 Ladies and gentlemen, I'm delighted to welcome you to today's meeting of the Disparity Seminar Series. As those of you who were here last week remember, Monica Peek went a week early because we had a cancellation last week and it gave us an opportunity to invite a dear friend and an old Chicago alum, Jeff Goldsmith, to join us today and to speak to us on the topic of Beyond Health Reform, Implications for Academic Medicine. Next month in Chicago, Jeff will be addressing the Council on Teaching Hospitals and the Council on Medical School Deans on this exact topic. So in a way, his talk today is a preview of a presentation that he'll make about a month from now to the Deans and the Teaching Hospitals. Jeff is the President of Health Futures, located as he and his wife are located in Charlottesville, Virginia. He's an Associate Professor of Public Health at the University of Virginia and has been there for a long time, about 20 years. I can't believe that between 1975 and 1982, I actually checked with Jeff to make sure I had the dates right. Between 75 and 82, I think when he was about 11 years old, Jeff was a Strategic Planning Advisor in our Dean's Office here at the Medical School and at the Health Center. That's when many of us, me and Dudley and Stan Goldblatt met Jeff when he was doing his work here at the University. Since then, he's published widely. His 1981 book, Can Hospital Survive, was very much read in the 1980s. Theater books include Digital Medicine, Implications for Healthcare Leaders in 2003, The Long Baby Boom, An Optimistic Vision for a Graying Generation in 2008, and a book that he recently published with Oxford University Press, which is called The Sorcerer's Apprentice, How Medical Imaging is reshaping healthcare. That came out this past year, 2010. He publishes regularly in journals that some of us read like The New York Times, The Wall Street Journal, Business Week. He's on the editorial board of Health Affairs. It really is a delight to have Jeff come back and talk to us, as I said, on the topic, Beyond Health Reform, Implications for Academic Medicine. Jeff, it's all yours. Thanks, Mark. Thank you very much. I'm going to try and project to the back of the room if I can with the sound deadening. There's definitely a prodigal sound quality to coming back here, which I enjoy a lot, but for people who have been here a short time or people who have been here a long time, but have spent their entire careers here, one of the most remarkable things about being an alumnus of this place is the company that we alums get to keep. The alumni network for this medical center is one of the most remarkable and unremarked. Going back 35 years, the person that hired me, Dan Tossison, became the Dean of the Harvard Medical School, his colleague, Bob Buchanan, the President of the Mass General Hospital, Altarlov, the Chairman, Mark's Chairman of Medicine, became the President of Kaiser Family Foundation, David Skinner was our Chair of Surgery here, President of the New York Hospital, Arthur Rubinstein, the Chairman of Medicine here after Altarlov, really the CEO of the University of Pennsylvania, Glenn Steele, former Dean, the Head of Geisinger Clinic, Elliot Sussman, Head of the Lehigh Valley Health System, and Chris Castle, another colleague of Mark's, the Department of Medicine, the Head of ABMS and the American College of Physicians, and then on the Leigh side, it's just hard to believe Ralph Muller was the CEO of the hospital here, the Head of the University of Pennsylvania, Steve Lipstein, one of his deputies, the Head of the BJCL System in St. Louis, Ken Bloom, Stamford and Georgetown, Mike Reardon, the Head of Greenville Health System, Ken Cates, Iowa, David Bray, Dean for Management of the Harvard Medical School, John Gunn, my colleague and friend who now runs Sloan Kettering, Tony Speranzo, who was fired here, a number of these folks were invited to leave and who got a great deal of lift in their next jobs, CFO of the largest Catholic health system in the U.S., managing about $3 billion. Richard Hunnall was President of the American College of Physician and Ex-Fredent and General Counseling, American Hospital Association, and this does not even touch the latest crew, which it just gives me shivers. Michelle Obama, FLOTUS is what the press called the First Lady of the United States, Valerie Jarrett, Assistant to the President, former Board Chairman here, and Susan Sher, your Chief Counsel, Chief of Staff at the White House. There is nothing remotely like this alumni network anywhere in American medicine, so it's something people don't talk about because a lot of the folks just kind of move on and go do something else. I've never seen or done what you just did. Well, but then that's a partial list. I've left off a whole bunch of people that you're going to remind me of who they are, but I mean it's, there's absolutely a life after the University of Chicago. Things don't work out for you here. I guess that's the bottom line. Now, you go back a year and we were all watching the Olympics and wondering how the President was going to land this jump, but sure enough, 11 months ago, this 14-pound colossus lands on his desk, the Patient Protection Affordable Care Act of 2010, and he signed it into law. I believe there were noble impulses buried in this bill, big ones, and the one people seem to keep forgetting about is the one I put in bold here, giving 30 million more people health insurance coverage that seems to have kind of disappeared from the press as people talk about, you know, repealing the act. You're repealing roughly a 20% growth in the number of insured people in the United States, along with a lot of things that have really needed to happen but haven't happened because they didn't have the resources or attention. Unfortunately, however, these important themes and changes in our health system were enswathed in, oh, I don't know, 2,900 pages of completely impenetrable legislative language, and the critter that is evoked, I've read it twice, twice, front to back. So the depths of my masochism now stands revealed to you all here in public. I have a surgible PDF of this bill on my desktop, my computer desktop. So I become a Talmudic scholar of this legislation, and the animal that it most evokes for someone who's been through it front to back a couple times is not an eagle or a lion, it's actually this blobfish, this is a gelatinous deep sea creature whose principle, mechanism of biological defense is that he's completely inedible. This is such a politicized topic that people are inevitably going to take offense. I want those of you that speculate about my political views. I am not a member of the Tea Party. I voted for the president twice. It gives me shivers to think that we made a senator from Hyde Park, the president of our country. This is not about Barak so much as about his legislative partners. This was the author of the bill, the father of the bill, the chairman of the Senate Finance Committee, who in September of last year said to a bunch of angry constituents in his home state of Montana, quote, mark my words, several years from now you're going to look back and say, well, that wasn't so bad after all. Well, that's what you say to someone before they have a colonoscopy, right? Not after, you know, a fundamental transformative event in our nation's health policy history. And of course it has subsequently been learned that he actually didn't read the bill. So maybe he didn't know. I believe I wrote legislation before I came here. I was in the governor's office in Illinois and then I analyzed legislation. My job here was to try and protect this medical center from regulatory and political malpractice. So I mean, I really have had some experience in analyzing bills. The Senate Finance Committee actually prepared a 120 page draft of corrections to the legislation. So just from a technical standpoint, the legislation itself has got a lot of problems. But strategically, this is an astonishing bureaucratic project. Easily 20,000 pages of implementation regulations will have to be written to make this bill become