1
Remarks by Governor John A. Kitzhaber, M.D. The National Health Policy Conference Washington, D.C. January 16, 2002 _______ Let me begin with a simple statement. Substantive reform of the U.S. health care system is well within our ability to achieve ñ but it wonít come easily. It requires a willingness on the part of each and every stakeholder to honestly evaluate their own contribution to the crisis in cost and access. Whether or not we have the collective will to do that remains to be seen ñ but to date that will has been lacking. As all of us remember, health care was a central issue in the presidential election of 1992. All of the stakeholders were engaged in that ill-fated debate ñ but, to a large extent, only to protect their own narrow interests. Nothing was achieved and we have done little since then, lulled into complacency by the strong economy of the 1990ís and by the short term cost savings produced by managed care for employers. But the crisis in health care cost and access is once again gravitating to the center of the national political stage and I predict that it will be one of the major issues in the presidential election of 2004. That means that we will once again be afforded the opportunity to make reform of the health care system more than a topic of conversation. We will have the opportunity to make it a reality. Over the past 24 years I have had the great good fortune to have practiced emergency medicine and to have served both in the legislature and as a governor. My perspective on the health care system has been influenced by these two roles and I have come to appreciate, in a very personal way, the distinction between the individual and society. This morning I would like to share with you what I have learned from this experience. 2
I offer these thoughts -- not as an advocate for the particular approach we have adopted in Oregon ñ but, rather, in the hope that the policies and principles we have been struggling with over the past decade can help inform the looming debate over the future of the U.S. health care system. Indeed, my comments today must be viewed against the backdrop of that system. Some of my conclusions and proposals are controversial and cut against the grain of conventional political thinking ñ especially here in our nationís capitol. I would ask that you judge them ñ not by whether they are perfect ñ but by whether they are more logical, more equitable and more defensible than the status quo. But I am getting ahead of my story Ö When I was an intern in 1973 I watched a baby die. His name was Sam. He was born very prematurely to a young mother who had not seen a physician over the entire course of her pregnancy. Sam wasn't breathing when we delivered him in the emergency room, and we had to resuscitate him before transferring him to the neonatal intensive care unit where he died two days later. I can still remember standing by his incubator during that final hour, knowing what was going to happen and feeling depressed and helpless. I remember what a quiet death it was. There was nobody there but his mother, a nurse and myself. Nobody else knew about Sam and his twoday struggle to live. He never made the papers or the evening news. It was an anonymous tragedy that touched the lives of no one but those in the room. I remember Samís death because it was one of the first that happened on my watch as an intern and because it offered such a stark contrast to a second death I witnessed a few days later ñ that of a 90-year-old woman. She had lung cancer and was scheduled for surgery to remove her right lung. She had told me that she did not fear death, but she did fear the surgery. She didn't want any more pain. Well, she had the surgery and subsequently suffered a respiratory arrest and then a cardiac arrest. I rushed to the room -- along with another intern, a surgical resident, two nurses, and a respiratory therapist -- and we spent an hour in a frantic but unsuccessful attempt to save her life. 3
Unlike baby Sam's passing, the last hour of her life was not quiet. We stuck tubes into her nose, throat, and bladder; needles into her veins. We pumped her full of drugs and shocked her repeatedly. We "failed," she died, and we ran up a posthumous bill of thousands of dollars to be picked up by her family or her estate. I can still remember the contrast between the frenzied efforts of a roomful of people, with all their sophisticated equipment, to save someone at the very end of a long life, and the quiet and undramatic death of someone at the very beginning of life. I remember the events but at the time I never saw the contradictions. I never considered whether the resuscitation of the elderly woman made sense -- whether the cost and the discomfort we brought to her was compassionate in the face of her underlying diagnosis of "terminal lung cancer." And I certainly never connected the money spent on her final hour with the money not spent on Sam and his mother during her pregnancy. Thirteen years later, however, I would recall this experience and see it in a new light. It was 1986. As President of the Oregon State Senate, I helped rebalance the budget by, among other things, changing the income eligibility requirements for the state-sponsored health care program. With no fanfare or controversy we dropped 4,300 poor Oregonians from heath insurance coverage. I was struck by how easy it was ñ an accounting exercise, nothing more. Five months later, back in my emergency rooom, I saw a number of the people who had lost coverage because of our decision. In most cases, they had delayed seeking treatment for minor problems -- because they were worried about paying the bills ñ and presented with much more serious and costly conditions. I distinctly remember a man who had suffered a massive stroke because he had no way to pay for the medication to control his blood pressure. I had come face to face with the human consequences of the our legislative ì accounting exerciseî five months earlier. 4
