SHERYL HILLIARD TUCKER: I want to thank everyone and welcome everyone to Mosaic DC. My name is Sheryl Hilliard Tucker. I'm class of '78, arts and science. And I want to welcome you to a very interesting and lively discussion that we're going to have today on health reform. This important discussion will be led by Dr. Atul Grover, who's class of '91 in arts. And I just want to thank the Mosaic committee for putting this together. I want to thank the chair of Mosaic, Liz Moore, and Rene Alexander for putting this distinguished panel together.
As a journalist and as the executive editor of Time Inc-- I work with a lot of different media-- I understand the difficulty-- and we face this every day-- in trying to help everyone understand what is going on with health care in the United States these days. A year ago, we thought-- a lot of people thought-- that a new president with a lot of energy, a lot of ideas, and a commitment to health care would make a big difference. And a year later, we're still struggling with this. A nation is wondering, what's going on? Why can't we seem to get this together? And for some of us, this is a daily existence.
In November, my mother passed. She was 88 years old, and not one time during her life did we worry about paying for health care, because she had a lifelong employment at AT&T, and she retired with the kind of health care that everyone in this room would just dream of. But those kinds of coverage don't cover-- most of America would not have the kind of benefit she had. I know I don't. And so we need to look at this as a people and understand what's going on, and tonight's going to give us that chance to do that.
We have a very distinguished panel here, and I'd like to just introduce first Doctor Atul Grover. He is a medical physician. He's also a PhD. He is affiliated with George Washington University. He has his PhD in public policy from Johns Hopkins. He is the chief advocacy officer of the American Association of Medical Colleges. So I want to welcome Dr. Grover to come and lead this discussion.
ATUL GROVER: It's a pleasure to see you all here. I wish somebody here would tell me what is going on with health care reform. I spend all my time on it. I've done that for the last year, and I still don't have all the answers.
The other thing I don't have was the right to be speaking to you today. In fact, Kosali Simon just got on to a supershuttle from National Airport, was stuck up in Syracuse today. And so I'm going to try and run through her slides and make her points as best I can while we wait for her to come join us. And I'm hopeful that she'll come join us in the next half an hour, certainly, so that we can have her voice as part of this panel.
I will tell you that she is assistant professor in the Department of Policy Analysis and Management at Cornell. She's a research fellow of the National Bureau of Economic Research, and also affiliated with the census. She's been a Thompson Prize award winner for young scientists. She works in health insurance, particularly for vulnerable populations. She's been published in a variety of journals, including Health Services Research and The ILR Review. She is a health economist, and I'm hoping, again, that we'll get her voice here with us soon.
Immediately to my left is Cynthia Covey, who's an endocrinologist and the VP for global clinical development at Merck. She is trained in endocrine at Memorial Sloan Kettering, internal medicine at UMDNJ, has an MD from the same institution, and a bachelor's in nutritional sciences from Cornell. She's been an educator, researcher, and a leader in medical organizations. She serves on the Cornell School of Human Ecology Dean's Advisory Council.
And lastly, I will introduce Cheryl Aldrich Backus, who's a 1974 grad of Cornell from arts and sciences, also in biology 1978, MD from SUNY Buffalo, and has a master's in public health from Columbia. She's an internist and also physician advisor at Queens Hospital. Has a lot of experience in Medicare and Medicaid managed care, extensive medical mission work, including work in Ecuador and Zambia. Has a lot of insight on quality in disease management, and also the insurance industry.
Hopefully we'll have a very good discussion. And again, I would do my best to go through Kosali's slides and what's what in health care reform. I think she wanted to make the points of what the problems are that have really led us to this discussion. It's something we've been working on as a nation for 100 years. There are some very difficult aspects of trying to reform any major part of the American economy. When you think about something as personal as health, that makes it even more challenging.
Where are we in the legislative process? I think that's a good question to pose to most of our members of Congress. They don't really know either. Two specific issues she wanted to raise, and that is, in terms of how do we really think about reform and changing the rules for insurers, it's certainly a popular and populist tagline to say we want to go after the insurance companies, but more difficult than some people might imagine. And also, how do we treat health insurance in the tax arena? And as a health economist, she'll certainly have some input about why that might be a good thing to change.
And the bottom line really comes down to-- for those of you non-wonky CBO aficionados-- Congressional Budget Office numbers. They're really what bills live and die by in the beltway. What does it score in terms of saving? What does it score in terms of costs? And what will the other party do to come assail you when you try to put forth major legislation?
So what are the major problems that government is really trying to fix? And I'll tell you that-- we tend to think about coverage, and also costs. That's what Dr. Simon has put on her slide. And if you look at polls from almost a year ago, February of last year, these were the two major issues in health care that the American public was concerned about. So about 40% was really concerned about the costs of care.
