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
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