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Health forum: government funding of health care in upstate New York
Join us for the first in a series of community forums on health care.
Sequestration, the Affordable Care Act, funding for Medicare and Medicaid all affect medical services and research. Upstate New York is a region that at times has struggled to have enough medical providers and facilities of various kinds to serve the community. Add in a population that is aging and in need of more medical care, and that also adds strain to the system. We will explore how changes in government funding affects affordability and access. What should community members know both as voters and as consumers?
Sunday, July 14, 7 p.m.
Panelists include: Gary Fitzgerald, president and CEO of Iroquois Healthcare Alliance; Dr. Arthur Vercillo, president of the central New York region of Excellus; and Thomas Dennison, professor of public practice and international affairs, Maxwell School, Syracuse University, and director, Program in Health Services Management and Policy.
CL: Good evening, I’m Catherine Loper, the news director for WRVO Public Media. We are very pleased to bring you the first in a series of six community forums on health topics sponsored by the Health Foundation for Western and Central New York. Today we are discussing how government funding of health care affects medical services right here in upstate New York. Currently, the sequestration and the Affordable Care Act are changing federal funding of health care as we know it. Medicaid has changed and will continue to undergo adjustments. And there’s always the perennial talk of Medicare reform, which could completely alter the landscape of government funding of health care. It’s all very complicated and it’s very confusing, but it has a real effect first and foremost on citizens and residents of the United States and we’ll be focusing on how those changes in funding affect those of us here in central and northern New York. But it also affects the economy, it affects politics and it affects all government budgets as healthcare becomes a bigger and bigger part of government spending. So we will sort through all of this and more with our truly excellent panelists. I’m very pleased to welcome first Mr. Thomas Denison, who’s a professor of public administration and director of the Health Management Services and Policy Program at the Maxwell School of Public Affairs at Syracuse University. He has his doctorate in health planning and administration and is an expert in the healthcare system overall. He’s on many different boards of medical associations and has studied healthcare funding from both the public and private perspectives. We also have Dr. Arthur Vercillo. He’s the central New York president of Blue Cross Blue Shield. He’s in charge of development and maintenance of healthcare provider networks across central New York and in doing that job he oversees nearly 1,000 employees. But he is also a surgeon and he is past president of the Onondaga County Medical Society and he holds academic appointments at SUNY. And also, we have Gary Fitzgerald who is president and CEO of the Iroquois Healthcare Association which is a cooperative membership organization representing 53 medical providers in 31 counties in northeastern and central New York state -- particularly hospitals. He’s held this position since 1996 and before joining Iroquois Healthcare Association, Mr. Fitzgerald worked for 12 years in the New York State Senate. He’s also past president of the conference for Metropolitan Hospital Associations. So I welcome all of our panelists, thank you for joining me this evening to discuss this important topic.
CL: I wanted to start out by just sort of quantifying and discussing how much the American healthcare system is dependent on government funding. And by that I mean state and federal spending. Maybe I’ll start with you, Tom Denison if you could give us some historical perspective on this.
TD: Well the United States healthcare system works on a blend of public and private funding. Until about 2010, the private sector paid a bit more than the public sector. Since 2010, the lines have crossed and more state and federal money goes into the healthcare system than private money. When we see the Affordable Care Act completely rolled out, the expansion of Medicaid, not so much impacting New York as we’ve already expanded Medicaid, we’re going to see the government share grow even more than it has in the past. Another piece of this spending that’s kind of a hidden piece is the foregone tax receipts associated with the treatment of health insurance that you get through your employer as a tax-free benefit. If you factor that into the equation, we’re spending quite a bit more government money than we are private money in our healthcare system, which is very, very different from the rest of the developed world. We spend far more as a percent on healthcare of private dollars than the rest of the developed world does.
CL: And Gary Fitzgerald, can you explain you know how much of the money hospitals receive in payment comes from Medicare and Medicaid?
GF: Sure. It’s really important to understand that Medicare and Medicaid make up a majority of the funding that hospitals get. And it’s especially important in upstate New York because we have some of the highest volume if you will of patients that are on Medicare in the country given that upstate New York’s population is an older population and the population continues to be an older population, as some of the younger people move out. So our hospitals continue to see more and more Medicare patients and as Dr. Denison said, the Medicaid program has been expanding over the years through government initiatives in New York state. One out of four people in state are on Medicaid and that will continue to increase under Obamacare. So under Medicare, the large elderly population in upstate New York, some of our hospitals have up to 80 percent of their patients Medicare patients, another 10 percent Medicaid. The average is about 60 percent Medicare and about 10 to 12 percent Medicaid. So that’s where they get the bulk of their revenue. So every time there’s a cut in those state and federal programs, hospitals need to make up that cut. Either cut costs or cut services or look to our private pay colleagues, Blue Cross, Excellus, to hand over more money which puts a burden on private insurance employers which pay for that insurance. So it’s really important to understand that the relationship between the government payers and what it does to the healthcare system, especially in upstate New York.
CL: And this is for any of you. What would medical care look like if there wasn’t all this funding from the government? I mean, for those of us who aren’t on Medicare or Medicaid, I would think that our services would be greatly diminished just because there isn’t this funding source.
