Guiding Principles — Discussion

1. Reform must address and reduce skyrocketing medical care costs.

The key to the success of any health care reform plan is its ability to address the true underlying problem with our existing integrated public and private system – the cost of health care insurance. True accessibility to health care and private health insurance coverage is dependent upon whether or not it is affordable. Constraining skyrocketing costs is a critical aspect of health care reform.

Since the early 1970s, the cost of health insurance has continued to rise faster than annual inflation. Although the rate of increase slowed during the first years following the passage of the Affordable Care Acts (ACA), it is again increasing at a rate significantly above inflation.vi

The following areas are those where, if improved, the U.S. health care system could achieve lower costs, greater efficiency, enhance quality, and provide better access.

A. Administrative Overhead, Regulatory Expenses, Benefit Mandates, Unnecessary Services, Fraudvii:

As noted in the original HealthCare Summit report, research by the Office of Management and Budget showed that an average of 15% of health insurance premium is retained by insurance carriers to cover administrative expenses, including profit; and an additional 6% is spent by health care providers to comply with the regulatory and accreditation requirements. Research by the Kaiser Family Foundation and the Maryland Healthcare Commission documents that an additional 5% of the premium is used to pay for mandated benefits not proven effective, for non-essential personal life-style choices, and for non-patient care services. Pricewaterhouse Coopers research documents that an additional 10% of the premium goes to pay for litigation costs to process alleged malpractice complaints, including defensive medicine costs.

In addition, recent office surveys confirm that an additional 3% of the premium is spent by providers for administrative expenses related to processing claims and contracting with carriers and provider networks. The White Collar Crime Division of the FBI reports that 10% of premium is spent on fraudulent claims and services.

The summit participants note that since the implementation of the Affordable Care Acts, these non-health service costs continue to increase. In addition, the newly created Accountable Care Organization’s administrative costs add an additional 6% administrative overhead.

The total of the above expenses is 55%. Today only 45% of health insurance is spent on medical services, both necessary and unnecessary; including the regulations which ensure access, ensure safety, prevent fraud, improve quality; and the basic health service infrastructure.

Controlling these non-medical service costs could potentially reduce health insurance costs significantly.

B. Medical Malpractice – Tortviii:

As noted in the original HealthCare Summit report, the amount health care providers must pay for medical liability insurance coverage is on the rise. This has directly impacted health care costs in this country. An additional costly side effect of rising medical malpractice insurance rates is the cost of defensive medicine (when doctors order more tests, prescribe more medication, and make more referrals than they believe are necessary to protect themselves from being accused of negligence). Since 1975, when medical malpractice insurance data was first separated from other types of liability insurance, medical malpractice cost increases have outpaced other tort areas, rising at an average of 11.7% a year. In 2004, medical malpractice costs totaled over $28.7 billion, up from about $26.5 billion the previous year. Medical liability costs and defensive medicine combined, currently account for 10% of medical care costs.

Extensive independent research documents that:

• Negligent and substandard acts occur by physicians, other health professionals and hospitals. However, negligent acts are far less common and more difficult to identify than originally thought. In the largest study of hospitalized patients (30,000 patients studied by the Harvard Law School), adverse events occurred in 3.7% of the patients. However, negligence occurred in only 1% of the patients, and physician, nurse or other hospital staff negligence occurred in only 0.3% of the patients (3 out of every 1,000 cases).

• The malpractice complaint process is inefficient, ineffective and unpredictable. It takes an average of 4.88 years to process injury claims in America (2006). Sixteen times as many patients suffer an adverse event from negligence as receive compensation using the tort system. For every dollar award paid to successful malpractice claimants, litigation and administrative overheads consume 60%. Only 40% of every dollar is paid to the patient and only 29% of the patient’s share is used to pay for medical expenses.

• There is no association between compensation and the occurrence of an adverse event due to negligence or an adverse event of any type.

• The size of the settlement or jury award is based on the severity of the patient’s disability, not the occurrence of an adverse event or an adverse event due to negligence.

• The malpractice complaint process has serious, unintended complications. Physicians order medically unnecessary procedures and tests believing that this will help in their defense. Some of these unnecessary procedures and tests cause the patient injury or illness. All of these procedures and tests add to the already high cost of health care.

