Top Ten Health Policy Myths… and How to Debunk Them!

Cantankerous Grumblings of a Jaded Health Care Consultant

February 15, 2006

By: David Allen (952/835-2009, dwallen@mn.rr.com)

Myth #10: The Grass is Greener Somewhere Else

Other Countries are having problems, too

Canada: Government financed health system being challenged

Great Britain: Efforts to improve quality and service by spending more is instead resulting in increased waste

China: Employer sponsored health coverage is leaving big gaps

Truth #10: The Grass is Brown Everywhere

Myth #9: Consumer-Driven Health Care Only Works for the Wealthy

Capitalism Works for All Income Levels

CMS “Independence Plus” Initiative The Self-Determination project

(19 states) The Cash and Counseling project

(3 states) Research shows the poor benefit more

from managing responsibility rather than simply being given handouts

Truth #9: Consumer-Driven Health Care Works for Every Predictable Health Expenditure

Myth #8: Medicare Part D was Designed to Give People Coverage for Drugs

Medicare Part D: A Response to a Major Gap in Medicare

Insurance lobby made sure that everything went through them, so they could take their cut

Pharmaceutical lobby made sure that the government didn’t allow price negotiations

Then, the government cobbled together Medicare Part D

Truth #8: Medicare Part D was Designed to Protect Insurance Companies and Pharmaceutical Companies (while also give Medicare eligibles drug coverage)

Myth #7: Health Plans have Administrative Costs of “Only” 8% to 10%

Administrative Expenses are HUGE

What Minnesota health plans report as administrative expenses are incomplete

Contributions to reserves, insurance agent commissions and costs, disease management, case management clearly excluded

Health education, utilization review, quality assurance are supposed to be counted as administrative, but ambiguities allow much to be excluded

Hospitals and physicians have huge costs associated with billing, complying with rules and waiting for payment – not counted

Truth #7: More than 30% of Health Care Expenditures are for Bureaucracy and Health Plans are More to Blame than Anyone

Myth #6: All Doctors and Hospitals Provide about the Same Quality

Quality Varies

Hernia surgery, recurrence rates: 5% mode 10% for some surgeons 0.2% for some surgeons

Treatable colon cancer, 10-year survival varies from 20% to 63%, depending on surgeon

Cardiac bypass surgery, risk-adjusted death rates vary from 5% to <1%, depending on hospital and surgeon

Quality Varies

Anecdotally: Tremendous differences in quality of

hospitals Substantial differences in the quality of

physicians

Truth #6: There are Significant Variations in the Quality of Health Care

Myth #5: Pay-for-Performance is the Key to Improving Quality

Pay-for-Performance is Hot, but Unproven

Health Plans and Government identify PFP as key strategy for rewarding quality

Problems with PFP: Controlling costs is a higher priority Quality can’t be measured statistically Quality varies by individual Health plans don’t want informed patients

Truth #5: Information is the Key to Improving Quality

Myth #4: High Drug Prices are Necessary to Promote Innovation

The Drug Industry is Sick

Pharmaceutical industry historically one of America’s most profitable

Research and Development Number of new drugs declining Many new drugs are “me too”

Marketing Distorts demand Corrupts physicians and researchers

Truth #4: High Drug Prices are Necessary to Maintain Pharmaceutical Company Profits

Myth #3: Health Care Costs can be Reduced by Using Group Buying Leverage

Group Insurance is the Premise of Health Care Today

Big group insurance plans drive cost-shifting, not economy Discounting payments to providers lead

to provider consolidation Profitability of big groups shift costs to

small groups Pawlenty’s “Smart Buy” Alliance

Truth #3: Group Purchasing is Not an Alternative to Market Competition

Myth #2: Consumer-Driven Health Care won’t work because 80% of health care costs are incurred by sickest 10% of patients

Shouldn’t Group all Health Care Expenditures Together

Predictable and Affordable (e.g. primary care)

Unpredictable and Affordable (e.g. minor trauma)

Predictable and Unaffordable (e.g. chronic conditions)

Unpredictable and Unaffordable (e.g. major trauma)

Truth #2: Consumer-Driven Health Care will work for most health care

Myth #1: Health care services are efficiently allocated

Examples of Misallocations

Physicians: RVU-based reimbursement distorts appropriate care

Hospitals: Reimbursement rewards high tech and patient volume, penalizes value

Health care coverage: disincentives for young and healthy

Truth #1: Health care services are grossly distorted

Three Principles for Debunking Health Care Myths

Principle #1: Insurance is optimal financing mechanism only if two conditions are met

1. Risk is unpredictable

2. Risk is unaffordable

Principle #2: Capitalism works better than socialism

Lack of free competition: Distorts the health care market Drives up costs

Capitalism also has negatives Forces people to make choices As Churchill said about Democracy…

Principle #3: The market must come before special interests Our government is the hostage of

special interests Lobbyists have disproportionate influence Campaign financing takes precedence

over the best interests of the nation The “establishment” naturally fights for

the status quo

Principle #3: The market must come before special interests Physicians need to be vocal and

community leaders Put competence ahead of ideology

(“Not right, not left, but forward”) Demand campaign finance reform