September 28, 2007
Here's an idea: a civilian VA for the uninsured,
and maybe the rest of us.
By Phillip Longman | October 2007
Back in July, while trying to justify his opposition to expanding government health care coverage for children, President Bush made a telling comment. The uninsured, he said, "have access to health care in America. After all, you just go to an emergency room."
That remark stuck many as blithe and callous, and in many ways it was. The uninsured don't receive in ERs anything like the full array of health care they need. Indeed, one of the abiding arguments for universal health care is that patients often wind up in the emergency room with acute illnesses that could have been treated earlier, and more cheaply, had they been able to afford regular doctor's visits.
Still, there was a kernel of truth to Bush's comment—one that we ought to take as a jumping-off point for rethinking how best to provide health insurance for all. The fact is, as a nation we already have an extensive, if ad hoc, system for providing health care to the uninsured. A fair amount of money flows through that system. And the quality of care it provides is far better than you might think.
According to the Kaiser Commission on Medicaid and the Uninsured, Americans who lacked health insurance in 2004 received an average of $1,629 per person in medical services. That's only about 55 percent of what fully insured Americans consumed that year, but it's still more than the total average per capita health care expenditure in Europe.
Some of that medical care is delivered at the suburban hospitals and doctor's offices where those of us with health insurance generally get treated. But the lion's share of health care for the uninsured is provided by assorted "St. Elsewhere" institutions: typically big, old, nonprofit community or teaching hospitals in poorer neighborhoods, with additional help from smaller public clinics.
This Spartan, patchwork system is in financial trouble, due largely to the cost of the uncompensated treatment that St. Elsewheres provide. But it nonetheless continues to offer surprisingly good care. A recent RAND study found that uninsured patients receive only 53.7 percent of the care experts believe they should get. Not so hot, right? But according to the same study, patients with private, fee-for-service insurance are even less likely to receive appropriate, evidence-based treatment. Indeed, among Americans receiving acute care, those who lack insurance stand a slightly better chance of receiving proper treatment than patients covered by Medicaid, Medicare, or any form of private insurance.
Counterintuitive as this may seem, in health care less is often more. The uninsured are virtually immune from receiving unnecessary surgery or other forms of overtreatment that the system constantly encourages. Once uninsured patients are through the door, they cost the hospital money until its doctors make them well enough to leave. There is no incentive to give them treatments they don't need. Since about 20 percent to 30 percent of all health care spending in the United States goes for overtreatment—much of it dangerous—this is no small advantage.
It's also true that the nation's public hospitals, while they may have a Dickensian atmosphere and lack the very latest imaging machines, tend to deliver higher-quality health care than their more prestigious counterparts. For example, Dartmouth researchers John E. Wennberg and Elliot S. Fisher have found that among Medicare patients who are not terminally ill, and who share the same age, socioeconomic, and health status, the chance of dying in the next five years is greater if they go to a high-spending hospital than to a low-spending hospital. Whether suffering from heart attacks, colon cancer, or hip fractures, patients live longer if they stay away from "elite" hospitals, with their overabundance of specialists, and choose a lower-cost St. Elsewhere. Given this unexpected reality, it is perhaps not surprising that patient satisfaction also declines as a hospital's spending per patient rises. It's not fun to be overtreated, even if you get valet parking and the finest in pudding.
None of this is to minimize the plight of the uninsured, who die at higher rates than the rest of us in large part because they don't have access to affordable primary care. But the fact that uninsured patients receive higher-quality acute care than do those with insurance ought to make us think twice about all the plans being put forth by presidential candidates to expand health insurance.
Virtually every one of those plans, Democratic and Republican alike, rests on the assumption that the uninsured should be brought into the health care system the rest of us use. But what if something like the opposite is true? What if the best way to help the uninsured is to make the health care delivery system they already use—the St. Elsewhere model—better and more affordable? What if that path to 100 percent coverage turns out to be not just better for the health of the uninsured, but cheaper for taxpayers than any other universal health care plan out there, and politically more viable? And what if, eventually, the rest of us could join that system?
What I'm proposing is this: Take the existing, ad hoc system we use for treating the uninsured and turn it into a real integrated system. Specifically, mandate that everyone in America buy health insurance (with subsidies to those who can't afford the premiums), and then contract with assorted St. Elsewheres to serve the resulting pool of newly insured patients. The organizing blueprint of this new system would come from the one truly successful national health care system we currently have: the VA.
