A Reason for Change: Letter to Dan Henninger Wall Street Journal

Dear Mr. Henninger,

I agree with your view “From Bismarck to Obama” http://bit.ly/16Tv8K except you did not include the big reason for change that would rally America to support meaningful health care reform. As you correctly asserted the reasons for change are not in misinformation that Obama refers to. The reasons for change are contained in what is not being shared by those who have useful information to influence the national discussion about health. All of us contribute to making our own health problem worse and we are not aware of the adverse impact of these actions on ourselves as individuals and collectively on the communities where we live.

First and foremost any strategy for containing runaway health must reduce the size of the pipeline of preventable financial and emotional catastrophic medical events that are bankrupting our country. Less than 50% of Americans undergo early detection of cancer even when they have insurance coverage, and similarly less than 50% of diabetic patients receive recommended care for their condition even when they too have insurance coverage. According to the Institute of Medicine an average of 5000 dollars of every hospital admission is spent for treatment of non identified adverse drug reactions. Similarly we waste enormous sums of money treating and diagnosing symptoms of adverse drug reactions on an outpatient basis that occur among as many as 20% of our population taking medications.

Cancer, diabetes, and adverse drug reactions relate to about 1/3 of our national medical bill.

The information to disseminate the gaps in care required to prevent advanced disease should be made available to every Medicare, Medicaid and privately insured person in America. Although available, this information has not yet been distributed. All the President and government administrators at the state and a federal level need to do is to require this personal health information to be shared with America. The impact of this information transfer will unify our country on a successful consensus driven course for health care reform. The conflicts of interest of those who benefit from the status quo will be eliminated. Dissemination of personalized accurate information will make us realize as a country that any citizen without access to care raises health expenditures for all of us.

I would be pleased to share with you very low cost available methodologies for making such information available.

The Health Gadfly

Health Care Can be Equal

N. Gregory Mankiw’s article “Why Health Care Will Never be Equal” http://bit.ly/2m0wzU describes only two legs of the three legs of health in America. He excludes from his equation the fact that compliance by individuals and their physicians with known guidelines for care can reduce medical risk and increase longevity at dramatically lower cost. These efforts can reduce as much as a third of the money spent today for health in America. This amount of money is more than enough to pay for everyone and even leave a little over for other items to reduce our national debt.

We are overweight, comply with recommendations for diabetes management less than 50% of the time, and do not get screened for cancer when we should. These low cost non compliant behaviors insure the continuing supply of patients who wastefully consume our health dollars. We have become dependent on the bail out of expensive medicines and treatments instead of taking actions to avoid their use in the first place.

In addition, significant proportions of Americans who take multiple drugs have adverse drug reactions (not drug interactions) and are not aware of them. These idiosyncratic (Specific to each individual person response to medicines) reactions often lead to unnecessary tests and hospitalizations. In fact, the Institute of Medicine has reported on average five thousand dollars of every hospital admission is spent on the clinical presentation of adverse drug reactions.

Dr. Mankiw does not address the contributions to society that result from the investment in life years gained from treatment.

We could avoid the ethical dilemma raised by Dr. Mankiw, if our culture changed to simply follow a more logical approach to health using available information technology correctly.


The Health Gadfly

Pathway to Health Care Reform

HealthNewsDigest published “Pathway to Health Care Reform” written by The Healthgadfly and his colleague this past Sunday September 13, 2009.

http://bit.ly/U835y

Health News Digest is a member of the New York Press Club, The Association of Health Care Journalists and The Online News Association. This prestigious 10 year old Online Magazine publishes news stories on the Health Industry on a daily basis.

They are syndicated to thousands of major health industry Websites and wireless phone systems. Also, over 2,000 news editors, and health columnists subscribe and have free access to use any and all content.

The Health Gadfly

Our President is on the Ropes

The Health Gadfly was again welcomed as a lead Op-Ed by The Health Care Blog on September 3, 2009. http://bit.ly/3nqGxu9

Change Your Strategy, Mr. President

Emerging consensus is against another health plan sponsored by the federal government.

There is already much oversight at federal and state levels of all insurance programs, yet these programs experience unsustainable cost trends. Medicare, Medicaid and the Federal Employee Health Benefit Plans are modeled after private insurance plans and they do not work economically. In the instances where profit incentives have been removed from government-run programs such as the federal employee health plans, the trends in these plans are not significantly different from private insurance plan trends.

One sustaining aspect of our health system is the belief in the patient/doctor relationship. This bond between patients and their physicians continues to survive insurer, government, and other third party interference. This patient physician bond must be strengthened in any successful strategy for change.

Instead of continuing to list all that is wrong with American Health and coming up with new unproven expensive plans for change, the president should focus on practical ways to improve quality in health care by leveraging our patient physician bonds.

First he has to communicate the message to everyone that on average clear evidence indicates that Americans receive substandard basic health care. This circumstance is driving up our health costs because without basic care we often develop catastrophic expensive illness. Less than 50% of all Americans participate in early cancer detection programs whether or not they have insurance coverage. Similarly for diabetes, many people develop complications of stroke and kidney failure because they do not follow basic treatment recommendations of the American Diabetes Association.

Physicians and their patients, contrary to their perception, do not have useful up to date information when making health care decisions that involve everyday health care.

One powerful source of information to improve health, and strengthen physician and patient bonds has been available for years yet not shared. Medical claims, laboratory results, and pharmacy data stored in health plan administrators’ computers (Medicare, Medicaid, Private Insurers, and Third Party Administrators) are available and able to support individual and doctors efforts to narrow quality of care gaps. Proper organization of this data can link every diagnosis, test, and prescription for each patient in a way that each doctor and patient are unable to do for themselves. The government can make this happen by regulation.