I began to ask myself questions. What kind of system would pay to treat someoneís stroke in the hospital but not to manage their hypertension in the community? I found the answer to this ñ and other questions ñ embedded in the very foundation of the U.S. health care system itself. As we all know, health care in America is not free. There is a cost associated with it ñ a growing cost -- and most of us rely on some ì third partyî to help cover that cost. The major third party payers in todayís health care system are government and employers. But they donít cover everyone. For example, not all employers offer workplace-based coverage to their employees. By the same token, not all those in financial need are covered by public programs. On the contrary, many who are quite well off financially receive publicly subsidized health care. While all those over the age of 65 -- regardless of their income -- are eligible for Medicare, we have no such policy concerning the poor. In order to be eligible for publicly subsidized care, low income Americans must fit into congressionally designated categories such as ì families with dependent children,î or the ì elderly, blind or disabled.î Just being poor is not enough. Poor adults without children, for example, are not eligible, even though they may be deeply impoverished. This concept of categorical eligibility underlies the entire system. So our health care financing system has two arms with a ì coverage gapî in between. One arm represents the public system, primarily Medicare and Medicaid. The other arm represents the private system, primarily employmentbased coverage. The gap in between represents those without any health insurance coverage. These are people without a payment source. Many of these people do not get primary or preventive care at all -- or at best get it sporadically. When they get sick enough, many use the emergency room for acute care that could have been avoided if they had had better financial access to primary care. And the health care costs incurred by those in the ì gapî are shifted to the third party payers by incremental increases in their premiums or their bills. Both of these third party payers face very real fiscal limits. Public resources, in particular, are limited because, quite simply, there is a limit to the level of taxation the public will tolerate. And since every dollar spent on health care is 5
a dollar not available for education, transportation, or public safety, there is a limit to what the public sector can spend on health care. So the major third party payers are understandably sensitive to cost increases -- albeit for different reasons -- and when costs rise beyond a certain point, they respond by trying to shift cost and economic risk somewhere else in the system. The operative word here is shift. At the state level ñ when faced with increased cost in the Medicaid program ñ legislators change income eligibility to reduce the number of people covered. This shifts cost to individuals who have no way to absorb it and amounts to the implicit rationing of people. And it is "allor-nothing" rationing. Instead of giving everyone coverage for something, we give some people coverage for everything and others coverage for nothing. And the legislators who make the decision to change eligibility avoid any accountability for the health consequences of the people who lose coverage. That is exactly what we did in our 1986 decision to drop 4,300 poor Oregonians from coverage. Legislators also manage cost increases by cutting reimbursement rates. This is a direct cost shift to providers and shows up as uncompensated care. At some point, providers stop seeing -- or try to avoid seeing -- Medicaid patients which constitutes another form of implicit rationing. Again, those who make the policy decisions that led to it escape any accountability for the consequences. The result of this implicit rationing is a growing number of people in the coverage gap. And as I mentioned, many of them eventually use the emergency room to access the health care system. The costs incurred are then shifted back onto the third party payers and the cycle repeats itself. In short, our current system manages increases in cost by reducing access -- by saying ì noî to coverage. But we do not say ì noî directly -- we do it implicitly. We are not honest about it. We have not adopted an explicit policy that says that we wonít pay to manage hypertension in the community, but we will pay to treat a massive stroke in the hospital ... that we wonít provide all pregnant women with good prenatal care, but we will pay to resuscitate their premature infants. Yet this, in fact, is the unspoken policy of the U.S. health care system. 6
