Healthcare Reform: New Resistance, New Traction

2019.08.03 Seema_Verma_official_photo

Business school courses on managing organizational change often begin with how to deal with resistance to change. They teach business leaders first to distinguish between true resistance – recognition by front-line staff of real obstacles – and pseudo-resistance, the natural human tendency to fear anything unfamiliar.

We are seeing the emergence of true resistance this week, first to “public option” Medicare from Medicare administrator Seema Verma (photo, above) and second to Medicare-for-all from the Washington Post editorial board.

(For the purpose of this blog post, resistance has nothing to do with the Resistance movement against the current President.)

At first glance, this resistance to healthcare reform looks like opposition. But thoughtful change managers welcome resistance. First, resistance indicates that the proposed change is being taken seriously.  Second, it is a sign of loyalty and trust; the resister is willing to speak up and expects a respectful listening. And third, it shows an energy that can be channeled toward constructive problem-solving. Smart managers know to pay attention to the barriers spotted by their resistive staff.

So, in that light, let’s look at the resistance offered by Ms. Verma and then by Washington Post editors.

Obstacle: “A substantial proportion of providers – 30 percent – do not accept new patients on Medicaid” because of low Medicaid payment rates. She implies that doctors and hospitals would disenroll en masse if Medicare-for-all and Medicaid imposed their low payment rates throughout the whole health system. Alternatively she insinuates that hospitals and doctors would suffer financial collapse if coerced to accept disruptive revenue cuts.                                                                                                                        Comment: Ms. Verma echoes a very real concern about the impact of a public option or Medicare-for-all on those most directly affected — doctors and hospitals — whose income cuts, according to last year’s estimates, could range from 11 percent to 40 percent. These drastic disruptions to hospital and doctor income would indeed be a deal-breaker except for one thing:  Medicare would have the incentive and authority to adjust its payment schedules to maintain hospital and doctor revenue neutrality. Medicare would also be free to determine whether high fees were truly justified. Or whether those fees instead reflected unjustified monopolistic leverage, excessive profit-taking, waste, etc. It would be to everyone’s advantage for Medicare-for-all to convert the confusing existing tangle of revenue streams into a simplified single revenue stream. During the initial phase-in of Medicare-for-all, those revenue levels for doctors and hospitals could and should be kept approximately unchanged from current ones.

Obstacle: “Low [Medicare public option] prices imposed on doctors and hospitals can’t stop health-care costs from rising… [Lower Medicare pricing] causes doctors and hospitals to attempt to make up the lost revenue by charging higher prices to private insurers, resulting in higher insurance premiums for everybody else.”                Comment: Ms. Verma is likely correct that under a public option, Medicare would not attain control over enough of the system to hold down overall spending. The phenomenon she describes when doctors and hospitals increase revenue elsewhere when facing a price cut in target services is called “squeezing balloons.”  Her argument against the public option, accordingly, serves as a reason to skip the “public option” transitional program and, rather, to proceed directly to single-payer Medicare-for-all. Single-payer would achieve cost control in the whole system, enabling Medicare to end “balloon squeezing” and other waste.

This question of whether a public option could control prices was posed in an earlier post. 

Obstacle: “Without market pressure on the bottom line, an expanded government plan would balloon uncontrollably, crowd out public options, push consumers off private plans and reduce choice as private plans flee the market.” Ms. Verma ascribes the predicted business failure of private plans to being put at an unfair competitive disadvantage to Medicare public option plans underwritten by the full faith and credit of the federal government.                                                                                                  Comments:

