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Good evening and welcome to tonight's meeting of the Commonwealth Club of California. Tonight's program is sponsored by the Law Firm of Pillsbury Winthrop Shaw Pittman with exclusive media sponsorship by the San Francisco Business Times. My name is Joe Epstein, I'm a Past President of the Club's Board of Governors and I would be your chair for today. We also welcome our listeners on the radio and invite everyone to business on the internet at www.commonwealthclub.org. And now it's my pleasure to introduce our distinguished speaker George Halvorson CEO of the Kaiser Foundation Health Plans. Kaiser Foundation Health Plan is been called the emperor of the HMO Universe. Prepaid Kaiser Health Plans were first established around 1938 there is some argument about the exact date. It was established by industrialist Henry J. Kaiser to cover the health needs of the employees of Kaiser Shipyards. George Halvorson was named the CEO and Chairman of the Kaiser Foundation Health Plans and Kaiser Foundation Hospitals in 2002. Kaiser Permanente is the nation's largest nonprofit health plan with over 8.5 million members in nine states and the District of Colombia and those now about 13,000 physicians and staff. George Halvorson has more than 30 years of healthcare management experience. He was formerly President and CEO of HealthPartners and has held several senior management positions with Blue Cross and Blue Shield. He brings to the Kaiser Healthcare System a broad background including international experience as an advisor to the governments in Uganda, Great Britain, Jamaica and Russia on issues of health policy and financing. And he is also credited with supporting the successful role out of Kaiser's multibillion dollar information technology initiative which helped him win the Modern Healthcare CEO IT Achievement Award. He is the author of several widely acclaimed books on the U.S. Health Care System and is soon to be released book Health Care Reform Now the subject of today's talk. Halvorson points out that we spent more money on healthcare than any other country in the world and yet nearly 50 million Americans are uninsured for at least part of the time each year and to add insults to injury well documented study show that 50 percent of Americans received less than adequate and often unsafe medical care. George Halvorson is the current President of the Board of Directors for the International Federation of Health Plans and a member of the Harvard Kennedy School Healthcare Delivery Policy Group. He also serves on the Institute of Medicine Task Force on evidence-based medicine and on the Commonwealth Fund Commission on a High Performance Health System. It is now my pleasure to present the person who is continuing the tradition of innovative Health Care in America from the vision established by Henry J. Kaiser started over 65 years ago. The current CEO of the Kaiser Foundation Health Plans - Mr. George Halvorson. Thank you Mr. Epstein and thank you all for inviting me to have this conversation with you. Its great honor to be invited to speak to the Commonwealth Club. Health Care costs continue to climb in America, we are now at the point where the cost of family premium in California exceeds the per capital income of 147 countries. The total cost of healthcare in America now exceeds the gross domestic product of 254 countries. We are now spending $2.1 trillion a year in American Health Care and yet as you just heard the number of uninsured people in America is increasing. We are close to the point where 50 million Americans are uninsured. Every other industrialized country in the world has universal coverage for all of its citizens. We spent roughly twice as much money per citizen on health care in this country and we still have 50 million Americans without coverage. We spend more money than anyone and we don't cover everyone. That should be a national disgrace and embarrassment to us all. So are we getting the very best care in the world for spending all of that money? Many of the best care sites in the world are in America. If you need heart, lung surgery you should better do it in America. If you need Gamma Knife brain surgery, you should get it in America. This is the place to be for hi-tech healthcare. But overall it's pretty hard to argue that we are giving adequate value for the $2.1 trillion we are spending. Care in America is inconsistent, uncoordinated and too often dangerous. The Institute of medicine comprised of some of our best brightest and most prestigious medical leaders concluded that healthcare faces what the IOM calls a great chasm between the care we should be delivering and the care we actually deliver in America. The IOM said that American Healthcare is called a highly fragmented delivery system that largely lacks even rudimentary clinical information resulting in poorly designed care processes. The result they say is a quality chasm in a non system with enough safety issues that hospital errors alone in this country kill the equivalent of 27 - 47 for the passengers every day. Likewise, the RAND Corporation did an extremely important study with the Healthcare of 7000 Americans. RAND compared the care people received and the care people should have received based on the