This point was brought home to me in 1987 when the legislature discontinued the Medicaid transplant program ñ potentially affective thirty individuals ñ in order to expand prenatal care and well-child care to 1,200 women and 1,800 children. Although this was clearly an explicit rationing decision, it was both noncontroversial and unreported ñ most likely because there was not a highly visible individual in need of a transplant at the time the legislature made it decision. But in November, 1987, Coby Howard, a seven-year-old boy who had acute lymphoblastic leukemia, requested a bone marrow transplant. Although the child was covered by Medicaid, he was not eligible for the transplant under the new state policy. The family turned to private fundraising. Throughout November I watched the drama unfolding in the media, which fanned public emotions to a fever pitch, while completely ignoring the larger policy issues involved. I remembered baby Sam dying quietly before my eyes in the neonatal intensive care unit during my internship. The cause of his death was not as dramatic or apparently as ì newsworthyî as the failure to obtain an organ transplant ñ but it was made no less tragic by the fact that it was not reported. Coby Howard died in December of 1987, his supporters having failed to raise the needed money. No one can say whether a transplant would have saved him, for he was not in remission at the time, nor had his doctors located a marrow match. Nonetheless, the tragedy that befell little Coby was indeed a human tragedy. It was also a sensational human interest story, and both local and national media seized upon. In the wake of this publicity, a motion was placed before the legislative Emergency Board to partially refund the transplant program for eight individuals in immediate need ñ a motion which I opposed. The media, of course, saw this as a debate about transplants. I saw it as a debate over the allocation of limited public health care resources. 7
To me, the question was not whether transplants have merit -- clearly they often do. Nor was it whether the legislature had sufficient resources to make the appropriation. It did. The question was simply this: If the state was going to invest more money in its health care budget, where should the next dollar go? What was the policy that would lead us to fund transplants as opposed to further expanding the availability of prenatal care? Is one more important than the other? What was the policy that would lead us to offer transplants to eight individuals as opposed to nine, or to nineteen? Where was the equity in taking one group of poor Oregonians who were covered under Medicaid and giving them additional services on top of that, before we offered the basic Medicaid services to other equally needy Oregonians who currently were receiving nothing? It became readily apparent that there was no policy. And while we could easily have funded another eight transplants, we had no way of knowing - or being accountable for ñ the human consequences of not using that money to expand access to other individuals who were excluded from the system altogether. After an emotional two-day debate, the Emergency Board rejected the motion but left unanswered the question of what policy objective should guide health care resource allocation decisions. Should our objective be to guarantee all citizens access to health care? Or should it be to keep all citizens healthy? Certainly, the objective of the delivery system is to give people access to health care. But the objective of the health care system itself is health -- to restore, maintain or improve health. Health care is a means to that end, not an end in itself. It has no intrinsic value ñ except as an economic commodity -- beyond its relationship to health. Unfortunately, the current system, to a large extent, views health care as just that -- an economic commodity. Trying to achieve the objective of ì healthî using public resources requires an honest and acute awareness of the reality of fiscal limits. If, as I have argued, public resources are finite ñ and if all revenue cannot go 8
to health care at the expense of everything else -- it follows that public sector health care budgets are also finite. If this is true, then it also follows that people who depend solely on public revenue to pay for their health care will necessarily have some limits imposed on how much health care will be paid for. It is the responsibility of public policy makers to allocate these limited resources in a way which provides the most benefit to the most people. In other words, you cannot build a social resource allocation policy one individual at a time. This fact was brought into sharp focus for me in the debate over whether to partially refund the transplant program. Whereas my commitment as a physician is to the individual patient, as a legislator (or as a governor), my commitment is to the larger community. As a physician, I am committed to treating my patient to whatever extent I deem necessary regardless of cost. As a governor, I cannot ignore cost and my commitment is to provide as much health care as possible for as many people as possible with the resources I have available. The Oregon Health Plan (OHP) represents the intersection of these two roles ñ that of a physician and of a publicly elected official. It is a direct challenge to the status quo ñ to the explicit federal policy of categorical eligibility and to the implicit federal policy of allocating public resources to benefit the few at the expense of the many. At its heart, then, the OHP, is an effort to maximize the health produced by the allocation of limited public resources. To do so we sought to answer perhaps the single most fundamental question in the health care debate: who has the responsibility to pay for health care for the poor? The federal government ñ with its policy of categorical eligibility ñ has never really answered this question. Medicare covers people in the category ì over the age of 65î ñ regardless of their income; Medicaid covers certain categories of poor people; but we leave unanswered the question of who pays for the poor people who do not fit into a category. It is, to a large extent, the failure to explicitly answer and act on this question that drives the cost-shifting dynamic I have just described. 9