AV: Well, if I may, government spending and government interaction with the healthcare system. There’s more of the direct dollar and cents. In addition, to paying Medicare and Medicaid to physicians and hospitals stay afloat and to take care of those patients that are dependent on those programs. Don’t forget that the government is in charge of setting a relative value scale which is, in essence, it gives a relative amount of payment that the private players use also. The government is also responsible for the rules and regulations. They’re responsible for licensing, certificate of need. They’re responsible for a lot of medical education. So there are a lot of ways that the government is responsible for healthcare spending beyond the direct Medicare and Medicaid. That being said, as payments for Medicaid and Medicare go down, more and more doctors, hospitals, nursing homes, pharmacies and others are looking to the private sector to make up the difference. It’s all just a form of cost shifting. Well, the private insurers have always paid a little bit more to make up the difference, but there comes a limit and the question is how close are we getting to that limit?
TD: I think it’s also important to point out that if you look at other developed countries and typically we look at European countries as benchmarks. In those countries, the government typically spends far more as a percent of total healthcare expenditures than the private sector. And in those countries, the total cost of healthcare on a per capita basis and as a percent of gross domestic product is substantially lower than in the United States. And in many of those countries, the outcomes are much better than we achieve in the United States. So I don’t think that it’s necessarily a bad thing that the government pays more as a percent of the total health care bill than the private sector.
CL: And what do you mean by “the outcomes are better?”
TD: The United States is rated by the World Health Organization as the 26th poorest performing healthcare system. When you look at outcomes as maternal child health outcomes, life expectancy, years of disability, a variety of the health status indicators, we are behind many, many other countries. And really that begs the question what are we getting for all the dollars and dollars spent on healthcare. As a percent of other countries’ GDP in the other developed countries is about 9 percent. In the United States it’s about 18 percent. So we’re spending nearly twice the average of other developed countries on healthcare.
CL: Gary Fitzgerald, what would hospitals look like if they were solely dependent on private insurance payments and private payments?
GF: Well, as I said you would cut out 60, 70 percent of the revenues. They would have to downsize, they would cut out immunity. The misnomer here is that hospitals here, especially in central New York and rural areas can provide all sorts of services in the community. Whether it be pediatric services or dietary services, diabetes services, all kinds of public health services out in the community, because they’re the only organization that really has a foothold in that community. Those would be the first services that would go. You’d have to keep on services like the emergency room, which is by law 24/7. And as you all probably know, anyone that comes into the emergency room, whether they have insurance or not, the hospital must take care of that person and make sure they’re stabilized before they leave. And that’s another form where people that have insurance, both the government and private sector are subsidizing those people without insurance, so you would see a drastically reduced access to services in upstate New York almost to the point where there would be no access in some communities. What would happen in upstate New York is that we have a severe physician shortage that’s only going to get worse. The average age is 53 in upstate New York and we have some areas like the Mohawk Valley and the North Country where they have the lowest physician to population ratio in the country. And we can’t recruit new doctors. What the hospitals have done is they’ve gone into employing doctors and paying them as salaried employees of the hospital. So that means the primary care centers in your communities are mostly employed by hospitals. There are some examples where they’re not and it’s less prevalent in the urban areas like Syracuse, but that means if the hospital goes down financially those primary care services may go down as well. We’ve built a system based on government funding that the government is trying to reduce so that people can access this system in the North Country and upstate New York that would suffer not just in people in hospitals.
CL: I just want to pick up on what you were saying, Gary, about what some of the unique problems that upstate New York faces being a rural population, being an aging population. I mean, of course there are other parts of the U.S. that have some of the same problems as well but this is where we live so it’s unique to us and I just would like to find out a little bit more about the things that specifically set this kind of area apart and how we compare to other parts of the country and our dependence on government spending on that medical care. Who would like to take that question?
AV: Well, one thing that sets upstate New York apart from the rest of the country, and in my opinion it’s a fortunate thing for upstate New York, is the fact that the hospitals in this area are not for profit. They’re full service hospitals. In much of the country, hospitals have gone for profit and what that means is that they’re going to chase after profitable service lines. They don’t want people who are coming in who have kidney disease or who have respiratory problems. They would rather cater to very specific problems that have the highest reimbursement because when you have a for profit system, you have an obligation to the investors to give them a return on investment. That’s something that we don’t have in this area. The hospitals are not for profit. They are there to make sure that patients in this area get good, high quality, care. They want to attract the best, most talented staffs that they can. That’s one place we have a slight disadvantage in upstate New York. It’s really hard to recruit and retain good doctors, good nurses, good techs, there’s always a shortage. And that’s one of the problems we’re going to have to face as we go forward.
CL: I’m going to take the contrarian consumer point of view for just a moment. Because I think it is great to have not for profit hospitals, but on the other hand, I haven’t lived in this area for that long. When I first moved here, I tried to make a medical appointment and I wasn’t sure when I had the appointment whether I was going to be on my new insurance or my old insurance, but I couldn’t make the appointment without telling them what my insurance was, whereas in the metropolitan city I came from, I had a credit card, I could get a doctor’s appointment. So, do you think there’s some downsides to that?
TD: Well, largely physician practice is for-profit, it’s private physician practice, not the hospitals. The hospitals are non-profit in sponsorship. And we do have a tendency in upstate New York and in the private practices to ask patients for the insurance before the physician goes at risk to see the patient. And physicians are by in large mom and pop businesses and they attend to their bottom line.