There's a funny thing about the VA. Among most Americans, it still has a reputation for mediocrity at best, and abysmal care at worst. Last spring, when the Washington Post reported on scandalous conditions at Walter Reed Army Medical Center, many observers mistakenly saw the news as another black eye for the VA—not realizing that Walter Reed is in fact run by the Defense Department, an entirely separate cabinet agency. As for the VA, since its technology-driven transformation in the 1990s, those who use it love it. The VA has the highest rate of patient satisfaction of any health care delivery system in the United States, by far—higher even than fee-for-service Medicare, with its limitless choice of doctors. As readers of this magazine are likely to know (see "Best Care Anywhere," Washington Monthly, January/February 2005), the VA also comes out on top of virtually every study ranking the quality, safety, efficiency, and cost-effectiveness of U.S. health care providers.
As Harvard's John F. Kennedy School of Government gushed when awarding the VA a top prize in 2006 for innovation in government: "While the costs of health care continue to soar for most Americans, the VA is reducing costs, reducing errors, and becoming the model for what modern health care management and delivery should look like." In studies of health care quality, few private systems even come close to the VA.
So how is a supposedly sclerotic government agency with 198,000 employees from five separate unions outperforming the best the private market has to offer? In a word: incentives. Uniquely among U.S. health care providers, the VA has a near-lifetime relationship with its patients. This, in turn, gives it an institutional interest in preventing its patients from getting sick and in managing their long-term chronic illnesses effectively. If the VA doesn't get its pre-diabetic patients to eat right, exercise, and control their blood sugar, for example, it's on the hook down the road for the cost of their dialysis, amputations, blindness, and even possible long-term nursing home costs. Unlike the vast majority of American health care providers, the VA also has no incentive to perform unnecessary surgery or redundant tests. Where other health care providers make money by treating patients, the VA makes money by keeping them well.
The VA model is that rarest of health care beasts: one with a perfect alignment of interest between patients and providers. This is why, for example, the VA has emerged as the world leader in electronic medical records—and thus in the development of the evidence-based medicine these records make possible. For the rest of the American health care system, it makes little financial sense to invest in information technology and the systematic study of what treatments and drugs work best; precisely to the extent such investments improve the quality of care and make or keep people well, they dry up revenue. But for the VA, investments in quality make sense precisely because the system's financial interests are in sync with the health interests of its patients.
Historically, to be sure, the VA has faced many challenges, and still does. Unlike Medicare and Social Security, it has no trust fund to ensure adequate and predictable funding. In building or closing hospitals it faces intense micromanagement from Congress. Its patients are older, poorer, and far more prone to addiction issues, traumatic injury, and chronic illness than the population as a whole. It is subject to intense and not always helpful scrutiny from the press, veterans-services organizations, and other special interest groups. It has to plan against imponderables that other health care providers can safely ignore, such as when and for how long America will go to war and what the physical and mental casualty rates will be. And while the VA is not a monopoly, many of its patients have little ability to switch to competing providers.
Yet all these factors have not been enough to prevent the VA from emerging as the bright star of the American health care system by almost every conceivable metric, which ought to tell you something big. Particularly these days, when long-term chronic illnesses like diabetes are the dominant threat to the health of the population and the national bank account, a system of care under which the provider has a stake in the patients' long-term interest is the only sane way forward. If the 45 million uninsured Americans could be transitioned into a VA-style system, they would literally be getting the best care anywhere. And as news of that system's low costs and impressive results spread, more and more Americans would wonder why they, too, didn't have access to such a remarkable provider.
So how can we make that happen? The first step is to do what Mitt Romney has already done in Massachusetts, and what John Edwards says he will do nationally if he becomes president: make health insurance mandatory. Just as it is illegal in some states to drive and not have auto insurance, so too would it be illegal for any American not to have some kind of health insurance. Those who can't afford the cost would receive subsidies. But here's the twist: people not currently covered by private carriers or Medicare would have the option of receiving their care through a new network of providers that combines the best features of the VA.
For purposes of discussion, let's imagine that this new network took the name Vista Health Care Network, because it has been inspired by the VA's best-in-class VistA electronic medical record system and the high-quality model of care that the system makes possible. The slogan for the Vista Heath Care Network could be "Health for Life"—because Vista's prime long-term objective would be to offer Americans continuous and integrated lifetime care similar to that enjoyed by patients in the VA system.