And again, people tend to think of this very personally-- how much does it cost me?-- especially because most of us don't see the bills that come through when we're insured. We really want to know what's our out-of-pocket expense, what do I have to pay for my health care. And also, 39% of people said coverage was the most important issue. But again, I think people tend to think of this in very personal terms. Am I going to be covered? I would like to see everybody in society covered, but I don't necessarily want to pay a whole lot for that either.
Challenges-- I think there are certainly a lot of things that we don't know, and that we can't know with any certainty. And there is the problem that even if we have great theory, and we have sound policy analysis and evidence, politically, things can be very, very challenging. I think everybody's seen that as they've unfolded over the last year.
I will tell you that in the beginning, policymakers in Washington talked about the need to address insurance reform-- so really, how we insure people-- as well as payment reform. So how do we pay doctors and hospitals and others, and we pay for drugs and devices? And also delivery form. How do we really change the way that people who receive care? How we get them more responsible for their own wellness? How do we take more responsibility as providers for prevention? All of these were major challenges.
I think that we have settled on insurance reform well into the middle of last year. We've left payment and delivery reform up in the air for the future. There's a lot of experiments in the bills that have been passed by the two chambers of Congress that would try and get us down the road in terms of delivery and payment reform, but we certainly don't have all the answers there.
My guess is that-- I will also tell you that I've never spoken with Kosali until today, when she was in the airport in Syracuse, so I have no idea what she meant to tell you with this slide. But I think it was that we are expensive as a nation, and we continue to be expensive. Our costs are growing pretty much in line with everybody else's costs in the rest of the industrialized world, so it's not as if we are somehow bending the cost curve on growth. And that is a major issue.
She would point out that really, almost 2/3 of Americans get their insurance through their employers if they're not age 65 or over. And that is certainly something that most Americans take to heart, because they are very tied to their jobs when it comes to thinking about health care. And they're also very concerned about not losing what they already have, and we can talk a bit later about some of the messaging in that. But remember also that half of the health care dollars are actually expended by federal, state, and local governments. Half. So even though 2/3 of the non-elderly are employer-based insured.
The aims of the health care reform bills that were moving through were to increase the number of insured Americans. We mostly talked about doing that through public and private programs. So should we expand Medicaid, the program for the poor? There was some talk briefly in the Senate about expanding Medicare down to age 55 to 64, for people who-- really, when you think about it, they're the ones that you have a difficult time insuring, because they're more likely to have health care problems. But there is a very large discussion between the left and the right and the Congress-- and in the nation-- about what the role of the public government is in terms of health insurance.
The other discussions were around changing the rules of the insurance market-- so trying to prevent insurers from excluding people with preexisting conditions, trying to set the same price, or getting more community ratings, for people who are sick and healthy, so that you spread risk out among people-- that just because you've been unlucky enough to have a lot of illnesses, you shouldn't be paying five, six, 10 times as much in health insurance once when you're all in that same pool. So how do we really increase that risk pool?
Set a minimum generosity of coverage, so that people don't think they have insurance and not really have significant insurance. Creating an exchange-- and please don't ask me what an exchange is, because nobody really knows. But the idea is that you pool together people from these different risk pools who don't have insurance, and try to create some market whereby they can then pick and choose with some sort of government regulation. And then, of course, adding a public option would be non-Medicaid, non-Medicare, but a publicly run plan. That was real popular.
Reduce the growth of health care costs. Again, what the bills were really doing was cutting payments to providers-- cutting payments to physicians, hospitals, drugs, devices-- but not really doing a lot in terms of changing the way that we pay for care. So really still a fee for service environment, where if a physician does more, they get paid more. Really, it was just cutting back on how you paid for things.
Where are we in the political process? I'm not sure how easy this slide is to see from there. But she's got the Senate bill up there which was passed, and the House bill. I will say that if you look at the timeline over the last year-- February 24 last year, the President didn't do a State of the Union, but he did address a joint session of Congress, and laid out as one of his domestic policy priorities health care reform.
By April 8th, he had actually established the White House Office of Health Care Reform, and maintained that this was going to be a priority for this administration. People basically talked about getting the bill done by August, because the conventional wisdom was in this town that with a bill that's this complex, the longer you leave it out there, the less a chance it has of succeeding. To go home for an August recess with a lot of propaganda-- remember the town halls? Death panels, Sarah Palin? That was a huge mistake, and it cost the Democrats dearly in terms of their ability to get this done.
September, the President comes back to another joint session of Congress, again talks about health care reform, makes a comment about not insuring undocumented immigrants. And we got the famous Joe Wilson, you liar! So the conversation certainly had already degraded by that time.
