| Cover Story - Friday, April 10, 2009
Seeking a cure
Health economist Harold Luft says a national database of health outcomes could be key to improving care
by Jocelyn Dong
It takes nerve to suggest that an entire U.S. industry could be done away with, but health economist Harold "Hal" Luft is unfazed. If he had his way on reforming the United States health care system, health-insurance companies wouldn't have much of a future.
It's not that insurers are a nefarious bunch — it's the deeply flawed system that has allowed them to thrive, Luft told the Weekly in a recent interview. Luft, a longtime Palo Alto resident, is director of the Palo Alto Medical Foundation's Research Institute and author of the 2008 book, "Total Cure: The antidote to the health care crisis."
His book seeks to sidestep the stalemated national debate on health care between a "single-payer" government-run model and the present system by creating a more transparent, hybrid model.
"I don't think there are lots of evil people in the system. ... Most people are just playing the role that they're in," he said.
"We have a system that was initially built on a health-insurance model," but that model isn't working for millions of people, he said.
Last Friday, the Weekly published the first half of a two-part cover story on health care reform, which included Luft's quest to get his ideas heard in Washington, D.C.
Luft explained how his proposed health care model, SecureChoice, would guarantee that the costs of hospitalization and chronic illness in the United States would be paid for through what he calls a "universal-coverage pool."
The pool would be run by a private-public partnership, and possibly funded by taxes and contributions from employers and individuals. It would not exclude any person for pre-existing health conditions, he said.
Complementing that coverage, people would choose a primary-care physician to treat minor health problems, such as backaches and flu.
Because patients would pay their doctors independently using the traditional fee-for-service model, patients could choose a primary-care physician whose practice style they feel most comfortable with. Those who want longer appointments and follow-up phone calls from their doctor can opt for that. Those who prefer to have numerous tests and referrals to specialists will choose accordingly — and pay accordingly.
The goal of his plan is to improve the quality of care — not ensure that every person has health insurance, Luft said.
"I was trying to address what I would sometimes refer to as the 'morning after' problem: The morning after health reform you get everyone covered but the system still isn't working."
Among Luft's proposed solutions: Creating care-delivery teams at hospitals (composed of physicians, other health care providers and hospital staff) that would be tasked with working together efficiently and effectively to treat each patient. Each team would receive a bundled payment per patient, which the group would divvy up accordingly, from the universal-coverage pool. Reimbursements would be based on how much it costs teams to achieve a better-than-average outcome.
Luft also believes primary-care physicians should act as coordinators, spending time with each patient not only to determine what type of treatment he or she wants (and doesn't want) but also to educate a patient about options and to follow up with the patient after referrals are made to specialists.
Luft endorses collecting and analyzing results of medical treatments across the country. Doing so would improve the overall quality of health care, he said. While the federal government could gather the data, Luft favors open access to the information so that analysts could use it to discover patterns of care and the factors that produce better health.
In the following edited Q&A with the Weekly, Luft talks further about his SecureChoice plan, as well as health care rationing, preventive medicine, creating a database of outcomes and more.
The first part of this series is available at www.PaloAltoOnline.com. Search under "Total Cure."
Q: Can we talk a little bit about how the "choice" part of SecureChoice would work? How does the money flow?
A: Each person could choose a primary-care physician. That primary-care physician will have chosen what I'm calling a "payment intermediary." It's an organization to handle the billing because doctors want to take care of patients; they don't need to deal with the billing.
Q: It's not health insurance.
A: It's just a payment intermediary.
On your existing bills right now, it typically has a procedure code, which says what was done to you or for you and a diagnosis for each one of those things and why they did it, in essence.
As part of that routine processing, the payment intermediary will see if you are being treated for some chronic conditions (which are covered under the universal-coverage pool). It then passes that information on to the coverage pool and says, "Doctor So-and-So has this many patients with hypertension, that many patients with MS (multiple sclerosis), that many patients with diabetes."
And the universal-coverage pool will pay a monthly amount for the ongoing management of those patients' (chronic illnesses), whether or not the patient is seen that month.
Q: So it's not based on the service rendered?