GF: One of the areas that differs a little bit on the for-profit side is the area of capital. One of the reasons our hospitals in New York state are at the bottom of the state when it comes to physical plant, we have just do not have the money. We don’t make the money. Our margins are negative for the most part. If there’s a positive one or two percent, that’s a really good year. Most businesses will tell you to make four or more percent a year to recapitalize and become profitable -- and the next year. So we have an old physical plan in all of our hospitals. And our hospitals, especially in upstate New York, can’t get capital, can’t get access to private capital because their finances aren’t the best. So we’ve been working with the governor and the Senate on trying to do some demonstration projects to bring some private equity into the hospital industry. Not to take over and not to invest in our own companies but for example four of five rural hospitals would pool their capital needs so that they could invest in new rooms in the technology that would come with medical records. And all of the things that they need to do to get to the next level of healthcare reform. They just don’t have the money to do that right now. So we’ve been working on that. We’re the only state in the union that doesn’t allow private equity in the hospital system. And if you’re looking at some of the lists of the hospitals that make the most, the top 100 of the nation, most of those are for-profit hospitals so there are some downsides. They go very slowly, but there are obviously. We really need to look at how we’re going to capitalize the hospital system so we can move to the next iteration of healthcare reform.
CL: Why is private equity not allowed in hospitals?
GF: Well it goes back because the history of New York has been not-for-profit, as Art said, it’s been community based, which we think we can continue with different private equity firms but they have not allowed the for profit companies to come in and partner with the not for profit hospitals and for the most part for 150 years our hospitals have done well, but over the last 20 years, the finances have really been impacted and as Medicaid and Medicare rates have cut every year, it just is hard to keep up with trying to make your building up to standards and trying to do all of the things with technology. So we’re looking for ways to introduce some new forms of capital and the local banking community just will not invest in hospitals that don’t make money. And so it’s a different thing. It’s a demonstration project we’re working on and it may or may not pass in the next week or so here in the state legislator. And it’s a bit complicated and I think that when you look at other outcomes of profit and not for profit hospitals, the for-profit hospitals in other states have some pretty impressive outcomes as well.
CL: Well I was going to ask, does the difference between for-profit hospitals and non-profit hospitals have any effect on the quality of healthcare? Are there any studies that show that at all?
GF: Actually, there are some studies which just came out a couple weeks ago and they, it’s just all over the place; it’s across the board. It depends what outcome you’re looking at. Whether it’s length of stay or mortality, it depends. It’s not not-for-profits are better than for-profits or the other way around. It depends on each measurement you’re looking at.
CL: Professor Denison, did you have anything to add to that?
TD: Well, it’s important to recognize that we never had a plan to organize the acute care hospital system in New York state. We never had a plan around any of the system reorganize a system that makes sense. Hospitals were built in kind of a willy-nilly way and many communities ended up with too many hospitals and too many hospital beds. And we have still maintained a lot of independent hospitals with their own community boards and their own community identities, which at their own level is a very good thing. But when you don’t have sufficient capacity or sufficient scale to make the profits or to make the investments, the services suffer and the institutions suffer. So we really need to reshape our hospital system if we’re going to make sure that it performs the way we want it to perform financially and from an equality perspective.
CL: So is that part of the root of some or many problems with healthcare in the United States? There wasn’t an original plan?
TD: Yes. I teach a class that’s the history of the U.S. healthcare system from about 1900 until now and follow different strands of the healthcare system. Physician practice, mental healthcare, hospital acute care, long term care, insurance, government role, financing regulation and the common theme throughout each of those threads is that each of those sectors developed differently for their own sets of reasons in their own way in a disconnected fashion. So you end up in 2013 with this aggregation of organizations with interesting histories, but no actual history of collaboration. And no master plan. There was a piece of legislation passed in 1946 called the Hospital Survey and Construction Act that gave off enormous amounts of money to make hospitals all over the United States. And there were two pieces of legislation, one that essentially said we should have a plan to how we spend the money and there was a side that said here’s all the money. They never funded a side to plan; they funded the money. So all of these communities built hospitals and now we’re kind of reaping the problems of that and looking around saying, “why are there so many hospitals in so many different communities and all of the hospitals had to be non-profit to access that hospital survey and construction money?” So as Gary points out, we have all non-profit hospitals in the acute care side, and the New York state system forbids anybody from any kind of entity that’s publically traded to New York state because the health department has to qualify the operators of healthcare systems as individuals. Obviously, if something is traded on the public stock market you can’t qualify who’s going to buy the stock. So we have a cumbersome regulatory process and it was confounded with a system that was never planned.
CL: Just before the break, Gary had mentioned that about 20 years ago was when hospitals started suffering financially. Dr. Vercillo, I wanted to ask you about what has happened in the past 20 years that has helped us see this downturn. It was 20 years ago when the Clinton administration tried to reform healthcare. But we’ve seen rising price of healthcare cost and in upstate New York, as in many areas, we’ve seen an aging population. Are those the two main factors or what else in the past 20 years do you think has contributed to the issue of financial soundness of our healthcare facilities?
AV: There are a number of things that would be recognized as the drivers of healthcare costs and the rapid escalation of healthcare costs. There has been an increase in technology, for example. If you look back 20 years ago, if there was someone who had a problem in the area of the chest, you know they would get a chest x-ray, perhaps a cat scan. Now that same person would get a chest x-ray, a cat scan, an MRI, and a pet scan. It’s not to say that those aren’t necessary tests to have done, but they increase the costs. If you look at medications, there are truly miraculous medications that are out there, but the costs, the financial costs are very high. There are medications now that cost $20,000 a year, $100,000 a year. I’ve just been made aware of a medication now that costs almost $1 million a year for one person. Now these things are miraculous, but at the same time, there’s a real financial cost to that. And there are a number of other drivers. For example, much of what used to be considered terminal disease 20 years ago. A woman with metastatic breast cancer, well you were hoping you could get her through five years. Now that same person, we treat that as a chronic disease and we hope she will live many, many years and that is great for the patient, but think of the healthcare costs. And HIV that used to be a death sentence. Those patients are now living years and years and years without any sense that they’re going to have a premature mentality. But the costs are very high. So there are a lot of things that have resulted in an increase in healthcare costs, many of which are for very good legitimate reasons, but the question is, can we as a society afford all of those things and if the answer to that is no, we can’t spend that much of GDP on healthcare, where are you going to cut back? And I think this is one area where I think society has struggled and I think the government has struggled. Sometimes they say they want to reduce what the pay is to physicians, but then when it comes to taking a vote on that, the elected officials just don’t do it. And sometimes they say they want to reduce payment to hospitals. And it’s really not enough to bend that cost curve. But something has got to happen and when you reduce costs, someone is going to get paid less. And I think, Tom, is that in a nutshell what has been happening over the past 20 years?