truly become law. And it will depend on a remarkable amount of collaboration with increasingly or newly Republican administrations in state governments that were carved out a huge role in implementing and creating infrastructure to implement this bill. I think from a strategic standpoint, one of its crucial weaknesses was delaying signing people up for the coverage for three and a half years. Those of you that studied Massachusetts, it was seven months from the implementation of Massachusetts Health Reforms to actually giving people insurance coverage. Here it isn't going to happen until 2014. Two election cycles, two plus election cycles will have elapsed between the signing of this bill and giving people the benefit that we mentioned a minute ago. It's financed by a capital gains tax increase and an implicit tax on the wage base. They weren't huge increases. But if you want an economic recovery in the country, the last way to get it is by reducing the after tax return on capital and by making it more expensive for small businesses to employ people, which is what this bill did. I was a big advocate of Zika manual's idea of financing it off of a value added tax or more narrowly attacks on soft drinks and trans fats. The idea of shifting the financing burden off the wage base and off the invested capital base onto consumption is something that I think maybe we need to relook at a little bit. Part of the reason why I read the bill front to back twice was looking for the alleged cost reducing features of the bill. There were a lot of opportunities to reduce costs that were passed by because of political problems. A big thing for us here in the academic center is going to be that it excessively depends on the expansion of Medicaid to extend coverage, not only perpetuating deep inequities in our financing system but also threatening state and academic health center finances. We're going to come back and talk a lot of this because the principal implementation risks for academic medicine focus on that Medicaid expansion. And then finally it reinforces and complicates rather than reduces the role of employers and health benefits. Another thing that Zika manual, my friend Ron Wyden from Oregon, the center from Oregon would have eliminated the employer role and essentially granted people coverage directly as individuals. It is also not as White House staff said after the signing sold itself. This is the number of people that disapprove or have an unfavorable opinion of the legislation right after it was signed has gone up by a full 10 points. So it is it was not only incredibly expensive to get it into place but has been a political drag on the administration in the ensuing 11 months. And of course, the electoral debacle that took place in November, I think people will look back on the period of democratic ascendancy in Congress and say with an economic crisis in the country, it is remarkable that the Democrats had power for so short a period of time. I don't think the people that drafted this legislation had the faintest idea that the two election cycles that would elapse between the signing of the bill and the granting of the coverage, you would see this surge to the right in the country and put the defenders of the legislation really very profoundly on the defensive. And you've now got this incredibly polarized political environment that has created, you know, a lot of those Republicans ran on a platform of repealing the bill and rolling back the coverage expansion, as well as the regulations that were put in place to make that coverage expansion possible. So if you're sitting out there as a CEO of a healthcare system like this, or somebody trying to run a pharmaceutical company or a physician group or a health plan, the political uncertainty that exists now about whether and how much of this bill will actually be implemented makes it just, you know, you're basically like driving into this huge fog bank. It's really a very uncertain time. But what I want to spend the majority of my time on this afternoon is the impact of this bill, should it be implemented on these places and on their missions? And I focus on these four things. On deficit reduction, in which you play a role, 30% expansion of Medicaid, the rethinking of Medicare that's buried in the bill and finally the restructuring of private health insurance. Those are the four things that I believe will have the most significant impact on academic institutions, both their clinical faculties and the hospitals in which they work. To put it mildly, there is a bitterly polarized view over how we bring down the trillion dollar plus deficits that were presently running. The President's budget that was issued a week or two ago contains a $1.1 trillion plan budget for the fiscal year that ends in September of 2012. That was clearly a beginning of a bargaining process. The problem with the bargaining process is that there doesn't really seem to be a lot of interest in bargaining between the two sides. I think this budget and the deficit are going to be caught up in the melodrama leading up to the next election. And with both sides of this debate, trying to curry favor with their respective bases, the Democrats with their base in organized labor and advocacy groups for the poor and the Republican, we know where their base is. The reason why the deficit reduction thing should concern people in academic medicine are really multiple. Academic health centers were among the largest beneficiaries of the stimulus bill that had a major role in increasing federal spending to where it is now. There was a billion dollar funding pulse for NIH, a huge amount of money, new money. There was a bump up in the federal match for Medicaid that insulated states all over the United States from a ruinous increase in Medicaid spending. That pulse of funding expires in June. There was also $400 million allocated in the stimulus bill for comparative effectiveness research, a very important piece of the intellectual foundation of a more rational and thoughtful healthcare payment system. And a very large fraction of that money, of course, was going to be dispersed to academic institutions to study what works and what doesn't. When you hear people talking about 20% reductions in the discretionary domestic spending part of the federal budget, it's also important to remember that NIH funding, there's about $30 billion of that a year is inside the discretionary part. It's not automatic. It's not an entitlement. It has to be appropriated each year. A 20% cut in the NIH budget is $6 billion, billion with a B. What is your current NIH funding base in your institution? Round numbers? It's more than $100 million, right? Well, more than $150 million. Yeah, so, you know, when you hear the word discretionary domestic spending and people focusing their attention on significant reduction, freezing or cutting, there's muscle and bone in this institution in that discussion, Medicare, which is not as big a piece. I mean, if I remember, you had much more Medicaid than Medicare in this place. But Medicare is the balancing item in the federal budget. It's about a half a trillion dollars now, growing at maybe nine or 10% a year. If you cut Medicare, that affects everybody that takes care of people over 65. I don't call them elderly anymore, since I'm going to be on Medicare in what, three years? Three? Yeah, shocking. And of course, Medicaid, which is a much bigger deal here. That was my nightmare. My initial job here was to protect this medical center from cuts in Medicaid funding. If I remember correctly, you had we had 60,000 inpatient days of Medicaid in the institution when I started here. That's a much bigger deal. Medicaid is the balancing item in most state budgets, and states reached the end of the stimulus funding pulse that protected the Medicaid budget from recessions in June. So when you hear the phrase deficit reduction, you need to think hard about the streams and income that are flowing to support your mission here at the university. As mentioned, this bill relied in my judgment, excessively on expanding the Medicaid