A Conversation with Ezekiel Emanuel on Health Care Reform

May 22, 2014

Introduction

JAMES TRAUB: Good evening, I'm James Traub and welcome to Ethics Matter at the Carnegie Council. Our guest tonight is Ezekiel Emanuel, who is both an architect of and a leading authority on the Affordable Care Act, known as Obamacare.

Ezekiel's résumé is much too long for me to cite but I'll just mention a few of the high points. He earned a Ph.D. in political philosophy as well as an MD from Harvard. He's the author of a great many articles and books on health care and also bioethics. He heads the Department of Medical Ethics and Health Policy at Penn. He served as special advisor on health policy to the head of the White House Office of Management and Budget. He is the eldest member of the "Flying Emanuel Brothers."

Thank you so much for being here tonight.

EZEKIEL EMANUEL: My pleasure. It's a great honor.

Remarks

JAMES TRAUB: I want to first ask you a little bit about what made you you. Ezekiel wrote a book called Brothers Emanuel about these three famous brothers, himself, Rahm, and Ari. One of the things that struck me in reading it is that, given the fact that the three of you are all so extraordinarily successful, it seems to me the central message you got growing up was not, "Succeed!" It was, "Do justice," and maybe also, "Read books."

Could you talk a little bit of just about how the life you led as a kid shaped the choices you made that have brought you to this place?

EZEKIEL EMANUEL: Our mother was very active initially in the Civil Rights Movement, dating from the '50s and early '60s, when it was pretty unusual for a middle class white woman to be involved in the Civil Rights Movement. We had a lot of meetings at our house on civil rights and then subsequently through the decade she became very active in the anti‑war movement—again, well before it was fashionable—and was very active in Democratic politics in Chicago.

My father is a slightly different type of person in that his passions tend to be—he's a doctor. He cares for people, but he was very active in the lead paint removal days in the early '60s when lots of housing in major urban areas were filled with lead paint and a lot of kids were getting poisoned and having tremendous difficulties. He ran into this because he's a pediatric nephrologist and had to dialyze some of these kids. These kind of activities were the bread and butter of our daily life.

JAMES TRAUB: You were like a baby Vietnam War protester and things like that?

EZEKIEL EMANUEL: Correct.

JAMES TRAUB: You were young to have been that but—

EZEKIEL EMANUEL: I escaped the draft by one year, or the lottery, but we, very early on, went to a lot of civil rights demonstrations, a lot of anti‑war protests. I did a lot of campaigning in the 1968 election for Gene McCarthy, especially in Wisconsin.

JAMES TRAUB: You were 11 at the time.

EZEKIEL EMANUEL: Correct. This was what we did. You need a comparison class and we didn't really have a comparison class. It was just how we grew up. Political discussion was just what the table was about.

JAMES TRAUB: It sounds like being a doctor with the concerns you have was a highly over-determined thing.

EZEKIEL EMANUEL: Being a doctor was highly determined; I'm the firstborn of a doctor who's an immigrant family and Jewish. I also was pretty good in science. So it's well over-determined, but I also did not like and could not—it wasn't in my character to be the doctor my dad was, which was to care for patients one at a time. That drove me, I would say, around the bend.

JAMES TRAUB: What did you not like about caring for patients?

EZEKIEL EMANUEL: No, no. I love caring for patients and I love my patients. It's just that you saw the same problems over and over again. You were like, "God, there's got to be a systematic solution to this problem. We've got to do better than my just treating these patients over and over again. If we did something different I'm sure they wouldn't come in all the time." That was a major driving force.

One of the things that, early on, I started my career working on, was end of life care. I saw how badly we were doing and how many people we were sending to the intensive care unit, how many people really should be at home with their family.

Then I migrated to "we could change the system, control costs a little better, do more with the money we're spending." I also have written on research and how we can do research better and protect people better and do it more efficiently and faster.

I think if there's one thing, it's how do you make this part of the American system, which is after all about one in every six dollars in your wallet, work better and work better for the public? Both better health, better drugs, cheaper.