best available guidelines for healthcare. How often did we get it right? According to the RAND study, about half the time, read the study its amazing data, our success rate as a country as in American infrastructure of care was barely 50 percent. The Institute of Medicine agreed with it finding saying more than 50 percent of the patients with hypertension, diabetes, tobacco addiction, hyperlipidemia, congestive heart failure, chronic atrial fibrillation, asthma and depression are currently managed inadequately. For diabetes, the fastest growing disease in America and the number one cause of kidney failure, blindness, amputations and the number one comorbidity causing death for cancer or from heart disease. For diabetes the care givers of America deliver the right package of care less than 50 percent of the time. There is a massive inconsistency in American Healthcare. One of my favorite studies took a 135 doctors and gave them all the exact same patient. They came up with 82 different treatments for that one patient. So why was that true because the doctors may have gone to medical school last month, last year, 10 years ago, 20 years ago, 30 years ago, they may or may not have gone to a seminar on that topic, they may or may not have written article on that topic, various drug sales people had called on the doctors and that created additional variation, in any case 135 doctors, 1 patient, 82 treatments. To make matters even worse we have a major problem with racial and ethnic disparities in both our healthcare needs and our healthcare delivery. African American kids are 1.3 times just likely to have asthma, half as likely to be treated for it and four times as likely to die from it. African American kids of many communities are also half as likely to have health insurance. A study was released last week about childhood injuries that documented that uninsured children who are hospitalized die of their injuries twice as often as the children who are insured. I can list 50 other examples. American Healthcare has a great number of inconsistencies and there is a high-level of disparity. The patterns are the same. So what does this tell us about the outcomes of care? There are some major differences in care outcomes, your five year mortality rate after having breast cancer surgery can be 60 percent higher depending on which surgeons you pick. The likelihood of having your mammogram read skillfully enough to detect your cancer early, can vary by a profound amount. Cystic fibrosis is a great example of care variation, if you get your care for one set of care givers and you have cystic fibrosis you are likely to live another 33 years. Now that's a huge improvement of a prior treatment, but there's a lot less positive as an outcome if you know that the life expectancy at the best cystic fibrosis program is 47 years. There is a great range of performance in healthcare in America. Consumers need data about caregiver performance and care outcomes. We also need systematic process improvement science and techniques applied to healthcare. Every other part of the U.S. Economy has gone through extensive re-engineering. The DVD players that cost $700 five years ago cost $35 to $70 today and they have better functionality and better performance. Now how did that happen? Process improvement approaches were applied to the DVD production process. Healthcare as an infrastructure does not re- engineer. How many care processes can you think of that cost $700 five years ago and cost $70 today? If you know any give them to me and I will include them in the future talks. Key problem for healthcare is data. Re-engineering depends on data. When General Electric puts a process improvement program in place to achieve Six Sigma results the fewer than three errors per million units. The very first step in the GE Six Sigma Process is data. GE could not achieve Six Sigma results with data, it's foundational and fundamental. Healthcare lacks data. Healthcare has a massive data deficit. Healthcare lacks production data, process data, unit cost data and outcomes data. Healthcare lacks error rate data and healthcare lacks comparative performance data. Re-engineering an effective well designed process improvements are impossible without data. So why does Healthcare lack data? Healthcare lacks data because the basic record keeping process in Healthcare it is the paper medical record. The data is on the paper. For patient does three medical conditions, the patient typically has three paper medical records one for doctor. Keep an isolated files and generally not available for review or communication between caregivers. The patient changes doctors, the patient files almost always they with the old doctor and when RAND did their wonderful study they had to take 20 nurses and have them pull individual paper medical records from all of the physicians who saw all of the 7000 patients. That study took more than two years to do and it only gave us one snapshot of care performance for those 7000 patients. And we do not know what happened to those patients a day later or month later or a year later where in this case four years later. To find out how those same patients are doing today we need to gather another 20 nurses spend two more years gathering the information and then we would