And without a clear public policy to address this question, the health care ì market" will be left to make the determination. But market systems are designed to make profits, not to foster social responsibility. As long as there is a significant number of people unable to pay for health care, the market will try to avoid caring for them and will instead compete for those who can pay. Paying patients are seen as "market share," while those without a means to pay are viewed as liabilities. If caring for the poor is, indeed, a public sector responsibility, then eligibility for public coverage should be based on financial need -- rather than on an arbitrary set of categories. In Oregon, we defined the ì poorî in statute as all those with incomes below 100 percent of the federal poverty level. Having defined eligibility, the next question became how to allocate our resources in a way that produced the greatest health gain for those covered. The reality of fiscal limits makes choices inevitable. The question is whether we want to make them implicitly and by default ñ as we do in the current system ñ or whether we want to make them explicitly, in a way that is consistent with our stated policy objective. In Oregon we have committed ourselves to making those choices explicitly -- by establishing priorities in an open public process based on a set of clear criteria. We have also committed ourselves to being accountability for the consequences of those choices. To fulfill these commitments a Health Services Commission (HSC) was created, comprised of five primary care physicians, a public health nurse, a social worker and four consumers. The commission was charged with ranking medical condition/treatment pairs from the most important to the least important, in terms of the health produced, and judged by a consideration of clinical effectiveness and social values. Starting with the 1991 legislative session -- and each session since then -- the HSC has presented the Oregon legislature with an updated prioritized list of health services accompanied by actuarial information which assigns a cost to provide each line (or condition/treatment pair) on the list. The legislature is statutorily required to start at the top of the list and determine how much can be funded from available revenues and what 10
additional revenues will be needed to fund an acceptable benefit level. In this way, not only is the benefit directly linked to the reality of fiscal limits, but the legislature is clearly and inescapably accountable not just for what it funds in the health care budget, but also for what it chooses not to fund. The benefit package resulting from this process -- with its strong emphasis on primary and preventive care -- is eminently defensible. It covers virtually all preventive and screening services, as well as a number of important services not required by Medicaid including: dental services, hospice care and prescription drugs. Since it was implemented in 1994, the health plan has been unequivocally good for Oregon. First and foremost, we saw a dramatic expansion of coverage, particularly for children. The number of uninsured children fell from 21 percent to 8 percent. Hospital charity care dropped 30-50 percent. We experienced a significant reduction in visits to emergency rooms, and a reduction in infants with low birth weights, because more pregnant women received good prenatal care. Furthermore, between 1994 and 2000, the plan has brought more than $1.5 billion of federal money into Oregon. These funds have played a crucial role in supporting the infrastructure of health care providers -- especially in rural Oregon ñ on which both state sponsored and commercially insured Oregonians depend. This is not to say that our efforts have met with unqualified success -- they have not. We have faced ñ and continue to face ñ a number of challenges. • For example, coverage itself does not ensure access. Many Oregonians who are eligible for the OHP do not have access to it because of other barriers related to geography, communication, transportation and culture ñ to mention a few. • Parts of our delivery system are in chaos because of unequal risk sharing among physicians and hospitals and between physicians and hospitals. 11
• Federal inflexibility on benefit design and eligibility continues to force us into all-or-nothing coverage decisions and one-size-fits-all benefit packages -- and prevents us from using federal dollars to expand care to Oregonians based on their relative medical and financial vulnerability. To address these problems we are applying for additional federal waivers and are trying to move to a community-based model for delivering care under the OHP. But whether or not the plan ultimately survives in this new decade, there are some important lessons from this ten-year experience which can, at the very least, help inform the pending national debate on health care. First and foremost - as I stated earlier -- national reform efforts must be viewed against the backdrop of our current health care system. Failure to act is, in essence, an implicit endorsement of the status quo. And who could possibly defend what we have now? To bring this point home, suppose we wanted to adopt the policy reflected by our current system and introduce it as a bill in the upcoming session of congress. Letís call it The Health Care Equity and Empowerment Act of 2002. It might read something like this: Preamble There shall be no explicit policy objective adopted to guide the allocation of public health care resources. Section I (1) Categories shall be established to differentiate between the "deserving poor" and the "undeserving poor." (a) The "deserving poor" shall include women who are pregnant, families with dependent children, and those who are blind or disabled. Citizens in these categories shall be provided with publicly financed health care. (b) The "undeserving poor" shall include poor women who are not pregnant and poor men. These citizens shall be denied publicly financed health care. 12