  • Verma is correct that government programs do not have market pressures to keep them lean and responsive. They must constantly be stewarded in other ways. These include internal auditing practices, Congressional oversight, and public media scrutiny. No one doubts the challenge, but there are plenty of examples of public program successes, including current Medicare itself, which could serve as models.
  • Regards unfair competition, Ms. Verma should acknowledge plenty of unfairness throughout the existing rigged system. I described these market failures in a previous post on waste, and they are detailed in Elisabeth Rosenthal’s exposé American Sickness. These market failures result in millions without any insurance and in prices double those in other countries. Armed with the mandate and clout to overcome that ineffectiveness and waste, Medicare-for-all would indeed outcompete impotent private insurers. Private insurers would indeed either flee the market, transform themselves into Medicare subcontractors, or simply be outlawed or obsolete. A health system that finally cared for all and controlled costs would be the fairest system of all.
  • Regards choice, Medicare-for-all would indeed simplify the current overly complex healthcare financing system into a single payer and eliminate choice of insurance. But it would not affect choice of doctors and hospitals, which is what citizens value over the insurance policies themselves. Medicare-for-all would generally preserve current delivery systems and providers, at least initially.

Obstacle:  Ms. Verma singles out a failed ACA (Obamacare) trial demonstration program called CO-OP (Consumer-Oriented and -Operated Plan) as a warning against trying a government-sponsored health insurance plan. The CO-OP program funded 23 community-based non-profit health insurers in 5 states with federal start-up loans.  All but four have failed, and those four are expected to go out of business soon.      Comment: What Ms. Verma does not mention is that CO-OP was a compromise measure inserted into the ACA in place of a public option. According to Healthinsurance.org,“at the time, progressives who preferred a public option derided CO-OPs as a poor alternative because they can’t utilize the efficiencies of scale that would come with Medicare For All, nor do they have the market clout that a single payer system would have when negotiating reimbursement rates with providers.” These CO-OP programs each enrolled only 25,000 to 50,000 subscribers, often disproportionately sicker than average. Thus, it was not an actuarially sound model, and was financed with short-term loans not grants. So, the true take-home warning really should be: don’t undertake ill-advised half-measures like CO-OP.

Conclusion: Ms. Verma’s resistance is to be respected. In each case the problems she anticipates can be controlled or can be resolved with more complete analysis. Thus, these problems need not deter support for Medicare-for-all. But policy makers will do well to attend to the issues she raises.

Now, let’s look at Washington Post editors’ resistance.

Obstacle: “The nation as a whole devotes $3.5 trillion a year, split about evenly between private and public spending, on health care. That’s about a sixth of the economy… Upending such a large portion of the economy would be extremely hard.”       Comment: Extremely hard, indeed. But doable.

  • First of all, Medicare and Medicaid already have relationships with virtually every healthcare provider in the country.
  • Second, Medicare has well-established procedures for implementing policy changes throughout its networks.
  • Third, Medicare and Medicaid already administer about 40 percent of all national health spending.
  • Having said that, implementing Medicaid-for-all would entail new challenges and new potentials for disruption. Medicaid itself and other government departments would need to closely monitor for disruptions and be prepared to respond.

Obstacle: “Many of the massive numbers of Americans employed under the current system would have to find new jobs.”

Comment: Initially, during phase-in of Medicare-for-all, a key objective would be to avoid unnecessary disruptions. Medicare-for-all would involve only financing, not any change to delivery of healthcare services or to the administration of healthcare organizations. Doctors would still practice. Hospitals would still function. In all likelihood, insurance company employees would be the first to feel a change. But, depending on how fast Medicare-for-all transitioned into effect, even they might not experience a drastic change, since many of the functions of claims processing and payments would continue. Perhaps some insurance companies would become subcontractors under the new Medicare. Over time, insurance employees likely would need to find new jobs, and some would find them doing exactly the same tasks. Over the longer run, gradual change would come to the whole system. Some overutilized services would be curtailed, and thus their providers would need new jobs. For example, MRI technicians might need to be retrained as technicians in education, industry, tech, or the service sector. This illustrates that part of the challenge of implementing Medicare-for-all will entail managing labor policies and industrial policies to facilitate the transition. Challenging, but also doable.