Our President can no longer avoid sharing available and accurate health information that may be in conflict with some special interest groups that supported his campaign. Those involved in health plan administration must no longer withhold vital information about our health even though it may not be in their financial interest to disclose it.

Only with clearly understood reasons for change will change occur, patient physician bonds strengthened and special interests pushed aside. Changing the discussion to a “Moral Imperative” as mentioned today http://xrl.us/bfat4w does not give a practical incentive for change that is ultimately determined by the people of America. He has already won consensus on the need for change.

If our President does not get off the ropes quickly and change his strategy to improving health by strengthening the patient/doctor relationship he will get knocked out of the health care arena very much like his predecessors and the opportunity for “Change” regarding health care in America will be lost. The President and the nation risk losing much more than the battle for our nation’s health.

The Health Gadfly

Government Intervention VS. Personal Responsibility in Health

The health Gadfly was welcomed by The Health Care Blog and they discussed health care reform!
http://tiny.cc/HMCYm

Starting Points for Change

President Obama has challenged America to a fresh dialogue about how to improve our healthcare system. Yet, proposed steps for health care reform recapitulate old failed strategies. We can not reduce payments to hospitals and doctors, decrease payments for pharmaceuticals, replace physicians with nurses, and deny care based on age and anticipated life years, as our first steps to reform.

We all acknowledge that Healthcare is one of our Nation’s top priorities. Health (cost and quality as measured by health status) determines our productivity, our competitiveness in the world economy, and ultimately the strength of our national defense.

So what is it that has to change in order for our President and our country to succeed in making us a healthier nation at an affordable cost?

First, we must recognize that health, like democracy, requires active participation of our citizens. Our government does not work when we fail to vote; our health system can not work when most of us fail to actively participate in taking care of ourselves and our families according to known guidelines for prevention and disease management.

Every person in America needs to have a clear understanding of the rules of the road for health and follow them. We have plenty of precedents that require individual behavioral change to reduce high cost damage to society. “Click it or Ticket” is one example. We have to begin to drive on the right side of the road to health or some of us must pay more for their health care. Paying for health care with increased taxes will not change the behavior of rich and poor who do not participate in their own individual health reform. The knowledge gap that needs to be closed is to let uninsured and insured of all socioeconomic groups know the truth about the quality of their health care. Quality is defined as compliance to known standards for preventive health and medical condition management.

Americans put off proactive management of health, choosing to exchange low cost opportunities for high cost treatment of advanced disease that is often preventable. We have been seduced by our technological success and then blame pharmaceutical companies and health providers for the high cost of health care.

There are other mechanisms to achieve health care reform without adding new insurance programs. The technology already exists to provide every member of society a simple straight forward outline of their individual responsibilities for health care.

We have come to believe that if some kinds of care are not covered by insurance, we do not need it. We have also become sidetracked into believing that limited access to physicians who accept low fees is good enough. It is not. The economics of health cost in America is a demand side problem, not a supply side problem. The economics of health is market driven, and much like the failed war on drugs, can not be won by eliminating the suppliers. (Alcohol Prohibition 1930’s !)

Runaway health costs can only be reigned in by reducing demand for services; not by limiting access to care that will certainly result from reducing payments to hospitals and doctors. This insurance company strategy of lowering payments for services has not worked for the past 40 years; why would one think it will work today? Contrary to traditional thinking, the rising cost of health care is not as much related to how much is paid for a unit of service, a procedure, or a specific drug as it is to diagnostic and treatment plans outlined by doctors. The real driver of medical inflation is lack of use of existing resources in a rational manner and according to known guidelines for preventive care and chronic disease management.

One recent development gaining momentum in America which successfully aligns physicians, their patients, and their claims administrators is Value Based Health Care. This new benefit design links compliance to health care standards required by each individual plan member to the cost of his contribution for premium. The components of such plans use existing web based personal health records as the vehicle to communicate an individual’s preventive and condition management responsibilities. Aggregate reporting highlights improved population health status as costs decrease. Hospitals and physicians adjust to less demand, and irrational regional expense differences for care are reduced. Physicians and hospitals, who achieve better health status among their patients, can receive better payments.

Change is required and simple is better. Health Care is a behavioral and social problem; it is not amenable to change by administrative economic fiat as currently proposed.

The Health Gadfly

Health Cooperatives

Ontogeny Recapitulates Phylogeny

Blue Cross and Blue Shield regional health plans were begun in the 1920’s in Texas as not for profit efforts to provide health insurance that protected individuals and families from unacceptable cost of hospital and doctor care. These regional cooperative efforts between doctors, patients, and labor were very successful because their rates were the same for everyone. Not until employers set up their own plans and spirited away the lowest risk groups from the cooperatives did the cost of the Blue Cross plans begin their long ascent to not being affordable for anyone.

Medicare then guaranteed that the government would have the highest premium based on age adjusted risk. Medicare also relieved private insurers of high risk liability. And finally, HMOs appealing to young families with little risk continued to fragment the American health risk pool. As HMOs gained in popularity and their membership aged they could not deliver the same benefits at lower cost as promised.

In the evolution of health care as in the development of embryos of all kinds, ontogeny recapitulates phylogeny. We learn form this axiom of science that nature will not allow us to evolve to the past. This is especially true when it comes to health care reform. Any new system of health will now require reduction of high cost outlier care by improving the health status of everyone. Any new system will have to be all inclusive to succeed. The goal of health care today today is to reduce the number of people in our whole population that require care for catastrophic illness. Any one left out of the process costs us all more.