program to provide coverage to as many as 15 or 20 million people. The reason why they use Medicaid is because Medicaid dramatically underpays doctors, hospitals, home health care companies for taking care of the poor. And because the poor are not actually out out there rallying to give you more money. And because there's, you know, not a huge amount of support for, you know, growing the Medicaid program states were initially shielded from the cost of this expansion until 2016, but then begin taking on what will eventually be 10% of a very much larger program, a program that could cover as many as 65 to 70 million people starting in 2016. The sneaky part here is that by some estimates today, despite the six million person expansion of Medicaid during this recession, there are 12 million more people presently are eligible for Medicaid, but are not enrolled, who if they were covered, would be covered under the old matching formula where the state gets to pay half the cost. So the real fear is that the way this bill has been set up, when we get those health exchanges that everybody's talking about, the health exchange is the gateway to Medicaid eligibility. And you are legally required to be covered. So one of the reasons why governors in states that hate health reform are nonetheless getting money to set up the exchanges is because they don't want the federal government to be responsible for being the gateway to their Medicaid programs. Because if that happens, they will be inundated in patients for whom they will have to pay half the cost. I'm sorry if I'm getting excessively wonky here, but it's important to know this. The Affordable Care Act prevented states from shrinking eligibility between now and 2014. That makes sense. You don't want to throw 5 million people off the program and then reenroll them in 2014. But to put it mildly, when that funding pulse ends in June, states are going to go off a funding cliff, and they're going to have this huge Medicaid liability that they're going to have to cover somehow with revenues that are not growing. And so there's a tremendous battle going on right now over this maintenance of effort provision. And if you can't shrink eligibility, you have a Medicaid funding crisis, you only have two choices. You can actually cut benefits to the poor, you know, dental vision, you know, long term care, you name it, you can shrink the benefit package, or you can pay providers less, which is the easier thing to do, because it's a tiny fraction of the providers in a given state that actually worry about Medicaid. We didn't have a lot of friends in the state legislature from among our suburban hospitals and even places like Northwestern, where you can't find the emergency room with a GPS system. You know, when we went into fight to prevent Medicaid from being cut. And to put it mildly, the expansion, the 15 or 20 million more people that would be added to this troubled program is politically fraught. The reason for that is, you have 33 Republican state governors that not only oppose the maintenance of effort provision, but don't want to see the expansion happen. And they're going to work with their congressional Republican allies to attempt to kill the Medicaid expansion. I had a chance actually to meet and talk with one of the new Republican class of representatives about three weeks ago in Arizona as a young guy from Arizona. And I flat out directly asked him, Are you committed as a caucus to the expansion of coverage and contain in this bill? And I heard the most monstrous amount of mumbling I've ever heard in my life. And at the end of the mumbling, there was something about, Well, we'll do what we can afford, which didn't sound terribly good to me. The alternative to killing the Medicaid expansion will be to convert the Medicaid program to a block grant, which basically means here's $300 million, Vermont or Illinois or wherever it is, you figure out how to spend it. In other words, to eliminate the federal statutory restrictions on the benefit package on how they pay people on eligibility and the rest of it and let them decide what to do. This is scary because the block grant is basically a license to narrow eligibility for the program when the economy goes in the tank like it has in the last couple of years, or to butcher academic health center and safety net institution payment rates either directly or through a draconian managed care conversion. A surprising percentage of the Medicaid population are not in managed care plans. That is clearly an opportunity. So there is there are darkening clouds over at least the Medicare expansion part of this bill that a further growth in Republican control in Congress would make more likely that this expansion will not happen. Now, one of the other big themes in the health reform legislation, there's a couple hundred pages of the 2900 pages about this is trying to change how Medicare and Medicaid pay providers to try to encourage better coordination and improved outcomes and quality. And I think there's a lot of good ideas in here. The policy community has been searching for a while, as many of you know, for successor to fee for service payment for Medicare. The problem is there's no consensus about what to do. And so what this bill does is try 20 things and see what works, works to be defined later. So if you're I mean, I'm allegedly a forecaster, and someone asks me how is Medicare going to pay for services in five years? Honestly, I don't have the faintest idea. And neither do most of the people running these institutions. So it's really kind of a scary time. The consequence massive uncertainty in the provider community about what's next, a lot of these ideas were actually written into the bill. The bill created a new innovation center in the Center for Medicare and Medicaid Services. And actually, there's a list of 20 programs written into the statutes that this innovation center is supposed to provide. They gave a billion dollars a year to try a lot of these ideas. Just to put that in context, CMS presently spends before this bill was spending 30 million a year on care system evaluations, demonstrations, pilot programs, if you take out the surveys, they're going to go from $30 million a year to $1 billion a year. This is getting started very slowly. The head of the CMS Innovation Center is a friend as five staff, five to go from 30 million to a billion, it's going to take a while to get going. There's some good ideas in here, one that intrigues me, that Hopkins I think got in here was this idea of the health care innovation zone, which is sort of like a single payer health system applied to a neighborhood or a geographic area around an academic health center, where the academic health center could help organize a care system that encompassed all of the different levels of care, including inpatient care, and got all the money, Medicare and Medicaid and perhaps private insurance as well, to try and manage it in a more intelligent way. It's sort of like an HMO applied to a specific geography. I think it's a fascinating idea and it's something that we ought to be thinking about particularly for you know, folks that have issues in their neighborhoods related to health status and big disparities, which is what you worry about here in the seminar. There's also I think one of the really important things that isn't getting as much attention as it needs is a new center for the dual eligible inside CMS and a whole bunch of demonstration project money. The dual eligible population, as many of you know better than I do, are the people who are on Medicare who are so sick and so poor that they can't afford to pay their share of Medicare, so that's paid for by Medicaid. It's a quarter of Medicare spending. It's half of Medicaid spending. These are catastrophically ill people. They are frequent flyers in your emergency room. They are people that have multiple chronic conditions and a lot of social and human problems, homelessness, drug addiction, mental illness. I mean, you name it, it's out there. If you were thinking strategically about how to fix these programs, finding