A: It's not based on the service rendered. If the doctor's going to be managing your diabetes for the year, until you move or change, then he's managing your diabetes — whether or not he sees you. He's taken on a responsibility.
The universal-coverage pool will put into that payment intermediary's pot a certain amount of money for each patient with diabetes.
So the payment intermediary is processing all the bills. At the end of the month, it will take what you incurred, less the amount that came in from the universal-coverage pool, and that's the amount that would be your responsibility.
That will go up and down depending on how much use that you had.
You say, "I'd like to smooth this out."
So you ask the payment intermediary, "Could you write a small health 'insurance' policy for me that will smooth that out over time?"
The payment intermediary will offer you upfront a premium, and that premium will reflect how much you want to directly pay.
If you say, "I want a $10 office co-pay," your premium would probably be pretty high.
"I'll take a $50 office co-pay" — your premium will be lower because, first of all, you're paying an extra $40 every time you go. Also you might be a little less likely to go.
Q: Now, if I have diabetes and my cousin has diabetes, and we both go to the same doctor, and my diabetes is in a different stage, will the universal-coverage pool pay differently for us?
A: OK, we can start with that initial bill submittal where it's "diabetes" and "office visit" and the universal-coverage pool will pay the same amount. But then your doctor will say, "Well, wait a minute now. I've got some of these patients who are very sick. They've got really bad diabetes, and I can show you how problematic it is."
So the universal-coverage pool will say, "OK, if you start sending us some clinical information, some of those lab-test results, we'll pay you extra because we know those cases are more expensive."
Now the doctor — not being required to submit clinical information — voluntarily submits it because that's the way you get out of the standard, run-of-the-mill "diabetes" minimal cost into the more expensive version.
So it's a growing process that has its own feedback.
Q: You said your plan has incentives. Maybe you can outline the incentives the providers have in your system.
A: Now we have health insurers who have very little ability to reduce costs. They're under pressure from employers and government to reduce costs, but they've got no tools.
All they can do is they can tell the doctors, "No, we won't pay for that."
Doctors get angry; they go back and forth. They say, "The patient really needs it," etc.
If you turn that around, and you say, if the patient's in the hospital, "We're just giving you a bundled payment, and you guys decide what you need to do," what the doctors will do is start asking for better information on comparing those different implants and devices, organizing their services better, asking for advice from outside people.
"How is it that those guys in Pennsylvania are doing it so much better than we are? So much cheaper? Find out from them, come back and tell me."
Right now they've got no reason to do that.
That's going to start moving the system towards continuing improvement because the incentives are different.
Now you're incentivized to learn about it and to change your practice. So that's the underlying notion.
Q: I've heard a notion floated about a national clearinghouse for best practices and data. I understand in your system the payment intermediary collects a lot of the data. Is that separate from a national system? How does best-practice/data collection work?
A: I'm making a distinction between collecting data and pulling it together, matching it and linking it so all of my records (and) all of my claims get linked together.
In the current situation, I may use my Discover (card) for some things, my MasterCard for other things, and my Visa for other things. Well, at the end of the day I want that all pulled together in my Quicken system.
So here we would have that being done (with medical data) ... but put out there so lots of other analysts can look at patterns of use.
Now then the question is, "Who is doing that analysis?"
Is that a single governmental entity, which you could argue would be more efficient, or do you put it out there in the public domain — de-identified so I can't find out who's who but I can link together all the uses of an individual patient and an individual doctor, but I don't know who the doctor is.
My preference is to have the government entity pulling the data together, putting it out there with some very clear, transparent rules and then let anybody else go in there and use it.
If you're using public data, which is what this is, the research underlying it ought be in the public domain.
We've seen this with software now. You've got Linux; you've got a bunch of open-source programs that have highly profitable firms making them more user friendly, supporting them, etc.
So I would like it to be much more open-source. That, I think, is the best way to keep the system honest.
Q: And then everyone would have access to it, and presumably there would be a lot of analysts, whether they're academic or otherwise, providing information?
A: If you had a single system, even if you had no political involvement limiting their agenda, why would they ever have lots of different researchers working on the same problem?
I mean, if you were the Congress, would you pay for that? No, you'd have a competition and you'd pick one.
I've spent too much time doing research to know that any one researcher is going to have certain blind spots. So it's much better to have lots of people working on things in parallel.