By November 7, the House had passed their version of the bill after a lot of internal wrangling within the Democratic caucus. Remember, what unites Democrats is that they are not Republicans, but that's about it. Again, conventional wisdom-- a Democratic firing squad forms in a circle.
And then we get to Christmas Eve day, the Senate finally passes their version of the bill so they can get out of town and celebrate with their families. And then of course we have, depending on how you look at it, the Massachusetts miracle or the Massachusetts massacre of about 10 days ago with Scott [? Brown ?] winning in Massachusetts. What I would say is the case now politically is the Democrats have very, very few options left to them. They can tweak around the edges. And we can talk a little bit about how they might do that.
Or if they really want something substantive done, they're going to have to pass the Senate bill through the House. And if you look at people who watch these kind of discussions over the last several months, they would have told you, watch the Senate Finance Committee bill. Watch what comes out of the Senate. The final Bill is going to look 90% like that bill.
I'd say that's still the case if they can get something done. And there are a lot of discussions now about whether they get something done. But the House bill essentially looks like, a very mishmosh version of the Senate bill.
There are a lot of similarities. There are subsidies to expand coverage. There is no public option in the Senate bill. There are insurance rule changes in terms of limiting preexisting conditions. Medicaid expansion, much more generous on the House side, much more subsidies on the House side.
So the liberals in the House are going to have a hard time swallowing that Senate bill. What you would have to do is to pass the Senate bill through the house with a promise or, what the speaker would prefer, pre-passing a bill that changes the Senate version before you even pass the Senate version. What would have to be in there for the House to really accept that?
A Couple of things probably, a $60 billion buy off to the unions to change the excise tax because the so-called Cadillac tax the unions did not like. That was a deal that they had arranged just prior to things falling apart. $80 billion to AARP to fix the donut hole on the Medicare prescription drug coverage. $57 billion to adjust Medicaid payment rates for primary care physicians.
Everything adds money. It's going to make this very, very difficult. And it's hard to see how you get a whole lot more cost containment, especially when the president has said he does not want a bill that costs over $900 billion.
So again what do these changes really attempt to do? It's attempting to give people the ability to keep their insurance if they already have it, prevent them from being denied coverage if they're already sick. Spread the risk through an insurance pool that allows people to, if they change their employment, lose their employment, hold onto their insurance, really with a cost limited to about 10% out of pocket for their medical premiums, for their insurance premiums.
All good things for most Americans, somehow that message has failed to have been delivered over the last year. There will still be probably higher costs for the healthy. The thought, I guess, Kosali thinks that the exchanges will bring transparency and stability. I don't know.
Insurers may react, depending upon how forceful some of the individual mandates are. What they've basically said is, if you're going to require us to keep insuring everyone, then you better require everyone to have insurance. Otherwise the premiums are just going to go up for everyone.
Again, other thoughts about this is, could you really exempt health insurance benefits from their tax exemption? So tax them. That's been anathema to the unions and to labor and to small businesses as well. Because they fear that they'll lose their ability to be good employers.
But really this just demonstrates how there's a lot of great economic theory about how you could bend the cost curve if you taxed health care benefits. How you could potentially get more revenue because you've got a new tax base to help solve the problems of coverage. But politically those are all dead. They're just not going to happen any time soon.
In terms of what the two bills would lay out, I'd focus on, again, on the Senate. And I think the insured numbers are reversed here because the Senate would actually end up insuring 31 million additional Americans. About 94% of people would end up being insured.
But that's only if you exclude undocumented. So really if you include the undocumented, you're talking about 92% of the American public being insured. So it still leaves 8% uninsured.
The cost is just under $900 billion. Most of the revenues are actually raised through the excise tax on the Cadillac plans. There is also an increase in the Medicare payroll taxes for people who earn more than $250,000 a year. But again, we just don't know how they're going to proceed.
And we can talk more about that. So I hope I have done justice to Kosali's slides. And we will go ahead and start with our panel and hope that she joins us.
Now I get to [INAUDIBLE] on someone else, sit over here, and ask questions. So [? Cynthia, ?] one of the things that we have not heard a lot about in this discussion is how this all affects research. I mean, what does this really do for discovery and innovation and particularly in the sector that you work for, which is pharmaceuticals?
SPEAKER 2: All right, let's be friendly. Look to your left. Look to the person to your left. Be obedient.
Look to the right. Look behind you. Now look at me.
Someone you looked at either has or will have heart disease, diabetes, or obesity. And the most common cause of death in this country and morbidity is what? Heart disease. So I say that because I want you to know that whatever we are doing in research, we are going to save someone's life in here. We're going to save quite a few lives. And we're going to extend your life.
And when we talk about the health care reform, I should say, I'm not here to represent [? Totalita ?] Pharmaceutical company. I do research. But I do work for the pharmaceutical company. So by default I am representing them.