a better way to take care of this population would play a huge role. And then finally the thing that seems to have entranced your community based colleagues, this idea about an accountable care organization. I'm a published critic of this idea. I think it's really muddy thinking. We can talk about that in the discussion period, but it seems like all the rest of the stuff doesn't matter, because most of my colleagues in the non-academic health center world are trying to figure out how to become an accountable care organization. We can talk about that in the discussion period if you want. So a completely restructured private health insurance market, why should you worry about this? Well, it's where 130% of the cash flow that pays your salaries comes from. You lose 70, you lose 30 cents on the dollar by taking care of Medicaid patients. You lose 100 cents on the dollar for taking care of people that have no insurance. You lose 15 cents on the dollar for taking care of Medicare patients. And you make up for all those losses and then some by charging way more than the cost of actually caring for the privately insured populations. So 100% plus of the cash flow in these places comes from private insurance. There are profound changes in the private health insurance market buried in this bill. And I've become a scholar of this and I've been talking a lot with health plans who believe me have no idea what's going to happen to them or what to do about it. The Affordable Care Act will add 15 to 20 million new customers for private insurers, but it will accompany that expansion with an onslaught of new regulation by inexperienced regulators who, to put it bluntly, do not have the faintest idea of what they're getting into. Moral hazard driven behavior, meaning beneficiary and employer driven adverse selection, that is people either dropping out of coverage, if they feel like they're not going to need it or dropping coverage for their employees, if they feel like it would be cheaper for them to get coverage of the exchange, or people deciding, despite the law, that they don't want to get private insurance coverage, there's going to be a tremendous amount of adverse selection behavior. The University of Chicago part of me says, you know, that's the way the world works. But the cost of adverse selection will be blamed on insurers. In other words, deterioration in the risk pool by healthy people withdrawing and sick people enrolling will be blamed on the insurers. And the regulatory system really isn't capable of measuring the selection effects that are going on, but they've been going on during this entire recession. It's one of the reasons why even though health costs are only growing in the country by 4%, we're seeing private health insurance rates going up at 15 or 20. Most of that difference is selection driven. It is an inflation. Provider cost shifting, which is how you generate the money to pay all of your salaries, is going to be politicized because the controls placed on private health insurers and the rates they can charge is going to dry up their cashflow. And again, just to remember here, this is where your paychecks come from. If you define radical as abolishing health insurance altogether and instituting single payer or having a public option that people could enroll in, this is a moderate reform, but the reality of what these guys are trying to do really isn't moderate at all. That private health insurance risk pool in the United States is a trillion dollars. That's bigger than the GDP of Turkey or Mexico just by itself. It is an enormous lake of money. Seven percent of our GDP were required to participate in it. So that pool is going to end up being a trillion two or a trillion three by the time you add the insurance subsidies to it. So we're taking something that's already the size of a nation and making it 30 percent bigger. There is no way on earth to forecast the budgetary effect of these subsidies. People who say confidently this is budget neutral or it's going to blow the budget, the reality is we don't have the faintest idea of how many people are going to enroll and we don't have the faintest idea of what it's going to cost to cover them. So people that are claiming we know exactly, you know this is one of the biggest deficit reduction initiatives we've ever, I mean this is just nonsense. We've taken an enormous fiscal risk. Could turn out great, could turn out terrible. It's going to be fun to watch. There are huge political risks. If the Congressional Budget Office forecast of limited rate increases are wrong because it will dramatically increase the cost of the subsidies and they could be wrong by double or triple. They could be high by 40 percent or low by a, you know, like two thirds and we don't really know. So again and it really doesn't matter who's president. It could be President Obama in his second term when we start writing the checks. It could be President Palin. Roll that over on your tongue. President Trump, I mean whoever it is, Democrat or Republican is going to own this problem. I've actually found a picture of that private health insurance risk pool. Here it is. This is where the Edmund Fitzgerald went down in 30-foot seas, remember the 600-foot or about the Gordon Lightfoot paleo hippie song there from the 70s. The only people that actually have a navigational map to this lake of money, a trillion dollars, is the actuarial firm of Millman and Robertson. They're just Millman and company now and they're not talking. It's a shallow lake. There's a lot of different, I mean, and you think about politically you're responsible for how this thing behaves. If rates go up by 20% whether you're a Republican or Democrat, you're in deep trouble. You don't have enough troops to patrol all of the, you know, people can dump toxic waste. I mean it is just, it is beyond a civil engineering project to try and do what this bill envisions. My expectations, I believe we will see the individual health insurance market, the part that you get access to through the exchanges triple. CBO says it doubles, I think it triples. It goes from between 12 to 14 million privately insured people to maybe 40 million in a hurry. So there's a huge opportunity and a huge challenge here in gearing up for all those folks. Employer influence over health insurance contracting strategies will diminish because a lot of people will drop coverage and just give their employees money because for people under $50,000 a year it is so much better a deal to go through the exchanges. You get so much more benefit for the same amount of money. So I think we're going to see the employer role in our health insurance not diminish, not go to zero like a lot of us policy wants would have suggested, but certainly shrink. Why should that worry you? Well because if you don't worry about having everybody in the community in your health insurance network then you can selectively contract with parts of the health care system and simply exclude a Northwestern or exclude a University of Chicago and not pay a price. So I think what's going to happen is that we're going to see a profusion of products tailored to individual subscribers not to employers and a lot of economic incentives for people to take the routine care that they sometimes bring to you and take it to less expensive institutions and keep a portion of the savings for themselves. I also think we can expect a serious cash flow problem for many insurers despite the new people as the restrictions on their underwriting practices and the caps on their gross margins the medical loss ratios are put into place and of course a major goal of the tiered networks will be to steer patients away from academic health centers for routine care particularly elective ambulatory care surgery and imaging. If I were in the health insurance business I'm not going to pay seven thousand dollars for an MR scan for all that much longer. I'm going to find the five to seven hundred dollar MR scans and move people out and of course if you lose control of the diagnostic decision you lose control of where the patients go after they've