Faced with a mounting budget crisis, our leaders have cut hundreds of millions from Medicaid, and tens of millions more from block grants to safety net institutions like Cambridge Hospital (disclosure: I work there). As a result, thousands of patients with severe mental illness will find care unavailable, and many of the poor face unaffordable co-payments. At the same time, the Globe tells us that Partners HealthCare (disclosure: I also work there) has used its market muscle to extract higher rates – about 20% above average for the same services, and twice as much as Cambridge Hospital – from private insurers. That’s how Partners has managed to amass huge surpluses in recent years, money they’ve invested in expensive high tech facilities that drive costs ever higher, while studiously avoiding investments in facilities for the chronically mentally ill or other unprofitable patients.

The Partners story may seem disconnected from the state’s budget woes, but its not. You see, state and local governments in The Commonwealth will spend about $3.6 billion on private health insurance premiums for their employees and retirees this year. About 12% of that – about $430 million – will go for care at Partners’ facilities. (Partners gross receipts account for about 12% of total health expenditures in Massachusetts, and they probably have about the same market share among state workers). Hence, if private insurers paid Partners at the same rate they pay other hospitals in the Commonwealth, state and local governments would save nearly $90 million annually on their employees’ health insurance premiums. If they paid Partners the rate they currently pay Cambridge Hospital the savings would be more than $200 million.

Millions more go for tax subsidies for private insurance. In fact, these tax subsidies – which accrue largely to the wealthiest families – cost government treasuries almost as much as Medicaid. But these tax expenditures on behalf of rich and powerful institutions and individuals are carefully hidden. When it comes time to cut, they’re out of sight, while programs for the poor like Medicaid are in the spotlight.

When times are tough – as they surely are right now – government should not selectively spare the wealthy.

David Himmelstein, MD
Associate Professor of Medicine at Harvard Medical School
and Co-Founder of Physicians for a National Health Program

A little noticed feature of the first stage of health reform shipped additional millions of Medicaid dollars to the rich and powerful teaching hospitals and drained them from primary care. In a widely trumpeted move the state upped Medicaid rates for inpatient care – a change that mainly benefited Partners and other financially healthy institutions that provide expensive tertiary care services. (In 2007, the MGH reported a surplus of $354 million, while Brigham and Women’s Hospital had a surplus of $48 million in the second quarter of 2008). But at the same time Medicaid and free care pool payments for outpatient services were shrunken, dealing a body blow to cash-strapped institutions that provide a large volume of primary care to the poor.

On top of this, the state withheld tens of millions promised in the legislation to Cambridge Health Alliance (CHA) (disclosure – that’s where I work) – the only public hospital system left in the Commonwealth. The cash shortage has already cost CHA millions in interest costs.

The latest round of cuts inflicts further wounds on CHA and Boston Medical Center – the other large safety net provider in eastern Massachusetts. Not only will Medicaid rates for the future be cut, the state is demanding a refund of $100 million from past payments to those two systems.

At CHA we’re seeing more uninsured patients than ever, but our funding from the state has been slashed by tens of millions. In the second quarter of 2008 alone we lost $25 million, hundreds of health workers have already been laid off and clinic closures are in the offing.

In the months ahead, tens of thousands of workers in Massachusetts will lose their jobs – and their health insurance coverage. Many will need safety net and subsidized care. The costs of subsidized coverage under Commonwealth Care will predictably rise and the state’s fiscal condition will deteriorate even further. The promise of universal coverage will be broken – and the safety net that cared for the uninsured for decades before health care reform will be left a shadow of its former self.

What are the alternatives? In the short term: cut from the wealthy teaching hospitals that have been racking up huge surpluses for years, rather than the poor ones that are already staggering. In the long term: implement a single payer system that saves billions on profit and bureaucracy, and use the savings to cover the poor and to upgrade coverage for the rest of us.