TD: Well, we haven’t had the heart as the government to bite the bullet and make the hard decision, so certainly we’ve kind of kicked the can down the road every time there was an opportunity to make a change to bring costs down. I mean, first of all we’re a rich country. The United States is the wealthiest country in the world. And there’s a very, very direct relationship between a country’s wealth and the amount of money that is spent on healthcare. So when you look at the United States in the context of the rest of the world, we should expect to spend more money. But there’s about 40 percent more that we spend that cannot be explained by the wealth of the country. And that 40 percent is really where you need to begin to look for solutions if you’re interested in reducing the costs of healthcare. Now put it as a sidebar that this is one-fifth of the economy. The largest employer in Syracuse and in Onondaga County and in many counties is healthcare. So be careful what you ask for. If you reduce spending in the healthcare system, you’re doing something big to the upstate economy. There are things that can be done, Art mentions technology. We adopt technology in the United States without much consideration as to whether or not the technology is adding value to the output of care. We assess the technology to make sure it isn’t going to hurt you but we don’t really do a whole lot to make sure the technology is going to help at the end of the day. We pay far more for drugs than any other country in the world per pill and in terms of the mix of pills used to treat disease. Now bear in mind that when we compare ourselves against the developed world and we’re saying we spend so much more on drugs and we use so many more and complicated drugs, Art points out that some of these drugs are miraculous, they are indeed, but we still have better healthcare outcomes in many of these other countries. There’s still a lot that can be done in the fabric of care to bring costs down and rationalize it a bit more.
GF: If I could just add to this just a slight verification. I think our congress and our state legislatures are not shy about cutting hospitals and nursing homes, that’s the easy way out. And they’ve done that over the years sometimes three or four times a year. When Obamacare, the president calls it Obamacare now so it’s cool, but when we agree, the hospitals agreed to the Obamacare deal we said we would agree to $155 billion in Medicare cuts over 10 years because we thought we would get more people that would have insurance going to hospitals in a 10-year period, in theory. So we gave up the $155 billion and there was supposed to be no further cuts. There’s been like eight different cuts every year on Medicare and we’re not quite sure whether or not Obamacare is going to deliver on that increased on insured population that they promised us three years ago. Hopefully, it will. So I think the problem with our politicians, whether or not they’re listening to this, is the easy choices are whether to cut rates for providers. That’s easy enough and somehow we get through. It’s not easy to talk about end of life care and things that aren’t talked about, does a 98-year-old man who is healthy get a new hip replacement? That’s a tough question. Right now, they do. And you can go through a whole list of things that our government has decided to punt on when it comes to those hard decisions. And look what happened when Obamacare was being discussed and negotiated. Commercials came out and said that there were death panels in the legislation and that was completely false. In one section of the legislation, they actually had the guts to talk about counseling for issues for people who were at the end of their life, just counseling, not death panels. But you see that you know that issue has not been touched by our elected officials. And most of the costs in healthcare, it’s the old 80/20 rule. Eighty percent of the costs are in that population that are using healthcare, whether it be nursing homes or care or some of the other services that were mentioned here. So if we really want to cut the costs, we’ve got to have that hard discussion about where do we stop spending money and I don’t see anyone out there who would like to have that discussion.
AV: I’d like to expand on that because, you know, I think you’ve really touched on something. First of all, all of us have a role in holding down healthcare costs and doing it in a reasonable way. When you talk about end of life, certainly that’s a huge part of it. But in addition to that, we’ve all got to take a role in staying healthy. As a society, we are becoming more obese. There are still 20 percent of our population that are smoking. How is that possible? But it’s true. There’s a lot of things we can do to bring down rates of diabetes. So there are many things we can all do to stay healthy and that helps bring down costs. A second thing is the use of generic medications. Yes, a lot of name brand medications are very expensive, especially when we get into the types that are known as biologics and others, but we as individuals can do a lot by using generic medications and over the past five years, in central New York or upstate New York, we’ve saved over a billion dollars in costs that would have gone out of our area, but because of generics it’s stayed right here. We’ve saved a billion dollars. And in the area of technology, yes there is some technology that increases costs, but there’s also technology that can really help us out and an example of that is a regional healthcare organization, we have Healthy Connections locally. This is a way that we can have a central repository of our data in such a way that it reduces redundancy. It can helps produce better care at a lower cost. So there are all sorts of things that we can do as individuals and as a society to bring down healthcare costs.
CL: We had just touched on Obamacare and the Affordable Care Act and I think you, Gary Fitzgerald had said that it’s still sort of a mystery, how this is all going to work out and I think to most consumers, this seems like a big question mark on how this is going to affect healthcare for them. And I know one of the things that everyone’s a bit unsure of is health exchanges and whether or not this is going to work and whether enough young, healthy people are going to join these exchanges to help offset healthcare costs in other areas. Gary Fitzgerald, let me start with you and you can tell us a little bit about what that means and how that’s going to affect healthcare for everyone.
