Interview with Dr. Howard Forman, Founder of Yale University’s MD/MBA Program
Dr. Howard Forman is the founder and director of Yale University’s MD/MBA program. As a Professor of Diagnostic Radiology at the Yale School of Medicine and the Yale School of Management, Dr. Forman is a health services researcher focusing on diagnostic radiology, health policy, and healthcare leadership. He teaches healthcare policy at the Yale School of Public Health and healthcare economics at Yale College. As a practicing cross-sectional and emergency/trauma radiologist, he is actively involved in patient care and issues related to financial administration, healthcare compliance, and contracting. Dr. Forman has also worked on Medicare legislation as a health policy fellow in the U.S. Senate.
What are your thoughts on the Baucus bill and its potential to achieve meaningful healthcare reform?
We’ve gotten some non-partisan, reasonable assessments of the Baucus bill by the Congressional Budget Office. We have a reasonable estimate of its cost, and with the additional aid to the near poor, it seems to be in the $800 billion range. It does seem to at least allow for the possibility that over 20 million more people will receive insurance than previously were insured, so it does seem to achieve a lot of significant positive health care reforms. Unfortunately, in my opinion, a few things seem less than optimal. One is that it seeks to tax health plans for generous, so-called “Cadillac health benefits,” rather than undoing the tax subsidy that is already built into our tax code, and that just strikes me as highly inefficient.
Essentially every healthcare economist out there agrees that the tax subsidy currently structured in our healthcare system – the fact that employer-sponsored benefits are not subject to federal taxation, which is a $250 billion subsidy – is distributed disproportionately towards the richer and better health-insured and provides either no benefit or minimal benefit to the poorly insured and uninsured. The subsidy itself results in excessive purchasing of health insurance; it encourages excessive consumption of health care compared to what might otherwise be present and ultimately results in a net distribution of wealth from the poor to the rich, none of which seems to make sense on a policy basis. I think what we would like to see in the Baucus plan, rather than taxing so-called “Cadillac policies,” is some effort at restraining the continued growth in that subsidy and particularly its disproportionate effects.
Is it impossible for us to expand coverage without it costing more?
Yes, it’s probably impossible do that in the short run. I do think that there are wholesale ways that you could change the system where you would actually hold down cost growth and provide better access, better quality care, but they require draconian changes to the system that our political process just will not allow for. So I think the answer basically is that yes, there we’re going to have to make this type of transition, we’re going to probably have to spend additional money up front, hopefully invest in the type of on-the-ground research, pilot projects, and so on that will investigate alternate models for healthcare delivery that may be more affordable in the long run and that may actually truly bend the cost curve down. In the long run, perhaps we’ll do a better job of keeping costs down and maybe getting a little closer to the cost growth, or at least the cost levels, of our peer nations.
Do you believe that defensive medicine in response to lawsuits is a significant driver of healthcare costs in America, and if so, how should it be addressed?
There are a couple of issues around that. First of all, there’s very good evidence that our tort system doesn’t work, that malpractice suits are brought against parties that are not necessarily the most egregious acts of malpractice and that many acts of malpractice don’t get brought to justice. The way the distribution of benefits to individuals falls, it doesn’t seem to achieve the ultimate goals that one would hope to achieve in any type of tort system. Having said that, I don’t think that it is the biggest problem. I wish that we could put this issue to bed so that it wouldn’t take up the front and center of physician hopes for healthcare reform.
I think that we could fix the problem. The state level efforts to fix it, which include caps on economic damages, are poorly-done patches on the problem that don’t seek to truly benefit the aggrieved. They do seem to reduce the overall malpractice costs to physicians and may in fact hold down healthcare costs in certain regions, but they don’t seem to achieve the justice issues that we would hope to have in a well-functioning tort system. On the other hand, I respect the fact that much like the rest of healthcare reform, reforming our tort system is not a simple thing to do, and it requires a dramatic rethinking of the way we deal with medical errors, the way we deal with professional liability, and the way we hold both physicians, as well as health systems, accountable for the problems that exist in the practice of an imperfect field like medicine.
The Baucus bill also introduces some cuts in Medicare reimbursements. Can such cuts be introduced without reducing the quality of care for seniors?
There are a lot of areas where Medicare spending is proposed to be reduced. Some of them affect my specialty, which is diagnostic radiology. There are very clear opportunities for savings that are out there in some areas. We know that there are lucrative areas of medicine and that there are less lucrative areas of medicine, and Medicare has and continues to attempt to prep-pay a bare fraction over cost. They don’t seek to pay any more than that. And over short periods of time, various parts of health care may become very profitable if Medicare just overpays for it for whatever reason. So there’s low hanging fruit in terms of real cost saving that may occur.
