Best Care Anywhere

by Phillip Longman

  Full-Spectrum Health Delivery

  The same logic leads to the next step on the road to comprehensive health reform. That step is to assure veterans, both young and old, that their spouses and dependent children can also join an expanding veterans’ health-care system. Inclusion of families not only makes clinical sense—think of poor Terry Nickel’s needs and the millions of aging veterans’ wives like her—it also makes economic sense. It would allow, for example, an aging male veteran and his wife to see the same primary care physician, who would know the medical history of both and could help them to manage each other’s various chronic conditions.

  Or take an example from the other end of life. Under current law, the VA may provide medical benefits to a woman during pregnancy and labor, but not to her baby. About a thousand female veterans a year are forced to seek care outside the VA system when their babies are due. How does this make sense?

  In effect, the proposal here involves allowing military families to buy into the VA system while also giving those currently enrolled with Medicare or Medicaid the same option. Ken Kizer and others who have studied these options believe the VA could be financially self-sustaining if allowed to grow along these lines. The VA would become in effect an integrated, national network of nonprofit, staff-model HMOs and community clinics specializing in the treatment of military families. Once a year, veterans and their families would, through either their employer-sponsored plans or government-sponsored plans, have the option of electing for VA care, just as many today can decide whether to receive care through a Medicare Advantage Plan or a managed care network organized by their insurance company.

  As the VA thus expanded access, it would also gain the opportunity to do a much better job than it already does at preventing and treating the full spectrum of factors that determine the health and well-being of vets and their families. As it is, the VA is a place where a vet can go to get not just conventional health care, but also educational benefits, vocational counseling, job training, a mortgage, and life insurance. In addition, the VA provides services specifically for the homeless and veterans leaving prison, including check-in centers, shelters, and apprenticeships. What other health-care provider comes even close to treating the full spectrum of its patients needs? But these additional benefits are currently administered through a separate, often struggling bureaucracy, the Veterans Benefits Administration, and are not well integrated with the health-care service run by the Veterans Health Administration. Nor do they, as a matter of routine, benefit family members.

  This does not have to be. One can imagine future VA medical centers and clinics where all these services are brought under one roof. And if family members also join the system, one can imagine how the VA could take its model of care to a new level in which the system not only treats the physical ailments of each of its enrollees in an integrated fashion, but also takes into account the broad range of life circumstances determining his or her health and well-being, by, for example, providing family counseling, financial education, and innovative programs to benefit family caregivers.

  Could the VA handle such a change? Certainly not all at once. But remember, even the VA’s existing model of care does not require vast amounts of brick and mortar: its emphasis is on outpatient care, community clinics, and prevention of acute care needs, all making extensive use of information technology to coordinate care and make it far more efficient than elsewhere in the U.S. health-care “system.”

  Remember, too, that the rapid decline in the numbers of veterans will soon free up much capacity. Currently at around 24 million, the veterans population will shrink to less than 19 million by 2019 and to 15.8 million by 2029.6 Even with all the men and women who have served in Afghanistan and Iraq, the number of active-duty U.S military personnel as of 2006 was only about a third of what it was in the 1980s, and only a tenth of what it was in 1945.

  The drop-off in the numbers of very old veterans, who tend to place the most demand on veterans hospitals, will be particularly sharp over the next 20 years. The number of veterans eighty-five and over, for example, is expected to decline from 253,385 in 2006 to 162,032 in 2026. After that, the number of very old veterans will begin to rise again, as Vietnam vets age into their eighties and beyond. But through at least 2033 there will not be as many veterans eighty-five or over as today—a trend exactly opposite that of the U.S. population as a whole, where the ranks of the very old are soaring.7

  So why are we making it increasingly hard for veterans to get access to the veterans’ health-care system? For far too many sick veterans, especially those who served in Vietnam, experiencing a rejection like Gary Nickel endured is taken as the final insult of an ungrateful nation. It’s a hard way to die. For the rest of us, joining their cause is not only morally right but also advances the mission of true health reform by bringing us closer to establishing the principle that access to affordable quality health care is a right of citizenship.

  ELEVEN

  VA Care for Everyone

  After reading previous editions of this book, many people have asked me why the United States does not simply create a civilian VA? If we know the VA offers a model of care that uniquely combines high quality, cost effectiveness, and patient satisfaction, why not just have the government nationalize hospitals and run them using the VA’s protocols of care?

  Aside from the obvious political obstacles, one good answer, it seems to me, is that such a plan of action misses one of the key and often overlooked lessons of the VA’s turnaround, which is the role of competition in the public sector. Recall that the VA for most of its history was a moribund organization. Its transformation under Ken Kizer came only after its sinking reputation and other political circumstances conspired to make it seem quite likely that the Veterans Health Administration would be “zeroed out” and replaced by a system of vouchers. It was only at that point that the VA stopped behaving like a monopoly and embraced wholesale reform. As is often said in other contexts, nothing concentrates the mind like the imminent prospect of being hanged.

