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Sunday, March 7, 2021

To Ration Or Not To Ration, Is That The Question?

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John Osborn
John Osborn
John Osborn has been a senior executive with leading life science and healthcare companies, including Cephalon, Dendreon, Onyx Pharmaceuticals and US Oncology.

About twenty years ago, I left Washington and moved to Delaware to take a job at DuPont Merck.  Since then, I have spent nearly all of my working life in the life sciences industry.  This has given me a perspective on the ongoing healthcare policy debate.

 

As many have noted, President Obama’s healthcare reform triumph was not healthcare reform; it was health insurance reform.  Granted, it has many worthwhile elements.  I have yet to meet anyone who will admit any fondness for the insurance industry, much less its proclivity for stacking the deck in its favor when it comes to risk balancing and the odds of paying claims.  We had to change the rules to allow for more access and portability and less discrimination.

 

That said, it was an unfortunate and needlessly painful process.  If all we were to do was adopt insurance reforms, expand Medicaid eligibility, and take some baby steps in the direction of fostering competition through the (as yet untested) healthcare exchange model, the White House could have done that without igniting the level of political discord and spending the political capital that it did.

 

But where do we go from here?  It is a question that, I can assure you, is at or near the front of mind of many in government and business as the portion of our economy that goes to healthcare spending relentlessly increases.  Politicians and economists of all political stripes call it unsustainable, and although that may or may not be literally true depending upon our ability to innovate and grow the economy, it fairly suggests that we probably want to do more with our collective wealth in the coming years than sustain aging Baby Boomers in their golden years who hold tight to the apocryphal notion that “dying is optional.”

 

A few weeks ago, I attended a healthcare industry conference that featured a panel with two former Governors, Republican Jeb Bush of Florida and Democrat Philip Bredesen of Tennessee.  Bredesen has a short, but compelling, book out titled “Fresh Medicine” and I commend it to you.  The discussion was insightful, not only because they are two thoughtful, well-spoken politicians who spent much of their careers in the private sector.  It also was enlightening because, despite their party affiliations, there was very little disagreement as to the illness or the diagnosis.

 

Here is the CliffsNotes summary of the ex-Governors’ discussion:  Our healthcare delivery and finance system is dysfunctional, and it cannot be fixed merely by applying Band Aids to the gaping holes that have developed from the abandonment of free market principles.  The Obama administration missed a huge opportunity to truly transform the system but its package fails to address the core issues of enhancing quality and reducing costs.  States are going to rebel against the Federal mandates that allocate a greater portion of the costs to the States.  This is going to get worse before it gets better.

 

Delaware Governor Jack Markell is wrestling with one aspect of this issue, and I admire his political courage.  Full disclosure: I am a lifelong Republican but I supported the Governor; my wife and First Lady Carla first met as students at Skyline Junior High School in Pike Creek.

 

Like virtually every State in the union, Delaware has got to reduce its Medicaid outlays.  While some Governors are pushing for a large transfer of Federal dollars under block grants to the States, the Markell administration has outlined a proposal to cut $5 million in spending by imposing limits on Medicaid beneficiary patient access and costs.  Specifically, the plan would allow no more than three non-urgent trips to an emergency room per year, establish co-payments of about $3.65 for regular doctor visits and prescriptions, and temporarily reduce physician payments.  Seems reasonable, right?  Not to some of Delaware’s legislators, who pounced with the ferocity of lions devouring an injured wildebeest; House member Dennis Williams reportedly called the proposal “a sunken ship.”

 

The Great Recession has swelled the Medicaid participant ranks, and many Delaware families are struggling, understandably worried about every dollar.  But if we can’t place reasonable, logical limitations that will incent folks to practice wellness care and limit emergency room access to real emergencies, how in the world are we going to balance the budget once the new Federal mandate compels higher Medicaid reimbursement payments?

 

We desperately need to have an honest, national conversation about the ways in which we now ration healthcare in the United States, and how we might better align incentives going forward.  If this is the reaction to a fairly modest proposal by a Democrat, how in the world are we going to tackle the hard stuff?

 

What is the hard stuff?  We may need to limit Medicare eligibility or the extent of coverage based on income.  We may need to increase out of pocket payments significantly.  We may need to face the fact that employers are likely to start reducing or eliminating their health care benefit subsidies.  We may need to limit access to expensive new technologies and drugs.  We may need to do more to develop treatment protocols so physicians make more cost effective choices.  We may need to rely more on nurse practitioners and physician assistants to provide wellness and primary care.  We may need to reevaluate the wisdom of spending a small fortune to maintain a terminal patient in a vegetative state during their last days of life.  We may need to limit a doctor’s propensity to do everything medically possible to “save” premature, severely disabled newborns who cannot survive without artificial means.  Or we may need to do all this and more.

 

I am not implying that the draconian plan put forth by House Republican Congressman Paul Ryan of Wisconsin to replace Medicare provider payments with individual insurance subsidies is advisable, inevitable, or even the right place to begin the discussion.  But at least it recognizes that we have a severe fiscal problem that cannot be solved without addressing entitlement spending.

 

Here’s the bottom line.  There is no free lunch.  Our demographic and economic trend lines do not bode well.  Remember this word:  unsustainable.

 

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