Dr. William Hsiao, the K.T. Li Professor of Economics at the Harvard School of Public Health.

(Music)

Mark Masselli: This is Conversations on Health Care. I am Mark Masselli.

Margaret Flinter: And I am Margaret Flinter.

Mark Masselli: Margaret, there seems to be some good news from the census.
Did you hear the figures that show a strong uptake in the number of young adults
with health insurance?

Margaret Flinter: I did, and that seems like one part of President Obama’s health
care overhaul that’s proven very popular and as the parent of one of those young
adults who took that insurance, I can attest to that. Three different surveys, one
by CDC, one by Census Bureau, and the other by Gallup found that health
insurance grew by about a million young adults as families took advantage of that
and you know Mark, for years the understanding was it was all low income
families that weren't getting insurance but this proved there are a lot of moderate
income families but their kids were graduating from college and had no place to
go from an insurance perspective.

Mark Masselli: Well it is a dark cloud out there with lots of economic suffering
and fewer young adults finding employment after college graduation. But this is
actually the proverbial silver lining in a very dark cloud and it couldn’t come at a
better time for young adults. But while younger adults are getting coverage, the
overall number of uninsured in this country still remains too high.

Margaret Flinter: And that is absolutely right. We will know though earlier rather
than later I think if the Affordable Care Act will be able to live up to its full potential
to provide insurance to almost every American. Earlier this week, the justice
department decided it will ask the Supreme Court to rule on the constitutionality
of the individual mandate early next year, and I think the Justice Department has
said, it will forego an appeal to the Eleventh Circuit Court of Appeals in Atlanta
which could have taken months and delayed the final decision probably until
2013.

Mark Masselli: Well, speaking of the uninsured and underinsured, our guest
today is well-known for his work designing and studying health systems around
the world that increase access to health care. Dr. William Hsiao is a Professor of
Economics at the Harvard School of Public Health. You might also recognize his
name these days because he is leading in the design of Vermont Single-Payer
System. We are delighted that Dr. Hsiao is with us today.

Margaret Flinter: And no matter what the story, you can always find all of our
shows and hear more about us by Googling CHC Radio.

Mark Masselli: As always, if you have feedback, email us at www.chcradio.com ,
we would love to hear from you. Before we speak with Dr. Hsiao, let’s check in
with our producer Loren Bonner with Headline News.

(Music)

Loren Bonner: I am Loren Bonner with this week’s Headline News. The Obama
Administration has asked the Supreme Court to review the legal challenges to
last year’s Affordable Care Act sooner rather than later. The Justice Department
will forego an appeal to the US Eleventh Circuit Court of Appeals in Atlanta.
Such an appeal to the court could take months and delay any final decision by
the Supreme Court until at least 2013. The relaying is likely to come early next
year. A new survey released to this week shows a surge in the cost of employer
insurance. The Kaiser Family Foundation and the Health Research and
Education Trust found that the average cost of a family plan was 9% this year.
The results point to a sharp departure from just one year ago when the same
survey found average family premiums up only 3%, on average family plan
premiums hit around $15,000. While coverage for single employees grew 8% to
roughly $5,500, workers paid an average of $921 toward the premium of single
coverage and $4,129 for family plans.

Mark Masselli: Today, Margaret and I are speaking with Dr. William Hsiao,
internationally recognized for his work on health systems design. He is the K.T.
Li Professor of Economics at Harvard School of Public Health. Welcome Dr.
Hsiao. You spent most of your career studying and designing health systems
both here and around the world, and you are recognized internationally for your
work so from Mexico to China and many countries in between you have been
telling people about what the best system might be for them. Tell us here what
America might do to improve its health system learning from others something
that might improve our quality, increase our safety and control cost.

Dr. William Hsiao: The problem facing United States is not unique that’s cost
escalation and ensure people ask for quality of care. Other countries are actually
walking ahead of United States. We learned throughout the world that you
cannot get universal coverage unless you make it compulsory. There are
roughly, even if you give subsidy to the poor people, there will be a large number
of people who believe they are invulnerable and so they would not buy insurance
and when they get sick or they get in an accident, they just become a free rider
on the rest of the people, get ____ 5:27 care. So, all the middle income or the
advanced countries have put in compulsory national health insurance other than
South Africa. So if we want to be in the companionship of South Africa that’s our
choice. The second part is confirming cost escalation. The world only found one
complicated solution; one is you have to change the payment system from fee-
for-service payment system that encourages the physicians to do more
regardless of medical procedure or test that’s necessary or not, then their
revenue will go up. The world has learned that you have to shift away from that

