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Health Care Reform and Social Justice
This is a transcript of a talk by Bruce Bodaken, CEO of Blue Shield of California. Bodaken was a distinguished visiting scholar at the Center Nov. 5 and 6, 2009.
PowerPoint slides from the talk More Information on Health Care Ethics
I want to spend a little time today talking about the truth about American Health Care. I don't have a corner on the truth. Out of good dialogue, Socrates believes, truth should come. So if we have a good dialogue today perhaps we'll discover some truth together. I do have a perspective on what American health care is doing right and where we can make improvements. I certainly have a perspective, having spent much of my time over the last three months in Washington, about what politicians are talking about relative to health care and, more importantly, what they should be talking about. Finally, what will enter into the dialogue we're having tonight are the explicit ethical tradeoffs that we should be making as a society-as people that certainly need health care sometime in our lifetimes-though we may actually spend our careers in care giving (in health insurance or in health professions). There are really all of these difficult choices to be made when you've got scarce resources for what you might think of as almost infinite demand. That's really the way American health care has got itself into the place it's gotten, because we still have not resolved that issue. Demand has continued to spiral up. We've done a great job in bringing science to the place it's in, which means there'll be more and more new drugs, new technologies, new alternatives for treatment. But we still don't know how we're going to pay for it. So the real tradeoff: how do we understand that, and how to we find a way through those distributional dilemmas to a place we would call a place of social justice?
The truth about US healthcare is something that I suspect all of you have seen represented in a chart like this during some point in your careers. The truth is we spend about twice as much as the other developed countries on health care in general. We get, in some cases, not as good results, or roughly as good results. So while almost all the other developed countries cover almost every one of their citizens, in the US today there are fifty million people uninsured. That's certainly what part of the debate in Washington is about; making access something we take seriously. I should tell you that Blue Shield went on record in 2002 at the Commonwealth Club that we believe that there ought to be universal health coverage, and for those that can't afford it, it should be subsidized. If you look at the United States just in terms of public and private care, it's probably up to 16.5 percent of GDP. As you can see, the average for OECD countries is about 8 percent. So in some countries a little higher, some a little lower. There've been a couple recent NPR specials on KQED about other health care systems, which have been effective in showing what's been working outside of the US. Here, I've only put one statistic, which is life expectancy. That's not necessarily the only thing we should judge in terms of quality. In reality, there's not much difference. We spend twice as much, and there's not much difference. We haven't figured out how to get 50 million people-as they have in other developed countries-coverage. That's under the current circumstances of spending as much as we do today.
So, let's just talk about a couple of different countries-we could go into all of them, but we don't need to do that. If you think about the German system-insurance is required; if you're a German citizen you have to have insurance, which is provided through your employer, for the most part. There are some exceptions to that, but for the most part everyone gets funded through their employer. They pay it through payroll taxes, through the employer and the employee. In that regard, it's not much different than in the United States in terms of our employer-based system. But the premiums are not determined in any way by virtue of your preexisting conditions or health status. And the costs are-as you saw in the previous slide-are as low as they are primarily because the cost of care is much, much lower. By that I mean physicians' salaries, general practitioners' salaries, specialists' salaries, hospital bed days-all the things they use (including pharmaceuticals) are much, much cheaper. When you hear about the other systems, we often think "Gee, they must be doing something special to keep costs down so low, to keep quality up." Well, what they do especially well is provide hospitals and doctors a lot less than we do. That's the fact of the matter. That's the reason they've kept costs down while providing universal coverage. So it's really a debate, in Washington. We certainly could cover 50 million people if we spent half as much as we do on medical care, but there are a lot of people, like the people at O'Connor Hospital, and those of you that want to be physicians, and a few other folks that would be concerned about that. But that is the reality. Incidentally the German system is a pretty good system. It does provide pretty good health care in a variety of spectra in terms of quality indicators.