But I will say to you that in terms of research in health care reform, we have to understand that it affects cost but not demonize it. Prescription drugs account for what percent of health care costs? Does anyone know?
About 10%, so it's not 40%. It's not 50%. But it is still a significant number when you look at the amount. And what's going to happen?
We have to understand that the cost, when you look at that pill, just remember. It is not what the cost to make the pill. And then look at what you paid for the pill.
That's how they always present it, the difference. It only costs pennies to make this pill I'm taking. I'm paying $1 or $2. But that's not really what you should think of when you think of drug cost.
When you look at the pill, you have to think about 10 to 12 years of research that went into it to get it to market. You have to look at it and say, in this pill there was knowledge. There was research.
And now we have increased information about biological diseases that went into the development of this drug. You have to remember when you look at that pill, that is either saving, maybe saving your life, someone's life, or improving the quality of care. So that's, when you think about health care reform and drug prescription cost, it's a complex issue. And you've got to think about it in that way.
The other thing I will say to you is how it's affecting us. In terms of the industry, one of the things the industry did right away was contribute to what was called the donut hole in Medicare. And what that was was we decided that when you have Medicare, you hear seniors saying they can't afford their drugs.
What happens is Medicare costs, it pays for a certain amount of your drug coverage. And then it stops. And then they have to pay out of their pocket to a certain point till you get to almost catastrophic levels. And then something else kicks in and pays the rest.
That gap is called the donut hole. So the pharmaceutical industry has looked at that and has decided prospectively to try and close that gap so that people can have access. You got to understand. It is to our advantage.
The more people have access to our drugs, we do generate more revenue. But that revenue goes back into research and development. Unlike some other industries, it's not profit for something that will not affect you. The profit goes back into R&D.
So when you hear the health care discussion, just keep those things in mind as the pharmaceutical industry. And I must tell you, I do cardiovascular and metabolic research. And how will it affect me?
Well, I hope that I am around to still develop some more drugs so that when you look at me and I look at you, I can say, you know what? I've saved another life in this world. Thank you.
ATUL GROVER: Very well done, and I'd like people, we want to make this as much of a discussion as possible because these lights are really bright. And it's hard to just keep asking questions. So if you could please start thinking of some questions.
But in the meantime, I'm going to ask Sheryl just to talk a little bit about, because you work so closely with physicians and also in the hospital and have worked with insurers in the past, how do you think the provider community has really viewed this discussion? How do you think that they've really viewed what's been out on the table in terms of health insurance reform and what it means for them? What are they worried about?
SHERYL HILLIARD TUCKER: Well, first I'd like to discuss the impact on hospitals. Because they are obligated to give emergency care to anyone who walks into the hospital despite their inability to pay. And at first blush, it would seem like more covered people coming into the emergency rooms would be a plus for the hospitals.
But there are other provisions of the bill that really are negative for the hospital. And they are very concerned about it. For example, the decreased reimbursements for Medicare and Medicaid, and as goes Medicare, so goes commercial.
So much negotiation of fees by commercial health insurance plans have to do with a certain percentage of Medicare payments. So the decreased reimbursements for Medicaid and Medicare are really going to affect the hospitals negatively. I'm at Queens Hospital Center, a municipal hospital in New York City, part of the Health in Hospitals Corporation.
Queens is one of the most diverse places on earth. And it has a solid middle class and very old ethnic neighborhoods. But it also has a stream of immigrants from all over the world. And so it is what you call a safety net hospital. And so many of the safety net hospitals, the need to care for undocumented people, it has not been addressed in the bill.
There are a lot of, there's another big concern that the hospitals have. And that's with decreased reimbursements for readmissions. There are many factors that go into whether or not a patient is re-admitted. One, the first has to do with their diagnosis.
Something like congestive heart failure in an elderly patient, if they are class three or class four, these people are in an end of life situation. And to ding the hospital just because they cannot keep up a patient out. There are other factors in readmission. It has to do with the available outpatient care, the social supports, the primary care doctor in the community, whether or not the patient can get to them in a timely manner, whether or not the patient can afford the medications that they have, what the patient diet is.
Nowhere in any discussion of health reform do they talk about nutritionists. And I don't know of a health insurance plan who pays for a nutritionist. We have a epidemic of obesity and the diseases that come from that. And no one is talking about nutritionists.
Also within our hospital system, you have the hospital, which is a facility. And even in hospitals that have salaried physicians, there seems to be this dichotomy between the medical staff and the hospital administration. And physicians really direct the care that's received in our system.
So you have someone in the emergency room who's salaried. But they're going to admit this patient if they feel it's necessary. And then you have the doctor on the floor who is in charge of when you discharge the patient. So again, there are so many things that go into the readmission of the patient. I think that this provision for decreasing reimbursement for readmissions is assuming that the hospitals are discharging too early or they have all control of discharge planning.
