Published by Ted Almon
November 3rd, 2005 in Articles.
On October 3, 2005 the Governor announced his agenda for providing affordable healthcare coverage for Rhode Islanders. Many of us have been briefed on the major points in earlier sessions with Chris Koller, the principal architect of the plan. Certainly we should all be gratified that the issue is finally being brought to the fore. It seemed also appropriate to me that we reflect on something of a gut level to the initiative as a baseline for future discussion. Since I am ready, I will go first without pretense of any special insight or importance on my part, but hoping that others will chime in and actionable plans may begin to evolve. The "Plan" is summarized on page 2 of this date's ProJo, so I will use their summary as a format.
The Wellness Initiative. Nobody wants to be against wellness including me. I have already signed Claflin up for the BCBS Well Company program. Those of you who know me know I am a sort of fitness nut myself. Still, I am quite sure that this initiative, while worthwhile, is clearly off the mark of reducing costs. In fact it may well increase costs in the short to even medium term and may never produce an ROI- but I am OK with it as a "banner" for the effort and a sort of PR lead-in to (not substitute for) more meaningful reform.

Balanced Healthcare Delivery System. This goal has two parts, re-focusing the system on Primary Care, and a fundamental restructuring (eventually) of the acute care provider infrastructure away from the failed competitive model to a more collaborative (and presumably regulated) "centers of excellence" structure.
Primary Care seems a strange place to start on a solution for high costs as it represents a nominal fraction of our total expenditures today. I believe the focus here is on reconfiguring the way individuals gain entry to the system so that there is standardized and rational access to the resources in such a way that costly specialized services may be subsequently controlled. This is sure to be a sensitive area for physicians and a "freedom to choose" red herring is sure to arise early. I believe this harkens back to the "gatekeeper" concept which was much discussed but little utilized a few years back. Gatekeepers then were defeated by their own brethren and some solution for this professional civil war should be planned immediately to avoid further disappointment, and the risk of the overall plan appearing naive.

Centers of Excellence on the other hand is in my mind one of the most fertile savings opportunities offered in the reform effort and is essential to success in controlling overall costs. Hospital costs constitute the largest single area of healthcare expenditures and our hospitals find themselves trapped in a pseudo competitive market environment which is profoundly broken. Rather than leading to innovation and productivity improvements it has given us costly redundancy in expensive technology and programs, compromised quality, and stifling administrative overhead. We are left with an acute care infrastructure designed around the needs of the providers and payers rather than the patients. The good news is it can be fixed but of course it will be sensitive and difficult. I believe that Chris has a rational blueprint for this critical process in his mind and I hope the leadership skills to implement it. It is a critical success factor in the plan as I see it and should be given the highest priority.

Anywhere Anytime Health Information. This of course is the Electronic Medical Record initiative now being spearheaded by the RI Quality Institute and funded initially by a $5MM federal grant. From a business perspective it is a no-brainer, something none of us would question, and deserves to continue to be aggressively implemented.
Affordable Small Business Insurance. Fundamentally, I no longer believe in employer sponsored healthcare for a wide variety of long term considerations. In the short term though I realize it is a political necessity. Therefore a central concern should be how it is funded. For it to be equitable I believe some form of tax is the best vehicle and participation cannot remain voluntary. We have a dismal record of trying to reform the small group insurance market; still we peck away incrementally with band aid fixes that only serve to make the situation worse. It is time for fundamental reform in this area and if that's what the Governor is getting at (but I doubt it) then I'm all for it.

Smart Public Sector Purchasing. Oooh, there's a novel idea! No actually I don't want to be negative I just couldn't resist- given our history. Actually the RiteCare program is in many ways a model of effective State involvement in the healthcare marketplace. I have been an advocate in the past of a RiteCare buy-in for small employers and I still think that idea has some, but limited merit. Currently my thoughts around big picture reform are evolving from the "single payer" concept that sucks the air out of every business conversation in which it arises, to more of a "single purchaser" (yes, the State of course) concept. We must recognize that the providers today heavily subsidize these government plans and can't be expected to do so in the reformed model, but the needless costs of dividing the covered population into countless small risk pools provide more than enough savings opportunity to offset rationalized reimbursement.

What the Governor's Plan Does Not Say, Insurance Reform. It is ironic in this project to reduce health care costs that the most obvious low hanging fruit is forbidden, guarded by the powerful insurance industry and their seemingly omnipotent lobby. Before each of our healthcare dollars can go to work, as much as thirty cents or more is skimmed off by insurance companies without providing healthcare to anyone. This is largely a function of a completely irrational reimbursement system in which every provider negotiates their own deal and then a giant cat and mouse game of claims processing commences. In the end the insurance companies and their shareholders always win, but not before the providers engage in a spending war to compete for their own money. The sure loser in this epic struggle between the providers and payers is clearly us, and no plan to "reform" healthcare can be considered complete if it does not address this issue. It is certainly the "elephant in the living room" that no one wants to discuss.

In my mind, the most scholarly analyses of the healthcare cost puzzle always conclude that reimbursement reform is the single knob on the giant complex machine that must be adjusted first. Regardless of your ideology, it is hard to deny that some sort of standardized reimbursement methodology would allow quantum improvement in system efficiency. Without even whispering the dreaded "single payer" words Rhode Island has drifted remarkably close to this ideological Holy Grail purely by the force of the market and our almost uniquely pure market characteristics. BCBSRI is a publicly chartered, not-for-profit, highly regulated entity. They also control a commanding share of the market which they have earned in a completely free market game. While many, including perhaps the Governor, have cast them as part of the problem, I believe it is time to consider that they may in-fact now represent the best potential solution. While their former management may have richly deserved the comeuppance the State gave them for their arrogance, the irony may be that this move (award of the State contract to UHC) could prove to be a costly mistake by prolonging the sham of a competitive market for health insurance that any small businessman knows died years ago.

It is not my purpose here to be critical of the Governor's Plan for Healthcare Reform; in fact I applaud it as a reasoned and rational starting gambit. We must all now get behind the ongoing efforts of the Health Insurance Commissioner to continue to push an agenda that I strongly believe can lead to high quality, basic healthcare coverage for all Rhode Islanders at a considerably lower cost than we now endure.

Ted Almon
President, CEO
Claflin Co