Coalition Sends Letter to Secretary Thomas Daschle Supporting Single-payer

January 19, 2009

Honorable Thomas Daschle
Secretary of Human Services
Hubert H. Humphrey Building
200 Independence Avenue, S.W.
Washington, D.C. 20201

Dear Secretary Daschle:

Congratulations on your appointment as Secretary of Health and Human Services. And thank you for requesting ideas about health reform from Americans. As a physician who has spent a career in public health, academic and clinical medicine, and a founder of the Arizona Coalition for a State and National Health Plan, I have several ideas that augment the ideas you express in “Critical,” and which might assist your deliberations. I call it

A Plan for the Reform of the American Health Care System

First, I suggest that legislation reforming our dysfunctional medical care system begin with the following clear statements of the GOALS to be achieved by the reform.

1. To prevent disease and protect, preserve and promote the health of individuals; and improve the Health Status of the entire American population;

2. To assure that every resident of the United States has access to appropriate clinical care when they are in need;

3. To assure that the quality of care provided in the United States is based on scientific and clinical standards that are continuously improved; and

4. To support and improve the education of those who seek to become clinical and public health professionals in the United States, and support the continuing education of those who are already in practice.

Second, the Federal Healthcare Board you recommend in “Critical,” must establish standards for prevention, assure universal access to care, and adopt criteria to maintain and improve the quality of care. Full access to high quality care will lower medical costs in the United States. The evidence is irrefutable. Nations that provide universal access, have shown that both individual outcomes and community health status improve. The delivery system becomes more efficient, illness is prevented, or managed earlier in settings more appropriate for care than when people have limited access, or postpone care due to worry about its cost.

A system with a single set of goals will optimize its resources. Costs go down while outcomes improve. On the other hand, a system with thousands of companies selecting which services to provide, which fees to pay and to whom, will never be as effective, nor as efficient as one with a single focus.

A single, rational, scientific, clinically based decision making process to evaluate new drugs, new technologies, clinical innovations, and determine appropriate management procedures for disease and disability will assure a universal quality of care from Anchorage to Miami and Honolulu to Bangor. Access and quality will improve, and costs will decline throughout the nation.

Third, no new money is required to create an equitable public payment system serving every member of our 305 million-person society. The $2.3 trillion now spent on health care is sufficient to provide care to everyone., provided waste, excessive overhead and redundancy are eliminated. If all funds now appropriated to the system were deposited in one Healthcare Trust Fund (akin to the Medicare Trust Fund), and managed at low overhead by your FHB, huge savings would evolve. To achieve this objective:

1. All employers, in lieu of their insurance premiums, should allocate 12% of their payroll to the Trust Fund, generating approximately $750 billion. State and Federal funds now purchasing Medicaid services should also be assigned to the fund, raising nearly $400 billion. Medicare monies, another $450 billion, shall go into the Fund. And to cover personal out-of-pocket costs and salary deductions used to cover insurance premiums. a 5% personal income tax will be added to the Trust Fund raising another $400 billion. The resulting two trillion dollars will be sufficient to pay for the medical care for all US residents, by eliminating $300 billion now wasted on paperwork and the bureaucracy woven into the system.

2. The single funding structure will lower costs for nearly everyone. It will eliminate private health insurance carriers with their multiple forms, complex payment schemes, high administrative costs, and profits. The single payment system will eliminate the many factors that now promote profit making at the expense of quality, assuring that the medical needs of patients will not be subjugated to the financial needs of private corporations.

3. The cost of administration should not exceed 3% to 4%, the standard for Medicare or the VA. Multiple private payers, and hundreds of payment and reimbursement schemes only add to the inexorable inefficiencies and inequities that exist in the current morass. A centralized Trust Fund, managed by the Federal Healthcare Board, will reduce costs, improve quality, and achieve the goals stipulated above.

Fourth, compensation from the Trust Fund to the private medical sector, clinicians and other independent care givers, pharmacists, hospitals and other inpatient facilities, should be based upon a process in which fees and reimbursements are negotiated between the regional Healthcare Board and elected representatives of regional providers of care. Clinical fees, pharmaceutical costs, and reimbursement for inpatient care all deserve to be negotiated separately. Hospitals and practitioners consume about 55% of the total healthcare budget. drugs around 10%, and other inpatient facilities another 9%. The remainder is absorbed by dental care, community and public health services, medical education, research, technology, other forms of capital development, and administration costs that range up to 20% of the funds they manage.