JAMES TRAUB: Before I ask you about any of the substance of this giant thing you've helped craft, could you explain, as briefly as possible, consistent with being coherent, how it is that the United States wound up with the extremely odd, extremely dysfunctional, extremely complicated system that we have and that nobody else on the planet has?

EZEKIEL EMANUEL: No. [Laughter]

I can't be brief. The problem is you just can't be brief.

JAMES TRAUB: You do it at the length you think is necessary.

EZEKIEL EMANUEL: There are lots of strands to this.

One of the important strands is that around the turn of the 20th century, 1910, medicine suddenly becomes much more effective than it's ever been. You have safe surgery because of anesthesia combined with antisepsis combined with the fact that we can identify bacteria. You have suddenly hospitals that are effective. Doctors are effective. They can make diagnoses.

We have the introduction of radiological techniques. The X‑ray comes in in 1895.

You get a blossoming of ability.

Simultaneously, you get a change in training of doctors. They can't be quacks. There's a reason we call them quacks or snake oil salesmen.They actually need to be trained. In 1910, we change the training process in medical schools to make them university-affiliated, in‑hospital training. We actually reduced the number of doctors, because they have to have college education with four years of training. It becomes more importanat

Then after the war, the federal government begins pumping a lot of money into developing hospitals, into research at the National Institutes of Health [NIH]. Specialists become important. Insurance companies pay specialists more.

So you get this reinforcing effect: more hospitals, more research to do more, paying people who do these special things more.

Then you get Medicare, which puts it all on turbocharge because it pays a lot of money. One of the things that happened with the passage of Medicare is there's a worry that doctors and hospitals wouldn't take people who are 65 years old and wouldn't take payment from the federal government. It's hard to remember those days.

One of the things the Johnson administration did is that they actually paid hospitals costs and extra money for their capital investments. Suddenly, making a big capital investment, adding a wing, buying new equipment, became profitable for hospitals. They could get more money from the federal government, so hospitals exploded, getting doctors who could do all this technology.

You've got this mix of insurance paying more, more specialists, more hospitals, funded research. It is all driving great advances, but a lot of high-cost care.

Truth be told, we have a very dysfunctional system. We are unique in how dysfunctional our system is. But I think it's fair to say, you go to lots of countries—I just returned from Switzerland, plenty of dysfunction in Switzerland.

JAMES TRAUB: In Switzerland?

EZEKIEL EMANUEL: In Switzerland.

JAMES TRAUB: Are you sure? [Laughter]

EZEKIEL EMANUEL: I'm positive.

Switzerland is a country of 8 million people. They have 26 cantons. Everything's organized at the canton level. You take 8 million people, divide it by 26. Then they have 100 insurance companies for just 8 million people. They can't streamline things. Every doctor is entitled to be paid. You can't say, "Well, you're not up to snuff" or "We want to have good coordination between doctors and hospitals."

Their hospitals haven't gone through a little more rationalization. In a little place like Geneva, 500,000 people, they have public hospitals—forget the private hospitals—2,000 beds, just way out of proportion to need.

JAMES TRAUB: Is there also a path dependence problem here? That somewhere way back in the past, you do something or other and that then sets you on a path that becomes crazily dysfunctional in a very different setting many years later?

EZEKIEL EMANUEL: Yeah. As I was saying, we heavily emphasized hospitals. We end up with very expensive hospitals, expensive hospital care, and a lot of specialist care rather than primary care, which other places have emphasized.

It is path dependent. We have a way of paying, and you can't change that radically overnight. It's not difficult, it's impossible, really. The best you can do is create a change of incentives and a change that'll evolve over time. I think that's what the Affordable Care Act has tried to do.

JAMES TRAUB: I'm curious. When you were younger and had not had to deal with all the incredibly complicated issues that you have, did you think America could have a rational single-payer system?

EZEKIEL EMANUEL: I guess once I thought that. You get too close to thinking about the government running something for 300 million people, and I think you pause. You say, "That's probably not a good idea," because if you look at Medicare, which runs for about 50 million people, it's very slow to change, very hard to get real significant reform. If that was scaled up sixfold, you'd have real gridlock.