No alternative administrative change to health cooperatives or budget reductions for insurers and third party administrators can succeed to stabilize health expense unless we use existing high quality readily information for each of us to guide change to better health. By focusing the debate on improving health and avoiding risk for unnecessary, avoidable and expensive medical care, lower medical expense will be achieved, wastfull spending eliminated and unwanted unpopular government fiat avoided.

New methods of budgeting disguised as health cooperatives is the ostrich head-in-the-sand approach to dealing with our personal and national health need. Preventive proactive health is the responsibility of each person and his physician. Until this behavior change to practive health care occurs there will be no opportunity to reduce medical expense trend in America.

The Health Gadfly

Child is Father of the Man

The August 14, 2009 Wall Street Journal editorial “Obama’s Senior Moment” http://bit.ly/27jKZL suggests older sick people may be denied care based on their life expectancy. The author appropriately cautions against European style QALYs (Quality Adjusted Life Year) as our yardstick to measure who should live and who should die. The vocal seniors at the town meetings may have it right.

The life expectancy of most premature infants born with hyaline membrane disease (premature infant respiratory distress syndrome) in the early 1960s was less than a week. During this short time, many unfortunate prematurely born newborns were placed in a covered crib (Isolette) and treated with a mixture of oxygen and moisture until they completed their course of illness. Statistically most died and a few survived. Applying QALYs to these children would have prevented the successful evolution of clinical treatment for this condition because the clinical experience was essential to evolve modern day care for this now treatable condition. It is true that if QALYs were used as a tool for managing costs many millions of dollars, over many years would have not been spent. However, not only would we most likely have wound up in the same quagmire we find ourselves today, we would be worse off as a society. We would have lost contributions from newborns whose lives would never have existed and we would have not benefited from technologies that were developed in learning about infant care that subsequently applied to a wide range of infant and adult health care.

Now faced with the same end of life dilemma in adults with many medical conditions, we are led to believe that in order to “survive” financially we must sacrifice our culture of learning and continued enhancement of life’s quality. Quality now will be defined by fiat from the State budgeting process and as the authors point out can ruthlessly prevent advancement of knowledge and compassion for families. As a result compassionate decisions about health are now going to be removed from the hands of doctors and patients and placed in the Dispassionate hands of government. This is not health reform, it is budgeting.

Now here is the irony. There is most likely enough money in the current medical system not only to cover end of life care but also all catastrophic care. As a society we choose to spend our resources frivolously when our bodies feel well by not identifying medical conditions early and by not complying to known high quality health standards for chronic medical conditions. People and their physicians together abdicate their health responsibilities every day and perpetuate growth of our national financial shortfall for health care. Creating demand for treatment of avoidable disease threatens to deprive all of us of continued access to care.

Until our national dialogue on budget shifts to a dialogue about health quality with good data to focus the discussion, we all remain at risk for ill fated legislation that will guarantee ill fated health care. When it comes to immortality, Wordsworth had it right!

The Health Gadfly

Curbing Runaway Health Inflation

The August 2nd “New York Times” editorial “Curbing Runaway Health Inflation,” http://bit.ly/qT3BY suggests that “Congress should not slow the push for near-universal coverage while it looks for ways to apply the brakes to the growth in costs.”

While the discussion offers a few suggestions to curb health care spending, such as implementing electronic medical records, increasing taxes, limiting the influence of lobbyists and experimenting with the current Medicare model, they are but only baby steps in the big picture of true health care reform.

To reform health care in America, we must take a step back and evaluate what’s truly affecting our health economy. We must summarize for every person in America the real facts about their health. I don’t mean supplying broad generalities about our health care system; I mean deeply personal information about how 50% of us receive really substandard health care that leads to our own suffering. This suffering is physical and mental and made worse when often accompanied by increased health debt that may cost us personal possessions like our home or other necessities of life.

All of this substandard care is occurring while congress, insurers, physicians, and pharmaceutical companies lobby for their own prosperity, which, in many cases, is not in our best interest. These actions are not the “changes” promised by President Obama during his election campaign. Rather our government’s irresponsible behavior seems to perpetuate our national health malady because the same failed efforts of the past to control health costs are continued today. The national discussion so far has not been about a proposal for “change.” The discussion has been about how to rationalize special interests versions of preserving the status quo.

When we all have access to the true status of our individual and collective health, these conflicts of interest will vanish faster than a school of bate fish that scatters when threatened.

Empowered citizens when armed with clear understanding of their individual health and our collective health, will define a clear path to reform. It’s that simple.

So what is it that we do not know? First and foremost, we waste a lot of money fixing our bodies because we don’t maintain them when we are feeling well and ironically we don’t maintain them even when we have chronic conditions and are not well. We try to fix ourselves only when we really break down.

In some health plans with rich benefits that provide for preventive health, over 50% of people with rich benefit coverage fail to follow common sense guidelines for preventive health. Either people actively refuse to follow known guidelines for prevention or they have not been reminded what their preventive schedule requires. In some studies as many as 50% of us fail to undergo cancer identification tests, follow basic guidelines for diabetes management, refuse to detect coronary artery disease early, or manage asthma, musculoskeletal disease and pregnancy according to known high quality care standards.

In addition, 10% of all people on multiple drug regimens suffer from adverse drug reactions and are not aware of their plight. Often when people on multiple drugs seek attention for their symptoms they are treated with yet another drug, undergo expensive unneeded tests and procedures or simply they die and their families never really know the cause of their death. Paradoxically, some people take the right drugs for the right conditions, and yet get sicker. Their adverse drug reaction may not be diagnosed because their doctor and their hospital do not take advantage of new available technology that detects these costly adverse drug reactions.

According to the Institute of Medicine an average of $5,000 of every hospital stay in America is due to adverse drug reactions. Each of us needs an accurate report card that is a summary of the steps we have taken or need to take to comply with our individual health requirements.