still only have two data points and a care performance chart. Two data points are not enough that keep track of $2.1 billion in Healthcare spending. So our paper files are isolated they are sometimes eligible that too often unavailable and they are never interactive. Now in an age of interactive databases the paper medical record cannot advice a treating doctor about best practice and the paper record cannot warn a prescribing doctor about possible drug interactions. Usually the paper record doesn't even tell the prescribing doctor that another prescription exists much less at the intervention, the interaction between the two drugs might be dangerous for the patient. Paper medical records are an absolutely inaccurateness take extremely dysfunctional way of providing badly needed data to a data dependent profession. We need all of that data computerized. We need not only to know as RAND study pointed out that one half of our diabetics received less than adequate care. We need to know exactly which diabetics received an adequate care and we need the tools to help us make sure that everyone does get the needed care. So what do we need? We need an industrial revolution in Healthcare. We need transparent accountable continuously improving data base care. That level of care cannot and will not happen in a care delivery infrastructure reliant on a paper medical record. We need to can track cancer survival rates by cancer type, by cancer stage and by cancer caregiver. We need to track not only the number of mammograms that were given, but we also need to track how well those mammograms were read. We need programs to make sure that every kid with asthma is getting needed care and that can only be done if the information's are on the computer. And then it needs to be used for process improvement and re-engineering as well as caregiver information flows. Now that's just commonsense. We also need to put the right incentives into our Healthcare Economic System. The current Economic Incentives and Healthcare are definitely problematic if you believe that incentives create behaviors. Let's look at how we pay our caregivers. We have over 9000 billing codes for procedures for units of care. We have zero billing codes for cures. We have zero billing codes for health status improvement. There is not one single billing code for process improvement. There is not one single billing code for care linkages. There are 9000 billing codes for procedures. So what do we get? We get $2.1 trillion worth of procedures - more procedures than anyone of the world with awfully inconsistent performance and less than adequate outcomes. Major health care problem the results from our current non-system of care is what I call care linkage deficiencies. Now care linkage deficiencies are bound in our system. Caregivers do not connect well with other caregivers in America. As Don Berwick, Professor at Harvard Medical School and the President and CEO of the Institute for Healthcare Improvement says, a patient with anything but the simplest needs is reversing a very complicated system across many handoffs and locations and players and as the machine gets more complicated there are many more ways that it can break. Likewise, the Institute of Medicine says, for many patients care for even a single condition is fragmented across many clinicians and settings with little coordination and little communication. So we have care linkage deficiencies everywhere. The doctors try very hard to do the right thing. All doctors want to do the right thing, because American Healthcares and economic environment doctors and other fee for service caregivers generally do the billable right thing. If it isn't billable in American Healthcare it tends not to get done. Care linkages are not billable, so care linkages tend not to have it. Those linkages are badly needed. Our patients who use the vast majority of our Healthcare Services typically have comorbidities. Comorbidities means multiple health problems. Multiple health problems means multiple doctors usually from multiple specialties unless your caregivers are part of an integrated medical group having multiple providers far too often means having providers who do not link, coordinate, cooperate or collaborate on your care. So we need better care linkages in America. It is criminal and operationally dysfunctional to have the care linkage deficit that we have and that's why far too much care is delivered in America. What we really need in American Healthcare is focus. The costs of care are not distributed evenly across the entire population. We are not in a situation where everybody uses an average amount of care. In the real world one percent of our population uses 35 percent of our care dollars. Five percent uses 60 percent of the care dollars, 10 percent uses 70 percent. On the other side of the coin, 70 percent of the population uses only three percent of the care dollars, 15 percent uses no care at all. So there was no need to focus on that low cost 70 percent or the zero cost 15 percent if we want to save money in American Healthcare, that's not where the dollars are, that's obviously not where the opportunity is. Again, its time to apply commonsense to health care. Where we should focus? We need to focus on the five chronic conditions that