been diagnosed so that's a very important concern. Now for 35 years people have been saying to academic institutions you're doomed horrible things are going to happen to you you better get ready and every single time you know with HMOs with DRGs the change in Medicare payment that took place in the 80s the lobbyists and advocates of these institutions have pulled a rabbit out of a hat and the problem has gone away and you've grown and prospered so for someone to come in here in 2011 and say you know what there are some serious risks in this environment for academic medicine most of the reflexes in academic institutions to take those warnings seriously and to respond to them in a substantive way have kind of evaporated because the leadership and your political guarantors and protectors who are numerous have been able to organize to blunt the impact of those changes in payment on academic institutions and their missions. I'm not so sure that they're going to be able to do that this time. There are numerous risks here the big ones are that the Medicaid expansion occurs but with many fewer new dollars to actually pay for the people and the nightmare here is 10 care in Tennessee in the early 1990s state government added 400,000 newly covered people to their Medicaid program without appropriating an additional dollar of money to pay for them so there was this huge scramble to try and basically take money away from providers to cover the new people or no expansion not necessarily a repeal of the legislation but a dramatic scaling back of the Medicaid expansion in the private insurance subsidies but the payment reductions to providers of care that were included in this legislation particularly in the Medicare program remain in effect so that's one thing to worry about another thing to worry about is what happens when the experienced inexperienced regulators I talked to you about try to take over the trillion dollar health insurance pool and how health insurers respond to the political and regulatory mandates that this bill creates. I also think and you saw it in Massachusetts that we're going to see a lot of boomer age primary care docs retire and not be replaced and in Massachusetts we saw a significant increase in ER volume from health reform and also significant increases in waiting time for appointments to see internist family practitioners and pediatricians in an environment like this that means more people coming into your emergency room needing care and then finally what happens in this budget balancing thing do we end up preserving our NIH funding the president's budget I think has a six hundred and seventy million dollar increase in NIH funding which is a remarkable thing to do in this kind of economic environment I think it would be a miracle if that money were appropriated as as the president proposed. How do you respond to all this stuff well I think academic institutions have numerous strengths that give you a capability to respond that doesn't exist in non-academic places I think both the meritocracy and the reverence for the science that pervades these places is a plus in environments we have to begin making choices about what care people receive. The other thing that's going on in the community that isn't going on here is a smaller and smaller percentage of community docs actually need to use the hospital it's a little bit like pediatrics you know we've got a group of people in the community that never come to the hospital that don't manage hospital patients what's happening all over the care system is that a lot of doctors just don't need to use the hospital anymore to practice medicine and so they've disappeared so the medical community is dividing itself into people that are not dependent upon or even see the hospital and then people who never leave the hospital well that's not the case here virtually entire group of people that take care of folks are inside the fortress so it's not like you've got a group of people you never see anymore that you've got to work with in close coordination you see them for better or worse the issue is do you all get along um clinical faculty also cluster around training programs and major clinical problems and of course in areas like oncology where you've had multidisciplinary collaboration in the best cancer centers for years we know that clinicians that work as a team across clinical divisions can work miracles can produce changes and benefits to patients that you just don't see in a more fragmented setting that's a plus but the real question is how do you extend that type of a care model across the institution so that you get collaboration across clinical departments across clinical disciplines for people whose clinical problems cross those jurisdictional boundaries I also think that academic centers did not participate in the conflict of interest in the greed that was going on in the non-academic portion of the world so you didn't have people you know paying off referring docs with clever partnerships for imaging centers or surgical centers you didn't have people organizing to try and maximize the use of services to the extent that you see in the community particularly in the Sunbelt Atul Gawande's article about to McGowan, Texas is an example of that type of an ethos and finally and I say this as a person whose job it was to try and organize that political support strong political support has always been essential to support the missions of these places and will be even more so in the coming five years so this isn't just a question of making an abstract policy case that what you do is important it's being able to find the people that are willing to expend political capital to protect that mission by preventing your funding from being cut there are also vulnerabilities for example the typical medical school today receives like eighty five or ninety million dollars a year from the hospital with which they are closely tied those numbers have been going up like this for the last 20 years I can assure you they are not going to continue going up most of the incremental money that's gone to these places to hire new people to develop new programs has come from the hospital that money is directly at risk by the shutting down of the ability of private insurers to cross subsidize your Medicare and Medicaid losses so how does the medical school cope with the leveling off or potentially even the decline in money coming from the hospital good question there's also relentless pressure for capital spending in these institutions my friend over Reinhardt says academic institutions can be divided into three groups there's the one crane places the two crane places and the three crane places how many cranes on this campus you mean maybe in the three crane I don't know I haven't walked around the cranes are getting ready to fly south and the idea that you can solve a problem by building a new building and putting a bunch of people in it is not going to be the way we're going to solve problems in the next five to ten years so capital is going to be tight regardless of how this plays out how do you address the fragmentation in the care experience that the family experiences is a sequence of drop batons and that the fellows and residents that take care of places in the institution drives you crazy how do you improve the coordination and accountability for the clinical experience across the continuum of care that's something these places have to put it mildly done a terrible job of and it's got to be fixed because there's costs associated with this and the 64 billion dollar question will clinical faculty embrace the need for a change in clinical culture both in practice and in teaching and when I call the Gregory House problem the obliviousness to cost the end to clinical resource consumption is a huge risk in an environment where you're only going to have fixed amounts of money to pay for people whether it's fixed amounts of money for a neighborhood fixed amounts of money for an admission an episode of illness fixed amount of money for a population of patients for a year however it ends up being fixed