S P E E C H

“THE STATE OF OUR NATION’S HEALTH CARE SYSTEM, A REALITY CHECK”
SPEECH TO THE NATIONAL CONFERENCE OF STATE LEGISLATURES ANNUAL MEETING
SCOTTSDALE, ARIZONA
December 10, 1997
Henry E. Simmons, M.D., M.P.H., F.A.C.P. President, National Coalition on Health Care

      Good morning, and thank you for this opportunity to address you on the state of our nation’s health care system. As you know, our nation began a major health care debate during the Presidential campaign of 1992 at which time both candidates agreed our health care system was already in crisis. That attempt at reform ended without action in 1994, and many in the public and the business sector breathed a sigh of relief assuming our problems had been solved. Only one thing has changed since then. That is: all the problems which existed then have grown worse, and because of that, you and those you serve now face more serious problems than would have been the case if appropriate reforms had been enacted six years ago.

      As legislators, you have a special responsibility and mission: protecting the health of the citizens of your states. As citizens, you are also stakeholders in our nation’s health care system. For both reasons, and because these problems are serious, I believe you must become advocates for major reforms at both the national and state levels. Otherwise, you will fail in your responsibilities to those you are entrusted to serve, and our problems will continue to grow worse to the detriment of all Americans and all the states.

      I have been asked to do three things today: first, to do a “reality check” and give you an update on the state of our health care system and its problems; second, to describe how these problems will affect your constituents and our nation; and third, to describe the reforms which will be necessary to address the problems and the possible role of state governments. In doing so, I will share with you the views of the National Coalition on Health Care, the nation’s largest and most broadly representative alliance working to achieve necessary health system reforms.

      Our members include over 90 organizations, businesses large and small, ranging from giants such as Ford and Chrysler, to the 4,000 small business members of the National Electrical Contractor’s Association, a dozen of the nation’s largest labor unions, the nation’s three major religious faiths, its largest consumer organizations and the organizations representing the nation’s primary health care providers and academic health centers. Our members either represent or employ over 100 million Americans. We are non-partisan. Our honorary Co-chairs are former Presidents Jimmy Carter and Gerald R. Ford. Our Co-chairmen are former Republican Governor Robert D. Ray (R-Iowa) and former Democratic Congressman Paul G. Rogers (D-Florida). We also have many prominent individual supporters including former Surgeon General Koop and Ann Landers.

      Last month our Coalition released studies on the nation’s critical health care problems. They showed that you and those you serve face three interrelated and growing health system problems. First, our costs are out of control. Despite the recent and modest pause in growth, costs continue to rise at 2‡ times the inflation rate and are far higher than they need to be. All other developed nations are providing necessary health care services to all their citizens at about one-half our costs, and their people are as healthy, or healthier, than we, and far more satisfied with their system of care.

      Despite the growth of managed care, our studies and Congressional Budget Office estimates indicate that our already huge costs of a trillion dollars yearly will increase by 50% or 500 billion dollars over the next 5 years and double to 2 trillion dollars only 5 years thereafter. Due to a lack of purchasing leverage, individuals and small businesses in your states will be particularly hard hit with this cost escalation and, in one way or another, state governments will bear a substantial share of those new costs.

      Middle-income families, those with children and incomes between $20,000 and $60,000–that is, half of all Americans–will lose the highest percent of their income due to health care inflation. This large and inequitable hidden income tax will adversely effect the standard of living and take home pay of our middle class and many of those you represent.

      So, major problem number one is rising costs, which have risen by over 50% or more than 500 billion dollars since the reform debate started in the early nineties.

      Rising costs in turn contribute to our second major problem which is decreasing health insurance coverage. We are already at a point where almost 80 million Americans–that’s one in three people under 65–are either totally uninsured or underinsured. This is 10 million more people than when the health care debate began only six short years ago. In large part, due to rapidly rising costs, one million more Americans are being added to the ranks of the uninsured each year, and many of these are your constituents from working middle class families. Because of cost increases, more contingent workers are being hired and fewer and fewer employees are provided with health insurance coverage especially in our small businesses, which represent the bulk of the nation’s economy. In fact, the fastest growing segments of our economy are small businesses in the service sector, where fewer and fewer jobs come with adequate health insurance coverage.

      As costs increase, more and more businesses and governments are forced to cut coverage, and our safety nets, including our present dominant employment based health insurance system, are deteriorating. Since we have nothing ready to replace them, the number of uninsured and underinsured will inevitably grow. The growing burden of covering the uninsured will be shifted as a new cost to private sector payers, especially small businesses and your state budgets. Private sector payers are becoming society’s insurers of last resort. This is a classic example of the systemic and interrelated nature of the problems we face and how they disproportionately hit private payers ñ especially the many small business payers you represent. In the absence of major systemic reforms, this cost shift from the Federal to state government and private sector payers is inevitable and will grow. In addition, because of resultant higher employment costs, the businesses who currently employ and insure your constituents will become less and less competitive as they have to bid against competitors who do not provide or who cut back on coverage. This creates an unlevel playing field which will lead more businesses to drop or cut back coverage in order to remain competitive. This is another reason why universal coverage is essential.

