Walker half way there on health reform

Governor WalkerGov. Scott Walker’s just released plan that aims to put him out front of other GOP presidential candidates on the repeal of Obamacare includes some salient points, but fails to address the major issue of rising costs.

Give him credit for a partial answer. No Republican heretofore has developed a clear strategy on this overriding economic issue, though the GOP chorus has uniformly denounced the president’s Affordable Care Act (ACA). They have opposed, but have failed to intelligently propose.

That vacuum played a large role in the Mitt Romney’s failed presidential run in 2014. He had authored Romneycare in Massachusetts, a clone of Obamacare, and inexplicably opposed ACA. Voters saw the untenable contradiction.

Gov. Walker is calling for repeal day one in the oval office (it’s going to a busy day with other repeals). And he’s directionly right that Obamacare needs massive revision to be an effective platform for the nation’s care.

Back in 2010, the grand intention of the Democrats was to cover the country’s nearly 50 million uninsured. In big, round numbers, ACA and its subsidies have extended coverage to about 10 million Americans, solving about one-fifth of the access challenge. That measure of progress has come at a huge price:

• Major disruption in the biggest sector of the economy (as with the collapse of Assurant Health in Milwaukee and the loss of more than 2000 jobs.)

• A price tag to taxpayers of at least $100 billion per year.

• Sharply higher insurance premiums across the market for individual policies

• Higher deductibles on the exchange policies that are causing huge financial distress to families. Some have dropped coverage.

• Ever more narrow networks that limit choice for consumers. (You can’t keep your doc.)

• Consolidation of large health providers and insurers, which means less competition and higher prices down the road.

Most analysts agree that Obamacare is not going away, despite the GOP rhetoric. Repeal is mostly rhetoric, but Walker and his 16 GOP competitors for the nomination could one-up the Democrats by calling for universal coverage, but coverage made affordable by the management disciplines that are being rolled out by pioneering companies and providers. They constitute a grassroots revolution.

Interestingly, in his new 13-page white paper, on page 13, Gov. Walker says reforms are necessary “to ensure that all Americans get access to affordable health care.” That seems to an endorsement of sorts for universal coverage.

In reality, though, Gov. Walker was relatively inert on health cost reforms in his first term. He did raise premiums to public employees, but that is not cost reduction; it is cost shifting. As a result, the inattention to cost inflation in Medicaid and state employee plans blew a hole in his budgets. That managerial timidity forced him to cut back on resources for priorities such as education, conservation and economic development.

Walker has taken the time to learn that there is new business model being forged in the private sector Wisconsin and other states for the delivery of care. H just needs to add those cost reduction strategies to his reform plan to make it affordable. Here are the lessons learned in the private sector:

Keep employers in the health care business. They, not insurers, are proving to be the real reformers. Both President Obama and Rep. Paul Ryan want to shift from employer coverage to insurers and individual policies. Walker’s does not make that mistake. To level the playing field, he offers tax credits to those not fortunate to have coverage at their workplaces. They would replace the Obama subsidies. The price tag on the Walker credits was not given, but it has to be a big number.

Self-insurance for government employees. A huge majority of medium and large private employers have gone that route. When companies take on the risk, they are forced to manage employee health and the related costs. Walker proposes to move the management of Medicaid to the state level, and that would have a similar effect. That needs to happen, along with self-insurance plans for state employees. The latter hasn’t happened in Wisconsin.

Consumer driven health plans (CDHP). A majority of private employees are covered by CDHPs with high deductibles and off-setting health accounts. There are now 14.5 million Health Savings Accounts (HSAs) in the country, and that was a Republican reform back in 2003. Why the rapid growth? Because they work. Costs drop 20-30%. Public employees and Medicaid recipients should be on CDHPs, too. Walker proposes a $1000 tax credit for signing up to an HSA. Great idea.

Transparency. Prices for medical procedures still vary by 300-400%, the definition of economic chaos. Private companies are slowly exposing real prices and medical quality, with some grudging help from the industry. Walker could immediately make public the prices paid by the state for its plans and promise to do the same at the federal level. Why not? Those prices should be public record. It would help to create a marketplace for care. Medicare is already moving in that direction.

Value-based purchasing. Self-insured employers are steering their people to hospitals with the lowest infection rates, the best outcomes and the lowest prices. There is an inverse correlation: cheaper is better. They are getting contracts for bundled prices, with warranties for do-overs. Fixed prices are the ultimate form of transparency: such as $26,000 for a joint replacement, all-in. Bundled prices are generally half or less of regional averages. Walker could promise to steer public employees, Medicaid and Medicare recipients in the same manner.