managing within fixed resource limits is going to be something these places are going to need to manage and the idea that the cost of care is something you let the administration sort out later is not going to get you very far you run out of cash real fast that way in a fixed payment environment bottom line implications for academic health centers this is not a political statement it doesn't matter who's president it doesn't matter who signed this bill into law if this bill is repealed if those coverage expanses do not take place these institutions will be the largest single losers in our entire society you have a powerful interest in using your political resources and relationships to see that this bill is implemented regardless of the political party that's in power to me the other big implication academic health centers both management and faculty are going to have to learn to run on regular gas and I'm not talking about 87 octane regular I'm talking about 68 octane Albanian regular with seawater and fish scales in it you're going to need to filter out the seawater and fish scales but learn to run on regular gas medical faculties will have to learn how to manage it a quasi-capitated environment and then teach it to their students there's a tremendous learning challenge here there's a tremendous challenge about what the science tells you the right thing to do is for a particular patient problem you're generating the science it's the application of that science to changing how patients are managed that gets you out of this and that also produces good results for your patients so I see this idea of an elegant diagnosis not a throw the kitchen sink at the patient diagnosis but asking the right questions at the right time and making resource sensitive decisions about what to do evidence-based decisions about what to do based on what you learn I mean you're generating the knowledge to do this it's applying that knowledge to care situations on a consistent and thoughtful basis it's the real challenge and then all of these experiments my argument for academic institutions as well as community institutions is there's a hundred flowers blooming out there you ought to have a little garden of your own you ought to be starting experiments you ought to try and grab a piece of the billion dollars if you've got bright ideas about how to improve the care process set them up and go each one of these places ought to have an innovation center and it ought to be a place where fellows residents young clinicians that are going to be practicing that new world are not only going to be you know helping design the payment models that are going to support them through their professional practice but also giving the institution valuable knowledge about how to function in the event that those new payment models become implemented by the Medicare or Medicaid programs you know when you go to the opera everybody's got a place to stand they've got a role to play you know and you can tell when it doesn't work you can tell when it doesn't work patient care is a lot like this and we've been able to function for generations in these places without the libretto you know without the detailed sort of division of labor here's what everybody needs to do when and why that creates a really good sound I think there's an opportunity here to do a way better job in a really uncertain environment and I'm sorry this went on so long but I want to make sure we have time for you to ask questions just don't throw anything thank you very much for having me here what I've learned a lot about health insurance world through my experiences and one thing that I learned recently was about the difference between a self-funded plan private plan self-funded plans typically regulated by the federal like Department of Labor, ERISA and the private plans typically regulated by the state injured commissioner as far as for protecting patients the one exception to that is our self-funded plans that are church plans meaning yeah church plans are which I thought that was pretty small group initially until I realized that with large yeah it's quite large and so there's a lot of people are covered by those self-funded church plans and I'm trying to figure out first of all how this bill will apply to those plans and also kind of what protections will be taken away from or added to those plans are not regulated neither by state nor the federal level essentially real I you know I honestly can't answer that question but you know there actually are these strange insurance plans that are sort of like cooperatives we kind of put money in on a semi semi voluntary basis and when you get sick you just withdraw money out it's sort of like a quicker kind of community there are a lot of them and you know I would say there are a couple million people in them it's it's actually quite striking there one of the big drafting errors in the legislation was a one provision of the bill said none of these underwriting restrictions will basically apply to the self-funded plans they were exempted from the new requirements for you know how they cover people but then the very next set of paragraphs applies all of the underwriting restrictions to them so there's actually tremendous legal uncertainty about which one of those paragraphs actually is real or not and you know the 20,000 pages of regulations that are going to have to be written are going to need in part to clarify which approach of the law is going to apply I am betting that a lot of the underwriting restrictions that is preventing people from being excluded from pre-exist because of pre-existing conditions age-related restrictions on care you know that the coverage bans in other words how much you can charge people given an age versus younger people it's not English but you get where I'm going I'm betting that a lot of those end up being applied to the self-funded plans there's also this issue of grandfathering how a plan how a plan is covered by the law depends on not changing the cost sharing in a meaningful way if you change it or if you change carriers all the regulations apply I mean there is so much uncertainty here I would bore you with the details so I can't really answer your question because I don't know what regulatory approach the tiny overworked ban to people writing the regs to implement this bill are going to take going back to your wolf at the door slide right and the sanguine nature of the academic enterprise for the last 35 years I mean is it not the case that the academic enterprise makes major contributions to driving the innovation engine to training the next generation to providing care to the poor that that simply are irreplaceable I mean you've got to preserve them which is one reason for the sanguine attitude it would seem that any change has to leave intact its its academic health centers to carry on the missions that nobody else is prepared to do what Eric Catter the new Republican majority leader would say is yes we agree with all that these are vital institutions but that doesn't mean that we can afford to continue giving this sector a blank check that's going to be the Republican attitude so you've got these indirect medical education and direct medical education subsidies they're like these huge plums they are low-hanging fruit to be cut it's one of the reasons why academic institutions make money on their Medicare patients is because you get these subsidies I think those subsidies are clearly at risk and you know I think the other part of the problem is you and I can see I mean I travel around the country pretty much full-time I know we're going to have a primary care physician access crisis but the people that manage our Medicare program think there's no problem and their surveys tell them that Medicare patients have access to doctors whenever and wherever they want so I don't think the perception that we're about to have a horrendous crisis of access to physicians is really widely held in Washington so the argument that we need to preserve these places to make sure we don't have a crisis of access that the policy community doesn't