Hospital Head Addresses Health Care Reform

OCEAN CITY — When the House of Representatives voted 219-212 on Sunday night to pass the historic Health Care Reform Bill, it capped a year of heated debates and passionate arguments from both sides, but the discourse is sure to rage on for months to come, as those who hold extreme views on both the left and the right appear to be unsatisfied with the bill itself.

Regardless of one’s political background or stance, the fact of the matter is that health care is going to change in this country, and because of all the politicking that has gone on from both sides, there are many who are unsure of how the gigantic bill is going to effect their daily lives.

In an effort to get past the politics surrounding the bill, and to find out what is going to change for residents, The Dispatch sat down with Atlantic General Hospital President and CEO Michael Franklin to discuss what’s in the bill and what is going to change, for better or for worse.

Q: I guess a good place to start is by asking what is wrong with the current health care system in this country and does this bill address any of those things that need to be fixed?

A: From a health care insurance standpoint, there are a number of things that need to be fixed, and this bill does address some of those things. A lot of it has to do with the marketplace that’s been created over the years in health care. Decades ago, insurance companies were allowed to work together to establish prices in communities and create a false or imperfect market condition in exemption of the anti-trust laws. Physicians were not allowed to work together like that so it has driven the costs up to what we are seeing today.

Q: So the business side of healthcare is what needs to be fixed, and not so much the actual health care that is being provided in this country?

A: That’s exactly right. The conditions that were allowed to be created years ago by insurance companies have created this imperfect market place. Physicians who are trying to make a living, run a business, cover their costs and pay malpractice insurance are now struggling because of the conditions, and the way Medicare was set up in the 1960’s, physicians and hospitals were set up on different systems of payment. Physicians get paid to do more, and hospitals get paid to control costs and their take is based on admissions, and it has created a divide of incentives. The history of legislation in health care has created the existing environment so it is truly the business side of health care that needs to be changed, not so much the science of healthcare, but of course, in some cases, the economics drives the science.

Q: How will this bill address the problems you just mentioned?

A: It is attempting to eliminate that anti-trust law exemption and will try to fix the imperfect market conditions. Other parts of this are demonstration projects that will take several years to develop, but one of which is called ‘bundle payment’. Let’s just say you have a hip replacement. These bundle payments mean that the federal government will pay one price for the surgery and all the rehabilitation afterwards. Let’s say that the payment for that is $15,000. The government would pay that to one entity, so let’s say they pay it to the hospital. The hospital would then have to have a partnership deal with the physician and the post-acute rehab center and they will divvy the bundle payment up so everyone gets a cut. So, it creates an environment where everyone’s incentives are the same, and everyone will get a piece of the pie, which should address the division in the marketplace that was created back in the 60’s with Medicare.

Q: There are many who are concerned that this bill is going to raise people’s premiums down the line. How do you see it?

A: I think it could have the potential to do that. In reading this, some of the costs they are assigning for premiums for the Cadillac plans for instance, are looking at dollar amounts that people are paying, currently. If a normal plan costs 10, 11 or 12 thousand dollars, the Cadillac plans are upwards of $20,000. We are still going to see premium costs that are not indifferent to what today’s costs are, and that’s one of the scratch-your-head issues. But, for probably 90% of the population who have healthcare and are happy with their healthcare, this won’t really affect them much.

Q: The last time we spoke, we were talking about the doctor shortage in this country, and with one of the biggest talking points of this bill being that it will give affordable health care to 32 million Americans, will there be enough doctors to treat these millions of potential new customers?

A: No, and that is probably my biggest concern with this. Everyone expresses concern about availability of health care and ‘don’t mess with my health care’ sort of thing, and there are some things that providing economic incentives around improved care delivery models and more primary care. But, this is about the economics of healthcare and the basic principal of economics is supply and demand. What drives costs are an imbalance between supply and demand and price changes to create a balance. The question is: how is it going to work against the law of economics by pushing an already decreased supply of physicians even more.

Q: So, you think that the increased demand and the continuing doctor supply will also be a factor in healthcare costs potentially rising?

A: Yes, I do.

Q: Who are the big winners in the passage of this bill?

