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JIM LEHRER: Now, a kind of battlefield report on trying to control the rising cost of health care. The reporter is Susan Dentzer of our health unit, a partnership with the Henry J. Kaiser Family Foundation.
DR. KRISTEN ROBINSON: It’s good to see you today.
SUSAN DENTZER: To understand why health costs are rising so rapidly, consider the case of David Beeby. He’s a top geologist employed by the state of California.
DR. KRISTEN ROBINSON: We probably just need to recheck your labs…
DAVID BEEBY: Okay.
DR. KRISTEN ROBINSON: ..And see how you’re doing. Did you have any…
SUSAN DENTZER: Beeby is 58 years old, and though he’s generally been in good health, he’s also obese. On a routine visit to the doctor several months ago, he got bad news.
DAVID BEEBY: I got a blood test, and the blood test showed that my blood glucose levels were very, very high. Probably about a week later, I got a call saying come in to a diabetes training class that night.
DR. KRISTEN ROBINSON: Can we take a look at your blood sugars?
SUSAN DENTZER: Beeby was diagnosed with type II diabetes, the most common form of a disease that now affects 17 million Americans. Kristen Robinson is Beeby’s doctor at Kaiser Permanente, a Health Maintenance Organization not affiliated with the Kaiser Family Foundation. Once she diagnosed the diabetes, she quickly ordered up drugs and other interventions.
DR. KRISTEN ROBINSON: And within six weeks he was able to transition from insulin three to four times a day over to oral medication, and he also did a very, very rigorous job of controlling his diet and starting exercise, and pursuing weight loss.
SUSAN DENTZER: The HMO also gave Beeby a high-tech monitor to sample his blood sugar levels several times a day.
HEALTH CARE OFFICIAL: If each of you will take a look on your particular item…
SUSAN DENTZER: …And it provided education classes to help teach Beeby how to manage his diabetes and ward off the worst consequences of the disease, including blindness, amputations, and even death. Beeby says he realizes he’ll be coping with the disease from here on out.
DAVID BEEBY: I guess I look at this as a chronic illness and something I’ll have for the rest of my life, so having some magic end point wherein I’ll be done with it isn’t really an option for me. It really… it really requires just a change in lifestyle.
SUSAN DENTZER: The organization that will pay most of the bill for Beeby’s care is headed by William Crist. He’s president of the board of the California Public Employees Retirement System, or CalPERS. One of the nation’s largest public pension systems, CalPERS also provides health insurance for more than one million people. Crist says that CalPERS’ outlays for health care this year will run a staggering $3.5 billion.
WILLIAM CRIST: The rapid increase of our total health care costs is of great concern to us. It’s just about doubled in the last four years. Probably the more important number is an unknown one and that is, where is it going in the next four years?
SUSAN DENTZER: Crist got an inkling of that several months ago when his organization began negotiating with HMO’s over next year’s premiums for CalPERS enrollees.
WILLIAM CRIST: The HMO’s sent us in premium increases, one as high as 41 percent, and in general said, “well, we’re just not sure we want to do business with you at all.” And they certainly didn’t want to do business with us at the rate we were proposing they pay.
SUSAN DENTZER: By the time the negotiations were finished, CalPERS had struck deals with only a few large HMO’s, rather than the two dozen with which it once did business. That meant that as many as 350,000 enrollees would have to switch HMO’s in 2003. And even with the handful of plans remaining, Crist says, costs were headed sharply higher.
WILLIAM CRIST: We’re looking at a premium… average premium increase of right in the range of 25 percent. And the fears that we have is that looking forward into 2004 and so on, we may be even looking at rates of increase in health insurance premiums in excess of that, and certainly, at least in the double-digit numbers.
SUSAN DENTZER: Now the news about next year’s premium increase has set off shock waves among employers and other health care purchasers across the nation.
HELEN DARLING: It was just a reconfirmation of the bad news that they’ve been facing for a couple of years, and know they’re going to face for several more.
SUSAN DENTZER: Helen Darling heads the Washington Business Group on Health, an organization of large companies concerned about health care and health policy.
HELEN DARLING: We’ve had a 50 percent increase in the last five years in the large employer market, which is bad enough, and the last two were 12 percent and 14 percent. But those numbers are really startling, and when you think about the kinds of… the number of cereals… cereal boxes you have to sell or items that you have to manufacture, how many cars you have to sell to cover those kinds of costs, those additional costs, it’s really very hard for corporate America.
NANCY MICHAELS: So how’s the program going for you?
SUSAN DENTZER: It’s also hard on workers like Nancy Michaels. She’s employed directly by CalPERS, selling the organization’s retirement benefit plans to volunteer firefighters in California. She’s also a single mother with seven children.
NANCY MICHAELS: Come on, Louis. Let’s go.
SUSAN DENTZER: Michaels says one of the attractions of working for CalPERS has been its historically generous health insurance plan. In fact, until several years ago, the costs of coverage were fully paid for CalPERS enrollees by the state.
