Ian Morrison

President Obama will be re-elected in 2012.  All he has to do is restore faith in capitalism; reposition America in the world; reboot the American Dream; rebuild our entire infrastructure; redirect the economy to sustainability; reverse global warming; resolve the Middle-East, Iraq and Afghanistan; remain steadfast in the defense of the American Homeland; and reduce the trillion dollar deficit.  Do that and he is a shoo-in for  re-election in 2012.  Oh yeah, there is healthcare. He needs to reform that too.

The challenges are overwhelming, the starting slate of issues is daunting, and the expectations of his presidency are enormous.  Yet, somehow the new President has to lead us through this mess and fix healthcare too.  Political analysts point to the fact that Obama must deliver on the promise to reform healthcare, because the system is broken, and the voters who carried him to victory expect something big.

If he can help avoid a global depression, then the normal business cycle should kick in during his first term, and so he may have progress to report on the economic front by 2012.  The stimulus packages aimed at infrastructure and green technologies should make measurable progress by 2012 on climate change and infrastructure decay.  Iraq seems to be winding down, although Afghanistan may be a thorn in the side of his presidency for some considerable time.  And, although terrorists may test him early in his term, it is unlikely that Obama would go it alone in response without support in the broader international community.

Healthcare may be harder.  Not because there isn’t a consensus that something needs to be done, but because there are so many competing interests in the $2 trillion industry.  Policy analysts (myself included) are currently debating “big play” versus more incremental options available to the New Administration.  But if we take the longer view, what would constitute success for an Obama administration with regard to healthcare?

Real progress can be made, and if by 2012 the Obama administration can point to five big steps forward on healthcare, then reform will be deemed a big success.

Coverage Expansion. Without legislative changes, the number of uninsured will skyrocket early in Obama’s term, because of the economic meltdown.  This will make coverage expansion a very steep uphill climb.  Universality may be even more elusive, but there is a growing belief that piecemeal solutions will unravel without a commitment to some broad end game where everyone has access to healthcare.  The New Administration can set the path toward universal care and make progress toward it, even through early incremental steps such as SCHIP expansion and Medicaid support.

Affordability. President Obama and his advisors have pledged to make healthcare more affordable.  But, as Stanford health economist Victor Fuchs and others have pointed out there are a series of conundrums in the affordability debate.  First of all, the voters define affordability not by how much healthcare costs as a share of GNP but how much they pay for it out of the household budget.  (When health insurance is paid for mostly by their employers, most employees don’t really feel they are paying for it out of their budget, but every economist will tell you they are).  Comprehensive health insurance is unaffordable: a typical family policy with decent coverage can cost $15,000 per annum, an amount greater than the annual minimum wage in some states, and an amount that would swamp the household budgets of most families.   The only way employers have found to reduce the cost of health insurance premiums is to jack up co-payments, deductibles and premium-sharing.  We make health insurance more affordable to employers by making it less affordable to employees.  So the first conundrum is that the tools to make health insurance premiums more affordable are the every tools that consumers and voters complain about.

The second conundrum is that health insurance is expensive because the delivery system is expensive.  It is a convenient fiction that the greed of health insurers and/or pharmaceutical companies is at the root of expensive healthcare insurance.  The truth is that healthcare delivery system is expensive partly because of our collective greed: the providers of care, the consumers of care, and the suppliers of goods and services all want more.  We consumers demand cutting edge and often unnecessary or marginally expensive services and sue when we don’t get them.  Providers want higher incomes and tend to over-serve profitable procedures in order to attain those incomes. And suppliers of goods and services charge exorbitant prices for the same good or service performed in different industries or different countries (everything from high tech screws to software and accounting).  We tend to use overly expensive tools, in the hands of overly expensive people, with underwhelming and overly expensive results.  The core of the conundrum is that everyone wants more affordable healthcare but they fail to see their part in the excessive cost.

The third conundrum, is that the tools being proposed to reduce costs such as health information technology, improved disease management and care coordination, and strengthening of primary care, while laudable, will require major investment up-front before any cost-saving can be realized.

Affordability is the stated goal of the Obama administration, but these three policy conundrums need to be resolved before progress can be made. The key is in the next three benchmarks of success:  delivery reform, payment reform, and administrative simplicity.

Delivery Reform. Advocates for organized systems of care will push hard for the Obama Administration to favor integrated care systems in the policy process.  Mayo, Kaiser, and other organized delivery systems will be looked at to provide leadership, but the real challenge will be for those providers in parts of the country with little history or experience in integration of care.  A key benchmark for delivery reform success will be whether the administration and the congress enact policies that can create meaningful delivery reform in all the disparate markets across America not just in Minnesota and California.

Payment Reform. At the root of the transformation in delivery system is a change in reimbursement to encourage high-performance.  There is near unanimity in Wonkworld that payment reform is needed and many agree on its shape.  There is strong policy consensus to move toward episodic payment that rewards conservative, high quality, coordinated care and away from “payment for procedures” in a fragmented delivery model.  Making this all work and turning it into both legislation and private market action, may be the key challenge of the Obama administration’s health policy.  Without payment reform, delivery reform won’t happen, without delivery reform, affordability will suffer, and without affordability, coverage expansion becomes more difficult.

Administrative Simplicity. Healthcare is mind-bogglingly complex and there is real danger that all the necessary changes talked about here will make it even more complicated.  Common-sense solutions that reduce complexity, and can be communicated clearly, will be hard to find, but are badly needed.   For example, building on existing and familiar administrative frameworks such as the Federal Employees Health Benefits Program (FEHBP) may be easier to administer and sell politically than the creation of new and unfamiliar agencies and initiatives that add further layers of bureaucracy, both public and private.

President Obama has a lot on his plate.  I wish him well.  But if he can successfully address the issues on this list he will have earned re-election, and the opportunity to serve again in 2012 when the baby boom hits 65 and becomes eligible for Medicare.  If you thought your first term was challenging Mr. President…………….

Ian Morrison is an author, consultant and futurist based in Menlo Park, Calif. He is also a regular contributor to H&HN OnLine.