Governance of the Vista network would be in the form of a board appointed by the president, whose members would not be subject to Senate confirmation and would serve staggered terms—in effect, a Federal Reserve Board of Medicine. The board's first task would be to approach various public and charitable hospitals around the country that face large loads of uninsured patients, and offer them a deal: Install the VA's VistA health information management software, and agree to adhere to the performance measures and protocols of evidence-based medicine used by the VA itself. In exchange, you'll get a contract to care for a guaranteed pool of people—who will be paid for. No longer will you have to provide uncompensated care to everyone who enters your emergency room. This pool would consist of those who can't afford private insurance and those on Medicaid. Reimbursement rates would be set much higher than in Medicaid, and when combined with the efficiency in the VA model of care, they'd be high enough to guarantee the solvency of participating hospitals.
It wouldn't be hard for the Vista board to find hospitals willing to take this deal. Across the country, hospitals serving the growing ranks of the uninsured are in financial crisis. Today, for example, Maryland's Prince George's County, outside of Washington, D.C., is in danger of losing its three hospitals largely because of their high volume of uninsured patients. Half of New Jersey's eighty-two hospitals run deficits, and the state is intent on closing most of them. For the past eight years, New York State's hospitals as a group have lost money, and under the terms of a special "hospital closure" commission, as many as a quarter will soon be gone.
Let's put ourselves in the shoes of people who manage, work for, or depend on one of these financially imperiled hospitals. Joining the Vista network would offer them a lifeline. Yes, the hospitals that take Vista's offer would have to radically change the way they do business. They'd have to join the twenty-first century and learn to use electronic medical records, which the vast majority of providers currently do not rely on. They'd also have to shed acute care beds and specialists and invest in more outpatient clinics—in which, for example, diabetics could learn how to manage their disease, or people with high blood pressure could join smoking-cessation programs. Doctors who work for these hospitals would no longer be constantly visited by pill salesmen, because decisions on what prescription drugs to use would be made on a scientific basis by the Vista board, and because the Vista network, like the VA, would negotiate as an institution to obtain the best prices from drug companies.
These and other changes would ruffle many feathers. But accepting the Vista deal means the hospital wouldn't have to close. Instead, the local community could take pride in having preserved an institution that not only serves the needy, but offers them high-quality, high-value health care as well. As long as the hospital demonstrably adhered to the VA's model of care, local politicians could continue to use it as a source of patronage, while local restaurants, stores, and real estate agents could continue to live off the income its employees spread through the community.
Now, let's put ourselves in the shoes of those who would be the customers of the new Vista system. One segment would be lower-income people, who, for the most part, are already frequenting various St. Elsewheres for their health care needs. For them, the transition to the new system would be easy and, indeed, welcome. They'd be going mostly to the same hospitals and clinics they're used to. But they would be able to get preventive care, like regular doctor checkups, as well as acute care, and not be hit with impossible-to-pay bills that could force them into bankruptcy.
A second segment of Vista customers would be people—mostly young—who currently lack insurance because they're students or work for companies that don't offer it, and because they're healthy enough to feel that they don't need it. These people might not like being forced to buy insurance. But given that they'd have to, they'd likely see the Vista network as an attractive option because of its low cost and its nationwide presence, which would mean they wouldn't have to change health care plans when they move. Younger people, too, are more likely than their parents and grandparents to recognize the benefits of electronic medical records, and the evidence-based care they make possible.
In the short term, this new Vista system would offer acceptable care to every American who currently lacks health insurance—a better deal than they're getting now. Over time, as the reforms imposed on the participating hospitals and clinics began to take effect, the quality of that health care would improve, and, as word spreads, Vista's popularity should increase even more. (Remember, the VA has the highest rate of patient satisfaction of any health care provider in the United States.)
For all this to work, Vista would need to have what the VA already enjoys: a lifetime relationship with the bulk of its patients, so that its financial incentives were in line with its patients' health needs. This could happen with a relatively modest legal fix: any person in the Vista system who gets a job with health insurance should be allowed to direct his or her company to pay premiums to the Vista system if that person wants to remain in the system. And, presuming the system worked well, most people would want to stay in it, given its national reach and the strong desire most of us have not to have to constantly change doctors and health plans.
Finally, let's put ourselves in the shoes of Beltway politicians. Sometime around January 2009, they're probably going to have to decide which—if any—of the proposals for universal health care floating around Washington they're willing to support. The Vista plan offers several politically comforting advantages.
First, unlike the 1993 Clinton health care plan, the Vista proposal does not directly take on the medical/industrial complex. It would not require any changes to the private insurance market, for instance, or place any costly mandates on employers. At least in the short term, Vista would be focused on customers who aren't now part of the private health insurance market.