Obstacle: “Under a Sanders-style system, the employer-based health-care plans that most non-elderly Americans use would also be eliminated.”                                   Comment:  Although many people undoubtedly fear losing their plans, many others would shed no tear over these insurance plans. Drilling down, it is their doctor that Americans fear losing, not their health plan.  See more discussion at my previous post, ‘150 million would refuse to give up their private health insurance for Medicare-for-all’ – Really? Small businesses, for one, would welcome relief from covering their employees.

Obstacle: “Administrative costs would probably decline, but a lot of the efficiency of a universal system would be in integrating electronic records, which could happen slowly or not at all.”                                                                                                                        Comment:  It is true that the 2009 HITECH law — which provided financial incentives for doctors to adopt electronic health records (EHRs) to replace their illegible handwritten records — has taken 10 years to implement and still counting. At last estimate, there were 1,100 vendors of EHRs, few of them interoperable with each other. Thus, EHRs are a daunting challenge. Potential EHR pitfalls also should caution reformers to proceed slowly and carefully to recognize unintended consequences and minimize disruptions. In actuality, the most significant efficiencies and cost savings will initially accrue from simplified billing and payment processes, not from clinical elements like EHRs. It is the 907 distinct health insurers, each with unique prior authorization procedures, definitions and coverages, that make the system so inefficient. Simplifying down to one payer would yield more “low hanging fruit” savings than trying to implement a uniform clinical EHR, at least initially. Medicare would be up to the task.

Obstacle:  “Paying doctors and hospitals less… could discourage talented people from entering the medical profession.”                                                                                   Comment:  Good riddance. Healthcare should welcome talent that is driven by service, not big incomes.

Obstacle:  “Offering a generous program – Mr. Sanders wants fully health coverage plus vision and dental with no co-pays or premiums – could encourage people to use more health-care services, driving up costs.”                                                                          Comment:  Logically it would only stand to reason that affording access to healthcare, vision, and dental services to currently unserved patients would add to total health spending. On the other hand, many patients currently purchase their own vision and dental care out-of-pocket.  Accordingly, adding this coverage would not actually increase total spending, only change the source from patient wallets to the public purse (which actually leads back to wallets, anyway). The difference is that taxes are progressive, not regressive (which is a separate discussion). Basic services are highly valued by patients (see my post on Diminishing Marginal Benefit). And having access has a big payoff for patients – quality of life, longevity, and financial security (not to mention job mobility and productivity). As above, having a single payer would give Medicare the ability to attack costs effectively by other mechanisms – countering monopolistic pricing, negotiating drug prices, and eliminating low-value (excessive) testing and treatments, for starters. Over the longer haul Medicare-for-all could finally bend the cost-escalation curve.

Obstacle:  The Post quotes the Congressional Budget Office: “combining low doctor payments and generous benefits… would create a cascade of problems: ‘a shortage of providers, longer wait times, and changes in the quality of care, especially if patient demand increased substantially.’ ”                                                                                 Comment:  Medicare could control the pace of implementing coverage changes. It could also provide incentives for providers to relocate to high-demand areas. Over the intermediate term, Medicare could influence provider supply through subsidizing medical schools and residency programs, as well as through immigration policy.

Conclusion:  The Post editors raise valid resistance concerns. In my view, all are controllable and resolvable.

Summary: 

  1. Resistance is a good sign. It shows that thoughtful folks are thinking through obstacles, including Seema Verma and Washington Post editors. This gives the idea of single-payer Medicare-for-all newfound traction in the public discussion.
  2. A general principle in the science of change-management is: proceed with the change only if the manager’s level of control is greater than or equal to the levels of difficulty and uncertainty entailed by the change. My conclusion is that Medicare change managers would have more than enough control over transitioning healthcare to single-payer Medicare-for-all.
  3. Nevertheless, change will be daunting. It will require a deliberate pace, calculated implementation tactics, coordinated labor and industrial policies, and diligent monitoring over a decade-long transition time-frame.

Now, take action

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Image Credit

Title:  Seema Verma MPH official photo

By: Centers for Medicare and Medicaid Services

URL: https://commons.wikimedia.org/wiki/File:Seema_Verma_official_photo.jpg

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