      The worrisome thing is that this cutback in employer based coverage is occurring in spite of the best economic times in our history, questioning the views of those who claim a rising economy will grow us out of our problem. Just imagine what will happen to the number of uninsured and underinsured, and to the magnitude of cost shifting, when we experience the next and inevitable economic downturn.

      Given our cost problem, we can understand why government and private sector payers are focusing on cost control. But that then compounds our third problem, the quality of our care. We should all be concerned that despite the known close relationship between cost and quality, and the difficulty in containing costs if quality is poor, to this point the health care debate has focused almost exclusively on cost. This has led to efforts by government and the private sector to control costs predominantly by limiting fees, increasing beneficiary cost sharing, and increasing the use of managed care.

      However, a large and growing body of evidence raises questions as to whether any or all of these approaches will, over the long term, contain costs. For the evidence shows that the major driver of rapidly rising cost is increasing intensity of care and a sharp increase in our use of technology, especially for care of the growing number of elderly. This fact raises the critical question: Just how good is the quality of our care and what do we health professionals and you, the payers and consumers, know about this technology?

      Indications are we don’t know nearly enough. There are major gaps in our knowledge base, which contribute to medical uncertainty. Much of our medical technology has been adopted and widely utilized without adequate evaluation. The evidence to justify treatment of even the most common medical and surgical conditions is often questionable. This includes such common conditions as prostate cancer and low back pain, which affect millions.

      At the same time, there is no credible national database on quality and no national technology assessment or standard setting mechanism. This makes it very difficult for health professionals to practice as well as they would like or as well as you would like.

      Medical uncertainty leads to enormous regional variations in health care with no evidence that people in regions with access to more care have better outcomes than people in regions with less care. Let me give you an example. In Miami, admission rates to Intensive Care Units for Medicare patients are 5 times greater than for similar cases in Sun City, Arizona with no difference in outcome. The percentage of Medicare enrollees who are admitted to an intensive care unit some time during the last six months of life varies regionally from less than 9% to more than 47%. In his pioneering work on regional variations, Dartmouth’s Dr. John Wennberg has shown that, “in health care, geography is destiny: the amount of health care consumed by Americans depends more on where they liveóthe local supply of resources and prevailing local practice stylesóthan on patients’ needs or preferences.”

      Wennberg suggests that, in the absence of evidence to the contrary, it is in the public interest for each state to consider adopting universally the lower levels of acute care hospital resources, physician workforce, and spending of regions where resources and spending are more constrained. The impact of such a change on the health care economy and on most states’ economy would be substantial. For example, one estimate provided in Wennberg’s Dartmouth Atlas holds that if Medicare spending in regions with higher rates than Minneapolis were brought down to the level of Minneapolis (which is not even the lowest in the country), the currently-projected exhaustion of the Medicare trust fund could be avoided or substantially delayed.

      The huge regional variation we know exists in medical care is scientifically indefensible. When you next hear someone state that we have the finest health care system in the world, you can reasonably ask: Which one? For medical care is delivered very differently from region to region, hospital to hospital, doctor to doctor. In fact, the literature is replete with studies which show that we physicians disagree with each other and even with ourselves a high proportion of the time. Often no one knows who is right. Because of that, too often neither consumers nor health care professionals are able to make rational decisions. This is not to infer that my fellow health professionals are trying to harm people; they are not. But the fact is that they work in flawed systems with inadequate data. These flaws have to be acknowledged and fixed in a no-fault environment and adopting mechanisms and policies to do so should be a high priority effort for every state.

      In a speech to the American College of Surgeons, Dr. David Eddy, a noted expert, summarized our situation as follows:

“For centuries, the practice of medicine has been based on one huge assumption. The assumption that physicians instinctively know the right thing to do. Somehow, the assumption goes, physicians are able to assimilate all they have learned, process all the information they generate and make the right decision. That myth has been shattered. We are all coming up with different answers and it is impossible for all of us to be correct. Our practices are way out in front of our intellectual lines of supply.“

      There is another major reason why we must deal with and correct the regional variation problem, for hundreds of billions of dollars of waste could thus be avoided and become available to provide necessary services to those currently underserved.

      The question of the role of supply in influencing utilization and whether more is better belongs on the national quality agenda and is an issue every state should examine and deal with.