Section II (1) All those who are over 65 years old shall be entitled to publicly financed health care, regardless of their income. (2) Employed citizens under the age of 65, regardless of whether they can afford health care for themselves and their families, shall be required to pay a portion of their taxes to purchase health care for wealthy citizens over the age of 65. Section III (1) Expenditure for private health insurance ñ for those who can afford it ñ shall not be counted as taxable income. (2) All citizens, including those who cannot afford health insurance, shall be required to subsidize the health care of those who can afford such insurance. Section IV (1) The criteria of financial need and ability to pay shall not be used to determine eligibility for a public subsidy. (2) The relative effectiveness of various medical interventions in producing health shall not be considered in deciding which services will be paid for by public resources. I doubt that anyone in this room ñ or in the United States Congress ñ could openly support the policy embraced by the Health Care Equity and Empowerment Act of 2002. Yet these are exactly the policies which underlie the U.S. health care system. And these are exactly the policies which must be addressed if health care reform is to be driven by substance rather than by the polls. Letís be clear. Reforming our health care system is not about passing a prescription drug benefit for those on Medicare. Itës about asking ñ and answering -- questions like: • Why do these drugs cost so much in the first place? • Why should wealthy retirees receive publicly subsidized health care paid for, in part, by working families who cannot afford health insurance for themselves and their families? 13
• Why is the average annual per capita cost for Medicare $834 in Dade County, Florida and only $552 and in Henapin County, Minnesota? Ö $811 in Bronx, New York and only $552 Multnomah County, Oregon? • Why has the U.S. Congress has never demanded an accounting of why we should be paying so much more for Medicare in Florida and New York than in Oregon and Minnesota? Reforming our health care system is also not about passing a ì Bill of Rightsî for people who are already enrolled in managed care plans. • It is about ensuring a floor of basic primary and preventive care for the over 40 million Americans who have no health insurance coverage at all. • It is about basing eligibility for a public subsidy on financial need, not on categories. • It is about making the public subsidies in the system explicit and limiting them to the cost of the basic benefit package that constitutes the floor. Health care reform is about establishing priorities based on clinical effectiveness and applying limited public resources to those services which produce the greatest health gain those who depend on publicly subsidized health care. • It is about creating the incentives and database necessary to standardize best practices and reduce the wide variation in physician practiced patterns. • It is about using a reference-based process to require the pharmaceutical industry to compete on the basis of cost for drugs that are clinically equivalent. Over the past few decades efforts to reform the U.S. health care system have been framed and limited by the concept of categorical eligibility. 14
The debate has been characterized by a defense of those who are fortunate enough to fit into a category at the expense of those who are not. Whether the category is ì over the age of 65î or whether it is defined by Medicaid ñ powerful lobbies protect those within the categories, protecting subsidizes for the wealthy at the expense of the poor; protecting the ì deservingî poor from those who federal policy declares are ì undeserving.î The Childrenís Defense Fund ñ an organization for which I have great respect and one which has made great contributions to child health -- has a logo which offers an apt metaphor for the health care debate of the last few decades. The logo depicts ñ in a childís hand -- a child floating in a boat in the sea. Under it is written ñ also in a childís hand: ì Dear Lord be good to me the sea is so wide and my boat is so small.î If we are to have a meaningful debate about reforming our health care system in this new century we must frame it by making a few small changes to this picture. We need draw some children out in the water itself and add: ì And Lord, donít forget those of us who have no boat at all.î Long before the enactment of Medicare and Medicaid, President Franklin Roosevelt said: ì The true test of our society is not whether we give more to those who already have enough, but whether we give enough to those who have too little.î Perhaps the time has come for us to heed these words.