There's a couple other little sneaky things that are going on in the bill. One has to do with, they are going to decrease incorrect billing that's done by the hospitals. Right now, and this is something that's been going on even before the reform discussion, Medicare has a process going on called the RAC.
And it stands for Recovery Audit Contractors. And basically these are companies that in different regions of the country, they have different companies who have been charged by Medicare to go and look at charts in hospitals of patients who may have been discharged up to three months-- I mean, three years ago. And these contractors are paid a percentage of the claims that they reclaim for the hospital.
So here you have the RAC coming into the hospitals, looking at cases that were discharged up to three years ago in some states, and denying and taking away patients from the hospitals. They're also looking at DRG assignments through coding and saying, oh, no. You did it wrong, and just taking the money back from the hospitals. And suddenly this language is in the reform bills, saying that they are going to do more of that.
The hospitals are also concerned, once the government feels that more people are insured that they will be taking away what's called disproportionate care payments. And this is what hospitals who have a large portion of indigent care get to help them fund the health care. So hospitals are not in a good position with this bill at all.
And they're beleaguered. If hospitals, and we are in a recession too. But if hospitals are getting decreased reimbursement, what tends to happen is the acute care facilities want to survive. It's important to have an emergency room, trauma centers, surgical services.
And they will contract some of their ambulatory care activities. Queen's Hospital Center has recently closed a geriatric clinic in southeastern Queens. Now they closed that, and they're saving money.
And they say, well, the services are now available in the hospital. But this really decreases access for the elderly and the vulnerable patients. So the reform isn't looking good for hospitals at all.
On the physician side, we talk about decrease of Medicare payments. And that may not have an immediate effect on access. Because many, I would say 95% of doctors really do want to do well for their patients. And patients who are under care, it's very doubtful that they abandoned them.
But over time, these decreased payments, it's really hard for doctors, especially in private practice, to meet their overhead. Doctors in facilities where they are salaried, it probably won't have an immediate affect at all. They may not feel it. But as salaries go down, fewer people will enter the profession.
There is a provision in the reform that Medicaid payments by 2012 will be equal to Medicare payments. That's good news. I think that especially office space physicians will start seeing more Medicaid patients if they can expect Medicare payments.
Because right now Medicaid, very many doctors, unless they're salaried working in the clinic situation, really don't see them. In the communities that classically have Medicaid mills that accept this low payment. But perhaps private offices will see patients a little bit more.
The Senate bill, unlike the House bill, addresses tort reform. And I think this is just major. Our legal colleagues say that tort reform is a red herring, that very few patients who have an injury actually go on to a lawsuit. And they also claim that the awards from medical malpractice lawsuits have pretty much stayed steady over the years.
And that may be. But the adversarial tort reform system that's now in place is really prompting defensive medicine, which is a huge component of health care costs. Again, physicians are the ones who decide when to admit, what tests to order, what drugs to order. They're under pressure from more educated patients to give this service, that service, the other.
And so preventive, not preventive, but defensive medicine is major. It's thought that up to 25% of all diagnostic tests, procedures, and consultations are secondary to defensive medicine. The AMA says that this in dollar terms adds up to over $200 billion a year in defensive medicine.
So tort reform is major. And again, it's only mentioned in the Senate bill. The trial lawyers have been lobbying very successfully. But without that, it's very hard to change physician behavior in any emergency room.
Health care, the culture of health care is local, not just state wide or city wide, but even in an emergency room. So if you have a senior attending, emergency room or up on the floor, if you have a senior attending who's really going to have their junior doctors say, well, you can't miss anything. They're not going to miss it. Any person coming in with--
ATUL GROVER: Perfect timing, Kosali, have a seat.
Apparently they didn't want you to sit there. I'm going to welcome Kosali here. And I don't know, Sheryl, if you had just 15 or 30 seconds more to add.
SHERYL HILLIARD TUCKER: 30 few seconds more, yes. Anybody coming in with right lower quadrant pain, even if they don't have a temperature, even if they don't have a white count or signs of acute abdomen, they're going to get a CT scan. Some people feel Obama was using the Cleveland Clinic.
And recently in the New York Times, they had an article about Intermountain Health systems, how they've developed clinical pathways that help streamline care and also give quality care. But this is very specific to the culture of the hospital. And also in some perverse way, unless there's tort reform, the doctors are sometimes scared of these clinical pathways. Because they feel that if they ever practiced outside of those pathways, they are more at risk for getting a malpractice suit. So again, tort reform is major.