David Himmelstein
Associate Professor of Medicine at Harvard Medical School
and Co-Founder of Physicians for a National Health Program

Now the radiation from a single chest CT is equivalent to about 500 chest x-rays, which carries a real risk of causing cancer down the road. And there’s virtually no evidence that a CT would help a patient like mine. But it would certainly benefit the radiologist. He and his colleagues are paid as piece workers – they get an additional fee for each scan they interpret. Radiologists have gotten rich (they average over $400,000 annually) by buying CT scanners, MRI machines and other high tech gadgets, and prodding other doctors to order these expensive tests. And each test breeds more tests. A tiny abnormality on one CT (and most of us have something that looks a little funny if you look hard enough), means a radiologist’s report recommending “follow-up CT in 6 months to assess progression.”

It’s not just the radiologists who work this scam. Perhaps half of the stents that cardiologists put in do patients no good at all; oncologists inflict lucrative chemotherapy on many patients who gain nothing but suffering from these potions; and orthopedists often needlessly scope knees and operate on backs. And hospitals are willing partners to these rip-offs. The useless and harmful procedures keep ORs humming and beds full of high-paying patients. It’s gadgets and procedures that bring in the big bucks.

HMOs and insurers have tried to crack down on unnecessary care. But doctors and hospitals can easily outsmart them. We manufacture the data they use to monitor us. I can always make a plausible case for an expensive test, and just try interrupting a cardiologist in the middle of a diagnostic catheterization to debate whether a stent is really needed. So insurers are turning to high deductible insurance policies in an effort to get patients to do the dirty work of limiting care. Unfortunately, the high deductibles mostly keep people away from inexpensive primary and preventive care, and do little to discourage high cost, useless procedures. Even one day in the hospital pushes most patients over their deductible, leaving them no further reason to economize.

As Milton Roemer (a distinguished health policy professor) once observed: “an empty hospital bed will soon be filled.” He probably would have added “an idle CT scanner will soon be in use,” but CTs hadn’t been invented yet. Once you build it, they will come – encouraged by their doctors – and costs will rise.

So what are the implications of all this for health reform? Not good. Almost everywhere you look, hospitals are building, and the new buildings won’t house psychiatrists or family doctors who devote their days to the routine, inexpensive care that has the biggest impact on health and wellness. They’re for big ticket items like surgery and imaging suites. Those buildings will soon be filled, driving health costs further skyward. And legislation encouraging prevention, or electronic medical records, or even banning drug company gifts won’t make a whit of difference (even though I favor all of these things).

What can help? Real health planning, which limits the supply of expensive gadgets and ORs. Paying doctors on salaries rather than as piece workers. And a ban on for-profit medicine. Unfortunately, all of these require far more radical reform than Chapter 58. They’re only feasible under a real national health insurance program.

David Himmelstein
Associate Professor of Medicine at Harvard Medical School
and Co-Founder of Physicians for a National Health Program

1- Computerization – In the 1960s, Lockheed marketed a hospital computing system that was first installed at the Mayo Clinic and then at El Camino Hospital. A 16mm film from that era proclaimed with great fanfare that this system would improve efficiency, eliminate paperwork, improve accuracy, speed communication etc. It proved a disappointment and was quietly abandoned at both hospitals.

Similar rosy claims for electronic medical records have appeared regularly ever since. But despite the fact that virtually all hospital billing and most physician billing is now computerized, the cost savings have never materialized. In fact, paperwork consumes a much higher proportion of health spending now than it did at the dawn of the computer age.

When it’s done right (which it usually isn’t) computerization can help improve the quality of care. But there’s no credible evidence that electronic medical records will lead to substantial cost savings.

2- Prevention – Back in 1986, Louise Russell wrote a book called “Is Prevention Better than Cure.” She concluded that almost all medical prevention efforts actually increased costs, though many saved lives. More recent work has reached the same conclusion. It turns out that smoking and obesity actually save money on health care in the long run, because their victims die younger and hence avoid years of costly medical care. And a review of a comprehensive database of cost effectiveness studies found that 80% of preventive measures actually increased costs. So prevention is worthwhile because it can save lives – but not money.