Similarly, our health plan sponsors need an actionable summary of their health plan performances so they can measure the value for what is paid to hospitals, doctors and pharmaceutical companies. A summary medical performance index measures not only what we expect to get when we buy health, it also measures what we actually get when we pay for health.

The only way to overcome inertia preventing successful change in our health system is to mobilize each of our citizens with useful information about his individual health and then to show how collectively we impact each other's health costs. Then there will be change because all of us will know what to demand. For more information on how we can all get more value out of health care

The Health Gadfly

"Health Care Gang of Five" Published July 25,1993 New York Sunday Times

To the Editor: Leonard Orland ("Health Reform Runs Antitrust Risk," Viewpoints, July 11) clearly cautions all of us about the importance of antitrust laws.

The economic incentives that allowed the "Gang of Five" large national insurance companies -- Aetna, Cigna, Metropolitan Life, Prudential and Travelers -- to gain wealth and power during the last 30 years are precisely those that have placed many of our citizens at unacceptable financial risk when seeking health care today. When health care costs were 3 percent of wages or less, individuals and businesses did not pay attention to the way benefits were designed or paid for by insurance companies.

Health insurance traditionally consisted of two parts: the retention and the cost of claims. The retention, in insurance language, is the amount needed to administer the program and to provide profit. The claims are the amounts paid out in benefits.The retention, for the most part, has been based on the amount of claims paid. If the retention is 10 percent of paid claims, and paid claims increase, the insurer collects more money and makes more profit. The clear incentive of the Gang of Five and others, then, was to write policies that would stimulate employers and patients to spend more.

Think back to when insurance programs insisted that the patient go to the hospital to receive benefits for simple tests like upper GI series, barium enemas and gall bladder X-rays.The hospital, insurers and doctors all benefited. The percentage of wages spent on health care increased. The insurers made more money. The Gang of Five paid doctors so generously that it was common for physicians to accept whatever they were offered, frequently forgoing co-insurance or deductibles because the payment schedules were so rich. Physicians were not told what fees would be paid. They were told only to keep billing until the fees hit the top. Then the insurer would revise fees upward to "keep pace with inflation."

The percentage of wages devoted to health care continued to grow. Certain large employers began to balk, asking for preferential treatment. The insurers saw one more opportunity -- they would move from community rating to experience rating of premiums. This meant breaking up the large insurance pools. Bigger employers would pay less, smaller employers would pay more. Eventually, everyone would pay their own actual cost and the insurer would avoid all risk. The insurance companies became very expensive administrators and cash managers, no longer willing or able to provide insurance. H.M.O.'s then came along, skimmed the healthier employees, and shifted the real cost of health care to the sicker patients who remained in the now-fragmented traditional "insurance" programs, making costs rise for everyone.

President Clinton and his advisers now seek to reward these thieves by turning over to them the management of our health. What a terrible proposal! It could permit the Gang of Five to seal the tragic demise of the finest health system in the world in only 30 short years.

STEPHEN A. KARDOS Monmouth Beach, N.J., July 13 Dr. Kardos is chief executive of Health Network America Inc., a health management firm.

This article was “on the money” in 1993 and it still is! Profit must be based on performance, not medical inflation.

The Health Gadfly

Ourblook Interview on Health Reform

Stephen Kardos on Healthcare Reform

Ourblook interview with Dr. Stephen Kardos, quoted in various publications, such as the Wall Street Journal for his knowledge of the healthcare system.

Editor's Note: Dr. Kardos has authored numerous articles about health care delivery. He firmly believes that improving the quality of medical care will lower the cost of care.

President Obama has made it clear he isn’t working to set up a precursor to a single-payer health care system. Meanwhile, the insurance industry says that any version of a public plan will kill private industry. Is there any precedent for a public/private partnership in health insurance? If not, how could this experiment be structured?

SK: The real question here is whether insurance mechanisms are required to solve our nation’s ineffective delivery of health services. There is plenty of government oversight at federal and state levels of existing insurance programs, yet all of these programs experience similar unsustainable trends. The government programs are already modelled after private insurance plans and they do not work. In the instances where profit incentives have been removed from government-run programs such as the federal employee health plans, the trends in these plans are not significantly different from private insurance plan trends, and there are few if any reports of the quality of care in these plans being any better than private insurance plans.

Proponents of a public plan insist such a program is necessary to create competition to stop the skyrocketing costs of health. Why is our current market-based system unable to cut costs without government competition? Are there other forms of regulation that fall short of creating a new government program that could rein in costs?

SK: Yes, there are several steps that federal and state legislation could take to begin the transition to health in America. First, the public is in the dark about why its health costs increase. And leadership at every level does not believe that increasing public knowledge of specific issues will change behavior.This self-serving, paternalistic view of information management is due to deeply ingrained conflicts of interest in our health system. A public campaign to outline gaps in quality care from prevention to disease management will go a long way to drive medical care changes. The information shared needs to be hard-hitting and locally focused so it will have meaning. It can be as specific as making their personal health status available to individuals enrolled in Medicare. The government and the insurers have this data and refuse to analyze it and disseminate it because it is not in their interest.

But there is a political issue at play here. How could a president retain financial and political support if he challenged the AMA, insurance companies and pharmaceutical companies on quality of care at the same time? In fact, he would not have to do so if he and the federal government trusted the public with the information outlined below, as it would generate change from the bottom up. This information should also be mandated at the state and local level: I will be happy to supply the templates.