Canada we included because it's close, and some of you may have actually had experience with the Canadian system. It is also a universal coverage system, but it doesn't cost you anything if you're a Canadian citizen. What it costs you is a much higher tax rate. In general, the income tax of every province is significantly higher than the income taxes in the United States-which may be going up soon, especially for the wealthy. Nonetheless, now, we have much lower income taxes than in Canada. But what they do have that we don't is a universal coverage system that covers everyone for everything. The limitations on that are pharmaceuticals-not fully covered-dental, supplementary services, and mental health services that are not fully covered. The way it works in Canada, for those of you that have been to Canada-is that the provinces set a budget for the whole year. And about now (in October) they begin to run out of money. As they get closer to the end of the year, what happens is that the median wait times go up-for example, a hip replacement takes 242 days; that happens because those province budgets start to run out of money. A hip replacement is not life-threatening, and neither is a knee replacement. So you can wait almost a year or two for one of these operations. For Canadians, if you talk to Canadians, while they're not crazy about the system in general-they have their complaints-most Canadians I've talked to (and this is probably not statistically valid) usually say, "If I have to make the tradeoff of paying out of pocket for care and knowing it's going to be there for life threatening emergencies and care, and knowing that eventually I'll get the care I need-that's a tradeoff I'll make." But I'm not sure that the Canadian system would work in the United States because we're basically impatient. We're not used to waiting a year or even two years for something that we think is important and necessary now. I had my knee worked on a couple of years ago, made an appointment, and two weeks later had the surgery. If they had told me it was going to be two years, I'm sure that I would've complained, and said this is much more important because I want to get back to running. And the reality is that, in Canada, I would have had to wait. But these are the tradeoffs they've made.
Now, where does the money go internationally and where does it go in the United States? This slide pretty much says it all. This is a slide, as you can see, based on specialists, general practitioners, and RNs. On average, a specialist in the US makes about $225,000-some make a million, some make $150,000, but the average is about $225,000. We have, in this country, roughly 700,000 physicians-actually about 900,000 physicians, of which about 500,000 are specialists. So if you look at the left hand bar, which is the red bar, specialists make $225,000 on average in the United States annually. In other developed countries they make about $100,000. For you math majors that's a $125,000 difference. If you calculate $125,000 times 500,000 specialists it's a big number, a very big number. It would pay for all of the care for everybody in the US for probably ten years. So just that one difference in payment is the key to why healthcare is so expensive in the United States, and why it's so much less expensive in other countries. The same is true for general practitioners, whom we pay about $150,00, and who make about $75,000 [in other developed countries]-so it's roughly double. They're paying physicians roughly half what we are in the US. Plus, we all know pharmaceuticals are much cheaper in Canada because, in fact, the pharmaceutical companies negotiate with governments in other countries. They don't in the United States. But they do with other governments, and give them big discounts. And they pay for that by charging American hospitals, physicians, suppliers, a much higher price for those very same drugs. That's why you hear about people going across the Canadian line, getting drugs, and coming back-because they're roughly half as expensive. So if everything's roughly half as expensive, it's pretty easy to solve this problem.
But things aren't that simple. Think about it in terms of procedure. I had my appendix out in eighth grade. It was the first time I remember being in a hospital. As you can see, again, a very simple procedure. I'm sure appendectomies today take about fifteen minutes, and are pretty non-invasive. Five times as much on average, for an appendectomy in the United States than in any other country. And it could be double that for high-end institutions like Stanford Hospital, one of the highest cost institutions on the West coast. Again, if you look at procedures, payment to physicians, the reality is the biggest difference between other countries' costs and America's cost is we pay to providers. Not the quality they provide, nor the amount of care-in fact they provide more care, because the cost per unit is so much less. And we'll come back to that.
For the last decade, at least, people have looked at that picture and said, "How can it be that other developed countries can cover every man woman and child for essentially all their essential basic services, and the United States can't." We're a rich country-we were a much richer country ten years ago than we are today, but we're a rich country, still the economic center of the world for the time being. And certainly we can figure out a way to provide services. If Canada can do it, Germany can do it, Italy can do, Japan can do it, then why can't we do it? That's what started the debate. And it got serious this year when the president stood up and said, during the State of the Union speech, that we must not wait, we cannot wait, we must solve health care this year. He was serious. His plan was to both make access to insurance universal and to get costs down. Those were two of the three principles he said were very, very important. The third was that you can keep what you have. And he hasn't entirely delivered on the third. But the first two were very much in the sights of those in Washington for the first months of the debate.