drive 75 percent of our care costs in America. The big cost drivers that make the America the most expensive healthcare infrastructure in the world are just five chronic conditions. Its diabetes, asthma, congestive heart failure, coronary disease and depression. Five conditions drive 75 percent of our cost. Its not cancer care. Cancer gets a lot of visibility. Cancer only costs five percent of the total healthcare dollars. It is not maternity care. Maternity gets a lot of visibility. Maternity costs are only four percent of the total healthcare dollars. We need to focus our attention and our care re-engineering and our care improvement efforts on the very few chronic conditions that create most healthcare expenses in America. We need to be particularly aware that the patients with comorbidities, the multiple medical conditions are the most expensive patients and the ones who most need care linkages and systematic best care. One important study of people with chronic disease has found that well the likelihood of each chronic disease patient receiving anyone of the correct treatments they need range from 40 to more than 90 percent. The likelihood of those same patients receiving all six or seven of the treatments they need dropped to under eight percent. So now think of that - under eight percent of the people with those conditions received the complete package that they need. So there is definitely room for improvement in American Healthcare. Healthcare in America cost $2.1 trillion in large part, because of that inconsistent unlinked, uncoordinated, unfocused level of performance. This isn't rocket science, its basic blocking and tackling relative to the patients with a define set of conditions. So what do we need next? We need a short-term focus on those five conditions that drive 75 percent of our cost. We need better more consistent care and better patient compliance with medical treatments and those results can significantly improve the status of those health status of those patients and cut complications and cut the resulting cost of care by 10, 20 and even 30 percent, depending on the condition. There is no need to ration healthcare in America to make it affordable. We need to focus competent care on the people who needed the most. The number speak for themselves. Now, let me tell you just both the short-term and a longer-term perspective for a minute. In the short-term we need a solid and immediate focus on best practices in medicine for those chronic care patients. We need to make sure that are people with diabetes have their insulin or heart patients they have their beta blockers or patients with asthma have their inhalants and congestive heart failure patients have their medications and their early warning in their supported systems. As the diseases progress we know the right thing to do. We know who needs the right thing to be done. We need to do it. Each of them has each of those diseases have their specific medications. Let's take a slightly longer-term perspective for a second. It's extremely important to recognize that if we go back upstream, if we go back into the progression of each disease there are couple of extremely important things we could all do to reduce the likelihood of getting the three most expensive diseases in America. Behavior changes could have prevented heart disease, prevented coronary disease and prevented diabetes for most people. And interestingly the same exact changes of behavior prevent all three of those conditions. America is increasingly obese and inert. We are overweight and we do not exercise. The healthcare burden that results from that behavioral change is the behavioral reality is immense. If you want to make healthcare affordable in America overtime, we need to create a national culture health and we need to create an infrastructure that can support healthy behaviors. Trans fats should not be in our food - vegetables should be. We need to walk at least 30 minutes a day, at least five days a week. One study showed that walking 30 minutes a day cut the incidence of new diabetes cases by more than a half. More than 30 percent of all the money spent by Medicare spent on diabetics. We would have a very different view of the long-term future of Medicare funding if we could cut the number of diabetics in half by preventing the disease. We need to build expectations about healthy behaviors into our national culture. Now one of my favorite studies looked at a tribe of Native Americans located on both sides of the Mexican border. On the Mexican side of the border the people farm the diet was local vegetables, corn and free ranging chickens. On the American side of the border there were more TVs, fewer chickens and more McDonalds. What was the result? On the Mexican side of the border with age 65 less than 10 percent of the population had diabetes. On the American side of the border at age 65 more than half the population had diabetes. Same tribe, same gene pool, same geography, same point in history, differences diet and activity levels. Healthcare costs are exploding in the US. We do know why, we need to do with those cost creation issues very directly. Right now in this country General Motors spends more money on healthcare than it does on steel, Starbucks spends more money on healthcare than