ATUL GROVER: I would say, the other interesting thing is that when you look at those models that the president has held up, whether it's the Mayo Clinic or Intermountain or Geisinger, that typically Danville, Pennsylvania, Rochester, Minnesota, and Grand Junction, Colorado, don't look much like Queens or the Bronx. That makes a difference.
Kosali, I went through your slides. And I tried to do them justice. But maybe you could talk a little bit about some of the points you want to get across that maybe weren't just written down in those slides. And Sheryl, I can ask you to pass the microphone over to Kosali. [? You guys can ?] share that.
KOSALI SIMON: Sure, and I apologize for all the--
ATUL GROVER: No problem.
KOSALI SIMON: So there were, there are some points on those slides that I would like to stress. So I wonder, shall I point to the particular slides?
ATUL GROVER: Sure, I don't know if we can-- I'll bring that back up for you. You want to pick these out up here?
KOSALI SIMON: Great, if you don't mind. And you can give me a strict time limit and tell me what to--
ATUL GROVER: Seven minutes.
KOSALI SIMON: OK, all right, we are going to breeze through here. And I'm going to touch just the ones I think that are the key. So here what I wanted to stress is that even though coverage and costs are the two big issues that are the problems being addressed, I want to talk about over insurance as well as being an issue.
But the biggest being the, trying to bend the curve, meaning that we know that we don't want to get 1960s health care for 1960s prices. In the sense that in 1960, only 5% of GDP was being spent on health care. So we know what it was like when health care was a lower percentage of the GDP.
And while we want to try and reduce the percent that we are spending on health care, we also appreciate that we got a lot for our money and that the key is to reduce waste. And keep in mind that there are lots of advances even in the future that we're going to be willing to pay for. And if that's what is coming down the pipeline, then we shouldn't be afraid of moving this percentage up from 16%. It's being very vigilant about where the waste is.
ATUL GROVER: Let me ask you. Are people on, is Medicare an over insurance program?
KOSALI SIMON: Oh, when I'm going to talk about over insurance, it's going to be about the employer tax subsidy for health insurance. So not, I wasn't thinking of Medicare specifically there. So here in, the two challenges being that even if we were to agree on what we wanted to change, there are so many things that we're just not going to know with certainty how to do it.
We're pretty good at knowing how to cover people. We have past experiences from Medicaid expansions. From introducing Medicare Part D, we know how to get people coverage of a certain kind. Now, there are still problems there because we know take up isn't perfect. And that is an issue to deal with.
But the area we're really uncertain about is how to cut costs. And here I think what we just have to draw on are those excellent Cornell statistics classes. And think of there being these large confidence intervals around any number that's thrown out.
That is, whenever a number is suggested, just keep in mind that there is a huge deal of uncertainty out there in the health care field about how exactly those numbers are going to be [INAUDIBLE]. So with that in mind, I wanted to show this slide because there have been movements in the past, managed care, that was thought to be a way that we would know how to reduce cost growth.
And we saw costs starting to not grow as fast. But what the consensus is now is that that was a level shift. That is, as people were being moved on to managed care, we achieved one-time reductions in the level. But that once people were on managed care, the rate of growth continued to be the same.
Another instance is to look at other countries and say, look. It looks like other countries have lower levels of spending. But if you look at the rate of growth of health care costs in other countries, we are not that similar.
So this is where we have to be really careful in knowing that there's been really no good ways thought of to have long term reductions in the rate of growth, just level cost. Level reductions can be done easily, one-time cuts in payments to Medicare and various other waus we can do it. And the second, this point is just simply, I think, that we can see from recent past examples.
That even when there is good science or accepted ideas from the medical field, it's very difficult to adopt them for political reasons. So politics and not science and economics in the end could be, explain these. So I'm going to leave all this here, as one is really, all the slides say what I would have wanted to.
So I want to talk about two issues that have to do with the health insurance side. And one is the rules for insurance companies. And the second is the tax treatment of health care-- of, sorry, of employer provided health insurance.
So there's a lot of, there's a call for changing the way that insurance companies operate. And what the changes would be here are really-- it's really for the individual market and for the smallest employers. And from this slide up here, you can see that individually purchased health insurance is a fairly small part of where Americans get their health insurance.
The employer provided market, the group market, and most of that is the large group market, what already are, those policies are sold and administered on a fairly, way that doesn't prevent preexisting conditions that much. Doesn't have the kinds of problems that are pointed to in the individual market. So in the individual market and in the smallest employer groups, the new system that's talked about-- where insurance companies would be prevented from using health status and age to a certain extent in treating individuals for health insurance purposes-- those would have big advantages for those who have existing health problems.
But insurance companies are going to look for ways to even out those prices. And this will mean higher costs for the elderly-- for the healthy. The exchanges will bring in transparency and stability. And insurers are looking for the 30 million or so newly insured people that they are expecting.