Then it turned, when they found out that the only way they would
be able to get costs down in the US was to reduce the cost of
physician care, pharmaceutical care, hospital care, and professional
care. That was the only way they were going to be able to pay
for it without raising taxes. Obama also said it had to be budget-neutral;
it couldn't add to the deficit. So we had to find a way to pay
for it. How are we going to bring costs down over the next ten
years? It was pretty clear that a big part of this was that
we're going to have to talk about a different way of paying
physicians' costs, health care professionals, and pharmaceutical
companies. As soon as hospitals, physicians, pharmaceutical
companies, and health insurance companies found that out
we all had a point of view. The debate devolved into: "I'm
kind of worried about this. I'm all for universal coverage,
but if that means that my income is going to go down by 50 percent
so everybody can be covered, I'm not so sure that's a good thing."
So what happened was that all of those interest groups
of us went to the place of thinking, "I'd like to win out
of all of this. But if I can't win, I sure don't want to lose."
And so we stopped talking about decreasing costs, and we focused
on health insurance reform, not health care system reform, because
we didn't figure out how we could bring costs down. We just
said, we're going to have to find another way to pay for it.
It can't be by reducing hospital, physician, pharmaceutical
costs; we're going to have to do it some other way.
Fundamental health care transformational policy, at least from my point of view, certainly should have been part of the debate-and could have been part of the debate. Maybe it still will. What we should have been talking about, what we should be talking about still, is what I would call the achievement of social justice-knowing that there are finite resources, knowing that other countries have figured out how to do this, and knowing that, yes, someone's ox is going to get gored. And our view, Blue Shield's view, was, indeed, this had to be a shared responsibility of employers, employees, physicians, and hospitals-and everyone. There was going to have to be a shared responsibility if we're ever going to get everyone covered in the United States, and pay for it. So this distributional dilemma, which is classic we've got a scarce resource, we've got to distribute it, but how? What kind of dilemmas does it create?
The dilemmas I'd like to talk about tonight-they're not the only ones, but I believe they're the most important, and the ones that are the hardest for us to wrestle with as Americans. My view is that most Americans-well, it's not just my own view-the polls show that when Americans are asked this question-do you think everyone ought to have access to good health care?-90 percent of them say yes. If it means that your taxes, your costs, would go up, would you still say yes? And depending on how you put that question, people still say yes. If it means that your costs would go up by 20 percent, would you still say yes? This is when people start peeling off. The reality is that most want others that don't have health care to get health care. But the question is how to do that. So there's a set of dilemmas that come out of that: Rich versus poor. Those of us with means versus those that don't have means; should we be treated differently and if so, how? Those of us that are old, and those of you that are young; how do we deal with that? In the old camp, we want to make sure that there's health care left for us. Healthy versus sick; today, right now, if you try to get an individual policy in California from Blue Shield of California, we'll ask you to fill out a form. And if you have preexisting conditions of any magnitude, it's going to be very difficult for you to get insurance from us. And that's true of all the other insurers in California, as well. We think that's wrong; we said we needed to change the system. And the system, if these bills pass, will change that one thing. And then the question of personal responsibility. What personal accountability to I have to stay healthy or to get healthy if I'm not currently?
First, rich versus poor. You hear a lot about social programs here in California, and you might think, "Well, the poor don't have it so bad when it comes to health care because there's Medi-Cal." The truth is it does cover a good number of Californians. It's a good program, though it is struggling because of the deficit here in California. But certainly that program does a good job of covering people on the poorer end. But also, if you're on the poorer end the reality is that a third of the very poor, those who have incomes of $12,000 or less-a third of those don't have coverage. Look at those making $50,000 or more, or 400 percent above the federal poverty level. Most of the people in this room, one way or another, are in that category (would be my guess). We have health insurance; and there's only a very small number of Americans in that category that don't have health insurance. There are some, but it's a very small percentage. Clearly we've got a dilemma here. How do we take scarce resources and distribute them when, in fact, many of us that have the good fortune of some wealth are able to get health insurance while those that are poorer can't. Most of us think that's ethically not where we'd like to be.