GF: Yes, starting October 1st, health plans will have unveiled their plans in the New York State Health Exchange, which is basically an online way for people who don’t have insurance, or who have poor insurance, if you will, to go and shop for better insurance. The Obamacare plan allowed for states to set up the exchanges and New York state took advantage of that. It’s one of the few states that moved forward very quickly to open the exchange so that by January 1, 2014, people will have insurance that go to the exchange during October, November, December and pick a health plan. It is anyone’s guess as to how this will work when it comes out a year later, whether or not people will take advantage. Remember, the Obamacare law will go find people that don’t sign up for healthcare and insurance through the IRS and so there’s a lot of incentive to go to the exchanges, understand how they work. There’s going to be literally hundreds, if not thousands of people in New York state who are going to be healthcare exchange navigators, paid for by the federal government for a while, who you will be able to contact if you need help trying to understand how to shop for health insurance on the online exchange but there are many questions about who will take advantage, will people still refuse to get health insurance, and what will happen to those people when January 1 comes around. And the types of plans that are on the exchange, bronze to platinum maybe, and so they go from a pretty basic plan that is less costly to a very good plan, if you will, that is more costly. And depending on your income, you will also qualify for federal subsidies and that will be, supposedly, get help by the navigators to find out how much subsidies you would receive, depending on your family income and then you can choose a plan and have health insurance by January 1 -- in theory. We, as hospitals. hope that everyone without insurance will go to the exchange and get insurance and then they’ll get insurance. No one’s yet sure if this will be working the way it’s supposed to be working, and we don’t have much time, it’s coming quickly. And I know Art is very familiar with this, given that Excellus has to put forward what to offer in the exchange and how it might impact them.
AV: There are a lot of unknowns. We get a report almost daily about clarifications of regulations and new regulations as we submitted for this. And in fact, we’ve submitted rates and we’re waiting to hear back five o’clock some afternoon. It was supposed to be last week but we’re told whether it’s supposed to be told whether it’s acceptable. The exchanges, you know, there’s going to be one in New York state, there’s going to be a federal exchange for those who don’t put one together on their own. I think the objective is good. The overall goal is to make sure that every American has health insurance, and in this great country, in my opinion, nobody should be declaring bankruptcy over a medical issue. And that is the number one cause of bankruptcy in this country. Everyone should have adequate coverage. Now one thing that is fortunate about little old upstate New York, our uninsured rate in this area is one of the lowest in the country. Our uninsured rate is about seven to eight percent, which is still too high, we’d like it 0, but there are places like Texas that are closer to 25 percent. So the number of uninsured people that go on to the exchange is not going to be quite as impactful in the upstate New York area as other parts of the country, but it’s still going to be very substantial. In addition to the exchange, one of the other things it’s going to do is expand eligibility for Medicaid up to 130 percent above federal poverty level. So you’re going to have that expansion which is being fought in a bunch of other states, but it’s going forward in New York state. And in Obamacare, it’s more than the exchange. They are doing away with annual and lifetime limits. I mean, how do you tell the parents of a child with leukemia that they’ve run out of benefits in October and they have to miss the rest of the chemotherapy? How do you tell a parent that? So these lifetime and annual limits are going to be done away with. There’s coverage of children up to age 26 on their parents plan. I mean, how much do those young people really cost anyway? It’s about high time that this was included in that. So there’s a number of parts of Obamacare that really do make sense, including, in my opinion, if we’re going to go forward with the exchanges to do so in an organized way. Now, hopefully, it will reduce some of the healthcare costs. There is some speculation that it could actually increase them.
CL: Professor Denison, it is a huge program, Obamacare, the Affordable Care Act, so it’s probably unfair for you to give a thumbs up or a thumbs down but I will ask you from the broader perspective how this program as a whole you think will affect a region like central and northern New York. I mean, you know, there are some grants that have come through this act already to some clinics. There’s some question mark to the exchanges. What do you think the effect is going to be or is it just too hard to say?
TD: Well, first of all, New York state is not going to be impacted by the provisions of the Patient Accountability Act as much as many of the other states. Our Medicaid limit is already beyond what the law calls for. Our regulation of insurance is already beyond, or approaching, what the law requires. It’s some of the states that have very low or little eligibility for states that have very poor regulation and really shoddy insurance products being marketed. They’re going to have more problems than we are. The Affordable Care Act also allows regulation on a big chunk of public health and back to Art’s comment about people taking responsibility for their own health, there’s a big chunk of it that’s supposed to fund prevention and public health. Those of us that work in healthcare get kind of myopic about how important healthcare is. Medical care predisposes about 20 percent of what causes someone to have a good health outcome. Economics, jobs, environment, nutrition, lifestyle choices, those are the things that really make a difference at the end of the day. The Affordable Care Act has, or had when it was passed, significant funding for prevention. That’s being decimated Congressional session after Congressional session to pay for other things. That’s a travesty. Because we cannot fix our healthcare costs by providing more insurance, we have to do prevention. That’s a problem area. The other piece that is important to remember about the Affordable Care Act is it does not fundamentally change the healthcare delivery system one bit. It does not fundamentally change the insurance industry one bit. It’s all about insurance and regulations and rules and finance reform, but the fundamental problem around fees for service, the fundamental problem about administrative costs isn’t addressed at all and that’s when I see Congress kicking the can down the road. They don’t want to deal with the fee for service. They don’t want to deal with the special interest groups, big pharma, a medical supply group, physicians, insurance, those lobbies are huge. They don’t want to see that change. So I, frankly, would favor some changes in the fabric of the delivery system if we’re actually going to reduce spending.