There has also been an effort to essentially superfund Medicare Advantage plans, which are the managed Medicare plans of the last 8 years. The reason for the superfunding of those plans was to establish a base of operations in all 50 states so that Medicare beneficiaries would have the opportunity to sign on to an integrated non-fee-for-service HMO-like plan. There are in fact approximately I think 9 million Medicare beneficiaries currently on Medicare Advantage plans. If you would ask them, I presume they prefer it over fee-for-service, otherwise they wouldn’t have chosen it since they have the option. And yet, the government has been overpaying those plans, so there is a real risk that when the government starts to withdraw the excessive payments that some of the more marginal plans in some areas may fold, close down, or cut enrollment. That may result in some beneficiaries feeling like they have lost something; even though they have the opportunity to have Medicare fee-for-service, they were happy with Medicare Advantage and it’s no longer available to them. There may be a loss in healthcare delivery to those people, or at least in satisfaction associated with those, and that has been a recent complaint about the Baucus bill.
Is a single-payer system feasible in the US and if so, would it be more efficient than having a public plan competing with private carriers?
I tend to believe that a single-payer system is politically infeasible. It is a proven successful model in many counties, not the least of which is the UK. It does suffer from the overall political process even in the UK because you need to provide appropriate budgetary authority to them, and if, during times of fiscal crisis, it ends up being shortchanged, you could harm the healthcare system and impact people during those periods. It doesn’t allow for the expression of individualism that we’ve taken to hold very highly in this country.
Having said that, I think a single-payer system probably is the single best way to provide the greatest benefit to the greatest number, and we could do so at probably a lower cost than we currently do. It might stifle some innovation. That might be part of the cost that we pay for that. It would probably be an extraordinary alternative, but it is politically infeasible, and so I don’t think it’s even worth spending too much time on it. On the other hand, there are many that are concerned that a public option, if structured in a certain way, could ultimately lead to a single-payer system by default—that if you give a public option the ability to negotiate sub-cost prices and allow them to have certain monopolistic characteristics, they ultimately would have a flavor of a type of single-payer system, that they could harm the competition in the rest of the healthcare market, and you would lose many of the benefits that we have from a private system right now.
I think that there are two ways in which to make certain that health insurance is affordable and available to everyone. One is to very, very heavily regulate the insurance industry and basically mandate many things, including pricing of their products, and the other is to create a side by side plan, hopefully on a competitive playing field, that would be a much like our United States Postal Service or like our state university systems, which are government-run entities that may in fact receive some subsidies for certain types of services that you believe in but that seem to compete reasonably well side-by-side with private players like FEDEX, DHL, and UPS in the postal service and Harvard, Yale, and Cornell in the university system.
How can insurance companies address moral hazard – the idea that consumers, because they are insured, are disconnected from the cost of their health care and may opt for overtreatment?
So moral hazard, which is a well discussed problem within health care, or at least an aspect of health care where insurance is present, can be used for good and it can be used for bad. We can use moral hazard to encourage certainly health behaviors that we believe are important. When you encourage moral hazard, basically give someone full coverage for something, you encourage its use, and that may actually have some very strong health benefits. You could also discourage using moral hazard by raising copays, coinsurance, or deductibles. As we develop more evidence about the value of various types of healthcare, we have an opportunity to tweak the copay / coinsurance cost sharing so that we encourage the things that we believe are high value, discourage things that we think are low value, and maybe just not cover things that we believe have no value at all.
In our current system, we do a very poor job of discouraging things that we believe have no value. That’s a very tough thing for a society to absorb. We like to believe that if there’s hope, people should be allowed to have something even if there’s no evidence that it helps. So that would be one place we would have instant savings and we can use moral hazard to our advantage. The low-value healthcare is a little more dicey because who is to say how much money I’m willing to spend in order to get some value even if it’s very expensive. And then lastly, you can certainly use moral hazard to encourage preventative healthcare behaviors and protective healthcare behaviors.
As a practicing radiologist, do you feel that there is a consensus in your field of what is high-value and what should be done to a patient?
There are extremes where we all agree. There are extremes where you look at certain particular case and you realize that it is excessive utilization with no value or very, very low value. There are other areas where we know that there’s very high value and we all agree to that. There’s an enormous swath in the middle where each of us may have slightly different opinions. Part of the problem that I see is that the way the system is structured right now, a physician can get an extra imaging study done and the defensive medicine aspect can be alleviated, and at the same time I might even be able to examine the patient less if I know that I’m doing a imaging study. There’s no cost to me as a physician for doing the extra study. That study may have some value to the patient but it may also be the case that an extra ten minutes of my physical examination time as a surgeon or an intern might have had equal or more value. That extra 10 or 15 minutes has an opportunity cost to me as the surgeon, whereas the exam has no extra cost to me. Those are separate from the moral hazard issue. It’s only related to the moral hazard issue because if the patient’s not going to be charged for the imaging study as well, then for me it looks like a totally free lunch.
Does the U.S. have the best healthcare system in the world?
It does for rich people. I think that if you have wealth and access, you can’t beat it, and I can’t imagine why anyone would choose to go anywhere else. But I think that beyond rich people, even among the middle class, there are huge disparities in the way health care is delivered. And among the poor, it’s very, very limited. And it’s deeply unfortunate that there are many people that just barely get access to the most minimal health care and only when it’s under emergency conditions.