One of the advantages of the American system is we can have a lot of experimentation, and different trials on different scales, and begin to see what works. It does create complications. That makes it, to some degree, mind-numbing. On the other hand, it also prevents ossification that I think a single-payer is more likely to have.

My final point is, I don't spend as much time thinking that through as many people would expect, in part because we're not going to have single-payer in this country. I'd like to remind people who are big single-payer advocates—I've been booed off the stage at the San Francisco JCC [Jewish Community Center]—we passed the Affordable Care Act by the skin of our teeth, with no single-payer element. There's no chance we would have been able to pass the Affordable Care Act with single-payer element in it. It's just not going to happen.

JAMES TRAUB: It's still interesting to hear you say that, because of course it's a fantasy, but you're also saying even if you could imagine a different world where we could do it, it actually wouldn't be nearly as good as solution as the San Francisco JCC thinks it is.

EZEKIEL EMANUEL: Yeah. I think that's right. I think part of the reason we think it's a good solution is, it is a complicated system, and maybe it would simplify things. And it would simplify things, but you would also lose certain elements.

Again, I sit back and I cogitate, "Well, what's the organization that runs something really complicated and really well for 300 million people?" It's hard to think of any organization that does that, and that's what makes me somewhat hesitant. Building a big bureaucracy can make it just much harder to reform and modify.

I think, again, we're going to be in a constant state of reform and modification for forever, really, in health care, certainly our lives.

JAMES TRAUB: Let me ask you for a second about the politics of it before we go to the substance. Obama, and your brother, and others, went to great lengths to finally get on the administration side, or co-opt, or buy off, or however you want to put it, a lot of the institutional players, insurance companies, hospitals, ANA [American Nurses Assocation], and so on, but still faced an incredibly powerful Republican opposition to this.

Is your sense that the Republicans feared that this thing succeeding would be such a good thing for the Democrats and so catastrophic for the GOP that they had to oppose it at all costs, or they would oppose any piece of significant legislation as no different from anything else?

EZEKIEL EMANUEL: I'm not the political brother and I genuinely don't know the answer to that. I think you could say both motivations could be at play.

I think the fact is we, the Democrats, spent a lot of time—nine months exactly—trying to get Republicans to agree. So people who say, "Well, there was no negotiation"—that's baloney. Max Baucus was in power, negotiated, had the gang of six, three Democrats, three Republicans, spent a lot of time all through the spring and summer, and I know.

My boss, Peter Orszag, was going to Olympia Snowe, getting, "Here are the things she needs. All right, Zeke, make sure this part's in it," and other people working on his staff, "Make sure this part's . . . we can satisfy her demands," and we did. We went through great lengths to satisfy her demands. She was a Republican from Maine. In the committee, she voted for the bill. But when it got to the floor there was lots of pressure on her, and she voted against the bill.

We spent a lot of time trying to get bipartisan support. There was just no movement on that, and I think it's unfortunate. I think there are things that Republicans care about that could've been in the bill that might have made parts of it better, as I mention in the book.

JAMES TRAUB: Just give an example or two of stuff that you think would have made the bill better that you couldn't put there because of this entrenched Republican opposition.

EZEKIEL EMANUEL: Well, I think one element was that they had come to the table and wanted malpractice reform. It probably would've been more politically feasible to put it in the bill. As it is, we did put more malpractice reform in than anyone's ever achieved at the federal level.

Remember, one of the problems, which I think many doctors especially don't realize, is malpractice is not a federal issue. It's regulated at the state level, so it becomes complicated at how you put it in a federal piece of legislation. Nonetheless, there are some things we could've done more of on that thing.

Even now, if you talk offline, away from the glaring lights and publicity, you talk to Republican staffers, Republican senators, there are lots of things we agree with. I keep telling my think tank colleagues down in Washington who are from a more conservative think tank, "You know, 70 percent of the things I want, you agree with. Seventy percent of the things you want, I agree with."