GF: There’s just a couple of pieces I’d like to comment on. It’s not just the individuals that would be impacted. We’re worried about, hospitals are worried about, small businesses in general dropping their health care coverage for employees, paying them a little extra and telling them to go to the exchange and find coverage. And if they do that and decide to take the cheapest plan, the bronze plan, the one with a high deductible and a high co-pay, I mean we’re talking $2,000, $3,000, $4,000 deductible, most of these people can’t handle that and hospitals and those people will eat that and chase these high deductibles. So, it’s not just the business community, how they will react to this exchange. The other thing I wanted to follow up on from Dr. Denison’s comment, it’s the Obamacare projects that are working now across the country to one in the eastern part of Upstate New York, accountable care organizations. And there are CEOs where doctors are incentivized to get together and work to keep the patient healthy and never come into the hospital. So that seems to be the future. I don’t know without some of the things you talked about, Dr. Denison, how we get there across the country. But right now, hospitals and doctors are getting paid for how many times does a patient come in and how many tests do I do on that patient. That’s what’s causing the costs to continue to go up. If we could get to the point where the provider being paid to keep the person in the community and healthy, then we would see costs go down. I would have a lot less hospitals, probably, in my organization, but I think that’s what Obamacare is trying to test out in some of these areas and early reports are saying that some of those are working across the country.
CL: Is that, Professor Denison, what you were talking about when you said you would like to see the fee for service changed? Is that the direction you were speaking of?
TD: Well there’s an inherent incentive in the fee for service payment system to provide more and to do more. So, physicians, in particular, are incentivized to have the patient come back for more visits. The labs would like to have more tests order, the radiology companies would like to have more films ordered, though there is a fee for a machine living on more and more volume. So if we keep trying to pump volume, we keep increasing cost without paying attention to whether that volume is the right volume. Some of the experiments that Gary mentioned from healthcare organizations, providing incentives for providers to improve someone’s health. The medical home model, we have one here in Syracuse on the west side operated by St. Joseph’s, that health center’s payment will be calibrated based on whether or not it achieves certain health outcomes. For example, if they reduce their patient’s body mass index on average, if they improve blood pressure on average or if they improve some clinical lab measures on average, they will get paid more. So the incentive is not to have the patient come to see the doctor over and over, but do dietary counseling, physical activity, things outside of the norm of what we consider fee for service medicine. That has to happen.
CL: Dr. Vercillo, do you want to comment on some of these incentive programs and how they could affect funding?
AV: Sure. We’ve actually, at Excellus Blue Cross Blue Shield, we’ve been at the forefront of a lot of the Accountable Care Organization, or ACO, discussions. The medical homes and, in fact, the project that Dr. Denison was just mentioning, we’re a major supporter of that too. But I think the concept of that really is that there has got to be a way to reform the payment system so that the incentive is to keep someone healthy rather than pay so that if things go wrong you fix them, because, that is kind of a perverse incentive when it comes to healthcare providers. Now do I think that there are many millions of doctors doing unnecessary tests to generate a higher income? No, I don’t think that’s happening. But could there be some of that going on, we just don’t know how much. But clearly what we need to do is we need to encourage the population to stay as healthy as possible and there are so many ways of doing that. In addition, if there is an evolution toward a more bundled payment system, where you pay the doctor/nursing home system a certain amount of money, the incentive there is to keep people healthy rather than pay for blood tests and things that may not be absolutely necessary. So, I think we’re going in the right direction with that. Let me just mention one other thing that’s part of Obamacare that I think is an important one that kind of flies under the radar and that is that I think people struggle to pay their healthcare premium. That’s a lot of money and they expect that money to go and fund claims. That should pay the hospital and keep them going. It should pay for doctors and be a way to attract good, talented people. It should pay for their medications and it should pay for the nursing homes and all the other areas of care. But you know, so much of the healthcare dollar has gone other places, especially with some of the health insurers around the country. Part of Obamacare is mandating that a certain portion of the premium dollar goes to pay claims. I’m proud to be affiliated with an insurer that pays over 85, close to 90 percent of the premium goes to pay claims. Well, I think that the rest of the insurers, I want to see their feet held to the fire on this. So I think that’s a very positive development in Obamacare. That’s where that money ought to go.
TD: Except the overall structure of the healthcare system doesn’t change and we spend 25 percent of every dollar on administration. And that’s about two and a half times more what the developed world spends. And a fundamental change in the fabric of the delivery system has to happen to bring those costs down and bring a value to the money we’re spending.
GF: That’s called single-payer.
TD: It’s called single-payer.
CL: Dr. Vercillo mentioned technology a couple of times early in our discussion. And this relates both to prevention and keeping costs down. I’d like to have the other two panelists, get your opinion on things. How could things be used like telemedicine or the monitoring of health statistics from afar be helpful in keeping costs down or could it? That’s my question to both of you.