And care with coverage is directly connected. This is something we didn't use to spend a lot of time talking about. People say, "Geez, there are emergency rooms, trauma centers, and if I get really sick I can go to one of those." But, as you know, in California, trauma centers are closing, emergency rooms are closing. Don't be so sure there's going to be an open emergency room if you don't have health insurance and need it. That's just not necessarily true anymore. And I can guarantee you that if you don't have health insurance, the chance you get care goes down precipitously. The fact of the matter is that 25 percent of people that don't have health insurance will die prematurely. It's directly related to your health and your life, if in fact you have health care. What do we do? For the most part, and certainly when I was the age of many of the students in this room, I didn't think about getting health care. I never went to the doctor, and I never worried about it. But at my age, if I didn't have health insurance, I'd have to make some personal trade offs. You know that knee two years ago that was hurting and I couldn't run? If I can't get health insurance and can't qualify for a public program, I'm kind of out of luck-I don't have the money. I've no idea what the total cost was, with the MRI, but it was probably around the neighborhood of $30,000 to $40,000. And I don't have that. So that would've been the type of care I would have put off. And at some point, perhaps, I'd have to have my knee replaced because I put it off too long. We don't fill our prescriptions, and if we get them we don't take all of them. We cut them in half because we want them to last longer. So health insurance is directly related to the quality of your health care. When we talk about the rich and poor, it's not just about the accessibility to insurance but the accessibility to health care itself.
Now, how do the current reform proposals deal with that? As we go through this, I'd appreciate your thinking about it in this way: One of my best philosophy teachers said, "I'm not here to answer any questions, just hopefully to better articulate them." If I've done that, then I've done my job. The rest is up to you and me; what do we, as Americans, want for ourselves and for others? That's the dialogue going on in Washington, in homes across the nation, in businesses across the nation. How would we deal with this rich versus poor? I can tell you how the reform proposals deal with it. They do extend coverage, but they can't afford to give it to-in the current environment-everyone. But they can get about 70 percent of the uninsured, far better than zero. A hundred percent would be better, but 70 percent is a great start. They're expanding Medicaid. Medicaid in California-you don't qualify for Medi-Cal unless you're 100 percent or below the federal poverty line, though they're going to move that up to 130 percent or 150 percent. They're going to subsidize those that make less than $50,000 because premiums are, on average for an individual, about $8,000. And for a family somewhere between $12,000 and $15,000. If you're required to have coverage-and these bills do require you to get coverage-if you can't pay for it they're going to subsidize. Indeed, this is at the base of what Blue Shield said in 2003. Health care is a right, not a privilege. That means that if health care is a right, that there has to be a corresponding obligation on the part of society, however we structure it, to fulfill that right. That's one we have to collectively figure out.
And we have to figure out how to pay for it. How do the two bills pay for it? The Senate bill charges pharmaceutical companies, medical device companies, insurance companies, a significant tax, a tax to the tune of $6.7 billion over ten years. For Blue Shield of California, that tax will cost us about $100 million a year. Now, if you tax gasoline, who's going to pay? People who buy gasoline. So if you tax insurance, I guarantee you that insurance companies are going to pass that tax through. When I talked about the cost inflators versus the cost savers-if this is the way we finance the increase in access to coverage, it will be directly taxed to those people that have coverage today. If you have coverage with Blue Shield of California, your bill is going to go up. If you have coverage with anybody else, it will also go up because $100 million was erased from what was about a $200 million bottom line. So about 50 percent of our surplus has been eliminated, if they go this direction. Nancy Pelosi in the House said we don't want to tax insurance; that doesn't make sense because that drives costs up. Let's tax millionaires. For all of us that aren't millionaires, it sounds like a great idea. If you are, not so much. But, probably in the end, if these are the two ways we're thinking about it, I'd probably come down on the view that it just doesn't make sense to tax insurance if we're trying to keep costs down-we have to find another way. If that's the only way to do it, we should consider it.