The big cost is collecting the data; the little cost is doing the research, doing the analysis. Think of all those people needing to do doctoral dissertations.
Q: What about health care rationing? How would you prevent that from happening?
A: Rationing typically occurs when you've got people who feel that they ought to have something and they're told they can't get it. So in a sense we ration kidney transplants. There are only so many kidneys available.
The way it's being used in that kind of question is, "Well, what about the really expensive services? We're going to have to say that we're not going to pay for that, right?"
That's really where you get to when you have a single-payer system because at some point the Congress says, "We're not going to increase taxes" — and then somebody needs to make the decision.
I'm saying, "No, I don't want to go there." I don't know that we need to go there.
A lot of the increase in cost is coming from new technological breakthroughs — which are good, they may be of increasing value — that then get spread further than they need to be.
They're very good for a small number of people. You don't need them for everybody.
What that bundled-payment system (for hospitalization and chronic illness) does is it will keep (new technology) only with a small number of people.
So that's going to slow that spread of new technology.
That might also change the way people do science and move science into research and development — and (from) research and development to product. Because what will happen is pharmaceutical manufacturers and device makers will say, "Well, you know, this may only have a market of 10,000 people instead of 100,000 people. It's not worth going forward with it. I'm going to focus more on things that will help more people and get a bigger market share."
Right now the emphasis is on quality-expanding, cost-doesn't-matter technologies.
I think we'll see more quality-constant, cost-reducing technologies.
I have no preference as to whether the percentage of gross domestic product going to health care goes up or down. Maybe going up is fine. If people are getting more value for it and are willing to pay more for it then we don't have a rationing problem.
The other piece of it is, I think in many instances patients end up getting into the system and getting dragged along further than they really want. They went into the train station thinking they were getting on a local and it turns out to be an express.
Some of that very expensive end-of-life care is really where they are no longer able to get off the train.
And I think what will happen is the primary-care doctors and others will start saying, "What train do you want to be on? I'm going to make sure you get on the right train."
Will we ever get to rationing? Possibly, but I think it will take this kind of system that I am proposing a lot longer before it needs to get to rationing than if you went to a single-payer or some other system where you'll almost very quickly hit those rationing questions.
Q: I imagine that there will always be some people and providers in the system who will want to try the latest, very expensive thing.
A: That's allowed. Your doctor can prescribe it. If it's used a lot, it's going to increase his or her costs. So that's going to be the doctor's choice.
Now if there are new drugs that are not yet approved, I'm saying, "Anybody can get into a trial, and it will be paid for."
Now some people may say, "I don't want to have a 50 percent chance of getting the standard therapy; I want to make sure I get the new one."
First, that may be the wrong choice. If they knew the (treatments) were better, they'd be covered. That's why they're experimental.
I'm saying, "If you want to have a policy that pays for guaranteed access to anything you want, that's what I call the 'Platinum Plan.' Everybody else is in the Gold Plan."
But if you want it, you can have it.
That's like saying, "Everybody is guaranteed airline travel. For those who want to fly first class, you pay extra."
Q: Let's go from that end of the spectrum to the other, which is preventive care. Some people think it should be covered universally. What is your thinking?
A: First of all, all preventive services roughly are under 5 percent of total medical expenditures.
We could pay for it or not; it doesn't much matter. It's a rounding error.
Clearly I would say the universal-coverage pool — since it's paying for the hospitalization part and the chronic-illness part — if there are things that it thinks are going to save it money, it will demand that any payment intermediary offering a policy put (the preventive service) into it, and it will ship them money to do that.
So if colon-cancer screening reduces the rate of colon cancer that needs expensive surgery, it'll put money into it.
Part of what I'm doing here is playing, again, the politics of it.
I want the universal-coverage pool to make that decision not just on the fact that somebody has said, "This is preventive."
For example, if we go back to the virtual colonoscopy — virtual colonoscopy! Doesn't that sound great? — well, you still have to do the prep.
It turns out to be no better (than the standard test), and it's a lot more expensive.
Now the makers of the virtual-colonoscopy machines are obviously going to lobby for that as a preventive service.
I'm saying, "Let me take that off of the lobbying table."