      Finally, as part of the quality issue, there is the problem of treatment error. Because our quality control mechanisms are so rudimentary, mistakes are much more common, costly, and harmful than generally realized. There are distressingly high error rates reported in a wide range of medical practices with serious, and often fatal consequences. For example, autopsy studies show high rates (35 to 40 percent) of missed diagnoses, often resulting in death. A recent poll done by the American Medical Association suggests that more than 100 million Americans have been touched by what they consider a medical mistake, and over 40 percent of the respondents believed that these medical mistakes were misdiagnoses and wrong treatments. Dr. Lucian Leape, a physician board member of the AMA’s National Patient Safety Foundation has estimated that the number of injuries caused by medical accidents in inpatient hospital settings nationwide could be as high as three million and cost as much as $200 billion a year. Conservatively, he estimates some 300,000 people die yearly as a result of medically induced injury or negligence. This is 7 times the number who die on our highways and several thousand times the annual airline fatality rate.

      Tragedies such as these are not isolated events. The “Harvard Medical Practice Study for the State of New York” has demonstrated this dramatically. If the New York rates are extrapolated to the country as a whole, then the Harvard researchers estimate that over a million patients are injured in our hospitals every year, and approximately 180,000 people die each year as a result of medically induced injury or negligence. One-half of these deaths, or 90,000 each year, are considered preventable. The Harvard team concluded that medical injury and malpractice constitute the nation’s “hidden epidemic.”

      There is no other business in this country that would be allowed to continue to operate even a day with quality problems of that magnitude, nor would society pay more than a trillion dollars a year for its services. Yet this is now the case in our health care system. The executive editor of the New England Journal of Medicine has written that: “far from being beneficial, much of the medical care in this country is unnecessary, is of no demonstrated value to those who receive it, and some of it is harmful.”

      These are the problems consumers, health professionals, and you as purchasers and fiduciaries face. They are large, they are serious, they are growing worse, and there is no end in sight. These problems are adversely affecting you and the millions you represent and they existed long before the advent of managed care. In fact we believe that better systems of managing care are a part of our ultimate answer.

      Unfortunately, it appears that none of the incremental approaches which state and federal governments and private sector payers are using will be powerful enough to do the job.

      So, where does this leave us? Where do you and we go from here? Why, given the magnitude of our problem, have we not made more progress? What lessons have we learned and might you learn from the failed debate of the past?

      One of the lessons we have drawn is that the health care debate began before the public or even many opinion leaders, had developed anything approaching a sufficient understanding of the health care system and its problems. Now that system is changing rapidly and fundamentally in the absence of any national strategy. Yet the understanding of basic information is still lacking. The situation was well summarized by two Pulitzer Prize winners, David Broder and Haynes Johnson, in their recent book The System, which analyzes what went wrong in the recent health care debate.

“In the end the public got much of its informationóor misinformationófrom partisan or special-interest sourcesÖThe ability of the opposition to mobilize a small minority of people who feared losing some of their advantages carried the day. Too much of the debate was dominated by negative sound bites, by the importunings of ëspin doctors’ with their misleading arguments, false analogies, and statistics crafted for the convenience of the argument, not the truth of the case. As a result, the public, for excellent reasons, was confused and frightened throughout. In a classic sense, the people were woefully uninformed. The manufactured, and manipulated, ëpublic opinion’ prevailedÖWhat people really wanted to know was how the various plans would affect them and their families, and the media did not answer those questions well.”

      We agree and believe that necessary changes are unlikely to occur unless and until the public and leaders such as yourselves have a better understanding of the facts, and a broader and shared vision of a better, more equitable and affordable health care system, with assurance that it can be achieved.

      Let me share with you a few examples of where some better understanding is necessary. There are cities in this country that have more MRI’s and cat scanners than the entire nation of Canada. In these cities, the cost of care for patients is 2-4 times higher than in other regions of the country with no better outcome. Why do we allow that to occur, why do you pay for and thus support such excess capacity?

      We are living in a country in which 4 out of every 100 hospitalized patients in our best hospitals experience an adverse drug reaction which increases the cost of care, injures thousands and kills many. Half of all these events are considered preventable. Why do we, why do you in state government allow this to occur? Why do you continue to pay for and tolerate such care? Why do you not insist that better systems be put in place to identify and deal with this huge, harmful and costly problem?

      You all know of the recent public uproar over airline safety. Last year’s TWA crash received national publicity, the President went on television, major investigations were conducted, Commissions were empaneled, and hundreds of millions of additional dollars are being poured into airline safety and security. Yet remember that, on average, fewer than 200 people die each year in airline accidents. While in the health care system, it is estimated that 180,000 patients die each year as a result of medically induced injury, and 90,000 of these deaths are considered preventable.

