Healthcare Delivery Innovation Alliance

March 18, 2012 by  

Sen. Barto addresses the HDIA forum in Phoenix on March 1, 2012.

As employers and others intricately involved in health care, I don’t have to tell you about the challenges to providing affordable health care – you live it every day.  But just to set the stage,  RAND recently estimated that health care consumed 79% of the dollars that otherwise would have gone into paychecks for the average U.S. family during the 2000s.  Employer-sponsored health plan premiums climbed 9% in 2011, and they’re due to rise another 9.4% by 2014, according to Medicare’s actuaries.

Of course we can count on the Federal government to push health care costs lower going forward.  Just look at their track record!   And the latest case in point is the PCIP – the Federal Pre-existing Condition Insurance Plan.  Turns out the ‘smart people’, the actuaries who analyzed the program, were only off by a factor of 100% on the per capita health care costs… fortunately, enrollment is 80% or more below what the same smart people predicted.   [ State Medical costs $12,471 – Federal: 28,994 ]

And we won’t dwell on CMS’ predictions that Medicare will be insolvent sometime between 2016 – 2022 – after all – The Feds don’t seem too concerned – so maybe if we just ignore it and cut a half a trillion dollars from the program to pay for insurance for everyone else – the problem will just go away.   Along with the rest of the $16 trillion dollar debt we’re carrying.  Or the fact that many physicians aren’t all that excited about remaining in a system where they’re underpaid and overworked – with no permanent solution to the Sustainable Growth Rate and medical malpractice costs.

And not to get anyone too depressed, but if you’re following our state health care budget – that’s another rosey picture.  I hear there is something ‘called’ a revenue surplus this budget year, but with economic futures still very uncertain for a number of reasons, every dollar of that surplus times 10 wouldn’t be enough to prepare for the huge Medicaid expansion mandate coming in 2014.   Other pressing needs – little things like education and public safety & transportation are likely to make it very difficult to prepare adequately for that – so we won’t dwell there either – except to say – difficult as it is –unlike Congress – we won’t be able to spend money we don’t have.   Without a printing press – We simply can’t. 

But let’s focus on what is going right and the positive transformation that IS happening in health care. In this context I will focus on a couple of bills working their way through the Legislature this session that fit into that picture– SB 1249 and SB 1384.

It IS encouraging to know the Healthcare Delivery Innovation Alliance is taking on the obstacles to lower health care costs in real and innovative ways.   In some respects one might call it disruption.   One of the great ironies of the Affordable Care Act is that it is precipitating innovations by, as Joseph Rago phrased it, in the WSJ last week, “heightening the contradictions”  between capitalism and government-controlled health care and actually  hastening the health care revolution.

Rago wrote, “Two years on, the major achievement of President Obama’s new entitlement and its regulatory apparatus has been to heighten the contradictions and dysfunctions of the health-care status quo even as it creates multiple new problems.  The good—and less noticed—news is that the growing disruption is driving the industry toward the solution that prevails in the rest of the economy:  the price mechanism.”

This calls to mind the transformation in America’s education system happening right now.  Disruption big time.  In fact, Clayton Christianson, took the education community by storm his book, “Disrupting Class” – by promoting technology in traditional k-12 classrooms.  Tech tools in the hands of students, alongside  – very importantly – competitive options for parents like charter schools and traditional schools, stem schools focusing on Science, Technology, Engineering and Math, accountable teachers and principals ––where the state pays school districts based on student achievement – not on how many hours or years a student sits in a seat – all of these factors are forcing the status quo, the teachers unions included – to crumble and embrace needed education reforms.  In other words – they are disrupting class! 

Finally, lawmakers took note of Arizona’s 30% dropout rate and saying, adding more funding to a failing system isn’t working – and they began to force the system to embrace performance measures, choice and competition – and standards like actually teaching kids to read by the third grade – of all things! 

Two elements are essential for education reform to complete its transformation:  quality competition and parental choice.  If parents in Arizona were not moving their children from failing schools to better district or charter schools, districts and their unions wouldn’t be making the improvements they’re making right now.  

But in addition to competition and choice, government didn’t stay on the sidelines.  State Government played a role in forcing the change by removing obstacles to choice and higher standards.