1. Clinicians, and other providers: Any fee system or provider payment process must be developed in concert with licensed providers of care through their professional organizations. Several reimbursement systems may be considered: fee-for-service, capitation, and direct salaries to providers. All negotiations with clinicians, however, must be based upon the knowledge that the aggregate amount of resources available for providers shall not exceed a fixed percentage of the total health care budget, say 24% of $2 trillion, or $480 billion. Given this constraint, the funds may be divided based on the number of providers choosing each type of reimbursement, and the number of patients that each group represents. Negotiations of this kind can only occur under a system with one management structure, whose objective is to preserve an adequate number of satisfied primary care providers and other specialists, serving the appropriate medical needs of the population.

a. Fee-for-Service: This will probably be the largest group, representing providers who serve about 75% of the total US population. The Federal Healthcare Board would delegate this process to 200 health service regions each with 1.5 million persons, and 3000 to 5000 providers. The regional boards would be empowered to negotiate fees with representatives of the clinical providers in the region, by professional group (MD and DOs, NPs, ODs, NDs/NMDs, DDSs, etc.). In general, a resource based, relative value scale (RBRVS) might be the standard, adjusted slightly to achieve care in under served regions, or to meet other system goals through payment incentives. With representatives of all specialties participating in the negotiations, the fees for each will have to meet the needs of all, while remaining within the aggregate funds available for each profession. This process should allow for primary care physicians (generally under compensated in the current system) to achieve higher reimbursement.

b. Capitation: Physicians within large multi-specialty groups may opt for this payment method, allowing the group to cover a large number of patients with different needs. This is a process currently employed by Kaiser-Permanente, and other large HMOs. Some individual primary care physicians may choose this option; but the secondary services required by patients must be carefully defined in advance.

c. Salary: A salary structure similar to that in the Veteran’s Healthcare System, or the military could be adopted by some physicians in private practice. The volume of care and the specific scope of their practice would have to be defined in advance since no one provider can give all the care a population of patients may need. For physicians in large groups or in a system of care in which a large menu of services are available, a salary structure maybe the most acceptable. For providers working for larger employers, a salary may be the most common form of compensation, determined by the employer, not the Healthcare Board.

2. Pharmaceutical Services: The Federal Healthcare Board should have the authority to develop an appropriate drug formulary, and order an annual supply of drugs from the pharmaceutical industry in bulk at a price structure equal to, or lower than, that purchased by the VA system or the military.

3. Hospitals and other Inpatient Facilities: Medical care and other services provided within large, in-patient institutions, is best compensated on the basis of the average cost for an inpatient day, times the average number of bed-days served by that facility over the previous several years, plus an annual capital budget separate from operating expenses.

a. Operating Budget: Each institution will be audited annually to determine its current bed-day cost, including administrative overhead, educational costs, normal depreciation and repair (but excluding other capital needs which will be determined separately), and the changing trends in utilization. The bed-day cost times the average number of bed-days in past years would than constitute the current annual budget for that facility, divided into twelve monthly payments from the Trust Fund. Monies saved through quality management improvements could be retained by the facility as an incentive to improve quality and reduce inefficiency in the system.

b. Capital Budget: Capital needs for each institution will vary. Facility age, service menu, community needs, changing nature of clinical practice, and innovations in the profession all must be considered, and negotiated separately. Some items may be needed immediately, others may be planned for future delivery. Since all major capital expenses will ultimately impact operational costs of the hospital and the system at large, major capital needs must be evaluated within the context of the local community, and the needs of the region. Resource planning and management over the Trust Fund will be an essential function of the FHB administration and its regional surrogates.

Fifth, to achieve the goals related to the management and improvement of quality, a process for evaluation must be set by the FHB and implemented by its several healthcare regional agencies. Quality standards relating to structure, process, and outcomes will be set by Board professionals in concert with providers of care. Each facility will have to meet the relevant standards to receive reimbursement. The quality of ambulatory care will also be evaluated. The enforcement of standards should be based upon educating and improving the delivery system, rather than punishing those who fail to maintain the standards established by the Healthcare Board. To assure that the quality of care across the 200 or so national healthcare regions, the National Board will examine the differences between regions and hold regional administrators accountable to keep quality and access up while containing costs.

Summary: The national medical care system is broken. Its repair requires that every individual in the nation be assured his or her right to quality care. This objective can only be achieved if one system, one service package, a common set of quality standards, and a universal payment process, is established under a non-political, non-partisan, professionally managed Federal Healthcare Board that will eliminate excessive administrative costs and profits that now plague the system. In your book, “Critical,” you downplay the potential of a single payer, expanded Medicare type of system; yet to achieve the goals noted above, and those you recommend, any other system, working with multiple insurance carriers, will fail.

Employers and individuals will benefit from this system; each should contribute to the process. Employers will pay a payroll tax (in the range of 12%) in lieu of the insurance premiums they are now paying. Individuals will pay a health income tax of about 5% of total income to cover their current out of pocket and insurance costs. The nation benefits from a healthy populace, therefore, other revenues, Medicare Medicaid, SCHIP, etc., should be added to the Trust Fund. The Indian Health System and VA budgets should be kept separate as suggested by the Conyers Bill, HR 676, until the new Medicare program is running smoothly. State monies, however, now used for mental health and correctional health services, workers compensation, and other health related state programs could be folded into the Trust Fund. These additions will assure that everyone will receive the care they need, and their providers of care will be adequately compensated.

Under this reform, no one will be denied access to care. No one will have care terminated in the midst of treatment. No one will be driven into bankruptcy following a major illness. An the overall health status of the nation will be improved.

Respectfully Submitted,

Jonathan B. Weisbuch, MD, MPH

Enclosures:
Co-signers and supporting letters
Personal biography