really understand is already happening there's a bit of a reality gap there on the science side mark I'm hearing stuff from those Republicans like we declared war on cancer in 1972 how are we doing you know how are we doing on Alzheimer's disease and Parkinson's disease and you know curing diabetes I mean there have been extraordinary expenditures of federal research dollars going back 40 years to try and attack some of these problems and it seems like we sort of hit a wall so can you point to a cure for cancer and say you know if you cut my NIH funding you're going to prevent us from completing this work there's a larger and larger body of skepticism that the society is getting a return on that investment that I think is going to get in the way here I think you have a tremendous political challenge right now so I'm wondering what advice you have specifically for the University of Chicago that when the financial people here talk at the seminar for example they'll say that five percent of the patients at the University of Chicago account for what makes us brick even or have a profit basically the the quartinary care the he-mong that type of thing so a lot of strategies and based upon you know this five percent of a population but you know it's a changing environment as you just discussed and so what advice would you give us you know is that the right strategy or you know would you weigh heads your bets sir you know what would you do looking forward given the uncertainty but these changes and ACOs and all sort of on the horizon potentially what would you do in terms of then your advice to you know the administrative leaders here at the University of Chicago well I mean my advice to them 35 years ago was that you need to make a much better connection between the unique knowledge that you were developing in these institutions and your ability to solve problems that can't be solved at Christ Hospital or for that matter at Northwestern it's very hard to make that argument very hard to make that argument but I think it is a valid argument and the fact that you are generating new knowledge not only about the you know the underpinnings you know where where do these clinical problems come from but developing new approaches I mean erythropoietin was invented here you found the you know really the beginnings of the genetic linkage to cancer here I mean those things have never been effectively translated into market leverage people don't believe it and they need to so I think that the idea that you can solve problems here that can't be solved elsewhere you're going to need to be able to defend that empirically and then defend the cost which is high defend the cost which is high if your financial strategy is assuming that you're going to continue to be able to charge five or six thousand dollars from an MR scan lots of luck I think it's going to be very hard to defend that kind of logic I mean this is this was the argument for you know pushing out for actually taking care of a million and a half or two million people instead of waiting for them to come to you for getting your faculty out into closer collaboration into the community in the region those were you know campaign when I began to realize how much trouble this place was in in the 70s and it almost went down in the late 70s and early 80s I think those strategies are valid today I think they're important things to worry about and to do today I mean there there seems to be an alternate and concerning strategy to the idea of trying to be dynamic and learning how to cost contain and how to move forward in the healthcare world and that's doing what I see a lot of people doing now which is looking at an potentially enormous and uncertain liability and circling the wagons to try to protect against that and just refocusing entirely on high revenue streams of income is there either a carrot or a stick anywhere to incentivize academic medical centers or someone else to provide care for the increased number of people who will be on Medicaid or the increased number of people who will have insurance but not the kind of insurance anyone wants them to have well my response to that would be what kinds of problems just like I said a minute ago what kinds of problems can you solve because you're all here together and work together that can't be solved in an environment where you've got two medical communities that don't talk to one another anymore I mean that's I guess my answer to your question I I actually it's actually worse than what you you just said because I a lot of the response that I'm seeing out there in the marketplace to all this uncertainty are a wave of really thoughtless mergers and M&A activity that's going to burn up a huge amount of management bandwidth and create a tremendous amount of turmoil and uncertainty you know as people try to jockey to keep their jobs sort of figure out where the resources are going to go so I actually think that defensive impulse is really the rampant response to this uncertainty right now it isn't the aggressively experiment and redesign care that I talk about it's really how do I become even more unavoidable than I am now and even less accountable even though I'm dressing it up in the rhetoric of accountability so I am very concerned that the mindset that you've talked about is going to prevail these places look like fortresses from the outside the temptation is to behave like a fortress we see what's happening in Egypt and Libya what happens to fortress states fortress institutions institutions that depend on market leverage on you know brute force economic power to try and sustain their franchises rot from within and that's something I think you need to really guard against you have tremendous power it's how you use that power to change what you do and how you take care of patients that holds the key to making your way through this you mentioned had that discussion about sort of you mentioned there's the discussion about academic centers owning this sort of high end of care and making that differentiating point apart from sort of the threat to NIH funding are there any what are the other factors that differentially affect academic centers more than say the community hospitals that they might be seen as competing against in that market well the one that's a great question incidentally one of the ones that everybody talks about is the multiple missions thing you know the idea of you know well you're really in three businesses here you're in the patient care business you're in the teaching business and you're in the research business an organization like the Geisinger Clinic they've got a little research going on they've got some training programs but 90 percent of what they do is direct patient care and it really clarifies the mind and when you try to do something in an environment we're trying to do three things while there's always a lobby inside the organization that stands up and says well wait a minute you're going to damage one of those other two missions so I think it's really hard if you can't answer in clear and unambiguous terms what business are we in then you can't really develop a coherent strategy to succeed in those businesses so I think that's a big handicap that and the fact that increasingly those communities are sort of separating the whole point of translational research was to try and bring research and clinical care back together and to try and harness some of the potential leverage in scientific innovation to actually improve care of patients so that the movement to translational research and to you know try and get that engine of change in the care process restarted or started in the first place is an attempt to deal with that disability Peter Drucker said years ago the most complicated human institutions you know they'll dig this place up in 10,000 years and go what on earth lived in here what on earth you talking about what lived here you lived here in this late 70s and early 80s and you were involved in the relationship between the institution and the community now the community has changed considerably since then and we