kind of incentive system to a case payment system and/or to a global budget
system and United States is trying that but it’s understandable hospitals and
doctors do not like it and that’s a political resistance we face. And we see that in
other countries too so again it’s not unique to United States. However, I think
what’s unique to United States is we have spent so much money on health care,
we are denying ourselves to other public goods like better education or
investment research and so forth. In terms of improved quality of care that’s a
tougher problem. First of all it's hard to define what’s quality of care. It's a really
nice term but it's ill defined and a great deal of quality of care cannot be
measured. So the world, throughout the world, countries are groping with that
problem with not really a radial good solution. We only have partial solutions like
you pay people bonus if they do more prevention. let’s say if doctors can help the
patients to keep the blood pressure under control or if diabetic patients have
better biomarkers. But that’s only disease-specific, other kind of quality is hard to
define and measure. But my basic message is United States can really learn a
great deal from other countries and we do not have to put ourselves up as guinea
pigs.

Margaret Flinter: Well Dr. Hsiao, I think that’s a great lead into perhaps asking
you about let’s just take one country and let’s take China though you have been
involved as Mark said in so many. So you have this, an economic rapidly
growing country that’s trying to redesign care, redesign financing, improve
outcomes and to do it hopefully without repeating mistakes of the past and other
countries and to really forge some new territory. So maybe you could just share
with us from your work in China what are some of the innovations in providing
access to care and redesigning and refinancing the system there?

Dr. William Hsiao: First, China learned that to give people financial access to
health care then you will have to have a universal health insurance. You are
correct, China had very poor insurance programs even up to about 6 years ago
but since 2003, China made a concerted effort to make social health insurance
available to everyone. So by beginning of this year, China has 92% of the people
covered under one of the three insurance programs they have and they aim to
reach at least 95% if not 97% in another five years. So in a way China is ahead
of United States in terms of insurance coverage right now. However, the
insurance provider in China is quite shallow. Let’s say they still require patients
to pay 40% of the outpatient services or 50% of the inpatient services. So what
China has to do is to expand its insurance benefit package to not only cover
everyone but to give everyone a reasonable benefit package. That would solve
the problem of financial access for the Chinese residents. Then China is doing
something which is quite different from United States and other countries that is
they are shifting their resources to basic prevention.

Mark Masselli: This is Conversations on Health Care. Today, we are speaking
with Dr. William Hsiao, K.T. Li Professor of Economics at Harvard School of
Public Health. I am going to claim you as a Connecticut resident. Harvard might

claim you as one of the esteemed faculty there but you actually started your
career right here in Connecticut as an actuary for the Connecticut General Life
Insurance Company in Hartford, predecessor to CIGNA, and that led to your
appointment as the Chief Actuary of Social Security Administration in 1917. You
played a really important role in influencing legislation to bolster and preserve the
social security system and you can’t turn on TV and listen to a political debate
without the long term financial health of social security Medicare and Medicaid
being discussed. What advice do you have for the countries, the steps that it
should take to preserve these important institutions with the focus in on those
three Social Security, Medicare, and Medicaid?

Dr. William Hsiao: Social Security does not have a severe financial problem
even in 30-50 years from now. It will have run into a slight deficit but by raising
the retirement age little bit, by adjusting the inflation indexing for the social
security benefit and control the disability program more stringently, the social
security pension program can be put back into good health, financial health. This
is a point that does not get emphasized in the newspapers. They lump social
security with Medicare and Medicaid. Medicare and Medicaid is a totally different
ball game. Health care cost is usually rising in United States 2% to 4% faster
than our growth in “domestic product” or the rate of growth in our income. So it’s
taking away a larger share of our government’s budgets, it’s taking away a larger
share of our household budget or it’s increasing employer’s cost for health
insurance premium. That has to be controlled and some serious surgery has to
be done. In my work, I show my true color with my working from Vermont. I
believe single-payer system is a solution that United States should seriously
consider although I do not underestimate the political resistance by the insurance
industry, by many physicians and by hospitals because physicians and hospitals
have a good living right now and just like the Chinese hospitals and physicians
also have a good living, they do not want to reform. But the people who have to
pay the bills are screaming. And the single-payer would demonstrate for
Vermont that it can lower the, just as one shot, it can lower the health care cost
by 25%. For United States as a whole that amounts to $600 billion a year and
that money can be used somewhere else. That can increase household’s
income, that could reduce employer’s health insurance premium, that could
release fiscal pressure on the state and the federal government.

Mark Masselli: But you have laid out the battleground, it seems to be that we are
going to take those out of the pockets of providers and out of the coffers of
hospitals it sounds like and you have said that’s a huge battle. Vermont got
through it, you were part of that but do you see any group of hospitals and
providers embracing these models.