it does on coffee. We need to do something about that. We need to take the long view. So what should we do? We should be reform health care in America. We should focus our energies on the key conditions to create the huge expenses. We should systematize care, we should computerize records keeping about care, we should create data linkages and communication linkages between caregivers and we should demand that those linkages be used. We should setup a marketplace where inform patients can make choices about their caregivers and their care. We should reward our caregivers for excellent and for process improvement and we need process improvement data and inform choices in healthcare. And we need that approach now not other decade from now. So I think its time to take action and I also think and let me conclude with this thought, I think it's time for universal coverage. We all need to do this healthcare reform agenda together. I strongly believe we need to create universal coverage now and cover everyone in America and we can start by covering everyone in California. It is unconscionable to leave 50 million people out in the cold and healthcare. Universal coverage is extremely affordable if we do it right. Uninsured people in America do receive some levels of care now. Far too often that care is delivered at the wrong point in the care process and it's delivered at the wrong side of care. The emergency rooms of America have far too many people in them who should have been taken care of earlier in the care process of primary care medical science. Uninsured people tend not to receive preventive care or primary care or early care but the uninsured do receive catastrophic care and then often cannot pay for the cost like catastrophic care. So what happens to the cost of that care? It is shifted to other payers. Cost shifting is not an evil deed, it's a necessary evil. Hospitals shift the cost of the uninsured to their insured patients by increasing their fees. So people who are insured have their fees for their care increase to pay already for the cost of the uninsured. In California the cost shift to the private employers and to insured Californians equals about a $1100 per family contract per year. Now if we decide to cover all Californians and subsidized the cost of care for the low income uninsured by using the dollars that are now in the cost shift those dollars are more than enough money to cover all of the uninsured in California. So there is a great irony I think in the fact that we already spend enough money to cover everyone we just spend it in the wrong way and we end up providing catastrophic care to the uninsured rather than comprehensive care to everyone. Three years if we do this, if we create universal coverage, three years after the cost shift has been ended because everyone is fully covered. If we designed the model appropriately we could have the total healthcare bill in California that is no higher and possibly a bit lower than what we would pay in three years if we did not cover the uninsured. Other words, if we do this right we can target a three year payback one, two, three free universal coverage by using the cost shift pay for. So it's time to do universal coverage. One last point in universal coverage. Most European countries who achieve universal coverage do with a public private mix. It's the mix model. They don't use the simple single payer assessment. If you live in Germany, Austria, Belgium or Switzerland, you have an individual mandate by law to buy health coverage and you have many competing health plans to buy coverage from. Lot of people assume that Europe just uses the Canadian single payer model as a path of covering everyone and that is not true. If you live in Switzerland you have an individual mandate to buy coverage and you have 87 competing health plans to buy that coverage from. Germany has used the competing health plan model since Otto von Bismarck and there are hundreds of competing sickness plans in Germany. I mentioned that because some people believe that the only pathway to universal coverage is single payer and the universal coverage and single payer go hand in hand everywhere in the world. That is not true. Each country finds its own pathway to universal coverage and I think it's time for us to find our own pathway here. I personally believe would be very well served if we would to do what most European countries do create an individual mandate that requires every one on America. They have coverage and that we need to make that coverage very affordable if not free for all low income people. I think we need to end the cost shift and care use that money to cover the uninsured as a first step I strongly believe that every one below 100 percent of the federal poverty level should be on Medicaid. We should cover all kids and I wish we use an individual mandate cover everyone everyone else. I think its time for that to happen on America. So those are a couple of thoughts about where we are and where we need to go. In conclusion we need to focus, we need data, we need continuous improvement and we need to cover everyone. So I would be very happy to answer any questions you might have and I thank you for giving me this opportunity to offer some thoughts about Healthcare Reform in America. Thank you