So what does that have to do with health care?  Some of the same elements – like parental involvement & competition –  patient involvement – and competition are needed in health care

As members of the Alliance, you are well aware that the pressures in our current health care system are causing lower cost options for caring for patients to proliferate – Medlion & White Glove are prime examples.  Patient-centered medical homes are piloting in Arizona, too, to integrate care better, as well.

Business owners are searching for any possible (and legal) way to help engage their employees in their own health – many involving health savings accounts  – in an attempt to bring patients and payments together – as opposed to being separated and largely divorced from the cost of care.  Because as long as someone else is paying the bill, it’s not clear at all what health care really costs – nor is it very important to know.

As long as someone else is paying for my health care nobody asks “Why a two hour gall bladder surgery cost $30,000+ while a two-hour breast enhancement surgery only cost about $5000?”

As long as someone else is paying, what does it matter that a primary care physician charges over $400 dollars to run the same tests that a retail pharmacy clinic can run for $67. 

As in education where involved parents can choose which competing school deserves their child’s funding that year,  patients will push the reform envelope where it needs to go by assuming more control over the cost of preventive and primary health care.  And that will lead to more patients inevitably solving the final and much larger piece of the health care puzzle – controlling their health, which will impact the longer term cost of care. 

The numbers are undeniable.

50% of the population only spends 3% of total health care costs.

5% of the population spends 50% of the health care dollars.

using 2009 data from the Kaiser Foundation:

Put another way, if Arizona has 6,000,000 people… (rounding down slightly for simplicity)  and total HC spending is $36.3 billion, consider this:

300,000 people spent $18.2 billion, while 3,000,000 people spent $1 billion.

The question is what will government do?  Will government enable or inhibit the 3 million’s ability to purchase health care at a lower cost?  Government can’t stay neutral.

The Agency for Healthcare Quality and Research – in their annual ‘medical expenditure panel survey’ this month shows 70% of the population only accounts for 10% of all health care spending… and the bottom 50% of health care ‘utilizers’ spent only 3.1% of all health care dollars.

It is this 70% of all Arizonans who stand to benefit if they have access to true health care pricing information.  Whether it is for cold and flu symptoms, knee pain, or the need/desire to get an MRI, most patients and families are in a position to ‘shop around’ to have the cost of a health care service as part of their ‘value proposition’ in seeking health care services.

But again – government cannot stay neutral – for one very important reason – Our current system is government-centric.  The share of medical revenue that comes from government alone now stands at nearly 50% and total 3rd party payers is 90%.

So it is important that Congress and the states get involved to help move the price transparency needle.

First by laying down the ground rules to protect both market innovation and the providers of health care.

States protect market innovation several ways:

First – by protecting the fundamental rights of patients and health care providers. 

Arizona led the way here by passing the Health Care Freedom Act in 2010 – protecting the rights of patients and providers to not be forced into any particular government program and to be able to purchase health care privately.

I sponsored that legislation and Arizonans passed it overwhelmingly along with 14 other states with 23 more to vote on the issue this year.

But the rights of physicians and other providers to contract privately with patients directly and, perhaps more important, their right not to be forced to contract with government programs such as Medicaid and Medicare, are still threatened in Arizona.  And without further government protection –some insurers and health plans will continue to make an end run around the HCFA by forcing these contracting provisions.  This is simply wrong.

SB 1249 is aimed at protecting the contracting rights of health care providers.

The Second way states protect market innovation is  by ensuring patients know what health care costs. Transparent pricing by all health providers is important as this transformation takes place because we have become so far removed from a, competitive health care system over the past 50 years.   SB 1384 provides for transparent pricing for patients paying directly for health care. 

Health-care reform, happily – is inevitable.  But – the biggest obstacle to controlling costs is government itself – and how it injects itself into the equation.  Will government run in the direction of enabling transparency and freedom for patients and providers or inhibit them?

My goal as a state legislator is, I believe, to aim for enabling innovation – and setting the right ground rules for health care transformation to be successful.   If we are successful in protecting the freedom to innovate, I believe the work of the members of this Alliance will be able to continue to offer fruitful, efficient and lower cost health care to patients – and patients will benefit greatly from it.

These are obviously not the only solutions or challenges in front of us. I would be happy to answer any questions you have in the few remaining minutes I have before running off to the Capitol this morning.  Thank you very much  –


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