3- Disease Management – It’s an attractive notion that if we took meticulous care of chronic conditions we’d save money. Unfortunately, the data says otherwise. A Congressional Budget Office review found little evidence that disease management programs save money, and Medicare recently abandoned its disease management demonstration project because it has failed to realize any savings. Like prevention, such programs may improve care, but there’s zero evidence of cost reductions.

4- Higher Co-payments and Deductibles – The theory here is that when people have to reach into their own pocket to pay for care, they’ll use less of it. The Rand Experiment, a randomized trial that assigned some people to high deductible insurance plans and others to a plan that offered full coverage, seemed to bear this out – the high deductible group used less care.

But real life is more complicated than the Rand study suggests. In that study, no doctor or hospital had more than a few patients in the high deductible group. So cuts in the number of visits had virtually no impact on any doctor’s or hospital’s revenues. But a raft of other research shows that doctors and hospitals keep themselves busy, even when co-payments go up. So a doctor with empty appointment slots will tell their diabetic patients to come back sooner than one who’s fully booked. When there are more urologists in a region, more prostates get removed than in a region with few such surgeons. And people spend more days in the hospital when they live in an area with more hospital beds – e.g. Bostonians used about twice as much hospital care as similar people in New Haven. Years ago Milton Roemer, a distinguished public health leader recognized this fact when he proposed Roemer’s Law – an empty hospital bed gets filled

In Quebec, when national health insurance (NHI) came in and all co-payments were abolished, the total number of doctor visits didn’t change at all. Doctors were working, on average, 50 hours a week before NHI and kept working 50 hours per week after NHI. But the abolition of co-payments shifted care: the wealthy visited the doctor less often and the poor more often. Moreover, abolishing co-payments in Quebec led to a big increase in the proportion of patients with serious symptoms who actually got care. Basically, when you eliminate co-payments for everyone, poor people who need care are more likely to get it, and the wealthy cut back a little on unnecessary visits. Conversely, studies in Manitoba showed that when a conservative government came in and boosted co-payments, there was no overall decrease in visits or in costs; but care shifted to the wealthy.

What Works?

1- A Streamlined Financing System – Eliminate the middle men (insurance companies and The Connector); pay hospitals, clinics and nursing homes a lump sum budget, like a fire department; and cover everyone under a single public program. These measures could save at least $5 billion annually on useless health care bureaucracy in Massachusetts alone.

2- Limit the Profusion of Expensive High Tech Facilities – As discussed above, in health care, if you build it the doctors make sure the patients come. So our excess of CAT scanners has resulted in massive overuse of CAT scans – which can deliver radiation doses equivalent to 500 chest x-rays. Right now, hospitals and clinics across the nation are investing in hugely expensive linear accelerator machines which will send the costs of prostate cancer treatment skyrocketing; but there’s no evidence it’s any better than older, less expensive treatment. So long as we leave health planning to the market, the expensive medical arms race will continue.

David Himmelstein
Associate Professor of Medicine at Harvard Medical School
and Co-Founder of Physicians for a National Health Program

Why are such miscalculations the norm? Are the costs of health reform unknowable? Or did politicians (and the media) listen only to the “experts” who told them what they wanted to hear?

As I wrote here several months ago, the Census Bureau has been saying for years that there were far more uninsured in Massachusetts than state leaders cared to admit. But politicians and the economists who advised them stuck to their guns. It turns out the Census Bureau was right. The result is that many more people are eligible for the subsidized coverage than the legislature or governor planned for. And, by the way, the demand for free care from safety-net hospitals and clinics is not dropping as fast as projected, again a result of undercounting the uninsured and ignoring the large number of immigrants who are mostly ineligible for insurance under the reform.

Of course, the economic advisors also underestimated the impact of rising medical costs, taken in by claims that that the “Quality and Cost Control Council” would rein in costs, and that the computerized health records and improved prevention touted in the bill would save money. I laughed those off last May in this space.

(By the way, the same health economist who advised the legislature as it was drawing up the original budget, recently told a real whopper in the letters section of the Boston Globe – claiming that a single payer reform “would cost many multiples of the current Massachusetts reform effort.” He chose to ignore the reams of evidence that single payer would save vast sums on bureaucracy and profits. Indeed, the CBO, the GAO, and even the Lewin Group, a consulting firm which is owned by a health insurer, have all projected that single payer would cover everyone without any increase in total costs).