A: Time is going to tell, and there isn’t enough out there to tell, but even though the market is now going to be a little bit more balanced, the big winners of this are the insurance and drug companies and for those who make health care devices. Basically, they are going to have 32 million more customers and you can’t deny that any way you look at this. Primary care physicians and general surgeons are probably going to be happy with this bill because the bill shifts a lot of dollars into the price for preventive care and for those who do the so-called “grunt work” in health care. When students would go into residency, they would be always looking down the R.O.A.D for their careers and looking to move into Radiology, Optomology, Anesthesiology, and Dermatology because those were all the economic drivers and huge income levels.

The incentives now will help family practices and general surgery which we’ve seen huge declines in the numbers of those in recent years, as well as obviously people who don’t have insurance currently.

Q: From a patient standpoint, people are concerned that they will have to wait longer to see a doctor and that this bill is now socializing medicine. Is this bill making our health care system like that of, let’s say France?

A: It is not socializing medicine in this country. It is merely trying to align the economic incentives for how medicine is delivered in the United States. People may have to wait longer to see a doctor based, again, on the supply and demand. People think they are socializing medicine by giving everyone the same care, but that’s not necessarily true. If we can create a equilibrium in the market place it could be a good thing down the road to all folks, but when you bring 32 million more people into a system into an already stressed system, the health care you provide may be more affordable than what it was because of these economic exchanges, but it won’t necessarily be more accessible.

Q: By 2014, there will be a penalty for people who don’t have health insurance in this country. Do you think this penalty will motivate people to get insurance or do you think they will just opt to pay the fine?

A: Here at the hospital, the average plan for an insurance premium is about $12,000, so you have to ask yourself how excited are people going to be to go out and spend that type of money for health insurance. The penalties are interesting because the first year penalty is $325 in 2015 and $695 in 2016, so do you think people are going to pay $12,000 or $325? All the penalty really is, is a tax without calling it a tax on the lower income people who can’t afford healthcare and gets them to start paying into the system, so the government can address the huge deficit it is facing.

Q: You sit in an interesting position as CEO of AGH, as you provide health care to your employees who provide health care to the public. Is the effects on the business side of the hospital concerning to you and the board?

A: The logic is that getting more people to have health care will lead to more enrollees, hospitals are getting paid for these enrollees, and the thought is that the hospitals are getting paid more for the added enrollees so the government takes more of that added money, so the dollars keep going around in a circle, so to speak. Those types of things are the bigger heartburn in all of this, because you ask yourself, are we really helping anyone. Health care is a big business, and it’s going to continue to be.

But, we haven’t increased the number of residents put through the graduate medical education programs in the United States since 1980. If we don’t increase the amount of doctors coming into practice, and we have a lot of physicians that are baby boomers and are nearing retirement, the supply to provide health care is going to be really difficult to uphold.

Last I checked, the insurance card doesn’t make you better.

Q: Had health care gotten to a point economically speaking that government needed to intervene, or was this a case where government chose to stick their hands farther into the proverbial cookie jar of health care?

A: Honestly, this isn’t about the government getting into health care. This is about the government finding a new source of revenue to cut their costs and to increase the amount of revenue they have to pay off the federal deficit. The individual mandate is a tax without calling it that; so lower- and middle-income people of this country will be voluntarily paying money into the federal government to not have health insurance that weren’t paying into it before.

Q: So, it seems that the model is changing, and perhaps leveling the playing field, but it’s not necessarily changing the game all that much. Do you think the dancing in the streets from the left and the forming of angry mobs on the right is warranted?

A: No, it’s not changing the game that much, but the one thing that really does change is that it’s a mandate for everyone to pay into the system in one way or another. Extreme sides of anything are not mainstream, and it’s wrong because this is trying to balance a few things that needed to be balanced. There’s a lot of disposable income in this country and you can see that in the amount of gambling, luxury items, cigarette buying, etc, so the federal government is going after that disposable income.

Q: Is there any silver lining to this bill on the short term that even those who are against it can cling to?

A: I think that it will promote a healthier lifestyle and health behaviors in this country. People can’t afford what they used to, and so they are going to try to live healthier and statistics are showing that the amount of leisure time exercise went up significantly in America. Whether it’s an intended or an unintended consequence, I think America is just going to start living healthier, and that’s not a bad thing at all, and it might not have a whole lot to do with healthcare, it will be about what people can afford to do.

France doesn’t have the best healthcare in the world, they have some of the healthiest lifestyles in the world, and that’s the difference.