Segment 9 – The Big Fix for U.S. Healthcare

Segment 9 – The Big Fix for U.S. Healthcare



This segment reviews the “Big Fix,” based on the idea of setting limits fairly. It describes the success of the Oregon Health Plan of 1994.

In the first 8 Episodes, we have reviewed the evolution of the US healthcare delivery system and insurance system. We have identified the relentless growth of healthcare spending as the root of the problem. And how rising costs are literally built into the system as it is now. Finally we have looked at American traditions and values that we all agree on, and we identified loaded political words and the seeming conflict between market justice and social justice that voters disagree on.


Based on this understanding of the US healthcare system, we are now ready to look at what I’m calling the Big Fix. It is based on the idea of setting limits fairly. You’ll be surprised to know that it was already tried 20 years ago in Oregon. And it worked!



So, let me tell you the story of the Oregon Health Plan. It all starts with a Roseburg Oregon emergency room doctor named John Kitzhaber. Half of his ER patients – as everywhere – were not real emergencies, just uninsured patients with no other place to get healthcare.


So in 1989 when the Medicaid budget was being cut, he realized that many Medicaid patients would lose coverage, and would be flooding into his ER. Unless something was done.

He came up with an idea. Rather than keep the same level of benefits and cut patients, why not keep all the patients on Medicaid but limit their benefits? He formed a non-profit group to lobby for these low-income patients. This propelled him to the state senate and eventually to the governorship. He first created a list of 709 diagnosis-treatment pairs ranked by the dollar cost per life saved by each treatment (or “quality-adjusted-life-year”).


But this produced some odd results, for example ranking lower-cost dental care above life-saving appendectomies. And so he next organized 60 town hall meetings to re-prioritize the list with common-sense consumer input. Actuaries then calculated the line (Line 581) above which the fixed Medicaid budget could cover all eligible patients. The final list gave priority to life-saving treatments such as antibiotics for pneumonia and appendectomy for appendicitis, as well as to proven effective treatments for heart disease and treatable cancers. It also included routine preventive care, maternal care, newborn care, well-child care and preventive dental care. Kidney dialysis was covered above the Line. The list did not cover conditions like remedies for the common cold that get better on their own, conditions where “home” treatment is effective like sprains, ineffective or futile care such as surgery for most back pains or aggressive treatment of end-stage cancer. For those terminal cancers, it did cover comfort care.

Here are the other main provisions of the Oregon Health Plan. By eliminating low-value health services, it was able to cover 100 percent of low-income citizens. The combination of sound research and consumer input gained it public acceptance.


Here is the time line for the Oregon Health Plan. It actually took 5 years to gather public input and then to get necessary federal waivers approved.


Here is a summary of the key successes of the Oregon Health Plan. Oregon was able to extend plan eligibility of those below federal poverty level from 57% to all 100%. This meant 100,000 more Oregonians on Medicaid. However 65,000 still did not enroll, presumably due to complicated enrollment procedures or copays up to $28. Total uninsured in Oregon did drop from 18% to 11%. Most importantly, Medicaid stayed within its budget. Medicaid physicians were paid on a par with others, resulting in robust doctor participation and 88% patient satisfaction.


Let’s pause to consider a key question, Is it ethical to limit health benefits for low-income patients? Philosopher Paul Menzel (who I introduced in the last Segment) gives a resounding Yes. Here is his thinking. The right to prioritize healthcare services is especially important for lower-income patients. If they were given their Medicaid premium in the form of cash, many would spend only 33% of it on healthcare because they have more pressing needs for food, clothing, and shelter. Menzel also points out that these low-income patients would gladly accept a package of more restricted health services in exchange for first-dollar coverage. Lower-income patients live from paycheck to paycheck and don’t want the uncertainty of a large unexpected medical bill. Medicaid patients want healthcare insurance, but neither they – nor society at large – should pay more than it’s worth to them.


In plain language, lower-income patients – and other savvy insurance buyers — need the real choice for a lower-cost package of limited health benefits that is “worth the money,” not just a menu of higher deductibles and copays but the same old package of exorbitantly costly, low-value care.

Please notice that this idea blends both market justice and social justice. It acknowledges that low-income patients are not entitled to everything, no matter what the cost. But it also provides for them a package that they – and society – think is costworthy. And does so with their consent freely given. Costworthy care is one of the key features of a fair health system, according to Menzel, as we saw in the last Segment, and consent is a key principle.