1. Provide details of health status measured by compliance to preventive and medical condition management. (See enclosed charts of cancer screening and diabetes management compliance as examples). Note that the technology is available without changing legacy computer systems that insurers use to pay claims. However, many insurers have paid and continue to pay claims not in accordance within the specifications of benefit plans because of poor quality controls and union interference.
2. Trust that people in poor socioeconomic conditions want to live healthy lives and they also want high quality health care for their children. Just like wealthier people, Medicaid recipients take active roles in their health care when given the right information.
3. Let those with insurance know that their costs are rising in large part because of lack of care for poor people and lack of financing to care for aliens, legal or not.
4. Require health plans to include compliance with medical care standards readily available from the CDC as a requirement for maximum benefits.

You recently commented in the Wall Street Journal that "we need to make prevention our chief policy." Can you elaborate ... why do you feel this way, and what provisions or incentives would you like to see in a health care reform bill to accomplish that?

SK: The focus for the past 50 years in America has been to zero in on the 20 percent of people who account for 80 percent of health expenses. This has been a very costly strategic failure because the best you can do by “managing” sick people (and I thought doctors and patients managed care, not insurers) is to squeeze out some nominal payment for procedures or avoid the procedures completely. This failure to reduce the cost of health care for our country contrasts dramatically with the huge financial success of these same companies that drain away billions from our health care treasury. It has occurred in part because of health plans’ lack of understanding that an epidemiological strategy encompassing the entire population is required to improve any population’s health. Consider the following analysis of insured health plan members

Population: 75,000Cancer Screening Rates (American Cancer Society Recommendations)
Breast cancer (Mammography) 26.9% of eligible women
Cervical Cancer Detection (PAP smear) 35.5% of eligible women
Prostate Cancer (PSA) 29.1%
Colon Cancer (Colonoscopy, Sigmoidoscopy, Stool for Blood) 25.0%

This is a rich union plan with plenty of insurance coverage benefits. But the BENEFITS ARE NOT USED. Making insurance available does not affect behaviour unless there are other drivers for cultural change in place. Below is a predictive model of people with cancer who do not know they have cancer in THIS population of 75,000 plan members with broad benefits and low cost sharing.

And now look at the costs of early-stage cancer care vs. late-stage care in the same population.

Consider not only the cost of care, but also the loss of productivity, influence on family and overall real costs to personal and national economies.

The last health care debate, a la Hillary Clinton, was met by an immediate backlash from health care providers and insurance companies. This year, the debate began with a ‘strange bedfellows’ meeting on cost cutting measures at the White House. The proposal of a public plan seems to be fracturing this fragile bipartisan atmosphere. Do you think there is any room for compromise now that detailed legislation is about to be debated publicly? Will we see Harry and Louise return?

SK: The AMA has not taken the opportunity to follow up on Harry and Louise; however, all is not lost. (See New York Sunday Times letter, “Gang of Five”, Stephen Kardos 1993) 'Health Care's 'Gang of Five' Originally published: Sunday, July 25, 1993

To the Editor: Leonard Orland ("Health Reform Runs Antitrust Risk," Viewpoints, July 11) clearly cautions all of us about the importance of antitrust laws.

The economic incentives that allowed the "Gang of Five" large national insurance companies -- Aetna, Cigna, Metropolitan Life, Prudential and Travelers -- to gain wealth and power during the last 30 years are precisely those that have placed many of our citizens at unacceptable financial risk when seeking health care today.

When health care costs were 3 percent of wages or less, individuals and businesses did not pay attention to the way benefits were designed or paid for by insurance companies. Health insurance traditionally consisted of two parts: the retention and the cost of claims. The retention, in insurance language, is the amount needed to administer the program and to provide profit. The claims are the amounts paid out in benefits.

The retention, for the most part, has been based on the amount of claims paid. If the retention is 10 percent of paid claims, and paid claims increase, the insurer collects more money and makes more profit. The clear incentive of the Gang of Five and others, then, was to write policies that would stimulate employers and patients to spend more.Think back to when insurance programs insisted that the patient go to the hospital to receive benefits for simple tests like upper GI series, barium enemas and gall bladder X-rays.

The hospital, insurers and doctors all benefited. The percentage of wages spent on health care increased. The insurers made more money.The Gang of Five paid doctors so generously that it was common for physicians to accept whatever they were offered, frequently forgoing co-insurance or deductibles because the payment schedules were so rich. Physicians were not told what fees would be paid. They were told only to keep billing until the fees hit the top. Then the insurer would revise fees upward to "keep pace with inflation."

The percentage of wages devoted to health care continued to grow.Certain large employers began to balk, asking for preferential treatment. The insurers saw one more opportunity -- they would move from community rating to experience rating of premiums. This meant breaking up the large insurance pools. Bigger employers would pay less, smaller employers would pay more. Eventually, everyone would pay their own actual cost and the insurer would avoid all risk.

The insurance companies became very expensive administrators and cash managers, no longer willing or able to provide insurance.H.M.O.'s then came along, skimmed the healthier employees, and shifted the real cost of health care to the sicker patients who remained in the now-fragmented traditional "insurance" programs, making costs rise for everyone.

President Clinton and his advisers now seek to reward these thieves by turning over to them the management of our health. What a terrible proposal! It could permit the Gang of Five to seal the tragic demise of the finest health system in the world in only 30 short years.

STEPHEN A. KARDOS Monmouth Beach, N.J., July 13 Dr. Kardos is chief executive of Health Network America Inc., a health management firm.This article was “on the money” in 1993 and it still is! Profit must be based on performance, not medical inflation.

Opponents of a public plan have decried a potential government program as “socialism” and “rationing.” Yet, Medicare is one of the most consistently popular programs in our history. From your perspective, do you think that people relate the two? Do you think a public plan gives too much control to the government?