GF: Yes, I think telemedicine has a tremendous amount of opportunity to not only reduce costs but bring services to rural areas where we will not have the old hospital that delivered babies and every technology known to man in the hospital at every community. It’s not going to happen; we can’t afford that. So what we have to do is have one hospital in each town, sole community providers is what we call them, where there’s only one hospital in a town, has to link up with a larger hospital in an urban setting that has the potential to talk to those doctors in that hospital through telemedicine using the technology that exists today to look at patient records to look at all the film that is done on a patient to get a diagnosis in the larger hospital. And to either move that patient to a more appropriate setting if or to consult with the physicians in the smaller hospital to take care of that patient. That is a key to the future for upstate New York in order for the upstate citizens to have access to the quality of care that they deserve. And I think the state of New York has tried some demonstration projects, and we have some going in upstate New York, but there’s not enough put in that area to really grow that whole sector. So the other piece is this sharing of information that is going between information organizations. There’s one in the Capitol region that stretches into the North Country, there’s one in Syracuse as well, that brings doctors and hospitals and pairs all together the sharing of information so that if you show up at a hospital in Syracuse, you’re from Watertown or you come from another part of the North Country, they can hit a button and get your information on their computer without having to wait a day or two to have those films or statistics sent to them to hand delivered to them and that’s a key to better healthcare in upstate New York and I think we’ve got some good programs in place that are already far ahead of some of the other places in the country.
CL: Professor Denison, what do you think about technology and how this could change?
TD Well Gary really pointed out two of the really positive innovations that have the opportunity to save money and improve quality of care at the same time, but let’s take something like the da Vinci robot. You drive down the highway and you see every hospital has a robot and that sounds like a good thing to have a robot do your surgery. And at the end of the day, what we’ve found with research that has just recently been published around the da Vinci robot is that it essentially increases cost in a material way with absolutely no improved outcome. So we have to be judicious about what technology we adopt if we want to have both reduced costs and better quality outcomes.
CL: And what about more electronic medical records? Gary mentioned that. I feel like from a consumer point of view, I mentioned that I moved to this area not long ago and I feel like my medical records are in every part of this country and not in one place and if I had a major illness all of the sudden, who knows what anyone would be able to figure out about me.
TD: Move to Taiwan. In Taiwan, you get a card and on that card is a chip and you go in to see the doctor and the doctor swipes your card and you have all of your information in one place, does what he or she needs to do, swipes it again, gets paid and gives you the card and off you go. The United States is very, very limitedly invested in electronic health records. We’re way behind the developed world. Canada is behind us, if that’s any consolation. But the European countries are far ahead of us. And we spend a lot of money on health care, repeating tests. You know, people point to preventative medicine as to why doctors repeat tests, well that’s not it. They simply don’t have the results because they don’t have electronic records that talk to each other. I think there’s a huge benefit to the electronic health records, but it’s very expensive. We don’t have, as Gary’s pointed out, the capital in New York state to make those investments, so we’re behind the eight ball with that, but electronic records coupled with things like telemedicine should have the potential of improving the quality of care, and patient experience. Anybody who’s hada any bout with the healthcare system will have stories of having information not transfer from one place to the other or delays and other bumps in the road. Continuity of care is really a problem in the United States. It’s what people complain about the most. And that should be really helped by electronic health records.
CL: I did want to mention sequestration -- that hasn’t come up. In addition to money being affected to the defense sector, there’s a portion written in that money will be affected to the healthcare sector. Who would like to speak about how that is affecting us here in New York?
GF: Hospitals took a two percent across the board cut in sequestration. And Medicare, Medicaid was not touched. Ironically, if there’s a grand bargain struck with the Congress and the president, we may actually see a larger cut in Medicare. They’re talking about the president’s put up $400 million, that’s his number and he’s supposed to be on our side. I don’t know what the Republicans will come up with. So sequestration hit and it was two percent across the board for Medicare for hospitals. There were some other cuts for homecare agencies. We’re getting used to that – two percent here, two percent there. But there’s still a big push in Congress not just to reform Medicare, Medicare needs to be reformed for obvious reasons and cuts are not reform so we’re hoping that we hope that there will be a reform of Medicare that includes raising ages and income testing and things that really would reform the system and not just cut providers. One of the things the politicians continue to say is that we’re not touching benefits we’re not going to touch your benefits. We’re going to take the money out of the provider rates. Well, eventually you take the money out of the provider rates and you will see less nurses and more time in the emergency room. It does impact the beneficiaries. It’s just an easy way for them to say we’re not going to cut your benefits. So the two percent went into effect on April 1st and so we’re managing around that and trying to figure out what the next cuts will be.
CL: And Dr. Vercillo, have you seen any changes in your world?
AV: Well, it’s mostly secondarily as Gary Fitzgerald mentioned just a moment ago. The main impact so far, I believe has been on the hospitals. And let me be very clear, I don’t think there has ever been a tougher time for someone to be a lead administrator in a hospital. I think these are incredibly challenging times for them. Trying to fund the hospitals to maintain the quality, they’ve never been under a microscope quite the way they are now. But to maintain good quality, to attract good talent, it’s very, very difficult. And I know they look to the private sector, like my organization, to try and make up the difference and we do that to the best of our ability but there are limits to that also. You know, we have a responsibility to the people that are paying the bills, the businesses and individuals that pay their premiums. So I think what we’re going to find is that as difficult as it’s been so far, remember health care reform one of its main objectives was to bring down costs. And I think Americans are starting to see what that really means. And it’s going to be difficult. I don’t hope, but I fear that we’re going to see hospitals close. I think you’ll see more involvement with mid-levels and less involvement with an actual physician, not that that’s always a bad thing but it’s a reality. I think you’re going to find that there are going to be more and more discussions about what tests are necessary and what tests are not as people have more skin in the game and they’re expected to pay a percentage of that. I think the public is clamoring for, and they deserve, good information about the quality of institutions and various doctors. They need to know -- what are the actual costs of things if they’re going to be responsible for paying a percentage of it. So, one thing’s for sure, there are a lot of cuts down the road and the two percent cut that we’ve seen so far I think is really just the beginning. Hold on tight; it’s going to be a wild ride.