• This fault based system relies upon public, adversarial proceedings to address patient claims. It introduces anxiety, distrust and second- guessing into the physician-patient relationship which should be one of trust, confidence, and patient involvement in the decision-making processes. Court actions for medical negligence take a considerable toll on the emotions and resources of both patient and provider.

• The tort system has not been successful in affecting meaningful improvement to the patient care process or accomplishing significant reduction in the incidence of patient injury. This is partly due to the random nature of medical malpractice litigation. It signals to health care providers that the likelihood of being sued for medical negligence is related to statistical chance rather than the quality of health care rendered.

In conclusion, the current malpractice complaint process using tort is expensive, lacks a nexus, is inefficient, and ineffective.

C. Service Delivery Inefficiencies and Quality Gapsix

As noted in the original HealthCare Summit report, service delivery inefficiencies lead to unnecessary use of expensive emergency department services, poor communication, delays of diagnosis and treatment, adverse drug events, redundant medical tests and medical errors — all of which increase morbidity, mortality, and cost.

It was noted that the National Center for Policy Analysis (NCPA.org) reports that the total cost of unnecessary emergency room visits and unnecessary physician office visits is just under $31 billion annually, or about $300 per American household per year. They also noted that “patient medical records are often handwritten and are usually maintained and stored separately by each physician, clinic or hospital used. Consequently, conditions affecting the patient may be unknown at the time of treatment. Because most patients see a number of physicians over time, care is fragmented, and doctors and other medical providers often must treat a patient with limited information. This lack of care coordination often leads to medical errors, adverse drug events and redundant medical tests.”

In addition, it was noted that according to research published in The Journal of the American Medical Association, during a 20-minute office visit, physicians spend less than one minute planning treatment (on average). In addition, more than two-thirds of the public (72%) think "insufficient time spent by doctors with patients” is one cause of preventable medical errors, and three-fourths (78%) think that the occurrence of medical errors could be reduced if physicians spent more time with patients.

Unfortunately, as reported in the New England Journal of Medicine, since the introduction of the electronic medical record, physician administrative efficiencies have not improved and the physician time spent with patients has not changed.

As reported in the British Medical Journal, the third most common cause of death in the United States is preventable medical errors caused by delivery system problems. Also, the CDC reports that hospital electronic medical record introduction and implementation has resulted in information errors which have caused significant patient harm.

2. Consumers must have transparency of medical information, including cost, which will enable treatment choices.x

As noted in the original HealthCare Summit report, Americans are consistently using health care services more and more. This has a tremendous impact on health insurance premiums. In a report prepared by PricewaterhouseCoopers (on behalf of America's Health Insurance Plans entitled The Factors Fueling Rising Healthcare Costs 2006), “higher utilization of services accounted for 43% of the increase, fueled by factors such as increased consumer demand, new and more intensive medical treatments and defensive medicine, as well as aging and unhealthy lifestyles.” Americans need to become more engaged as consumers. Informed shoppers are more efficient consumers, and efficient consumers spend less money.

Since the original HealthCare Summit report was released there is no evidence that transparency has improved.

3. Reform must include public and private wellness promotion initiatives.xi

As noted in the original HealthCare Summit report, unhealthy behavioral and lifestyle choices contribute significantly to the cost of health care. Research shows behavior is a significant determinant of health status with as much as 50% of health care costs attributable to individual behaviors such as tobacco, alcohol, and drug use, poor diet, and a lack of exercise.

Increasing numbers of Americans are obese, often starting in childhood as a result of poor eating and exercise habits. According to the National Center for Health Statistics, 38% of adults (more than 75 million Americans) are obese, a 29% increase in the past decade. Research has also shown tobacco use is responsible for approximately 6% of total U.S. health care costs. These behaviors lead to many serious chronic health conditions such as cancer, diabetes, heart and cardiovascular disease. Consumers are seeking medical solutions for these lifestyle issues rather than correcting unhealthy behavior.

The American health care financing and delivery system has made some positive gains since 2010. Age appropriate preventive and wellness insurance coverage is now available and the federal government more fully funds public health services which are primarily population based preventive services, community based, and proven to be effective by scientific evidence.