It is instructive to look at the fate of the Oregon Health Plan over the 8 years of its existence. Here is what happened. The legislature cut taxes. Healthcare costs rose with inflation. Oregon tried to get the poor to accept higher co-pays, but they could not afford them and so dropped out. Eventually these patients went back to traditional Medicaid or became uninsured again, spelling the end of the Oregon Health Plan.


What are the lessons to be learned?


First, limit-setting is politically feasible, ethically acceptable and pragmatically successful in controlling cost, access and quality.

Second, priority setting takes years to plan and years to implement.

Third, healthcare priority setting should be informed by cost-benefit research but driven by public participation, respecting minority rights and protection of the sick and vulnerable.

Fourth, two-tiered health benefits packages – one lower-cost and one higher-cost – is politically feasible and ethically acceptable (but so-called Essential Benefits should not arbitrarily cut entire categories of benefits like maternity care).

Fifth, sufficient primary care provider pay is needed to ensure doctor participation and patient access.

Sixth, sustaining healthcare system restraints and cost controls requires continual monitoring and periodic updating to keep up with new medical research and changing public values.

This is a critical point, because the casual observer might conclude that the Oregon Health Plan failed in 2002.

But I argue that the fact that the Plan was designed, politically adopted, implemented and sustained for 8 years proves the concept that limit setting can work, but also shows that something so big and so intricate needs ongoing political and administrative energy to sustain it.

Of course I have over-simplified the Oregon Health Plan. There are innumerable technical, legal, budgetary and administrative details involved.

Also, adopting a plan like Oregon’s today would need us to take into account 20 more years of research since then, with some very expensive but very effective treatments newly available. There are also many ethical nuances, such as should we budget for one patient needing a $100,000 treatment in place of 100 patients with $1,000 treatments, or vice-versa? But Oregon showed that all these issues can be managed in an orderly fashion.

I have also over-simplified that merely adopting the Oregon Health Plan cost-benefit method for limit setting would solve the entire cost problem. For example, many commentators have exposed the quirks of the US healthcare system that result in over-pricing, as discussed in Segment 5. That means that the same drugs, tests or treatments cost 2 to 10 times more in the US than in other countries. Those quirks should each be addressed in policies and regulations.

But the basic idea of fair limit setting – call it rationing, if you like – is the key, in my opinion. Limit setting would firmly challenge the common presumption that all healthcare is equally cost-worthy. It would put on notice the vested interests: if they play games with exorbitant pricing, they would ultimately lower their benefit-for-cost below the cut-off point, and drop themselves off the covered list altogether.

In the final Segment, I will talk about what each of us can do to promote health system reform and cost control.

I’ll see you then.


Segment 7 – Healthcare Power, Politics & Philosophy

Segment 7 – Healthcare Power, Politics & Philosophy


This segment reviews preconditions for having a focused discussion of healthcare reform necessitated by powerful vested interests, and it discusses how to overcome political polarization.

In the first six Segments, we have reviewed the relentless growth of healthcare spending. And how rising costs are literally built into the system as it is now. This review should give us some ideas on how to fix the system.

But before we talk about how to fix the healthcare system, we must first tackle some landmines that lurk beneath the surface. The landmines are power, politics and philosophy. They are the subject of the next 2 Segments.

In this Segment, we will discuss both preconditions necessary for a calm, focused discussion of healthcare reform as well as what I call “loaded” political words. Then in the following Segment we will look at traditional American values and principles that can be brought to bear on resolving the core philosophical dilemma that has kept us from fixing US healthcare all these years.

Let’s start with preconditions. The idea here is that healthcare now comprises 1/6 of the entire US economy. So, there are powerful interests, lots of money, and fierce political convictions that could derail any discussion before it even gets started.

So, I suggest setting preconditions to be agreed on beforehand. Only then can we calmly get into the meat of the discussion. Here are the preconditions.


First, for purposes of discussion, let’s agree to keep dollar spending at the 2017 level – no winners, no losers, everything the same.

Second, let’s keep power the same. Keep the AMA, the hospital association, the VA, Health & Human Services, etc. No power struggles.

Third, strive to keep partisan politics out of the discussion. Make it a joint problem-solving project. Give credit where it’s due: to politicians or policy writers who contribute constructively. The motto is: “U.S. spells us.” Healthcare employs 1/6 of us and touches all of us.