  So we don’t want a civilian VA that would give the government a monopoly, or anything close to it, on the delivery of health care in the United States. Not even in the United Kingdom, with its government-owned National Health Service, does the state control all health-care delivery.

  At the same time, however, we have to recognize another lesson of the VA’s transformation, which is that size matters. As we’ve seen, it is the VA’s near-lifetime relationship with its patients that gives it unique incentives and capabilities as an institution to maximize prevention, integration, and effective disease management. That long-term relationship is a function of its scale; it would not exist to nearly the same extent if the VA served only a single city or region because it would be constantly losing patients who moved.

  The VA’s scale has also been an important precondition for the deployment of its highly effective health IT platform (VistA), the cost of which it has been able to spread across a large base of hospitals and clinics. Similarly, the outcomes databases generated by VistA have far greater scientific value because they are drawn from a very broad population.

  The substantial advantage of market power that the VA enjoys in negotiating with drug companies and other medical suppliers is also a function of scale. By one estimate, the VA gets a 48-percent discount in the price it pays for frequently prescribed drugs as compared to those obtained by even the largest private plans.1 The size of the VA also allows it to push past the cartels, known as Group Purchasing Organizations, which control the prices paid by most other health-care providers for hospital supplies from hypodermics to bed linens.2

  So one key challenge in replicating the VA model of care is to strike a balance that avoids the hazards of monopoly while at the same time allows for the economies and other benefits of scale that are an essential part of the VA’s success story. This should not surprise us. In most other key industries—railroads, retailing, the media, for example—there is a tension
between the greater potential efficiencies of large-scale organizations and the hazards of monopoly. Why should health care be any different?

  Another important takeaway from the VA’s transformation is its status as a mission-driven, nonprofit institution. Like all true HMOs, the VA’s model of care minimizes overtreatment if only because its doctors are on salary and thus lack financial incentives to perform unnecessary procedures. Also like all true HMOs, the VA operates within a fixed, or “capitated” budget, as opposed to receiving fees for services, and this, too, minimizes overtreatment. But because the VA is not, like many HMOs, accountable to shareholders for maximizing profits, it also lacks incentives to engage in undertreatment.

  How then do these lessons of the VA apply to the rest of America’s health-care sector? They certainly show there is an appropriately greater role for government-run health-care systems to serve specific populations, so long as they do not turn into monopolies. But they also leave room for a complementary vision: a health-care system dominated by competing nonprofit, integrated health-care delivery systems, each deploying evidence-based protocols of care similar to the VA’s, and operating on a fixed budget using salaried doctors and other health-care professionals.

  From Here to There

  For purposes of discussion, let’s imagine concretely how one such entity might come into being. Let’s call it the Vista Health Network, taking inspiration from the VA’s VistA electronic medical record system and the high-quality model of care that the system makes possible.

  Let’s further imagine that in ten years, the Vista Health Network serves as many patients as today’s VA and in as many different locations. What would be involved in growing such an institution to scale?

  The first need, of course, would be for a good business plan, since even nonprofits cannot afford to lose money. That plan would begin by surveying the policy climate and market conditions likely to affect health markets in coming years. In doing so, it would note the rapid changes that are already underway in the economics of health care and that are predicted to accelerate soon.

  To begin with, common wisdom in the industry holds now that private health care is becoming a low-margin, “commodity” business, as both private insurance and Medicare reimbursement rates become progressively less generous. Harvard Business School professor Clayton Christensen predicts that health care will soon undergo the same transformation as steel and computers and many other industries in which low-cost producers have vanquished more sophisticated high-end producers. Christensen further specifically cites the cost-effectiveness of the VA model of care as a prime example of the potential for disruptive change in healthcare. In a health-care world of shrinking or nonexistent margins, the VA model of care, with its exceptional value for the money, is bound to gain competitive advantage, provided that it gets to market.3

  This will be especially true if key features of Obamacare remain in place. Consider for example its mandate, scheduled to take effect in 2014, that all Americans must purchase health insurance unless they are already covered.

  To date, being the low-cost provider in health care has not generally brought greater market share. One reason is that many people simply choose not to purchase health insurance. Instead, they rely on receiving what care they might need from emergency rooms and just hope they will be able to get out from under any catastrophic bills.

  Starting in 2014, however, millions of Americans (including “young invincibles” who currently can afford health-care insurance but choose not to buy it) will no longer have the option of going bare. Nor, under the terms of the Affordable Care Act, will they have the option of satisfying the individual mandate by purchasing very-high-deductible coverage with many exclusions. Thus, if by imitating the protocols of the VA, the Vista Health Network could come to market with a low-cost/high-value way of satisfying the individual mandate, it would stand a good chance of obtaining substantial market share.