Unfortunately, any reasonable forecast sees more fiscal trouble ahead for Massachusetts’ health reform. The $400 million overrun estimated for the coming year doesn’t account for the recession that looks to be headed our way. If we’re lucky, it’ll be no worse than the fairly mild downturn in 2001-2003. Back then, the number of working age people who didn’t have jobs climbed by 167,000, and the number of uninsured rose by 168,000 – presumably including many of those who lost jobs, as well as some of their dependents. So a modest downturn is likely to swell the ranks of the low-income uninsured by about 165,000 – adding perhaps $400 to $600 million to the bill for public subsidies.

So as we plan for the next year or two, let’s factor in the real costs that lie ahead, not the fantasy projections politicians would like to believe. If those realistic cost estimates look unsustainable, then lets get ready to talk about a reform that we can afford – like a single payer program.

David Himmelstein is an associate professor of medicine at Harvard Medical School and Co-founder of Physicians for a National Health Program

Blue Cross’ gain from the law was easy to discern. The state required the uninsured to buy private insurers’ policies, opening up a large new market. Blue Cross has been making more than a million dollars a day. Partner’s influence was subtler, largely hidden from public view, but no less rewarding. In its fine print, Chapter 58 shifted tens of millions of hospital dollars from struggling safety net institutions to the large tertiary care hospitals like the MGH and Brigham and Women’ that were already flush with cash.

Those shifts were accomplished by seemingly technical adjustments to how the free care pool reimburses hospitals and the rates Medicaid pays for care. While the detailed mechanisms of the shift are best left for another time, the results are striking.

According to the state’s Division of Healthcare Finance and Policy website, in the first 9 months of 2007 Mass General’s surplus amounted to $275 million; Brigham and Women’s raked in $57 million; Beth Israel Deaconess $73 million; Lahey $64 million; and Children’s Hospital $108 million. For all of those hospitals, 2007 looks poised to be a record year. Meanwhile, Carney lost $1.7 million (after making a surplus in 2006); Cambridge Health Alliance had an operating loss of $4.7 million; and Brockton Hospital was $300,000 in the red on operations. Other hospitals that serve a large proportion of poor patients have also taken a dip. While Boston Medical Center is on track to make a modest surplus, it’s way down from last year, and the same is true of Lowell General and St. Elizabeth’s. And to make matters worse, there’s talk of making up the newly discovered $147 million funding shortfall for Chapter 58 by cutting the funds promised to safety-net hospitals. [By way of disclosure, I should say that I receive income from Mass General, Partners Community Healthcare, and Cambridge Health Alliance – though I obviously do not speak for them.]

What’s the justification for fattening the state’s wealthiest hospitals while the ones caring for the huge remaining pool of the uninsured are starved for funds? Meanwhile poor people face co-pays for prescriptions they used to get free; the near-poor are dunned for premiums they can’t afford; and the middle income uninsured are forced to pay thousands for paper thin coverage.

David Himmelstein is an associate professor of medicine at Harvard Medical School and Co-founder of Physicians for a National Health Program

David Himmelstein
Associate professor of medicine at Harvard Medical School and
Co-founder of Physicians for a National Health Program

Covering 651,000 (the U.S. Census Bureau’s estimate of the uninsured in 2006) is a lot harder and more expensive than covering 355,000 (our state government’s estimate for spring, 2007; their 2006 estimate was 395,000).

So whose number is correct? The Census Bureau sends surveyors door-to-door, with interviewers available for almost every language (including Portuguese and Haitian Creole, common languages in Massachusetts). The state survey calls people on the phone (land lines only, no cell phones) and has interviewers who speak Spanish and English – but no other languages. Anyone without a land-line telephone or who spoke another language was, in effect, counted as insured.

