S P E E C H

THE STATE OF OUR NATION’S HEALTH CARE SYSTEM: WHY STATE GOVERNMENTS MUST BE CONCERNED
BY
HENRY E. SIMMONS, M.D., M.P.H., F.A.C.P. PRESIDENT, NATIONAL COALITION ON HEALTH CARE NATIONAL CONVERENCE OF LIEUTENANT GOVERNORS
PROVIDENCE, RHODE ISLAND
JUNE 12, 1999

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Good morning, and thank you for this opportunity to speak with you about the state of our nation’s health care system. As you know, our nation began its last major health care debate during the Presidential campaign of 1992 at which time both candidates agreed that our health care system was already in crisis. That attempt at major reform ended without action in 1994. Only one thing has changed since then. That is: all of the problems which existed then have grown worse, and because of that, you in state government, and those you serve, now face far more serious problems then would have been the case if appropriate reforms had been enacted five years ago.

As elected officials, you have a special responsibility for the health and welfare of the citizens of your states. As citizens, you also are stakeholders in our nation’s health care system. Thus, from both perspectives, and for reasons I will enumerate, I believe you must become advocates for major reforms at both the state and the national levels. Otherwise, you will fail in your responsibilities 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” on our health care system and its problems; second, to describe how these problems will affect your state, its citizens, and our nation; and third, to describe the reforms which will be necessary to address the problems. 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 comprehensive health system reform.

For those of you unfamiliar with our effort, our members include over 80 organizations, businesses large and small, including giants such as Ford, DaimlerChrysler and GTE, labor unions, the nation’s three major religious faiths, its largest consumer organizations, including AARP, 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. Former Presidents Jimmy Carter, Gerald R. Ford, and George Bush honor us as Co-chairs. Our working 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 Senators Mitchell and Dole, and House Minority Leader Bob Michel.

Over the past year, our Coalition has released eight major studies assessing our health care system. These, as well as others, show that our nation, and those you serve, face three major, interrelated systemwide problems which are growing worse.

PROBLEM #1 IS RISING COSTS

Five years ago we were told we didn’t need any major reforms because the market and managed care were the solution. This prompted a massive shift from fee for service to managed care in which over 85% of the nation’s workforce, and many of your constituents, are now enrolled. Despite that, health care costs have increased almost 500 billion dollars since 1990 and large and small employers and individuals in your states are facing premium increases at six to ten times the inflation rate with no end in sight. The Congressional Budget Office estimates that with current trends, our total costs will almost double to over two trillion dollars in just eight years. This in turn will lead to a major increase in the number of uninsured.

For a whole range of reasons which time will not permit me to enumerate, you in state governments and those you represent will bear a substantial share of those new costs due to cost shifting. This cost shifting could grow worse as the federal government further constrains payments to providers in order to control its costs in the Medicare and Medicaid programs.

Employers will be forced to transfer at least part of their health care premium increases to their employees. Our studies show that middle income families, those with children and incomes between $20,000 and $60,000 – that is, half of all Americans and most of your constituents – will lose the highest percent of their income due to health care inflation. This large and inequitable hidden income tax will adversely affect the standard of living and take home pay of our nation’s middle class.

So problem number one is rising costs, which although already higher on a per-capita basis than those of any other nation, will double again to over two trillion dollars in just eight more years.

PROBLEM #2 IS DECREASING INSURANCE COVERAGE

Rising costs, in turn, are a major cause of our second problem which is decreasing insurance coverage.

Under our present system, much of our huge cost increase will be cost-shifted from federal to state governments and to those businesses and individuals in your states who currently pay for insurance coverage. As health care costs rise ever more rapidly, more employers, especially small businesses, will be forced to either shift costs to their employees or other employers, drop or decrease coverage, or hire contingent workers without health insurance. This is already occurring, and, as a result, the nation’s largest private sector health safety net, i.e., the employment based health insurance system, is deteriorating. There has been a particularly ominous drop in employment based coverage for those over age 61. This drop in coverage is particularly severe in the case of early retirees. The previously tight link between employment and health insurance coverage is increasingly tenuous.

We are already at a point where almost 80 million Americans — that’s one of every three under the age of 65 — are either uninsured or underinsured. 43 million people are now uninsured. This is 10 million more than when the most recent health care debate began. Despite a booming economy, more than one million Americans are being added to the ranks of the uninsured each year. Just imagine what awaits us in the next and inevitable recession. Our recent report has estimated that when recession comes, the number of uninsured will reach 60 million. An equally large number will likely be underinsured.

This must concern all states because the growing burden of covering the uninsured and underinsured will be shifted as a new cost to state governments and private sector payers, especially small businesses and individuals. As our problems grow more severe, this national “shell game” of cost shifting will intensify and it will not stop unless and until we achieve universal coverage. This is another reason we cannot deal with the Medicare problem in isolation.

In addition, as the employment based system continues to erode, the businesses who currently employ and continue to 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.

PROBLEM #3 IS POOR QUALITY

Given our cost and coverage problems, 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. Despite the fact that we have long known of 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 federal and state 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? Here the evidence is even more ominous.