4. Reform must provide programs for uninsured Americans,while preserving the current health insurance programs that provide benefits to 85% of Americans.xii

As noted in the original HealthCare Summit report, in 2006, 85% of Americans had health insurance coverage, leaving 15% uninsured. Demographic information revealed that 19.4% of the uninsured in America had incomes between 100% and 200% of the federal poverty level (FPL). Therefore most of this segment of uninsured were eligible for Medicaid, but not enrolled. While mass enrollment may be challenging, attempts to identify and cover this population are extremely important. If coverage for all is the goal, then locating, enrolling, and funding for this population must be achieved.

Other segments of uninsured included the Low Wage Workers (LWW) defined as working individuals earning between 60% and 250% of FPL and the “irresponsible uninsured” who have the access and income to purchase health care coverage, but did not. Thirty-nine percent (39%) of America’s uninsured had income levels above 200% of FPL, ($40,000 for a family of four).

The largest percentage of the uninsured, 58.2%, were young adults ages 18 to 44. This population is arguably the healthiest segment of our society. Because this segment also spans all socio-economic categories, any meaningful reform must address this population.

The American health care financing system has made some positive gains since 2010.xiii More than 90% of Americans are now insured. Also, there is for the first time a national minimum standard benefit plan which includes guaranteed issue regardless of age or pre-existing condition; evidence based chronic condition disease management programs; and wellness services. Also, the Federal Government provides more funding opportunities for public health services, which are population-based and community-based.

5. Reform must provide a source of coverage for the uninsurable populations of the United States.xiv

As noted in the original HealthCare Summit report, the uninsurable populations in the United States were persons who cannot qualify for health insurance because of a physical or medical condition. This group included (1) individuals who lost their coverage through reasons other than failure to pay their premium, (2) certain individuals who move from state to state and (3) individuals who have acquired disqualifying illnesses or injuries.

The American health care financing system has made some positive gains since 2010. Uninsurable populations currently have greater access to insurance through health exchanges and Medicaid.

6. Reform must guarantee that all Americans have access to a“Medical Home,” coordinated by a primary care physician.xv

As noted above, health service delivery inefficiencies lead to unnecessary use of expensive emergency department services and urgent care centers, poor communication, delays of diagnosis and treatment, adverse drug events, redundant medical test and medical errors — all of which increase morbidity, mortality and cost.

This inefficiency can be eliminated if every American had a “Medical Home.”

A “Medical Home” is defined as a consumer having access to a Primary Care Physician coordinator, selected by the consumer, who is the coordinating physician for all health system interfaces. That physician is patient-centered, is wholly accountable for a patient’s physical and mental health care needs (including prevention and wellness, acute care, and chronic care), directs a team that coordinates care across all elements of the broader health care system (including specialty care, hospitals, home health care, community services and supports), is accessible 24 hours a day/7 days a week, and is committed to quality and safety.

Today, a “Medical Home” is not available to millions of Americans. Consumers without a “Medical Home” access the system through emergency rooms, urgent care centers and pharmacies as their only available option – all non- comprehensive, expensive settings.

7. Reform must ensure that the consumers and treating physicians are the primary health care service decision-makers (not the insurance companies, the corporate owners of health care organizations and institutions, nor the regulatory agencies).xvi

Insured consumers can no longer choose their physician. Instead, the insurance company makes that decision for them by restricting the consumer’s choices to contracted providers within their networks. Today, except for regular Medicare, “no network” insurance plans are unavailable in most markets.

In addition, as a practical matter, the insurance company is making the consumer physician choice and treatment decisions, not the patient or the patient’s physician. Today, the physician’s consultation, treatment and medication decisions are determined by the insurance carrier’s contracting arrangements. Also, most diagnostic and treatment decisions require prior approval by the insurance carrier, often delaying the patient’s health care needs.

Furthermore, corporate owners of health care organizations and institutions are frequently making physician treatment decisions, not the treating physician. As a condition of many hospitals (or other health care institutional privilege and insurance contracts), providers must agree to adhere to certain practice guidelines which may conflict with specific patient needs or require medically unnecessary services or treatments for specific patients.