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Feb152014

PBN Op-ed: Statewide health self-insurance may be best for R.I.

Guest Column:

Paul Block

Original Source

2/10/14

What do Rhode Island businesses want from their health care? According to four leading business groups, they don’t want to be responsible for the costs of providing access to care through Rhode Island’s health-insurance exchange for other Rhode Islanders. And why should they?

As long as Rhode Island operates within a system in which each stakeholder’s interests conflict with the overall goal of the most affordable, effective health care for the state’s population, such positions are not only inevitable, they are appropriate. Unfortunately, they also sentence us to the unaffordable, unequal-quality care that we and the rest of the country currently suffer.

What do Providence Business News readers want from their health care? Certainly not what we have now.

Health care is unaffordable and getting worse. Forty-one percent of adults report problems with medical debt or difficulty paying for care. In Massachusetts, the 78 percent increase in health costs between 2001 and 2013 has crowded out spending on education, mental health, public health, environment and public safety, all of which have decreased in real dollars, a pattern replicated in Rhode Island and nationally.

Even with best-case projected savings from the Affordable Care Act, the average household share of total health care costs will be greater than total average household income by 2037. Rhode Island businesses can’t afford the health care system we have, and we can’t afford the rest of our state’s needs unless we fix it.

But businesses need healthy, productive employees, so the cost of health care has to be balanced against its value. Unfortunately, health care, in it’s current state, is a bad value.

According to the British Medical Journal, the effectiveness of half of the medical interventions that have been studied is still unclear. Rand Corp. researchers found that proven effective interventions are too rarely used in everyday medical practice because of the structure of financial incentives and clinicians’ difficulty translating research findings into manageable practices in the current system.

The result? According to the Commonwealth Fund’s Commission on a High Performance Health System, “the care that is provided is highly variable in quality and often delivered in a poorly coordinated fashion – driving up costs and putting patients at risk.”

This situation isn’t inevitable. Harvard economist David Cutler noted that “most estimates suggest that about 20 percent to 30 percent of medical spending could be eliminated with no adverse effects on patient outcomes.”

The Institute of Medicine estimates that 31 percent of total U.S. health spending was wasteful, including 8.5 percent unnecessary services, 5.3 percent inefficiently delivered care, 7.7 percent excessive administrative costs, 4.3 percent excessively high prices, 2.2 percent preventable spending, and 3 percent fraud.

Private businesses could not survive with such levels of inefficiency and ineffectiveness, but the current health care system is structured to promote them, not just make them possible.

What is the solution? Changes to the way we fund care or the mechanisms through which we access care, alone, will not fix such widespread systemic problems. Michael Balit informed the Small Employer Task Force that the primary causes of cost growth are prices and volume, which in turn are driven mainly by provider consolidation, lack of price-based competition, inefficient payment models, lack of care coordination and lack of proven effective care. In other words, our system is unaffordable because we have designed it that way.

Michael Porter, a Harvard Business School expert in competition, argues that the current health care system is not organized to support better health outcomes for the cost because competition is not based on patient outcomes. System participants’ financial success is not based on their ability to improve the value of care. Current reform efforts, including consumer-driven health plans, accountable-care organizations, patient-centered medical homes, and care management and coordination can’t fix the fundamental problems with health care because they don’t address the system design that makes them inevitable.

Many PBN readers are suspicious of government solutions to big social problems, such as Physicians for a National Health Program’s single-payer model or British-style socialized medicine. Yet most U.S. health care is already directly paid for by taxpayers, and the vast majority falls outside of the private insurance system. Almost three-fifths of health care is funded by federal, state and local government dollars through Medicare, Medicaid, other federal programs, public employee health benefits and taxpayer subsidies for private insurance.

In 2007, the Organization for Economic Cooperation and Development and Health Affairs data showed that U.S. per capita public taxpayer spending on health care was more than total spending from all sources in other countries (71 percent more than in Japan, 23 percent more than in France and 13 percent more than in Canada).

Even privately covered employees are covered outside of private insurance: according to the Employee Benefits Research Institute, 68 percent of employees whose employers are eligible are covered by self-insurance plans.

Business leaders have clearly decided. Self-insurance is good business sense. It makes sense for the state to self-insure too.

Statewide self-insurance would solve many of the problems of the current system. Risk would be pooled fairly and sufficiently to make coverage more affordable. Management of costs would be driven by the state’s overall need to maximize the quality of care given a defined level of funding deemed affordable by the state’s citizens through the state budgeting process. Design of care would be controlled by competition for how best to achieve those public health goals in effectiveness, avoidance of waste and errors and overall value.

While government already funds the majority of health care, however, Americans and especially business leaders have expressed concerns about putting the control over how that funding is spent, and especially how health care is delivered, into the hands of the political system. Health care decisions need to be made based on how we can best reach health goals given available funding, not other political concerns or political philosophy.

Accordingly, I believe that employee income taxes (“premiums”) and employer payroll taxes should be combined with existing public funding sources to pay for health care, but the resulting budgets should be controlled by representatives of the communities they are used to serving.

HealthRIght, a Rhode Island multistakeholder health-policy group, has proposed that all residents’ health care be accessed through the exchange and managed by current insurance carriers offering administrative services. New, elected community health authorities would have control over funding of health care services and, therefore, what services are purchased and how they are delivered.

Their decision-making should be guided by robust, coordinated health planning, R.I. Department of Health oversight of public health needs and outcomes, and health insurance commissioner oversight to achieve desired outcomes, whether spending is on patient-centered medical homes, accountable-care organizations, or even social determinants of health such as seeding affordable, healthy food sources and safe, quiet and exhaust-free walkways, which the Graham Center reported are significantly greater problems in our state than our neighbors, which could explain much of our overutilization of health care services.

In addition to providing a means to control our health spending and ensuring best use of our health care budgets, this community-controlled, state self-insurance model overcomes other key problems with our current system.

By aligning the interests of every participant and stakeholder in health care with the overall success of the system, negotiating or political power would no longer outweigh public health or affordability in determining health care system design and decisions.

Finally, positions such as that of the four business groups protecting themselves from new costs with no obvious direct value to them would no longer be necessary. Each of our best interests would be served by promoting the highest value, affordable health care for all of us. 


Paul Block is the director of the Center for Behavioral Science and Public Policy at Providence-based Psychological Centers.

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