Proactive primary care. Private companies have learned that they can’t manage health costs without managing employee health. Duh! Many large corporations have installed on-site clinics (Briggs, NML, Rockwell, Quad/Graphics, Kohler, Miller-Coors, West Bend Mutual Insurance, and many more) to get six-sigma serious about member health and prevention. They keep people out of expensive (and dangerous) hospitals. Walker could promise to establish on-site or near site medical homes. Savings are 30% or more. His plan stops short, promising “to support” wellness programs.

Lean disciplines at health systems. When in the state, Gov. Walker could drive Appleton’s Memorial Hospital or La Crosse’s Gunderson Health to observe teams of employees drive out defects and waste. They are using “lean” to transform the delivery of health care, much as “lean” has made U.S. manufacturers competitive again in the global economy. Walker could promise to lead and fund the lean revolution.

Trust Busting. Take a page out of Teddy Roosevelt’s book and use the Justice Department to reverse consolidation in the health care sector. President Obama has turned a blind eye to “big health.” Less competition is not a Republican concept.

Bottom line: If Gov. Walker wants to get presidentially serious about taming the beast of health care hyperinflation, unlike Romney, he needs to incorporate the innovations being adopted in the private sector, right in his own state.

The full GOP blueprint for Obamacare Rev. 2 exists.

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  • Tim Nixon

    John,
    It’s great to see ideas from a guy who understands the problems, and has well thought out fixes. But one suggestion concerns me a bit. The marketplace for care makes prices public. That not only would set a ceiling for the cost specific care, it would provide a floor. That could be a problem in a world that is developing new and more efficient treatment(s) every day.
    Tim Nixon

    • JohnTorinus

      Good point, Tim. Prices can move, though. Our fixed prices for joint replacements just dropped, yes dropped, from $28,000 all-in to $26,000.

  • Bob Stodola

    John, you suggest Health Savings Accounts. I don’t understand how they help a family whose provider has a minimum wage job. How does a person making around $15,000 per year have any excess money to put into a health savings account? And if he/she does, how does it help him/her?
    Bob Stodola

    • JohnTorinus

      Many companies, including Serigraph, fund the HSAs or HRAs. That’s the right way to go to offset the high deductibles.
      The high deductibles and co-insurance get people thinking right about purchases of care, and then the HSAs give the money back to the employees.
      Without disincentives and incentives, the system goes bust. That’s what happened to the state budget this year. It was in crisis because of health care cost inflation, and the university, K-12 education and the Stewardship Fund got whacked.

      • Doug Swanson

        But John, like many people who believe in the right thing you make the mistake that other businesses will be like Serigraph. I will bet a substantial amount that they will not. Also I cannot be a responsible consumer of health care until hospitals and clinics have to publish their prices and their quality measures. Purchasing health care is not like buying a washing machine.

  • jim Lenfestey

    john – many very good points, as you know this so well. A few comments before i get over my head. 1) I have a friend who is a hospital admin, says the ACA is rolling our he bundling you propose right now, and he finds it very helpful in cost control. He praises the many cost containment features of the PPA, also its coverage for the indigent (of course). 2) How about adding another avenue for cost containment – allow a public option plan in ACA? Health ins cos would be apoplectic, but Medicacre overhead is circa 4% as I recall, whereas private plan insurance overhead is up to 20% (capped, used to be up to 25% before ACA). That cost differential would bleed customers from private to lower cost public. Anyone unhappy with medicare service?

  • Workplace Wellness is a fraud. The Department of Labor report earlier this year proved it.

    “The study found that lifestyle management programs did not result in
    reduced utilization of health care services or reduced cost. No
    evidence was found of reduced costs from smoking cessation or
    pre-disease management programs. Greater exposure to interventions
    through telephonic counseling programs increased rather than reduced
    costs. Lower cardiovascular events attributable to wellness programs
    reduced costs, but did not come close to offsetting increased costs of
    participation.
    Wellness programs, in sum, do not do reduce health program cost,
    contrary to the assertions of program vendors and the beliefs of
    employers.”

    It was released along with a raft of other releases from federal agencies.

    http://healthaffairs.org/blog/2015/04/17/workplace-wellness-programs-federal-agencies-weigh-in/

    http://www.dol.gov/ebsa/pdf/WellnessStudyFinal.pdf

    There’s no rational reason to believe that they would work, considering that they’re premised on cult belief in quackery, fraud and charlatanism. They falsely blame peoples’ lifestyles for diseases that are really caused by chronic infections such as cytomegalovirus, which don’t go away just because someone eats their magic fruits and vegetables or quits smoking.

    • JohnTorinus

      You read one report and you have all the answers.

      At my company, we have cut hospital admissions in half. There’s a lot to managing population half, not just brochures and web sites. Companies that are doing it right are getting remarkable results.

      • I read the Department of Labor review of all available reports. You’re the one who only read one report. And, where is this report?