Most people have at least some understanding of the magnitude of the cost and coverage problems. But very few understand that our third problem, poor quality, is even more serious and that unless it is addressed, the cost and coverage problems cannot be fixed. The reason is that these three problems are inextricably linked.

As already noted, cost escalation leads to an increase in the number of uninsured. In the absence of insurance coverage, needed care is becoming increasingly difficult to get. When this happens, health and quality in turn suffer. In fact, studies show that, other than aging, the biggest risk factor associated with a poor outcome or death is the lack of health insurance. Whether or not you receive care (which is now determined largely by your insurance status) can determine whether you live or die. So lack of insurance intensifies our already existing quality problem.

In addition, there is an abundance of evidence which shows that poor quality wastes hundreds of billions of dollars each year. This, in turn, is a major cause of cost escalation. So we see here the vicious cycle which feeds on itself; i.e., poor quality raises costs, rising cost leads to cost shifting and decreasing coverage, decreasing coverage leads to poor quality and poor quality in turn increases costs. We’ve built a perpetual motion machine headed in the wrong direction.

In the past year alone, four major reports have all concluded that our health care system is “plagued with overuse, underuse, and misuse of health care services.” Harvard researchers have concluded that malpractice and medical negligence constitute the nation’s “hidden epidemic.” And yet, despite the magnitude of our problem, our current one trillion–and soon to be two trillion–dollar health care system continues to operate in a virtual quality control vacuum. As a result, it is estimated that 3 million Americans are unnecessarily injured, hundreds of billions of dollars are wasted and more than 120,000 Americans die each year as a result of errors, preventable medical injuries, or negligence. This is the equivalent of two fully loaded jumbo jet crashes every three days with a total loss of life.

This is not meant to infer that my fellow physicians and health care professionals are trying to harm people; they are trying to do the best they can. But the fact of the matter is, they work in a flawed system with inadequate data and quality control. These flaws have to be acknowledged and fixed in a “no-fault” environment.

There is no other business in this country that any state would allow 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. This serious quality problem exists in every state of the union, even in our supposedly pre-eminent health care institutions.

CONCLUSIONS

These are the problems. They are large, they are serious, they are growing worse, and there is no end in sight. These problems are adversely affecting the millions you represent and they existed long before the advent of managed care. So where do we go from here?

We feel that at present, neither the public nor many of its political leaders really understand how serious the problems are and why comprehensive change will be necessary. At the same time, we recognize that necessary change is unlikely to occur unless and until the public and its leaders 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.

Achieving that common understanding will require 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. We hope each of you will consider making your states a part of this effort.

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 its’ leaders to understand?

First: We believe we must all recognize this problem is not going to go away. It will grow worse. We cannot address these systemwide problems by dealing with the Medicare problem alone.

Second: The public must be helped to understand that they and the majority of Americans are now at risk. This is now a serious middle class issue. None other than the wealthy can feel assured that coverage will continue to be there when they or their families need it.

Third: We must recognize that we won’t be able to control cost, or afford universal coverage or even know what to provide coverage for unless we address the quality problem. Quality is a central problem.

Fourth: We must recognize that partial reforms will not be sufficient, and none of our current approaches, including Medicare reform, market forces, medical savings accounts, new tax provisions, benefit redesign, cafeteria plans, managed care, or a bill of rights will, by themselves, be powerful enough to address our problems. Each can make a contribution, but we will ultimately need a far more comprehensive strategy, one which integrates more rationally Federal, State, and private sector policies.

It’s important here to remind ourselves that our past failure to do so has resulted in the creation of the most expensive, administratively complex, and non-user friendly system on the face of the earth. One which now expends tens of billions of dollars each year just to push paper through the system. This is a terrible waste which is completely unnecessary. Fifty nonintegrated state policies, including the wide variety of mandates, are a major contributer to this administrative nightmare.

Fifth: Because our problems are 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 a variety of reforms including the development of a credible and publicly accountable quality measurement and quality assurance system. A national commitment to improve quality, a quality “moonshot” if you will, must be a major element of our national and each state’s strategy.

Each state can also help achieve necessary reforms through the use of your power to regulate the health insurance market and the delivery system, including managed care, through how you utilize your authorities in the Medicaid and CHIP programs, and through more prudent use of your authority to mandate benefits.

But there are some important things that must be done which states cannot do alone. And this leads me to our Coalition’s final conclusion, which is that to solve the problems which face us, our nation will ultimately have to achieve the following 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.

Why must all of these goals be achieved? Because all the evidence shows that our three problems are inextricably intertwined. You can’t solve one without addressing them all.

It’s a vicious cycle. Without system wide cost containment strategies, you cannot assure or afford universal coverage, without universal coverage, you cannot assure quality, and in the absence of quality, you cannot contain costs. In addition, without universal coverage you can neither create a truly competitive system, make the system less complex, control costs, stop risk selection and cost shifting, or achieve a level playing field of equitable financing.

In summary, we believe there is a way to build a more equitable, more affordable, and higher quality system and the states have a major role to play in that process. For a trillion dollar expenditure, we believe that the American people have the right to expect no less. I wish you the will and the wisdom to discern how to best contribute to that important effort, for without your help, the problem won’t be solved.

Thank you.