Among health policy experts, I think there's much less opposition. We need some payment reform, we need a few other major changes, and everyone agrees. You know how I know that? A large part of the Obamacare structure, like the exchanges, like the individual mandate, came from Republicans.

JAMES TRAUB: Like Mitt Romney.

EZEKIEL EMANUEL: It's the idea that this isn't American. Well, it was American when the Republicans suggested it. Why is it, when the Democrats embrace it, that it stopped becoming American? It's a quintessentially American solution. We've got a market called the exchanges. We've got competing private plans. We've got the government subsidizing Americans who can't afford to buy in that market.

What's not American about that? Let me tell you how American it is. Richard Nixon, Jacob Javits, senator from this state, they proposed that in the '50s. The only thing they didn't have in the '50s was a mandate, but that structure sure looked a hell of a lot like it was a Republican idea going way, way back.

I think you've got to think that this opposition is not about the substance of the bill. This opposition is more, as you might say, political, some elements they didn't like about it, but I think that if we weren't in such a partisan moment in American history, so polarized, this is kind of the thing that ought to have bipartisan overlap.

JAMES TRAUB: It's worth adding that there is probably no part of Richard Nixon's domestic agenda that could get through the Republican Party today. The party is so much further to the right than it was at that time. He would be in the middle of the Democratic Party, I would say, today.

EZEKIEL EMANUEL: Well, Richard, interestingly on health care—in my book, I go through the history of health care reform, and he plays actually a big role. He came from California, he knew about Kaiser, he had two brothers who had died, so he was very sensitive to health care. Early on in his Congressional period, he introduced health care legislation. When he ran against John Kennedy, both of them had ideas how to insure the seniors. He didn't want to leave them out.

Then in 1973, '74, when he was in the White House after his re-election, before Watergate hit full-scale, it looked like he, Teddy Kennedy, and Wilbur Mills were going to come to this grand bargain about health care reform. He was fully on for having a system that included managed care.

Here's another little tidbit. When he proposed his legislation in the '50s, he had this rider. I said you'd have a marketplace, private insurance companies competing, the government offering income-linked subsidies so people could buy insurance. He had one rider. All those insurance companies, they had to be not-for-profit. Go figure.

JAMES TRAUB: Socialism.

EZEKIEL EMANUEL: Uh‑huh.

JAMES TRAUB: Let's talk a little bit about what's in the legislation. I know you're good at talking to lay audiences, and these are people who think big thoughts but not necessarily big health care thoughts. In the book, you point out there really are seven or eight categories. People think it's just about increasing access. But if the biggest categories are access, cost control, quality of care, prevention—

EZEKIEL EMANUEL: Workforce.

JAMES TRAUB: In terms of the way the Affordable Care Act increases access, obviously you have a whole bunch of big things—kids get covered up to the age of 26, not 18; Medicaid expansion; the exchanges and so forth.

Given some of the problems, like states have refused to actually allow Medicaid to expand, in terms of access, how big is the improvement we have now, and are going to have, over whatever it was we had before?

EZEKIEL EMANUEL: That states are refusing, I think, is a surprise. The deal in the Affordable Care Act for state is really sweet. The federal government picks up 100 percent of the fee and it drops down to 90 percent of the Medicaid expansion towards the end of the decade. It's like, this is a great deal for you, first of all, so we didn't see that coming at all.

I would say, and I make a prediction in my book, that I think all the states will be onboard by 2020. One of the things most people don't realize is when Medicaid was passed in 1965, it took until 1982 for the last state, Arizona, to adopt Medicaid. We've got to have a little—

JAMES TRAUB: Arizona's waited to adopt a number of things.

EZEKIEL EMANUEL: —got to have a little patience here. But I think they're going to come on largely because their hospitals want it. They're going to figure out this deal. This deal of putting people, if we're not going to expand Medicaid directly, putting them into the exchanges with protections, I think, is going to look appealing to conservatives. Notice how the exchange has become to look appealing to Republicans. I think you're going to have a lot of that.

