There Are Good Ideas Out There to Make This Work

Does paying for health care have to be so difficult?

Americans enjoy--and insist on--good medical care but argue and dissemble endlessly about paying for it.

The old system of fee for service saw a type of outright fraud called “cost shifting” in which fully insured patients were overcharged by 20% or more to pay for those with less or no insurance.

It wasn’t so much a crime as an open secret that allowed care for the poor. But costs got out of hand and employers and the government rebelled. So managed care, through health-maintenance organizations and physicians management groups, took over coverage of most employees and reduced cost inflation.

Yet we’re still arguing. Right now Congress is debating new laws to guarantee patients information on treatment and rights to appeal decisions about their care. One proposed law would make it easier for patients to sue HMOs.

Some of those ideas, such as giving patients more information and a sense of control of their health care, make sense. The proposed right to sue, on the other hand, is merely a payoff to trial lawyers who contribute heavily to political campaigns.

But none of the proposed laws should be necessary. They only attempt to micromanage health-care providers without creating incentives to cure the sick and keep patients healthy.

And that’s a shame, because there are better ideas for delivering high-quality health care. Such ideas require thought and investment but can pay for themselves over time. And they are likely to be widely adopted in the years ahead, in response to the realities of aging populations and chronically ill patients.

Ironically, many ideas gaining renewed currency today emerged a decade ago in discussions about health care among experts who met in Jackson, Wyo. Their thinking later influenced the Clinton health plan, which, despite its defeat politically in 1994, contained good thinking.

Alain Enthoven, professor of management at the Stanford University Graduate School of Business, was one of the original Jackson group. And he is still developing ideas on managed care, such as the following:

* Patient information systems. A high-quality health-care organization, Enthoven says, uses computer systems to amass databases on the outcomes of treatment. It follows up on treatment for each patient and compares results with those of other patients who underwent similar or alternative treatments.

That may seem like a simple idea. But, in fact, today’s managed- care groups, like yesterday’s independent physicians, do little or no systematic follow-up to assess how well patients respond to treatment, says economist Glenn Melnick, a health-care specialist at Rand Corp., the Santa Monica-based think tank.

Why not? Because medical groups and physicians struggling to keep within tight budgets for patient care have no incentive to invest tens of millions of dollars in expensive information systems. In the competitive managed-care environment of recent years, if an HMO made such an investment and raised premiums to pay for it, it would have lost business to lower-priced providers.

Yet investment in information systems could improve patient care and ultimately the financial well-being of health-care groups.

* Total care. Another of Enthoven’s ideas is that integrated efforts of physicians, therapists, dietitians and pharmacists are superior to fragmented fee-for-service medicine.

That’s an idea that’s catching on, says Michael Lynn, managing director of Unimed, a Los Angeles-based management group for physician practices. To keep aging patient populations healthy longer demands ancillary care in many settings, from homes to clinics to doctors’ offices, Lynn explains. So managed-care groups increasingly include dietitians and exercise therapists along with physicians and nurses.

An example of such ancillary care is the home studies that PacifiCare Health Systems, a Santa Ana-based HMO specializing in Medicare clients, conducts. The company tries to eliminate throw rugs, slippery shower stalls and other potential hazards that could lead to debilitating, and costly, accidents.

* Care-adjusted pricing. Patients with chronic diseases--such as diabetes, heart trouble and cancer--have always been a concern of Enthoven’s because care for them is expensive and managed-care groups try to avoid taking on responsibility for them.

“Health-care delivery systems should not be penalized for caring for patients with costly chronic conditions,” Enthoven wrote last year in Health Affairs, a periodical for medical professionals.

That’s noble talk, but how will care for increasing numbers of patients with chronic illnesses be paid for? By adjustments to the insurance system that now finances health care, says Dr. Schumarry Chao, a physician at USC and former head of medical insurance for Aetna.

Right now the economics encourage discrimination, she explains. Most HMOs and other groups are paid flat fees, generally ranging from $1,500 to $2,000 a year per plan member, whether the members are young or old, well or ill.

But costs of care and treatment differ greatly. It costs $900 a year, on average, to care for a young, relatively healthy person, Chao explains. That rises to $2,700 a year for a person with one chronic disease and $4,000 a year if the person has two chronic diseases, she says. More than two chronic illnesses and the cost goes to $7,000 a year, on average.

Managed-care groups, naturally, want to avoid the chronically ill. The economics “make the sick person the enemy of the health system,” Chao says.

But what can be done? Payments can be adjusted for expense of care. If a patient costs $4,000 a year to treat, then the care provider should be paid that amount. But payments for the young and healthy should also be closer to the actual cost of care.

What is called for is a combination of insurance and a Medicare-type system. Some risk could be adjusted for, as auto and life insurance policies are priced differently depending on age and habits such as cigarette smoking. Medicare, on the other hand, pays for care of the elderly, who inevitably incur far more illnesses than the young and healthy.

The objective, we should keep in mind, is to finance health care for the population, not to leave the poor and sick to the mercies of families or charity wards, as in former times.

Among other good ideas, the Clinton health plan contained proposals for using Social Security-type insurance to cover chronic illness. It’s time to go back and look again at those ideas.

Many reforms of U.S. health care will be made in the years ahead because they are necessary. People are living longer and chronic diseases are not death sentences, but need normal, affordable care. Paying for it should not be beyond our intelligence or political will.

James Flanigan can be reached by e-mail at jim.flanigan@latimes.com.