Fourth, here’s where I will insert a viewpoint from my 40 years experience as a doctor: Human beings all get the same illnesses, all suffer, all are interconnected mind/body/spirits. I – like all doctors — have taken care of rich and poor, all races and nationalities, religious and non-religious, social outcasts and VIPs, saints and sinners. In a hospital bed or in the doctor’s office, we’re all the same. We should remember, “We’re all in this together”

Lastly, since healthcare is “too big to fail,” whatever is done should be done deliberately, slowly, with monitoring along the way and mid-course corrections when needed. If we accept these preconditions, we can have a Win-Win Discussion.

This kind of discussion should look at Facts, Goals, Values and lastly Methods, the actual Fix.

We have already discussed the Facts. The key facts are:

– the US health system has grown to 3.2 trillion dollars, representing 1/6 of the entire economy

– Cost growth is built into the system, has always outpaced inflation, and has resisted attempts to restrain the growth

– Healthcare spending is draining vitality from the economy, government and individual household budgets


Here are the key Goals:

– We must stop excess healthcare growth beyond the natural increase expected from population increase, aging, and innovation.

– To do so will require fundamental reform of the system, not just tinkering with public finance and private insurance

– Since healthcare is “too big to fail”, a key goal is Avoid short-term disruption, again proceed slowly.


The last things to discuss before we get to specific Methods – what I am calling the Fix of healthcare – are Politics and Values.

We all know that our country is polarized to an unhealthy extent. This has contributed to political paralysis – not getting anything done. I’m not a political scientist and cannot tackle the whole subject of healthcare politics.

But I do want to look at what I call “loaded words” that creep into our debates on healthcare. These words lock us into a closed, rigid mindset and can shut down discussion.

Let’s look at a few “loaded words” and suggest more neutral words to help keep the discussion open-minded.


First is “socialized medicine.” This terminology stirs up the negative connotations of the so-called “Prussian menace” after World War I and “Red scare” after World War II. A more neutral term would be “publicly financed medicine.” The truth of the matter is that currently almost 50% of healthcare is already publicly financed through Medicare, Medicaid and other government programs. The issues behind the loaded words, which do need thoughtful discussion, are accountability; and also advantages and disadvantages of uniformity and nationwide scale, instead of the current fragmented system.

The next loaded terms are “free market” and “competition.” The connotations are freedom from government interference, freedom from politics, consumer freedom, and efficiency. The grain of truth behind the terms is that the law of supply and demand does drive down prices to a balance point in pure markets. The reality, however, is that healthcare is not a pure market, as we saw in Segment 5. Also, markets sometimes leave aside consumers who are poor or powerless, which includes many of the sick. A more neutral term is commercial market.

Next is “rationing.” The connotation is forcibly withholding something from an individual. A more neutral term is “limit-setting” or “prioritizing.” We will talk more about this in the next Segment, and about the need for patients’ to consent to limits on their health service or health insurance. The reality is that we already have de facto rationing by zip code, income level, government budgeting, and hospital technology policies. Prioritizing is not bad – it’s necessary.


Another loaded word is “choice.” The connotation is that the government will interfere in choice of doctor or into the doctor-patient relationship itself. This was one of the scare tactics used by the insurance association in 1993 to bring down the President Clinton’s health reform plan. But the reality is that insurance network plans restrict patient choice of doctor more than government rules do. In addition, doctor inclusion in Medicaid – and other insurance plans, for that matter — is often a matter of the pay scales set by Medicaid or insurance companies, not the choices made by patients.

And the last loaded term I’ll mention is “big government.” The connotation goes back to President Reagan saying, “Government is not the solution to the problem; government is the problem.” We always hear about the Army’s 100-dollar toilet seats (in 1986 dollars) and the disastrous roll-out of the Obamacare website.


And the truth is that government is big and can be just as flawed as any big institution. However, national government, unlike private companies, is legally transparent and accountable. Also, Government can fulfill some functions more effectively and efficiently than some private sector piecemeal approaches. Here are examples: FAA, FDA, FCC. Currently the military enjoys a high regard. Some examples of public-private partnerships are the moon shot, internet and healthcare research. Medicare has an enviable customer satisfaction rating of 77%.

The reality is that we are now a nation (and world) of big institutions – for-profit, non-profit, government, academic. All have institutional governance and administrative challenges, which are studied by the disciplines of public administration and business administration. Public administration and business administration tell us how best to run big institutions so as to fulfill their mission and to remain accountable and transparent. More neutral terms instead of “big government” are: public sector programs or taxpayer-funded program.

So we have some better neutral terminology to use for discussing healthcare to avoid inflammatory polemical words.