      This is the equivalent of 3 fully loaded jumbo jet crashes every 2 days with a total loss of life. Where is the public outrage? Do the American people and, for that matter, do you have an adequate understanding of the problem we face? We don’t think so.

      Achieving a common understanding requires a major educational effort. With our members’ support and substantial grants from several of the nation’s largest health foundations, our Coalition has dedicated itself to help create such an effort. You in each state should also consider becoming involved with us in such efforts.

      If we are to have a rational dialogue on health care, and ultimately achieve necessary reforms, what do we believe are some of the most important things for the public and for leaders such as you to understand?

      First, we believe we must all recognize this problem is not going to go away or be corrected by current approaches. It will grow worse.

      Second, we must recognize that, for a number of reasons, market forces and competition alone will not solve our problems. Remember that markets need good information to work. Successful markets rely on a fair transaction between an informed buyer and an informed seller. That doesn’t exist in health care where the consumer and often even the provider is at a severe disadvantage lacking the information necessary to make an informed decision. Consumers can’t buy solely on price because they have insufficient information on quality.

      Competition can help contain costs in real markets, but to get competition, you need a wide variety of choices. We’re getting the exact opposite as large segments of our health care market move to more and more consolidation and therefore less competition and choice.

      Markets need independent oversight to assure public accountability. There is no such mechanism to protect consumers in today’s health care system. That is why 50 state legislatures and the U.S. Congress are frantically trying to patch together consumer safeguards while at the same time realizing they are not equipped to make sound scientific judgments. That necessary mechanism is yet to be created and will be a key part of the solution to the nation’s problem and each state’s problem.

      Third, we all have to recognize that our problems cannot be solved by each of us acting alone or by the private sector alone or by each state acting alone. In fact our health care system, which is already the most complicated on the face of the earth and which costs 100 billion dollars each year to administer, could become an even greater nightmare if 50 states adopt 50 different and uncoordinated policies to deal with our problems. As more and more of our businesses and commerce operate across state lines, this problem becomes even more burdensome.

      The Federal and state governments will have to work together and develop a new private/public partnership to simplify and improve our already far too complex system.

      Finally, we believe people must understand that because our problems are interrelated, successful reform must focus on achieving five principles or goals:

• Making sure every American has health insurance coverage.
• Controlling total system costs and stopping cost shifting.
• Improving the quality of all care.
• Creating a more viable and equitable mechanism of financing.
• Simplifying administration.

      All 5 of these principles must be achieved because you cannot solve any one of our problems without addressing them all. Let me explain. As already noted, costs are now rising at twice the rate of inflation and will double to 2 trillion dollars by 2007. A major factor increasing costs is poor quality and the resultant extensive waste and poor outcomes. Largely due to rising costs, our safety nets, including the dominant employment based health insurance system, are deteriorating causing the already large number of uninsured to increase at the rate of one million each year. We know that in the absence of insurance coverage, or cross subsidies, it is becoming increasingly difficult to get needed care. When this happens, health and, quality, in turn, suffer. In fact, the RAND authors of our Coalition’s quality study assert that, other than aging, the biggest risk factors associated with a poor outcome or death are poor quality or the lack of health insurance. Because of major variations in the quality of care, where you receive care, or whether or not you do (determined largely by your insurance status) can determine whether you live or die. So, the quality, cost and coverage problems are intertwined, they exist in governmental and private sector programs and therefore cannot be successfully addressed independently. Dealing with the Medicare problem in isolation could in fact exacerbate our total system problem.

      Why do we believe these findings are relevant to the states? I think you will recognize, as does our Coalition, that such problems cannot be corrected by a consumer Bill of Rights alone, or by eliminating gag rules or by more access to specialties or better appeals processes. Far more basic steps must be taken. In order to have a high quality and less wasteful system, it will be necessary to assure that care rendered is evidence based. In our view there is no more fundamental consumer right than to be assured that care is evidence based and available to all who need it, when they need it and this, I believe every state should insist on. Absent these elements, a Bill of Rights at either the Federal or state levels will have little positive impact upon our health care system.

      Finally, because this problem is too large and complex to be addressed by any one sector alone, we believe the nation and each state needs to proceed in partnership with the private sector in a “no-fault” manner to achieve the principles I have enumerated, i.e., universal coverage, containment of total system costs and development of a credible and publicly accountable quality measurement and quality assurance system. A credible arbiter will have to be part of such a system so that you as legislators are not constantly sucked into the task of making scientific decisions for which you are not trained. A national commitment to improve quality, a quality “moonshot” if you will, should be a major element of our national and state strategy. The payoff to society with such an effort will be huge.

      In summary, we know how to build a better, more affordable and higher quality system. As suggested throughout my remarks, the states have a major role to play in that process. I wish you the will and the wisdom to discern how to participate in that important effort. Thank you.