SK: Medicare’s popularity has diminished greatly in recent years as the government has been forced to shift uncontrolled medical claims expenses to plan members, hospitals, pharmaceutical companies and physicians. Multiple Medicare Gap programs are sold to supplement Medicare, and the “doughnut” contained in the prescription drug plan has created unacceptable hardship to Medicare enrollees. Decreased payments to physicians have made them less accessible and increasing drug costs cause some patients to stop taking their required prescriptions.

The issue is not that a government plan will give too much control to the government; the issue is that the entire government health strategy has been based on the failed strategy of private health insurance. Proposed government plans are not different alternatives to private insurance. They represent the arrogance of politicians who think they can take the same approach as private industry and somehow come up with a different result ... because they CAN.

The difference between our government health plans and private health pans is that the monopoly power exerted by the government has accelerated the failure of private health insurance by shifting costs to the private sector. Not-for-profit or for-profit health insurance programs must first change the acceleration of medical expenses caused by the poor quality of proactive (preventive) health management by patients and physicians.

Changing administrative venues or administrative expense ratios (the government touts how low their administrative expenses are compared to private insurance) isn’t going to change the medical expenses trend. In fact, a higher administrative to premium ratio will occur as medical claims decrease when better preventive proactive health is practiced.

What do you think of the more controversial Medicaid program? Do any substantial changes need to be made or keep it basically as is?

SK: The following actions will dramatically improve the effectiveness of Medicaid programs:

1. Medicaid must first provide good useful information about individual health and provide that information to each Medicaid recipient. All people want to survive and to provide for their offspring. Trust the Medicaid population to respond as any population of human beings. Comprehensive Personal Health Records are available today, records that would make valuable Medicaid data available to Medicaid members and their families.

2. Medicaid must reduce disproportionate amount of money spent by Medicaid for transportation expense. We must make medical care accessible to patients close to where they live; in schools, churches and neighborhood physician offices. We also must pay physicians for time spent in nursing homes taking care of Medicaid patients and be sure any home taking care of Medicaid patients is equipped with appropriate medical equipment and nursing staff. Medicaid must hold providers and plan members accountable for performance measured by health status of members.

3. We must publish physician performance data by community. David Leonhardt, an economist and New York Times columnist, writes that rationing is already an unfortunate reality in health care, but mostly because of the way scarce resource are allocated, such as the high costs paid for experimental or unproven treatments that could be going to preventative care.

Do you think there’s any reform that could increase the number of Americans covered without rationing?

SK: There is more than enough money in our current health system to take care of everyone including catastrophic care for anyone who needs it. Reliable studies repeatedly highlight that one-third of a trillion dollars is wasted on health care in America. Uninformed advocates of rationing health care fail to appreciate just how much more rational uses of resources unconstrained by conflicts of interest will improve quality and reduce medical expense.

What role do you see small business owners playing in the debate? The major players in the debate so far represent powerful interests such as drug companies and doctors, but small business plays a vital economic role in any discussion of costs to employers.

SK: Small business and individuals sign on and off health plans at a dizzying pace. Major health plans have to sell through a turnover of their entire enrollment in just 2 1/2 years. This occurs because small group and individual health care is purchased when use of the benefits is anticipated. When feeling well, members drop out, only to re-enroll when high expenses are anticipated. The administrative costs of such a business dramatically increase premium rates. Claims costs are made higher because preventive health efforts are not measurable when enrollment is inconsistent. Medicaid especially suffers from such high turnover.

The solution: Longer term insurance contracts with a penalty for dropping out, no different from a cell phone contract. Higher benefits and guaranteed rates for longer term membership will go a long way toward improving quality and lowering medical costs.

Do you feel that a public plan is necessary if reforms include mandated health coverage?

SK: A public plan is a dreadful mistake. There is enough power in existing regulatory authorities in each state and the federal government to take a rational risk-reducing approach to health care. Our government leaders must stop populist pandering and the extension of our federal government further into private business.

No matter what new plan our government establishes, unless the strategy for medical care changes to one of risk management, failure is assured in public and private efforts for health reform. Health care reform has been on the table in Congress before, but the resulting reforms, once they meet the president’s desk, are often more tweaks then overhauls.

How do you see the debate on health care reform playing out in Congress this year? Do you think we will see sweeping reform at the end of the day when these proposals are negotiated? Do you see any Republicans crossing the aisle to support a public plan? Do you see any Democrats crossing the aisle to oppose one?

SK: Once the logic of this ill-defined effort for health reform is critically reviewed, I am confident the wisdom of our collective legislative bodies will discover that without truly new strategies for private and public health coverage, they will not pass any legislation. No currently discussed plans will change the country’s escalating costs for health care.

So far there has been no reform proposed in the discussion about reform of the very nature of the system itself. What I see on the part of Democrats and Republicans is an attempt to drive health care reform through political posturing and sound bites. There is no aisle to cross since neither group has put forward a new strategy for health care reform.

Are there any other points you would like to make about health care reform?

SK: See Sunday Times letter 1993 above. The changes proposed today are no different from those proposed in 1993 ... and nothing has changed in our national health strategy in the interim.

Dr. Kardos is board certified in pediatrics from the American Board of Pediatrics, a fellow of the American Academy of Pediatrics, and a senior fellow of the American College of Osteopathic Pediatricians. He is a member of both the American Medical Association and the American Osteopathic Medical Association, and served as a board member of the American Cancer Society, Monmouth County, N.J

The Health Gadfly

How Your health Measures Up

Value in health is no different than value in anything we buy. Value is always measurable. Health value is a measure of real and perceived quality divided by cost. The following simple equation provides an index that should be used to govern health policy decisions and to measure their success or failure. This equation provides a practical structure that supports all arguments for all elements of proposals for health reform.