Dr. William Hsiao: I think it requires a lot of public debate and education.
Providers actually will not be hurt that much. The ones who get hurt are actually
some super specialties. The physicians’ net income, the physicians who are in
private practice, the net income between specialties varies three times. For

pediatricians and general internists, their average income today is $180,000 to
$190,000 a year net after their expenses. Some of the super specialties are
making half a million dollars a year on average. It is the super specialties that
will see a loss but not the average physicians, not the ones who have to use the
thinking process to make the correct diagnosis on patient’s illness at the initial
stage. Hospitals can reduce their cost also by they do not have to lose their
surplus; what a hospital would do is to reduce the carrying of the administrative
clerks they have now to process insurance claims. So who are the ones who are
going to be hurt? One is private insurance industry who offers health insurance,
another are the administrative people who are handling the insurance claims,
checking on patients’ eligibility in different insurance plans and so forth. That
means we have a responsibility to retrain these people for new jobs. And in
Vermont we demonstrate, if the health care single payer is implemented, there
will be new jobs created because the health care cost comes down so
households have more money in their pockets to go to restaurants or buy
clothing or buy cars and that would create additional demand.

Margaret Flinter: Well we are keeping a very close eye on the State of Vermont.
We had Governor Peter Shumlin on our show recently talking about the Vermont
move to single payer system. And that’s been talked about so often in the United
States and people say well it's just not possible, people won't go for it but we may
have a chance to see this experiment in Vermont and we are going to be looking
at it really carefully. And it seems to me that the issue even for the primary care
provider is going to be is there a shift to paying just for the services and the
procedures we provide or is it for the outcomes that we get. And you of course
were a leader in developing something that’s really only known to the health care
people, the Resource-Based Relative Value Study or the RBRVS system. When
you look back on the time in health care policy when you created that and today,
how do you think we need to change our financing and payment systems to be
much more focused on the outcome of the patient than just the service that we
provide? Have you rethought that initial work that you did?

Dr. William Hsiao: Well the initial work I did was fee-for-service payment system.
As I argued earlier, United States has to shift away from that payment method.
United States has to pay physicians based on per person, per patient or per
episode of illness or per case rather than for each item of service or each test
you put forth. So I think the RBRVS should be ready to see its last days if United
States shifts to a different payment method and that United States should pay
physicians some bonus for patients’ outcome. Right now, physicians are paid
regardless if patients got well or did not get well. In China, there used to be a
system that doctor only get paid when the patients get well. Well, if we can
establish a system at least that doctors are recognized and compensated more if
the patients got well rather than something was done to the patient, then I think
the doctors will pay more attention on healing their patients rather than what
procedure can I do or what other tests can I do on this patient.

Mark Masselli: Dr. Hsiao, we would like to ask all of our guests this final
question. When you look around the country and the world, what do you see in
terms of innovation and who should our listeners at Conversations be keeping an
eye on?

Dr. William Hsiao: One of the most innovative countries actually in Asia, Thailand
adopted a payment method which all the experts consider is the most innovative
one, they combine paying per person with case payment and with bonuses. And
China has dozens and dozens of experiments going on throughout the country
on that. And England is the one which actually emphasized primary care and
prevention which United States can learn great deal from. So I would say the
emerging economies are experimenting more in their country which United
States should pay attention to but for the industrialized countries I would say
England is the most interesting one.

Margaret Flinter: Today, we have been speaking with Dr. William Hsiao, the K.T.
Li Professor of Economics at the Harvard School of Public Health. Dr. Hsiao,
thank you so much for joining us today on Conversations.

Dr. William Hsiao: It's my pleasure, thank you.

Margaret Flinter: Each week, Conversations highlights a bright idea about how
to make wellness a part of our communities and every day lives. This week’s
th
bright idea pays tribute to the 50 anniversary of the anti-segregation Freedom
Rides.

They were highlighting to me that other people wanted to ignore. We also want
to highlight an issue that could get ignored if it wasn’t for people pointing it out.

Margaret Flinter: Food & Freedom Rides organized by a group called Live Real
continues this journey for justice but now with food as a focus. In the same way
that Riders in 1961 worked to change the most urgent issue of their generation,
racial injustice, Live Real seeks to do the same thing about our industrialized
food system. 13 young leaders kicked off their road trip in August in Birmingham
Alabama then traveled up the Midwestern states before heading off to the
California Coast in early September. They traveled through eight states in total
spreading awareness about America’s broken food system and the impact that
that has on health, on our workers and on the environment. The riders were not
only teaching communities about federal food policy but they were gathering
stories and innovations from communities that can inspire others. Honoring the
Freedom Riders while at the same time focusing on this injustice and
empowering a new generation of leaders, now that’s a bright idea.