And that also increases the likelihood that they wouldn't react adversely to the new rules. So insurers' reaction is going to really depend on the stringency of the mandates and defines how many new people are going to be brought in. And this is something to watch for.
So I'll just end with this one issue about the tax treatment of health insurance. So currently, money you get from your employer as health insurance is not taxed. Whereas if you were to take that same amount in cash wages and buy something else, it is taxed. So this shifts the tendency of individuals to want to buy more, or receive more in health care.
And this builds in a force that doesn't act towards reducing health care costs in the future, in fact, in the direction of growing health care costs. And this is a very regressive tax system, in the sense that the biggest benefits of this current tax structure are to wealthier individuals. So reducing that and reversing, removing that tax exclusion for employer health insurance in economists' eyes goes only in the right direction for efficiency and equity.
But yet this is one of the biggest political issues to try and deal with. And so I think it's a good example of how, even when economists agree on something and can show, here's why there are these beneficial effects, it's really hard to get through.
ATUL GROVER: [INAUDIBLE]
KOSALI SIMON: Thank you.
ATUL GROVER: Thank you. And I'd like to take some questions. I think we started late. So we have a little time to go over. There are mics on the side, which I don't know if our friends on the staff here tell us. Do we need to use those? OK, we need to use those since we're taping this.
AUDIENCE: Hi, [? Jonathan ?] [? Hoenig, ?] class of '78. We have heard from the Netherlands' health minister and the Israeli foreign minister. And when they analyze it, because the key thing here is the difference between the 17% in America and the 8%. The rate of growth is not going to really be material for, in comparison to that difference. And what they tell us is that the two big things that are the difference is, one, that in order to get the costs down to be competitive with the international scale, the doctors here are paid more than in coordinate countries abroad.
And that's one big piece of it. The second big piece of it, they say, is the rationing, that you have to have a government regulatory apparatus that restricts the ability to do a $15,000 thing with the arteries when you could do a $150 procedure. And a whole range of things where they ration care in order to keep down the total cost to the society. And I wonder if you'd comment on your perception as to whether that's accurate and the implications for the policy debate.
ATUL GROVER: I'll let the economist answer first.
KOSALI SIMON: So I think there are many reasons when you think about why health care is more expensive in the US than in other countries. And provider payments are a major factor there. The other aspect of it, what kinds of care we get, how much easier access to the high end technology is here, I'd say I think those are important factors. But if I were to try and quantify how much it's those versus other things, I'm not sure that I could.
ATUL GROVER: I would tell you that politically you can see how well the discussion of rationing went over in the last year. It instantly became death panels. And just a statistic for you, essentially the rates of voting participation are directly proportional to age and education.
You're all very smart people. You all went to Cornell. You obviously vote. But when you have people at the age of 70, they're voting in the 70% range that will actually get out to the polls even in off elections. Younger people do not vote.
So essentially everybody on Medicare is voting. They don't like the idea of restricting their access to care. So politically it's not a feasible thing to talk about rationing in this country, not in this day and age. Do you want to add anything?
SHERYL HILLIARD TUCKER: Yes, it's hard to really put a finger on what you mean by rationing. But in some sense, that's already going on, especially with health insurance companies. There's some sneaky little terms that they use, medical necessity and medical appropriateness. And care can be denied because of, it doesn't meet medical necessity criteria.
There is an effort going on, looking at clinical effectiveness research. Not just looking at what services we give but how we give them and where we give them. And this may address that because at this point the medical criteria are developed by nonprofessional organizations, for example, InterQual and Milliman.
The American College of Emergency Physicians is developing more protocols and criteria of when to give care to who and what. But many of the other American colleges aren't as out in the forefront. So clinical effectiveness training will help that so that any rationing that we do will be studied and appropriate. But right now, please know that "rationing," quote, unquote, is going on.
ATUL GROVER: That's a good point. I'm going to go over to this side.
AUDIENCE: Thank you. Justin [? Davis, ?] class of 2007. I have two very basic questions. The first--
ATUL GROVER: And tell me if there is somebody in particular that you'd like to aim these questions at.
AUDIENCE: Well, the first one is for the two presenters of the PowerPoint. And simply, could you explain, if any, what barriers to entry will be created with the expansion of Medicaid? And then the second question is for the pharmaceutical rep. I don't mean to couch you to that.
But as you said earlier, could you extrapolate a little bit more on what pharmaceutical companies are doing to close the donut hole more specifically? Because it seems as if those companies would get more by direct billing to patients rather than insurance coverage billing. Thank you.
ATUL GROVER: I can give you a quick answer on the Medicaid side, that essentially you're talking about cost to the states to expand participation in Medicaid. Whether you're going to 133% of federal poverty levels or 150%, it's money the states don't have right now. And so it's difficult for them to make that decision to expand Medicaid.