Value = Outcome/Cost

Outcome is measured by comparing each person’s compliance to care standards set by the Center for Disease Control (CDC) and other academies and associations that set trusted standards for health. Another component of outcome and directly related to perceived and measured value is each person’s perception of his or her care, which is quantified by survey. In this equation, cost of care is measured as cumulative dollars spent for an individual for health over finite periods of time or over a lifetime. The same value index is a measure of the quality of care provided by physicians. The value of a physician is measured by the health status of the panel of patients he cares for.

This equation provides a quantified explanation of the long sought after explanation of the link between value, quality and cost in health. The highest value and therefore quality of care according to this equation costs the least. The equation dispels the long time held inappropriate view of health that the best care costs the most. The best care actually is always the least expensive.

Health care measured in this context looks at cost over time, not in terms of cost of a single office visit, lab test or surgical procedure. Thoughtful decisions about health strategy contribute the most to high health status and lower health expense burden. Health professionals and each of our citizens must focus on making thoughtful decisions to improve health in America.

The equation, Value = Outcome/Cost accurately predicted the failure of the past forty years of insurers trying to “manage care” because objectives for managed care were actually constants, cesarean birth rates, lengths of hospital stay, etc. (nothing to do with improved health status or quality). Applying these managed care principles to this equation quickly led to the transformation of the equation from Value = Outcome/Cost to Value = K(constant)/Cost and ultimately Value = Cost. Simply put, if insurers paid no claims, the insurer got the best value! The use of misleading nomenclature (managed care) and its adverse impact on strategy (managing to constants) has deprived us of better health for over fifty years. The equation was right; the strategy of the “managed care” era was wrong.

Getting good value in health care is achieved by measurement of improved health status according to the equation Value = Outcome/Cost. Knowing how our health measures up provides a logical basis for health reform. Without measurement, successful transformation of our health system is not possible.

The Health Gadfly

Right Idea, Wrong Time

The Wall Street Journal report, “Doctors Oppose Giving Commission Power Over Medicare Payments” by Jacob Goldstein that featured President Obama’s Budget Director Orszag explaining the creation of a commission to determine fees for physicians continues to perpetuate the flawed path to health reform our president has begun to walk. Before paying for something, we usually ascertain what we are buying. In the instance of setting fees for medical care, most of us do not know what we are buying and then we constantly complain it costs too much.

It appears that shifting Medicare reimbursement out of the hands of Congress is a good thing to do because it removes one of many conflicts of interest that continue to drive up the cost of healthcare. Some highly paid medical specialists and the American Medical Association (AMA) are lobbying against this proposal because highly paid specialists are the ones who will be most financially affected by the proposed commission. Certain highly paid Specialists are the one group of physicians that can still afford to belong to the AMA. Insurers pay fees to the AMA for providing the nomenclature for the code books they use for claims administrative payments making insurers customers of the AMA.

Congressmen are reluctant to change the method of adjusted per capitation payment for medical services by region because they depend on political support especially from hospitals and doctors in regions that receive higher Medicare reimbursements.

The Dartmouth Atlas of Health Care http://www.dartmouthatlas.org/ has long confirmed variation of medical spending by regions in the United States is not due to medical care quality or to medical care need by region. Rather, this “small area variation” is due to differences in medical practice performance, i.e. the quality of care. These variations exist not only in widely disbursed geographic regions, but also among practicing physicians within the same hospital staff and by hospitals in the same community. Our current reimbursement system rewards each region based on medical spending, not on quality of care.

The idea of making all physician payments more equitable, based on performance and across specialties and populations is important. However, when the President highlights the importance of the discussion by proposing a new commission about payment mechanisms, we are distracted from the single most important focus for public discussion: What are we getting for what we are paying when it comes to health in America?

Preoccupation with reforming health through administrative change will not reform health care unless a new strategy is invoked that provides all of us regularly reported useful knowledge about what we are purchasing… before we pay for it.

The Health Gadfly

Changing the Language of Health

Pauline Chen’s July 23, 2009 New York Times article “Getting Good Value in Health Care,” Abraham Verghese’s July 24, 2009 Wall Street Journal article “Who Speaks for Medicine” and David Leonhardt’s July 25, 2009 New York Times article “Forget Who Pays, It’s Who Sets the Costs” segue into a much different discussion about how to achieve monetary relief from America’s unrelenting health cost trend. Instead of trying to reform a system with existing nomenclature that forces even the most creative thinkers to regress to what has already failed, new vocabulary is required to shape new thoughts.

To begin with, Dr. Chen’s discussion is about health care, not health. By using the words “health care” she inadvertently perpetuates the notion that we must take care of sick people better in order to gain control of health expense. This is only partially true. We often hear that unless the care of some people is limited (rationed) all of us will continue to pay unacceptable amounts for health care. This is also not true. The use of the phrase “health care” instead of “health” has created a conundrum of thought about reforming our medical system.

We will all benefit if we can shift the discussion from “health care” to “health.” This word is more optimistic and does not drag us into the quagmire of sickness as the “care” in “health care” suggests. After all, isn’t sickness what we all want to diminish or avoid altogether?

So what is health and how is it measured? Health is the status of each person’s physical and mental condition. Good health is the condition (status) in which people not only feel mentally and physically well but also are aware of personal risks that can lead to deterioration. Without immunizations to protect against infectious disease, without knowing that results of screens for cancer are negative, without following guidelines for early identification of medical problems and without complying with proven successful treatment regimens for chronic and acute conditions, our health status is diminished. This collective diminution of health status represents a large portion of the many billions of wasted dollars spent for medical care in America.

Measurements of health (health status) can be easily summarized and quantified (indexed) for individuals and collectively for populations. Quantification of health status permits comparisons and sets the stage for measuring improvement among individuals, groups of individuals and our population as a whole.