Second, Vista should garner a wider array of political allies. Many private hospitals and doctors are likely to welcome the program, because it would relieve them of the burden of having to provide uncompensated care to the uninsured. Doctors working within the Vista system would also be free of the hassle of having to file claims to third-party payers and, as in the case of VA doctors, would not bear the burden of paying for medical malpractice insurance. Almost any universal health care proposal could hope to attract these kinds of allies—but Vista would rally an additional set. Every lawmaker who has a costly or failing public hospital in his or her district (and most do) will have a built-in constituency of local politicians, newspapers, medical professionals, and community activists who will see Vista as the best way to save their local institution.
The third political advantage is price. If Vista worked like the VA, it would almost certainly be the lowest-cost route to decent health care for all the uninsured. High-quality health care is also low-cost health care, especially over the long term, as the effects of prevention and evidence-based medicine pay off. Precise costs are difficult to calculate because of differences in the populations served, but consider this figure: for every patient who transfers from Medicare to the VA, taxpayers save about one-third, while the patient, on average, gets higher-quality care.
In addition to employing the VA's cost-control strategy, Vista would have other means of limiting its impact on taxpayers. Much of the money to pay for the Vista system would come from people who currently don't have insurance but, because of the individual mandate, would have to pay at least something up front to defray the cost of their care. What subsidies the Vista system would require would also be largely offset by the forty-some billion dollars in federal, state, and local government spending that goes to treat the uninsured under the current highly inefficient, ad hoc system. Nor would creating a Vista Health Care Network require the government to incur huge capital costs or long-term debt. Though the network would have to build some of its own hospitals and clinics in certain underserved locations, most Vista-affiliated facilities would remain owned and operated by the private interests, charity organizations, and local governments that currently run them. Vista's role in these hospitals and clinics would be analogous to that of a franchiser: setting and enforcing standards, and achieving economies of scale in technology, purchasing, information management, and marketing.
By building on a system that already exists, then, the Vista plan would be the least costly and, initially, the least disruptive way to provide health care for the uninsured (and high-quality care, at that). But that doesn't mean conservatives and health care lobbyists won't go after Vista. They will. For while Vista would not, in the short run, pose a challenge to the private-sector health care market, in the long run it's a different story.
Again, the VA experience is instructive. Thanks to quality improvements, many veterans not currently qualified for VA health care benefits are demanding access to VA hospitals. Among the American Legion's top legislative priorities this year is to allow veterans on Medicare to be able to receive their treatment at the VA.
Similarly, imagine that Vista is put into place and works as advertised. Over time, word gets out that the quality of treatment in Vista is pretty good—indeed, better than what most people with employer-provided health care receive. Pretty soon, individuals who are not eligible for Vista start clamoring for the right to buy into the system. And employers, realizing that Vista is doing a better job of controlling costs than their own private-sector health providers, start pressuring Washington for permission to contract with Vista to provide health care for their employees.
If this kind of competition were allowed to happen, private health care companies would either lose customers to Vista or be forced to find ways to curb overtreatment, reduce medical errors, and in general provide better, more cost-efficient care. Either way, the competition would lead to dramatic improvements in American health care. Just as the existence of state universities puts competitive pressure on private universities to pursue excellence, the existence of the Vista network would force the rest of the health care system to try matching it on quality and value.
Conservatives and health care lobbyists can be expected, of course, to denounce anyone who supports the Vista plan as advocates of "socialized medicine." They would do the same to any serious attempt to provide universal health care. The difference is that with Vista, it may be harder to make that case stick in the public mind.
For one thing, the model for Vista comes not from Canada or France, but from the U.S. military. Is the health care system we provide our troops really "socialism"? Also, the competition that the industry is worried about will happen—if it happens—down the road, only if Vista turns out to be a big success, and only if elected officials later decide to open up the system. The Vista program that today's politicians would be voting on would not alter the health care most Americans have—and this is a major political advantage.
In reality, "socialized medicine" is not the phrase to use when describing the Vista system. Nor is "single payer." The plan would expand the role of government in health care and achieve universal access, but no one would be compelled by law to join the Vista network, just as no one is compelled to receive treatment at the VA. In replicating the best features of the VA, Vista might offer the best care anywhere, but its existence would not erode our all-American right to make bad choices in health care.
Yes, there is a solution to the health care crisis. It starts with the comparatively limited step of creating a high-quality health care delivery system for the uninsured, as opposed to simply throwing more money in their direction or mounting an all-at-once overhaul of the entire health care sector. It ends with future generations of Americans wondering why we took so long to open our hearts and our minds and create the Vista "Health for Life" network.
Phillip Longman, a Schwartz senior fellow at the New America Foundation, is author of Best Care Anywhere: Why VA Health Care Is Better Than Yours.