can't hold you accountable for knowing exactly what's going on today but I wonder if you could use your historical perspective about this institution to think about what sort of interactions are ought to be back in your day and today between the institution and its surrounding communities well I mean this really was like a medieval fortress when I came here and it was it was one where we had little entrances for people but people basically stayed inside the fortress and the people that were heroes of mine people like your chairman Al-Tarlaw well people who realized that you know the legitimacy of the place the highest and best use of this knowledge was to serve the people outside the institution to build relationships not only to your own trainees but to clinicians in community-based practice so a lot of the work that I was doing was trying to foster those collaborations with community hospitals with clinic systems with the city and county health department trying to get people to realize that we were a part of something larger and that if we worked together with them more effectively it not only protected us politically and economically but it enabled us to do our jobs better I think that's very real and that was of course tremendously controversial there was huge political controversy about what Al was trying to do from creating a general internal medicine section in which you had your your appointment in trying to build outreach efforts there was a almost a civil war going on inside the place about whether that was a legitimate mission of the place or not I don't think there's a real question there you are a part of this community you are a huge part of this community both as employers and as caregivers you have a community trust people rely on you they need you so you know the idea that you can sit inside the fortress and you know resources come pouring in from out of the bottom and you hope that they continue to pour in I don't think is really a you know it's not a really responsible way of managing your franchise Do you have any suggestions for academic medical centers on how they can be engaged in advocacy beyond fortress here so that we can be part of this decision making and prevent this catastrophe as you you know define it we know I think about you know what were Michelle Obama and Valerie Jarrett trying to do they were trying to strengthen I at least I understand anyway trying to strengthen the ties and relationships I'm not sure what all the program was because I never really got briefed in it but it was clear that that was a very important thing to do it is a very important thing to do I mean you you know the idea that continuing economic problems in this town could savage the county's health department could could dry up funding to community health centers has an effect on you and on the patients that you take care of and if you can't expend some of your political capital to protect those missions it's going to hurt the people you take care of and hurt the institution this was a very hard sell for the trustees and management of this place in 1975 it's still a hard sell today what are your thoughts about other health care models around the world as far as universal payer models and and of course a lot of these are much smaller countries like Norway or some of the other countries and how that could be applicable to our society at large there's a whole I have a whole talk on that that I can't really do justice to in a paragraph but the biggest problem that we have isn't the fragmentation of the payment streams it's the society that we're trying to take care of and the culture that causes people to behave and act the way they do and I'm talking about a political culture as well as a social culture I doubt very much that Canada's health system or the Dutch health system applied to this chaotic society would do all that much better a job of meeting people's needs than the system that we've built so I mean are there things that we could learn from those countries yeah big time you know the idea that that you know that not tying the benefit to employment so when people become unemployed they just get they continue to get the same health insurance coverage that they had before we could definitely profit from that there are many of these countries that do a way better job of primary care and community based medicine than we do don't get me started there's a whole bunch of things that we could do better or differently but you know this idea that there is an ideal health system out there for this colossal mess that we've built here I don't know it doesn't really get you very far because most of those systems really don't scale to a 310 million person chaotic society like the one we have what would you say differs regionally between the northeast midwest and maybe the west coast if you could just address that well you know Joel Giroux who is a sort of a journalist slash sociologist wrote this marvelous book about 30 years ago called The Nine Nations of North America reattempted to divide the country up into culturally and economically homogeneous zones that was a brilliant piece of work I mean it was you know social science by a journalist without a lot of numbers The Nine Nations of North America I mean there is very little in common between this health system and the health system in like San Diego County or McAllen, Texas for that matter there is astonishing variation the role of the academic medicine the behavior of the payers the ethos inside the medical communities there is more variation inside this country I think than there is between our country and these other countries and you know it's interesting Don Berwick who's done a lot of traveling smart enough to know I actually heard him say this a couple of months ago we know enough about the extent of that variation to believe that we cannot impose a one size fits all payment solution on all these different regions and have it really work anywhere oh I thought that was a very that was a very thoughtful remark but how you actually customize all of these different moving parts to accommodate that variation I'm not sure Don has all that much of a clue I've worked in all those places and I mean they are I mean it's a different countries different countries I sort of have a question and an announcement you may know that two economists here at the business school Bob Topel and Kevin Murphy have published for the last four or five years a series of these remarkable papers on the economic return from investments in cardiovascular research the Murphy-Topel work has suggested that for for a generational investment of between 75 and 100 billion dollars by government and private drug companies the return has been just under a trillion dollars which is better return than you get on just about anything else and the way you measure these things is complicated and so the reason I refer to it in part for Marie's question is that next week Kevin Murphy was supposed to speak was supposed to speak on disparities and the gains for medical advances that is he and Bob we're going to be looking at the dataset that I've just told you to see whether the benefits were evenly or unevenly distributed among the population and I got a call from them this week saying that they've had some technical problems in sorting through the data and could they put their talk off till the spring quarter and I told them of course they could so instead of Kevin Murphy and Bob Topel next week Shola Olapati has kindly agreed with almost limited arm twisting and a lot of advanced notice to move his talk up one week so next week's talk will be by Shola on indoor air pollution from biomass a global health disparities challenge you know about indoor cooking and the high toll in lives that that takes around the world we will expect to hear from Murphy and Topel on the economic benefits of investment in cardiac research and whether it's evenly distributed or whether there are disparities during the spring quarter so with with that I'm going to let Jeff say the final word thank you those are two words thank you very much