But we know from Census surveys that 43.9% of phoneless adults are uninsured. Moreover, immigrants are often stuck in low-paying jobs that don’t bring benefits, and hence have extraordinarily high uninsurance rates. Yet only 41% of the Commonwealth’s non-English speakers are Spanish speakers; the other 59% (about 530,000 people) vanish in the state survey. In sum, the state’s figures are unreliable – a fact confirmed by a third survey, carried out by the Urban Institute for the Blue Cross Foundation. This survey – also done on the telephone, but with statistical adjustments to avoid undercounting – confirmed the Census Bureau’s findings.

Why does it matter whether the state’s estimate or the Census Bureau’s is right? According to the state, we’re almost half way to covering the uninsured. 155,000 people who were previously uninsured had gained coverage under the health reform bill by July. But according to the Feds, the new sign-ups amount to less than one-quarter of the uninsured in 2006. Moreover, it’s likely that some of that gain has already been offset by shrinking coverage from employers.

So where does that leave us? We’ve made meager progress on covering the uninsured at great expense. And the half million or more who remain uninsured are threatened by the draconian cuts in the free care pool slated to begin October 1, and by budget woes at safety net institutions (a disaster I predicted in my March blog, which was pooh-poohed by a Health Care For All official).

Its high time we acknowledge that health reform built on private insurance is not working in our state. We need to enact real reform – a single payer system that would slash bureaucratic costs and insurance executive’s outrageous incomes, and use the savings to cover all of the uninsured and to eliminate co-payments and deductibles for the rest of us.

David Himmelstein is an associate professor of medicine at Harvard Medical School and
Co-founder of Physicians for a National Health Program

Every year, costs rise far faster than inflation, making health insurance less affordable for individuals, and tempting employers to stop offering coverage altogether. For city and town governments in the Commonwealth, health spending for public workers’ benefits rose 85% between 2001 and 2006, eating up most new tax revenues. And state government spending for Medicaid and other state health programs continues to skyrocket.

With unemployment low and tax revenues high, the state – as well as cities and towns – can scrape by and meet their healthcare obligations. But when the economy turns sour, tax revenues will drop and business will lay off workers and cut benefits for those who remain. The number of people needing free or subsidized coverage under Chapter 58 will balloon, just when the Commonwealth’s coffers are empty. Predictably, the subsidies and coverage will be slashed. Meanwhile, the costs of unsubsidized coverage will continue to rise, leaving fewer and fewer able to afford even the meager offerings under the Commonwealth Choice program.

Unfortunately, the cost control provisions included in Chapter 58 are laughable. No serious observer thinks the toothless “Quality and Cost Control Council” will be able to rein in costs. The computerized health records touted in the bill may improve quality – even that has yet to be proven – but there’s not an iota of evidence that they will save money. And while improved quality and increased prevention – the other pillars of cost containment in the law – are great ideas, they generally raise costs, not lower them. Americans currently receive only about 55% of recommended care, so improved quality frequently means more, not less care. Prevention often keeps people alive (and needing expensive medical care) for years, rather than allowing them to die a quick and cheap death. Indeed, when Louise Russell analyzed the cost implications of prevention some years ago, she could find few things beside immunizations that are likely to save money.

That’s the bad news.

The good news is that there is enormous fat in the current health care system that could be trimmed. By moving to a simple, single payer system we could save about half of the $5 billion we’ll spend on hospital bureaucracy in Massachusetts this year. $2 billion or more could be saved by simplifying doctors’ paperwork, eliminating the need for a huge office staff to do billing, costly billing software etc. And more than a billion could be saved on insurance overhead if we replaced our wasteful private insurance firms with a single public plan.

Additional savings could be realized by having a single payer for prescription drugs, which could bargain with drug companies and bring prices down to the levels that Canadians pay. And limiting the profusion of expensive – and often useless and even harmful – high tech care could save billions more. Doctors and hospitals may make a bundle by offering whole body CT scans to the worried well, but patients get mainly unnecessary radiation.

In sum, single payer reform could save enough to make health care affordable – for everyone. Without such reform, we’ll soon again see a rising tide of the uninsured.

David Himmelstein is an associate professor of medicine at Harvard Medical School and co-founder of Physicians for a National Health Program