In the next Segment we will look at American values at stake in health care. We will also look at what philosophers say is a fair way to run US healthcare.

I’ll see you then.



Healthcare’s Dangerous Fee-For-Service Addiction

For its many users, healthcare’s fee-for-service reimbursement methodology is like an addiction, similar to gambling, cigarette smoking and pain pill abuse. Doctors and hospitals in the clutches of this flawed payment model have grown dependent on providing more and more healthcare services, regardless of whether the additional care adds value.

I don’t use this metaphor lightly, nor wish to trivialize our nation’s growing problem with addiction. Rather, as a physician and former healthcare CEO, I am increasingly concerned with the impact this payment structure is having on American health. And I worry about whether providers are willing to “kick the habit” before it’s too late.

Addictive Qualities

The Affordable Care Act, signed into law March 2010, included several provisions encouraging doctors to focus on increasing value (instead of simply maximizing the volume) of healthcare services. And yet, seven years later, between 86% and 95% of U.S. healthcare providers are still paid for each individual test, procedure and treatment they provide, an arrangement that continues to drive up healthcare costs with little to show for it. According to the latest Commonwealth Fund report, the United States spends more on healthcare than any other industrialized country but ranks at or near the bottom in almost every measure of comparative quality.

As with any addiction, America’s dependence on fee-for-service has dire financial and health consequences. This year, the estimated cost of care for an insured family of four will reach nearly $27,000, paid for through a combination of employer health insurance ($15,259), payroll deductions ($7,151) and out-of-pocket expenses at the point of care ($4,534). Year over year, patients are on the hook for a higher percentage of their total healthcare costs, which rose 4.3% compared to just a 1.9% increase in the U.S. GDP last year. This is a major warning sign. If medical costs continue to surge 2% to 3% higher than our nation’s ability to pay, the healthcare system will soon reach a breaking point. Businesses, the government and insurers will have no choice but to ration care or slowly eliminate coverage for the nation’s poor, middle-class and elderly populations.

As with all addictions, the fee-for-service model has mind-altering effects, distorting the perceptions of its users in ways that make them unaware of their growing dependence. When providers are paid for doing more, that’s what they do: They increase utilization of services and ratchet up the cost of care without even realizing they’re part of the problem. According to one study, just 36% of practicing physicians were willing to accept “major” responsibility for reducing healthcare costs. Of course, the first step, as with other habits, is to recognize the problem. Only then can we explore treatment options.

Whose Lives Should Be Saved? Researchers Ask the Public

In a church basement in a poor East Baltimore neighborhood, a Johns Hopkins doctor enlisted residents to help answer one of the most fraught questions in public health: When a surge of patients — from a disaster, disease outbreak or terrorist attack — overwhelms hospitals, how should you ration care? Whose lives should be saved first?

For the past several years, Dr. Lee Daugherty Biddison, a critical care physician at Johns Hopkins, and colleagues have led an unusual public debate around Maryland, from Zion Baptist Church in East Baltimore to a wellness center in wealthy Howard County to a hospital on the rural Eastern Shore. Preparing to make recommendations for state officials that could serve as a national model, the researchers heard hundreds of citizens discuss whether a doctor could remove one patient from lifesaving equipment, like a ventilator, to make way for another who might have a better chance of recovering, or take age into consideration in setting priorities.

At that first public forum in 2012 in East Baltimore, Cierra Brown, a former Johns Hopkins Hospital custodian, said she favored a random approach like a lottery. “I don’t think any of us should choose whether a person should live or die,” she said.

Alex Brecht, a youth program developer sitting across from her, said he thought children should be favored over adults. “Just looking at them, seeing their smiles, they have so much potential,” he said.

“Who’s going to raise them?” asked Tiffany Jackson, another participant.

The effort is among the first times, Dr. Daugherty Biddison said, that a state has gathered informed public opinion on these questions before devising policy on them. “I don’t want to be in a position of making these decisions without knowing what you think,” she told the residents. “We as providers,” she said, “don’t want to make those decisions in isolation.”

Rationing already occurs in delivering medical care in the United States, though some practices are little acknowledged. Committees struggle regularly over policies for allocating scarce organs for transplant.

During widespread drug shortages in recent years, doctors have sometimes chosen among cancer patients for proven chemotherapy regimens and among surgical patients for the most effective anesthetics. And doctors sometimes have to choose among patients who need treatment in intensive care units, which are often filled to capacity.