Using “health status” instead of “health care” in our discussions implicitly changes the paradigm for improving health from reactive to proactive. This new proactive view of health prevents ongoing misinterpretation and gross underestimation of the broad opportunity afforded by comprehensive preventive health for everyone. The simple shift of language creates new thought and discussion. Using the words “health status” instead of “health care” improves everyone’s perspective on the overwhelming value of preventive health and leads to more meaningful discussion about how to achieve value in health.

Value in health is no different than value in anything we buy. It is a measure of real and perceived quality divided by cost. Value is always measurable. The following simple equation provides an index that should be used to govern health policy decisions and to measure their success or failure. This equation provides a practical structure that supports and can provide measured credibility for Dr. Verghese’s important argument for payment reform. The equation directly deals with the issues raised in this Sunday New York Times article “Forget Who Pays Medical Bills, It’s who sets the costs” by David Leonhardt.

Value = Outcome/Cost

Outcome is measured by comparing each person’s compliance to care standards set by the CDC and academies and associations that set these standards. Another component of outcome and directly related to perceived and measured value is each person’s perception of his or her care, which is quantified by survey. In this equation, cost of care is measured as cumulative dollars spent for an individual for health over finite periods of time or over a lifetime. The same value index is a measure of the quality of care provided by physicians. The value of a physician is measured by the health status of the panel of patients he cares for. How else could a physician’s effectiveness (Value) be measured?

This equation provides a quantified explanation of the long sought after explanation of the link between value, quality and cost in health. The highest value and therefore quality of care according to this equation costs the least. The equation dispels the long time held inappropriate view of health that the best care costs the most. The best care actually is always the least expensive. Health care measured in this context looks at cost over time, not in terms of a unit of service measured by a single CPT-4 code. Doctors submit codes for each medical procedures and office visit of every kind for the purpose of making insurance company billing accurate and efficient. Thoughtful decisions about health strategy for individuals in consultation with their caregivers contributes the most to high health status (quality of life) and lowers our health expense burden.

The equation, Value = Outcome/Cost accurately predicted the failure of the past forty years of insurers trying to “manage care” because objectives for managed care were actually constants, cesarean birth rates, lengths of hospital stay, etc. (nothing to do with improved health status or quality). Applying these managed care principles to this equation quickly led to the transformation of the equation from Value = Outcome/Cost to Value = K(constant)/Cost and ultimately Value = Cost. Simply put, if insurers paid no claims, the insurer got the best value! The use of misleading nomenclature (managed care) and its adverse impact on strategy (managing to constants) has deprived us of better health for over fifty years. The equation was right; the strategy of the “managed care” era was wrong.

This broader view of preventive health requires us to measure compliance with guidelines for health provided by the Center for Disease Control, The American Cancer Society, American Heart Association, The American Lung Association, The American Diabetes Association and The American Academy of Pediatrics among others.

Individual health status is measured as the difference from 100% that individuals or a population achieve compared to their goal. Organized medicine must replace the words “preventive health care” with the phrase “proactive health” as the guiding principle to bend the trend in American health expenses. This change in language creates greater opportunity for all stakeholders, individual citizens, physicians and all care givers, insurers and government.

In conclusion, using the two words “health status” instead of “health care” in our national debate is an important first step towards reaching a satisfactory conclusion to our debate on health. Health status is inclusive because all individuals have measureable health status. Health status is present among people who feel well, are chronically ill or who are acutely ill. Understanding health status will quickly lead our national effort to shift from a narrow focus on reducing individual high outlier expense to actually decreasing the number of outliers for entire populations. Improving health status is comprehensive prospective (preventive) health care.

Bending the trend of medical expense in America requires broader interpretation of preventive health, focus on health not on health care and focus on populations, not outliers. Bending the medical expense trend is measured by actual change in expense for our whole population and can not be achieved by just squeezing out some discounts, avoiding tests or depriving sick people access to advanced medical interventions. Our health expense trend will never be lowered by a new government insurance company; and it cannot be changed by government shuffling of the financial terms of contracts with doctors, hospitals, insurers and others who are on the health care dole.

“Getting good value in health care” is achieved with improved health status as defined by the equation Value = Outcome/Cost.


The Health Gadfly

Making more insurance available does not make more and higher quality care available

Congress and our President mean well and have correctly brought to the front of all discussions that health is one of our nation’s highest security risks, yet the newest of plans put forward continue to replicate failed efforts of the past.

CNN today reports the sobering takeaway from testimony Thursday by Congressional Budget Office Director Douglas Elmendorf and states “The health reform bills released so far would increase government spending on health care without sufficiently reining in health care costs.”

Fortunately our government structure is so good that people like Elmendorf can be heard.

Health policy analysts support two ways to "bend the curve" on health care costs above others, Elmendorf said.

--Change how employer-paid premiums for workers are treated -- currently they're tax-free to the worker.

--Change how Medicare pays providers to reward cost efficiency and quality of outcome rather than the a la carte approach of fees for service.

The last bullet is half of the key to the kingdom of higher quality and affordable health care for all. The other half is an incentive structure that unites physicians with their patients. Providers are unable and ill equipped to accomplish this task without a unified effort with their patients stimulated by the appropriate incentives from the federal government.

The change required is to pass laws that align incentives for individuals, their health care givers, and the payers. This means an end to health insurance as we have known it. The issue for congress and the president is how to improve health. The issue is not coverage, it is access to care! Access to care is available to all but a few million uninsured Americans, yet appropriate care is not obtained among all of the millions who have insurance.

Making more insurance available does not make more and higher quality care available.

The Health Gadfly