Now, the old versus the young. The reality is that we have this dilemma of old and young. How do we finance it today, in the current system? Well, today, if you're over 65 you have Medicare, which is a great program, a hallmark of the United States. I think it's probably the best program we have. Expensive, but in fact it has provided a tremendous amount of care for those over 65. Now, if you're under 65, you have what we call age-ratings. If you're 55 years old, and you're getting an individual policy at Blue Shield, you'll be charged one rate. If you're 25, you'll be charged roughly a fifth of that, or maybe a seventh of that; there's a big spread between the young and the old in our current system. The reason for that is the older folks, like me, use much more service; people like you, in college, use much less. We charge you what we think you're going to charge the system. There aren't many limits on how much we can spend. There's not, if you will, rationing, in any real way, at the end of life. Unfortunately, most of us have probably been around somebody at the end of their life. And as we've seen, if they're in a hospital setting, sometimes millions of dollars are spent in the last week, month, or six months of somebody's life. On the one hand, it would be terrible to say we shouldn't do that. On the other, that does tax the system, and we've got to deal with it.
Now, the reform proposals would change that. They would cut Medicare spending by about $500 million. When I said that they really haven't dealt with the costs, that's not quite fair. They have said that we're going to cut Medicare reimbursement to physicians and hospitals by a significant amount over ten years-not nearly as much as what it takes to fund the whole thing, but it's a very real cut. And they will continue to cut Medicare would be my guess. Also, there are limits on age rating. Remember I said if you're getting a policy from Blue Shield, if you're 25 what your costs should be, and if you were 55, much different. That has collapsed to a much closer average rate, what used to be called the community rate. You're really charged the average of the communities. So the rates for me and the rates for you would be much closer. When we introduced our proposal we thought that was the way to do it. But then again, if you're 25, you might ask why am I paying for Bodaken? I don't go to see the doctor-is that really fair? Well, is it? We should talk about it. And there has been discussion about the so-called death panels-there are no death panels in the bill. In fact, there's very little restriction. Essentially, the bills don't have very strong restrictions on end of life care, and care generally speaking. In fact the kind of structural change we could have made is one of the things that is the saddest part of where we stand with health care reform. We had an opportunity in our hands that has, thus far, eluded us.
Healthy versus sick. Again, a very difficult issue. Today, if you want an individual policy from Blue Shield of California and you have a serious health condition, as I said earlier, chances are it's going to be tough for you to find a policy. If you've had minor issues, we might rate you up a little bit. But you'll probably get coverage. With any preexisting condition it might be difficult. But if you work for an employer, and your employer offers coverage, we can't turn you down and wouldn't want to. We sell to employers, to businesses-that's our business. We do rate each group in terms of their experience; it does calculate into how much it costs for health insurance. Today you're rejected for preexisting conditions or, if you do get coverage, often it's a high deductible health plan because that's what you can afford. These are great if you don't go to the doctor; they're not so great if you do. The highest we go is a $5,000 deductible. The reason we do that is to get the price down. The reality is that $5,000 is a lot of money to come up with-but it's much better than coming up with $100,000 or a million, if that's what your bill is. But there's a real question of whether that meets the requirement for basic health services. How do reform proposals deal with that? They go to guaranteed coverage. And again, in 2002, we said that everyone should be covered, and they shouldn't be excluded as a result of preexisting conditions. Both these bills do that, and I think that's very important. We pay something, about the same, the community rate, regardless of health. In the bill there are limits about how much difference there can be. And in both bills there is at least mentioned the essential benefits package, what they call the minimum benefits package, which are really preventive services, basic medical services, chronic disease management, pharmaceutical services, and probably mental health services. Beyond that, vision and dental probably wouldn't be covered. But for every American that would be the package. So that's how the healthy versus sick is being solved in Congress so far.