It's not that we don't want to pay for prevention.
I don't want to say, "Anything that has a preventative label automatically gets covered," because that is opening this loophole.
Most prevention, however, does not take place in the doctor's office. Most prevention is better diet, exercise, lifestyle.
And those are typically public-health interventions; those are better zoning laws. Those are changing corn subsidies, all those sorts of things. That's really outside the medical care system.
Q: Are there any other services that you would see the payment intermediaries as providing, other than billing?
A: There are probably going to be half a dozen or so payment intermediaries in this area — maybe a dozen nationally.
They're competing for the doctor's business. This is sort of like Vanguard, Fidelity and Schwab wanting to get you into their administration of your 401(k) plan.
They're going to compete on offering administrative costs lower and lower and lower.
"We're also going to offer to you, doctor, advice on how you can make your practice more efficient. On how you can better select the specialist to whom you refer. On how you can sit down and explain to your men that they probably don't need the PSA (prostate) test. Maybe this will be a DVD that they take home with them, or they can even download from our site."
So the payment intermediaries will become the assistants of the doctors in informing patients — and informing doctors in how they can change their practice.
There are lots of opportunities here for new entrants into this business. But they are working for the providers.
Q: In a summary form, what are the non-negotiable elements, the things that are really key to your plan?
A: That's a bit of a challenge. I've had some people recently who've been saying, "We can't adopt such a big system, such a totally comprehensive change."
So I've been thinking about pieces of it that would work.
For example, just consolidating all the data is technically feasible. We need a little bit of legislation to deal with these additional confidentiality and use laws.
I could even imagine ways in which payers or other kinds of intermediaries would come to doctors and say, "You know, just funnel everything through my one little machine here; I will send it out to all the other payers."
As part of that process, (they could) create this consolidated data set. So you could do that. That could lead to a bunch of other really nice things.
You could go to a care-delivery team model in hospitals. It's relatively easy to do under existing Medicare law. From the patient perspective it wouldn't change things much at all.
It would really help, then, if other payers could buy into that because Medicare is only part of it.
There are things that could be done step by step. It helps if you do it within the context of, "Here's the vision of where we want to go to. We're going to start with some things here."
Then people will know how they're going to design stuff, what kinds of hooks would you need to build into the software for things that would be used later. You're not using it now, but you want to know how you're going to deal with it later.
Certainly there are things we could start doing that we need to start doing very early on, in terms of changing how medical education is focused and trying to get more doctors into primary care.
So there are lots of pieces that can be done. You don't have to buy the whole thing.
Q: Is it possible to have a state system instead of a national system?
A: You could. But the big problem if you're going to do a state system is you'd have to get Medicare willing to play. And Medicare is a national system.
If you only had a state system, though (which you could: Massachusetts is going down the road in terms of coverage. It's very good, but it's nowhere near there in terms of cost. They're a very expensive place to be), it could work for individuals. But it won't change that rate of growth in technology because technology developers look at a national or an international market.
So there are some real advantages to going national. That doesn't mean that you might not, in a transition phase, have some states volunteering to move first. They may say, "We're going to move our Medicaid (or MediCal program in California) over in that direction."
They get a waiver from the feds to move Medicaid in their state. But that's part of a national plan to transition everybody. And we're saying, "Yes, we want some early volunteers to get the kinks worked out."
Q: Seems like there's a greater movement now from all different sectors towards reform.
A: And that's the really exciting part. Almost all of the players came to that meeting (in March) with (President Barack) Obama and have said publicly, "Yes, we're going to play at making something happen here. We don't know what will happen when push comes to shove — and there will be a lot of pushing and shoving — but we don't have people out there saying, "Over my dead body will there be health reform." Everybody realizes that the current system is not tenable.
Join the discussion
People are talking about health reform on TownSquare, the online discussion board at Palo Alto Online.com.
Chat with Harold Luft
Health economist Harold Luft will be online to answer your questions about health care reform. Go to TownSquare on PaloAltoOnline.com between noon and 2 p.m. on Tuesday, April 14, where Luft will be chatting live with readers.
Managing Editor Jocelyn Dong can be e-mailed at jdong@paweekly.com. | 
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