CL: And Gary Fitzgerald had mentioned the “grand bargain” which is something that’s often referred to in Washington about, you know, trying to fix all of the large pieces of the puzzle, of which Medicare is one of the largest. Professor Denison, do you think that’s what’s really needed to fix the healthcare system? You know, is there some political solution here? You know, I’ve always figured, as somebody in her mid-40s, that Medicare isn’t going to be around for me. I’ve thought that way for a very long time and I think people in my generation feel that way, too. Can a grand bargain be struck? Is that what’s needed?
TD: I don’t think that the bargains that have been put on the table are big enough. I think we need a very large solution. The incrementalism that’s been characterizing the kinds of changes we’ve seen in the healthcare and financing system have not served us well and we’ve failed at every turn. So if you look at the price of healthcare from 1970 forward, it’s been an increase every year. We don’t even talk about reducing spending; we talk about reducing the rate of increase of spending. And fee for service is a large part of that problem. Administrative costs are catering to special interest groups, year upon year, and that’s part of that problem. We need to fundamentally change the structure of the delivery system if we’re going to reduce spending over time and if we’re going to increase the quality of the outcomes we receive.
GF: What makes this so complicated is that it’s not just the delivery and access to healthcare, which every upstate citizen should have. It’s if you don’t have healthcare in your communities that’s measured, good doctors and good mid-levels, then business people won’t come here. They won’t stay here. The first thing they ask when they’re going to relocate a business, according to the studies that I’ve looked at, is the educational system, the tax system, of course and the healthcare system. If you don’t have it, the government of New York state can give away tax-free zones and give away a lot of money to bring companies in. But if you don’t have a healthcare system and the educational system, we have the educational system in upstate New York. In almost every community, we have a community college or a state university. But I’m fearful of some of the thing we’ve talked about tonight. We will not have access to healthcare system in our communities, and they will have an impact on business development as we go forward.
CL: Well this is a huge topic and we’ve only begun to strike the tip of the iceberg here, but I don’t want to leave it on a depressing note. It’s a big problem. But I would like to ask all of our panelists what you would say to our listeners and consumers of healthcare in New York state about what they should be looking out for in their communities as we see healthcare changing in the future. You know, what are the things they can be doing? What are the things they should be looking out for, they should be talking to their politicians about, you know? What are your words of wisdom to consumers? Dr. Vercillo, let’s start with you.
AV: Well, I would just start out at the very individual level. They are just so many simple things all of us can do to improve our own health and the health of our communities. Stop smoking, get exercise, reduce your weight. Do those kind of individual things to increase your own longevity and reduce the amount of time that you need to spend in a doctor’s office or in a hospital. There are a lot of things that we can do in that regard. I think that that is a big start. Secondly, take advantage of generic medications. Why should your dollars go to some faraway place to pay for medication that does exactly the same thing? Use the generics whenever it’s safe. Talk to your doctor. If it’s available and it’s the right thing, take advantage of it. I also think that there’s a lot to look forward to. I think technology is going to help us. I think that electronic medical records is going to improve care, hold down costs ultimately, reduce errors, reduce drug interactions, match people up so you’re not receiving prescriptions for something you might have a potential allergy to. Make it so that you’re not being prescribed the same medication by different names by two different doctors. To make it so your records are immediately available so when you show up in your doctor’s office, there’s the results, and they’re not ordering another set of redundant tests just so that they have the results immediately. So I am very positive. I think that we’re in a period of time where there’s going to be incredible change, but I think that ultimately we will come through the other side and we will do well, we’ll be a healthier society. And I think that will bring down costs.
CL: Professor Denison…
TD: I think it’s imperative to recognize what characteristics of a community attribute to good health and good health outcomes and pay attention to those issues as much as you pay attention to the medical care system, and specifically I’m talking about education, I’m talking about economic development and jobs and opportunity, I’m talking about lifestyles. As Art points out, there’s a lot you can do on the individual level. If I were talking to the politicians, I would ask them to do two things. First of all, pay attention to the public health system. Pay attention to the core investments that need to be made to ensure that we have a good health system and prevention, because that’s where we’re going to make a fundamental difference in the long run. Second thing I would tell politicians is to start thinking about this in the long run; stop thinking about this in the short run. The death by a thousand cuts is basically what the hospitals suffer. Two percent here, two percent there, these are not solutions, those are stop gap bandages. And the grand solution that the president is talking about is a deal to cut something even in the short term. That’s no solution. We need to look at the delivery system structure and the way that the financing system is structured and chart out some major changes and be bold enough to do that.
CL: And Gary Fitzgerald…
GF: I think there’s some really exciting developments coming out of Obamacare and the state initiatives that have come out of Governor Cuomo’s Medicare redesign team. They focus on keeping the patient out of the hospital and keeping them in the community and keeping the patient healthy -- and being paid to do that, as we’ve talked about here. That should make patients and people out there very excited about the future, because no one wants to go to the hospital. And if that’s the focus, and we have some good examples of where that’s actually working. And if I was a resident of upstate New York, I would tell our legislators to give us enough money to keep our systems alive so they can transition into discussing community health, keeping people healthy in the community, and we’ll get there. We have some issues, obviously in the short term, but there are some places where they are working. And if I was a patient, and I am a patient like everyone else, those are things I would look forward to knowing more about because that’s really the future.
CL: Well, I’ve learned a lot from the three of you, and I hope all of you in the audience have as well.
Thursday, June 13 at 7 p.m.
26 East First Street, Oswego, NY 13126
WRVO's series of forums on health care is sponsored by the Health Foundation for Western and Central New York