Secondly, you can give people Medicaid. But as was pointed out, a lot of providers, particularly on the physician side, won't take Medicaid right now. So just because you're granting insurance doesn't mean people have access. And I don't if there's anything you wanted to add to that.
KOSALI SIMON: I would say that trying to close the gap between the Medicaid physician rates and Medicare or other market based rates is key to making sure that, if we're going to have this new population covered by this policy, it's going to only become harder to get access if the rates stay that low.
ATUL GROVER: [? Cynthia, ?] I'm going to let you answer that question. And we're going to answer the questions of the two people that were in line over there since we started a little late. But then we'll make those the last two.
SPEAKER 2: OK, the question about the donut hole, this was being addressed by the pharmaceutical industry in reference to when the ongoing discussions were in relation to the health care reform bill. So what the companies did is get together as a group and decide that as part of this health care reform, they would put in a certain amount of money, a large amount of money.
ATUL GROVER: $80 billion.
SPEAKER 2: That's right. It was $80 billion. And put that in a pot and let the health care reform group figure out how to distribute that. But it was going to be dedicated to money to close that donut hole. And you said, I'm not a pharmaceutical representative by any means.
ATUL GROVER: Fair enough, next question.
AUDIENCE: Thank you. How you doing? My name is Edgar [? Estramiento. ?] I'm class of 2010, arts and science student. And my question is I know that the final bill hasn't been finalized yet. But if any of these two current bills on the House or the Senate includes anything about a community health clinic, particularly federally qualified community health clinics, how would they affect them who serve a large number of uninsured on their insured population?
ATUL GROVER: There is a $15 billion in there for community health centers, FQHCs. In fact, one of the final Senate deals before their Christmas Eve day passage was with Bernie Sanders of Vermont. It included an additional $7.5 billion for community health centers for their infrastructure and personnel.
Now, what's interesting though is community health centers, FQHCs, typically serve people who are not insured. And if the bill insures everyone, there's a real question about what the role of community health centers will be. Given the choice, will people actually go elsewhere?
I think that's a big question in terms of on the hospital side as well. If people are actually insured, what are the choices that they'll make? And that's a very big question for safety net providers as well. I don't know if anybody has anything to add.
SHERYL HILLIARD TUCKER: Well, for the immigrant population, community health centers are still a big source of care.
ATUL GROVER: That's true.
SHERYL HILLIARD TUCKER: They will, they'll still be busy.
ATUL GROVER: They'll continue to go there. And they'll still come to HHC as well, I'm sure. I'll take the last question over there.
AUDIENCE: To the panel, lest you doubt, all health care is personal and one on one. And I'm an evil, elderly person on Medicare.
ATUL GROVER: I just said, you're smart, and you vote.
AUDIENCE: And actually, I want to ask you, the panel, to address a question about end of life decisions, where appropriate, to spend money. I was admitted to the hospital as a 59-year-old, very productive physician. And I had five vessel bypass through no fault of my own.
And if the decision hadn't been made, I'd be dead within a year. I've had a pretty good 10 productive years. The question here is it's been reported that 25% of the Medicare budget is spent on the last 30 days of life.
So how we make a decision about how we pass from life is a very important financial decision. And I'll tell you this. You can have my 30 days of money if you'll guarantee you'd give the money to the young, who can live healthy and not get the illnesses that I had. So how do we get there?
ATUL GROVER: I'd say the hard thing is most of us don't come with an expiration date. So it's hard to know when those last 30 days are. I'll let you guys.
SHERYL HILLIARD TUCKER: I have some hope that clinical activeness research will start addressing these issues. They're very hard. There are very many ethical issues. And also physicians, no matter what protocols come out to say, give care or not give care, the physicians make that decision sometimes very silently one way or the other.
And again, those decisions aren't only made for the elderly but for different minority populations. When you look at who receives a coronary artery bypass, these decisions are made all the time. But hopefully with clinical effectiveness research, we can really answer these questions about what interventions really have the best outcome for different people.
ATUL GROVER: Well, please join me in thanking the panelists. Thank you for your time. [INAUDIBLE]
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At this Mosaic@DC event, Dr. Atul Grover '91 and Kosali Simon, professor of health economics and a national authority on health care and minority communities, lead a discussion and in-depth analysis of the Obama health care reform bill. Grover and Simon are joined by panelists Cynthia Covey and Cheryl Aldrich Backus '74.
This year's Cornell Alumni Leadership Conference, held Jan. 29-31 in Washington, D.C., was organized by the Office of Alumni Affairs. Participants from dozens of Cornell Clubs, classes, associations and geographical regions attended to brainstorm and share ways to connect as Cornellians.