paid by themselves or their employers. The costs aren't transferred to state or federal government, to you or me.

-- It costs the government $2,000 per employee per year to insure the rest of the new enrollees, numbering about 442,000. (Medicare Part D drug coverage alone costs $10,000 a year, he said.)

-- There has been 98.6 percent compliance with the mandate that individuals sign up, enforced through tax forms (the state has 3.9 million tax filers).

-- And, "75 percent -- the number that really counts" -- is the positive approval rating of health care reform in Massachusetts, according to a survey taken last summer.

*******

Now, health care isn't real estate development. It is isn't transportation. But it's a big problem, whether you're concerned about people's personal welfare or economic costs, and it impacts all businesses, so we were interested in what Kingsdale had to say.

As Pioneer executive director Jim Stergios said, "All eyes are on Massachusetts. We are a petri dish."

Although employers shot down Gov. Michael Dukakis's 1988 attempt at universal care, 75 percent of them support this current program, Kingsdale said.

"In Massachusetts this giant experiment seems to be working."

Costs have not been controlled by the Connector. It hasn't increased them either, and has "slightly depressed" them, he said. (This of course means slowing the increase.)

"This legislation was not about cost containment," he said. But that decision "was really, really the right way to go. Bordering on brilliant."

Nationally, specialists are overpaid, compared to primary car physicians, Kingsdale said.

"Because of health care reform, we have initiatives to address that problem."

But it will take time.

"It's a nine-inning game in a 200-game season," he said. "It's the third inning now."

*******

After three years of discussion, the act was passed, and the system's reforms will be sequenced.

"Breadth of support is from virtually far left to virtually far right," he said. "The coalition stayed together."

The big reason for such an extended rollout is, "We're talking about refinancing 16 percent of GDP, or 18 percent in Massachusetts." By comparison, education is eight percent.

"We spend $2.4 trillion on health care." Agriculture, he said, is 1/16 that size.

The legislation left to the a Connector board to answer big questions like, "What does affordable mean?" and "What is the minimum amount of credible insurance?" As it shaped the plan, the board got unanimous votes on all the tough issues, agreeing that the program should make health care accessible and affordable.

But there was and is opposition, particularly from the right. He said he doesn't recognize the facts in some of what the critics produce, particularly from "the Pacific Research Institute, whatever the heck that is." (He might have been referring to this one.)

And, "You get it equally from the left wing," many of whom support only a single-payer (that would be government) system. "I swear they want to see this fail to prove their point."

Some of the critics are among those inhabiting the halls of "gotcha journalism," he said, who will only let you go so long before whacking you.

" 'It's time for gotcha. You haven't covered everybody. It costs too much.' " Cost containment in health care would be a great victory, he said, but won't come till the third or fourth quarter (switching from baseball to football here) of the game.

"There's no constituency for health care cost containment," as there is for merely covering everybody with care.

Nationally, it would cost $125 billion to cover the 15 percent who are not now covered, he said.

But, "The Clintons tried to control costs first." It's the wrong order. "What happens every time? Nothing."

"We said to hell with costs. We've got the federal government. They'll cover 50 percent."

(Kingsdale admitted to being "a little glib" here. What we appreciated was the honesty, because those ultimate costs, shifted or not, are certainly what critics are talking about.)

*******

The tactic Massachusetts used was, "We closed off the exit."

With the so-called individual mandate, "The government is telling me I have to pay for it."

"When you cut off exits, you build a lot more voice," or support.

"For the first time we were building a coalition for cost containment."

But, he said, "The United States is actually not yet ready for cost containment. It needs help from an individual mandate. Nationally it's going to be a much bigger challenge."

"There's not even a public understanding," Kingsdale said. "There's so much education we have to do."

He said it took 338 meetings to put the connector together.

Nationally, "We need to stage reform. It takes a whole lot longer to refinance 16 percent of GDP than people think."

At minimum a national health care reform would take five years, he said.

"A lot of uninsured don't want to be insured. Most of them can't afford it."

The typical one is young, single, male, and Hispanic. Healthy, of course.

"They don't really believe in chronic illness."

"We're not yet ready for serious cost control in this country."

*******

Kingsdale answered some questions from skeptics, including one about the thesis outlined in "Who Killed Health Care?", Harvard Business School professor Regina Herzlinger's 2007 book.

In it, to grossly oversimplify, Herzlinger says two major things need to change before health care can become affordable, and therefore accessible to everybody.

One, the health care establishment is complex and arcane, and it has to be more transparent.

She reluctantly supports a Securities and Exchange Commission-like entity that would require big providers and insurers to disclose information.

Second, the heavy government regulation that has grown up around health care has to disappear.

She envisions entrepreneurial activity in the health care market like it exists in, say, software.

So, transparency and competition. Two things Kingsdale said he endorses.

But, he said: "I just don't see how you get there."

Hospitals are now big enough, and few and far between enough, that "we're well past monopoly prosecution."

He said health care savings accounts are promising, but just one tool, and the timing has to be right. Tufts tried one but was "too early."

And one person with a question noted in passing that there is "several hundred million in new money in this program."

"That's a low estimate," Kingsdale said. "The truth is nobody knows."

He said he appreciated a question about where the new money is going, but said, "We have a system that will absorb every dollar we provide. Nobody knows where it's going."

The up side is more people are getting better care.

*******

And why is health care moving toward universality? "We believe you should not be allowed to die in the street," Kingsdale said. "And that is very costly stuff."

Until costs are controlled, "We pay for care, more and more and more for doing more, even though we know more care isn't necessarily better care."

And each country tailors its system to its outlook.

"In England they think death is inevitable. In Canada they think it is postponable. In this country we think it is elect-able."