NANCY MICHAELS: Even seeking state employment when I was 17 and a half years old, part of the incentive was the health benefits, was the benefit package. I felt that it was important. I knew I wanted a family eventually.
SUSAN DENTZER: But recently they’ve had to start paying ever more costly monthly premiums. For the Michaels’ family, those now run about $60 a month. Next January the family’s premiums will rise to about $90 a month.
NANCY MICHAELS: I’m here to pick up the prescription for Michaels.
SUSAN DENTZER: Then there are growing out-of-pocket costs for items like doctors’ visits and prescription drugs.
NANCY MICHAELS: We recently had an experience where my 14-year-old broke her collarbone in a soccer game. I have spent since May 17 over $160 in co-pays and medications, visits to the doctor and the premium alone in just a little tiny bit over 30 days. And the costs of everything else are going up also. You know, groceries in this household have skyrocketed. So you do find yourself cutting.
DOCTOR: Could you lie back a second?
SUSAN DENTZER: Crist says it isn’t entirely clear just why CalPERS’ health costs are rising so steeply. On the other hand, experts say it is clear that CalPERS and other health care purchasers are faced with several costly trends.
GEORGE HALVORSON: We’ve got new drugs, new technology, new procedures, aging population, provider consolidation. It’s just a ton of health care cost drivers that are affecting everyone in the country.
SUSAN DENTZER: George Halvorson is chair and chief executive officer of Kaiser Permanente, which provides health care to about a third of those enrolled under CalPERS.
GEORGE HALVORSON: The average population of CalPERS is about five years older than the rest of the population. So what we’re seeing at CalPERS is exactly what we’re going to see in the broader population a couple of years from now. When you’re 30, you may be sick occasionally, and you get cured and then you’re not sick anymore. And when you get to 55, you end up with hypertension and you have to be treated regularly.
SUSAN DENTZER: In addition to costlier patients, there are also forces making the provision of care more expensive. In California, a state law requiring hospitals to be earthquake-proof is adding billions of dollars in costs to retrofit old facilities or build new ones.
Meanwhile, a shortage of nurses as well as other health care professionals is forcing hospitals to hike wages, and driving up overall labor costs as a result. Kaiser’s Halvorson says hospitals are in no mood to swallow those costs after years in which health plans sought to shave their rates. Instead, those institutions are merging or otherwise teaming up to demand higher payments.
GEORGE HALVORSON: If you go into communities– St. Louis, Milwaukee, San Diego- – across the country– Boston– where there used to be 30 or 40 separate hospitals competing with each other, each of them with low prices, you now have a couple of very large systems. And those systems have such great negotiating leverage now that they’re going back to the health plans and saying, “here’s our rate for this year. Take it or leave it.” And we’re seeing 35 percent, 40 percent, 50 percent increases.
SUSAN DENTZER: For now, officials of Kaiser and CalPERS say their best hope is taming costs for the sickest 15 percent of enrollees, who represent about 70 percent of the total health care tab. The hope is that managing their care wisely, through a process known as disease management, could save billions of dollars and improve the quality of care at the same time. Dr. Richard Harr oversees chronic care for patients in Kaiser’s North Valley region. He says a key element of the HMO’s disease management programs is better educating the patient.
DR. RICHARD HARR: We really put a great deal of emphasis on having the patient try to understand the nature of their disease and what they can do to prevent the complications that accompany the disease. We’ll also check their blood sugars and their lipids; we’ll check for kidney disease on a regular basis, and if we find that they’re not getting those procedures done, we will send them letters to encourage them to do that.
SUSAN DENTZER: The HMO also plans to invest more than $2 billion in new computer systems to help coordinate care. Eventually a paperless medical records system is to link all of Kaiser Permanente’s clinics and hospitals, and provide state-of- the-art medical information right at doctors’ fingertips.
DR. KRISTEN ROBINSON: Your cholesterol and your hemoglobin A.1.C. are up-to-date.
SUSAN DENTZER: Dr. Robinson, David Beeby’s physician, uses an early version of the system to check his lab results and coordinate his care.
DR. KRISTEN ROBINSON: Well, it’s incredibly helpful, and I can pull up all of his numbers over the past six years and compare them, and we can go over them together and talk about the progress that he’s made.
SUSAN DENTZER: The problem, of course, is that much of this investment will cost money up front, in the hope of producing savings over time. So in the meantime, as costs continue to rise and more workers face the loss of health insurance, Crist argues that public policymakers must step in.
WILLIAM CRIST: It’s a national crisis, one which I think public debate has to be focused on in a very serious sense within the immediate future, or we’re going to find that it’s not just the unemployed and the very poor people of our country and so on that are going without health care. It will be a lot of the working people in both the public and the private sectors.
SUSAN DENTZER: And as with so many trends that sweep the nation, the grim truth is that California may once again be leading the way.