  The Network’s advantages in patient safety and quality might not, at first, be as important in driving consumers toward it. Many consumers still view unrestricted access to specialists as the key measure of a health-care plan’s value. Yet as more and more Americans become sensitized through their own experiences—as well as through media reports—to the hazards of medical errors, overtreatment, dangerous drugs, and poorly coordinated care, it’s likely that such a model, which has a demonstrated ability to provide quality and patient safety, will become more appealing.

  Still, these trends and policies by themselves will not necessarily ensure the rapid rollout of VA-quality care. As we saw in Chapter 7, an important countervailing trend, for example, is the massive consolidation of health-care providers in many local regional markets, which increasingly gives them the power to dictate high prices, potentially even to Medicare.

  Another gum in the works is how to raise the capital that would be needed to form an organization like the Vista Health Network, which in the current market and policy environment would still be a highly speculative endeavor. There is, in short, still a missing key—one that until quite recently I thought would be impossible to obtain but that now seems increasingly within reach.

  The Medicare Moment

  The missing key is found in the radically changing politics of Medicare. As described in the foreword to this edition, Medicare has become the overwhelming cause of the federal government’s long-term deficit. Meanwhile, the need to reduce that deficit is no longer an abstraction, as the nation sees its credit rating, and stature in the world, downgraded.

  As we’ve seen, the squeeze is so extreme that even a progressive Democratic president, whose signature legislative accomplishment was to attack the problem of the uninsured, has suggested that he’d go along with raising the Medicare retirement age to 67 while also signing off on dramatically reduced reimbursement rates for doctors and hospitals. At the same moment, the Republican Party has voted to end Medicare as we know it. Once the untouchable crown jewel of the American middle-class welfare state, Medicare is going to get cut one way or another. So why not do it in a way that is smart and fair, and that leads to a better day—specifically, to the availability of VA-like care for everyone?

  The first essential step is to set a date when the Medicare system will stop covering fee-for-service medicine. Medicare beneficiaries will instead have the choice of deciding among competing managed-care organizations that meet specific requirements. These organizations wouldn’t be standard for-profit HMOs. And they would not receive the inflated, no-questions-asked reimbursement rates that have prevailed under the Medicare Advantage program. Nor would they be anything as amorphous and under-defined as an “Accountable Care Organization.”

  Instead, providers qualified for reimbursement under Medicare would have to be nonprofit organizations to start with. They’d also have to use salaried doctors, deploy integrated health information like the VA, adhere to evidence-based protocols of care, and operate under a fixed budget. Specifically, for every Medicare patient who decided to join their plan, the government would pay a set annual reimbursement based on that patient’s age. These Medicare-certified providers would not be allowed to turn away patients on Medicare, and they would not be allowed to kick Medicare patients out of their plan. Finally, while legally prevented from becoming local monopolies, these institutions would have to be at least the minimum size that would enable them to achieve the economies and other benefits of scale described above.

  The best of our integrated health care providers—the ones most like the VA—would qualify, including, for example, Intermountain Health Care, the Cleveland Clinic, the Mayo Clinic, Geisinger Health System, and Kaiser Permanente. Dartmouth researchers John Wennberg and Elliott Fisher have estimated that if all providers could achieve the same level of efficiency for in-patient care as Intermountain, Medicare hospital spending would fall by 43 percent.4

  The VA itself would also qualify. It could begin serving the many older veterans who are currently excluded from the system be
cause they lack service-related disabilities or are not poor enough to meet the VA’s means test. By allowing these older vets—and perhaps their elderly spouses as well—to use their Medicare entitlement for VA care, everyone wins.

  Meanwhile, many existing health-care providers that didn’t qualify would face a choice: They could merge with institutions that already deliver the high-quality health care necessary to become a Medicare-certified provider and adapt to their cultures and protocols care. Or they could reform themselves. Under the threat of losing their ability to collect from Medicare, they will find it much easier to stare down greedy, profit-driven specialists and others resistant to change and gain the power they need as an institution to do the right thing.

  Raising any capital needed to reform an existing institution or to create a new one eligible to treat Medicare patients should not be a serious obstacle. Banks and investment firms would gladly extend credit and capital to any institution that could show a reasonable plan for meeting the requirements because such institutions would have a predictable future revenue stream that could be used as collateral. Our financial system routinely does this for other nonprofit entities that have predictable revenue streams, from cities and counties to universities and, yes, certain hospitals with assured earnings.

  Indeed, institutions that became certified to serve the Medicare population under this proposal could reasonably hope to attract many younger Americans as well, especially those who will become mandated by “Obamacare” to purchase health coverage starting in 2014. Benefiting from an inherently efficient model of care, these institutions will be the thrifty option for fulfilling the individual mandate, while also happening to be the smart option as well. Thus we set in motion the rollout of VA-like care.