Let me move on to this. This one has really come up over the last five years. Ten years ago-I've been in this business for about 25 years-ten years ago we might have mentioned it, but we didn't take it seriously. Now it's on people's list. I believe it first started by the non-smoking campaign, because it's not only bad for the smoker's health, but for ours as well. And it was costing the health care system millions and billions of dollars. We decided, as a society, that we wanted to get rid of smoking as much as we could. And we've done a lot, especially in California. The question becomes: Should I be charged, incentivized, because of the way I behave? That's a question we should ask. In today's system, you can come into the system or leave the system if you qualify. Certainly, if you're an employer group, you don't have to buy coverage if you don't want to; if you want to buy coverage, you can. There are really few penalties for unhealthy behavior. When you go in and you're smoking and overweight and you're not exercising, your doctor doesn't charge you twice as much; he charges you as much as somebody that's very fit. So the question is, should that be part of the incentives? Reform proposals actually do take this on in the Senate side. Both proposals take on the issue of voluntary coverage. Coverage is mandatory, although the requirements are not nearly as clear. It's mandatory to get coverage; there's no penalty if you don't in the first year. There are very modest penalties in the Senate version for the future years. Coverage, again, we believe that coverage should be mandatory; that is, it's your responsibility to pick up coverage. If you can't afford it, we should subsidize you. In the Senate side, they said your premiums could be adjusted as much as 50 percent by your employer if you are not engaged in taking care of yourself-stopping smoking or losing weight, whatever it might be in terms of the issues you're facing. Not whether or not you actually had stopped smoking-you had to just be engaged in the process. Your employer could actually charge you a different premium. I must mention that Blue Shield has a program called Wellvolution. Just this year-we've had it for three years-just this year we have provided a pretty significant incentive for our employees to get biometric screening, to get access to a health coach if they want one, and to apply online for both education and coaching. If they do those things, they actually get a much lower premium than they would otherwise have out of pocket. Our costs go up, just like any other employer's. While we did have people that were saying, "Geez, is that fair?" on the whole I believe most of our employees saw the merit of that. And it certainly kept their premium down if they did those very simple things. We'll see how that works. We want to try it with our folks first before we send it out to other employer groups. The question is, how much should you be, if you will, penalized for something that's likely a genetic predisposition? Should you be charged for it? I don't know.
In summary, and I hope this has, again, spurred some thinking about questions you might not have thought of when you got up this morning-what do we need to be doing if we're going to get to a just distribution of health care resources? How are we going to get there? I would say that the way we're getting there today is going to be very expensive. I don't think it's really going to solve the problem. I'd like to think that we'll have time over the next couple of months, as that bill goes through Congress, to change it and in fact change it in a way that really is sustainable. But I do worry that costs haven't been addressed in the bill. We are covering 70 percent of the uninsured, which is wonderful. But that, of course, adds costs to the system; it doesn't reduce them unless you actually change the system. I think that if we put out to the American people the honest tradeoffs we have to make we're smart enough, and we care enough, to know that we've got to change something. If our costs are twice as much as every other developed country, we have to change something. Because they're going up ten percent a year. If you compound that, it means it doubles every seven years. We are not going to be able to afford even basic coverage if we don't honestly look at these tradeoffs.
Again, so far, we've tried in Washington-much better than we
have up until now. But I worry about the outcomes. And we have
to be transparent about it; we have to talk about these things
openly. Does everybody get everything? If the answer is no to
that question, then it's no. It's not somehow, well, yes, because
we will somehow provide that. Politicians, in general, and for
that manner CEOs, don't want to sometimes tell the ruthless
truth. And the ruthless truth is that if we all get everything
we'll never be able to afford it. We may have to change our
expectations of what we can get from the healthncare system,
and what we need to do. Who should pay? Well, we again believe
it should be a shared responsibility. We suggested that this
isn't for free. We said that, in California, we should add 1
percent to the sales tax. We knew it was politically unpopular,
but it was realistic; it added $10 billion to the state fund,
and that would have covered the 7 million people here that are
uninsured. A few years ago, when the governor tried to get universal
coverage, it was $12 billion. Now, it's probably closer to $14
or $15 billion. It's moving very fast. Finally, how do each
of us bear responsibility for solving this problem? Certainly,
by being interested citizens. But I would also say by being
engaged in the kinds of solutions that are going to be important
for those of us that need health care. For those of you that
don't need health care today, you will. I know that because
I didn't think I would. I was going right along until I was
the first thing that goes is the eyes. And all
of the sudden it was hard to read. I got to 50 before my knees
started to hurt. The reality is that we're all going to need
health care. The question is, how do we arrive at that? I will
end as we started. It's only in rational dialogues, as Socrates
said, that we arrive at any form of truth.