Pennsylvania, for example, Governor Corbett is trying to negotiate that now. I think you're going to have a big blossoming of interest, especially because the deal is good. Once we get past the 2014 election and all the hullabaloo, I think politics is going to die down on this.

JAMES TRAUB: You have said that you're an optimist, though.

EZEKIEL EMANUEL: Yeah. I think the exchanges, the fact that we've got 8 million people after the two months of utter problems with it, and not really being able to use it, suggests there is a very large appetite for affordable coverage in this country. The reason people haven't been insured is exactly what we hypothesized. They couldn't afford it. So you give them a mechanism where they can afford it, and subsidies for people who are under 400 percent of poverty, they're going to go out and buy it.

I actually anticipate this is going to grow much bigger than the Congressional Budget Office [CBO] thinks.

JAMES TRAUB: Is the question of penalizing people who don't get coverage going to just wither away because that's going to be a trivial part of the population?

EZEKIEL EMANUEL: No, it's not going to be trivial, but I think it's going to become much less important. The latest data—I think there was a study released either yesterday or today saying that the penalties did seem to play a role in people's thinking, and I think, going forward, it'll play some role in people's—

JAMES TRAUB: Do the penalties exist now?

EZEKIEL EMANUEL: Well, people haven't paid the penalties, but that they would be penalized is, I think, changing people's attitudes. I think you do have to have some kind of penalty, especially for young people.

I'll just give you my personal story. In early March, I was in Aspen, Colorado, and renting some skis, and a guy who's helping me is hobbling around, hurt his shin. So I said, "Do you have health insurance?" "No." I said, "All right. When I come back this afternoon, we're going on the Colorado exchange website and we're going to buy insurance."

JAMES TRAUB: This was one lucky ski shop guy. Wow.

EZEKIEL EMANUEL: No, it wasn't. It turned out not to be just one. He's got the insurance plans up online. He's comparing them. "This one's got insurance dental care for an added $10." He's doing exactly what the exchange is supposed to do, comparative shopping, figuring it out.

I asked him, I said, "Listen, I don't want to pry. How much are you making?" He says, "I make about $27,000 a year," not a whole lot of dough in Aspen. He got a reasonably good subsidy, but Aspen's a very expensive city because everyone else in Aspen has a lot of money and it's a very expensive insurance market.

He got something, I forget exactly, 150, 175 in that range. He's sitting there. There are four other workers, and the guy who owns the shop, he's 40-plus years old, says, "Really? How much was that?" He begins to say, "Well, maybe I should give up my plan and go shop there."

JAMES TRAUB: Oh my god, it's a commercial. It's the Obamacare commercial.

EZEKIEL EMANUEL: I don't think this is unique. I've been driving around, talking to everyone when they find out I know something about this. Some driver in New Jersey told me—he's 57 or 58 years old—he and his wife were paying some exorbitant $18,000. He went on to the New Jersey exchange. He saved about $4,000. It's real money to him.

I think you're going to get a lot more of this and a lot more interest. Once people become used to shopping on the exchange, I think people are going to like it.

The last point I make is, my kids and their peers are very used to shopping for everything online on the exchange. That's going to be the real big change here. They buy clothes, they buy computers, they buy cars—although my daughter said, "Cars?" I said, "Yes, cars"—almost everything. They're used to it. They're savvy about how to shop, and how to compare, and how to use the tools. Over time, as they become a much more important part of the shopping customer base for insurance, I think there's going to be a very big switch on the receptivity there.

JAMES TRAUB: Before the ACA was passed, there were 50 million, 60 million uninsured Americans?

EZEKIEL EMANUEL: It's hard to calculate. It's 50 million uninsured residents in America. About 12 million of that is undocumented. So citizens, it's 38 million. Those 12 million are not permitted in the exchange.

JAMES TRAUB: Is it reasonable to hope that the 38 million is going to get pretty close to zero?

EZEKIEL EMANUEL: It won't get pretty close to zero.

JAMES TRAUB: What's a hopeful? What's your hopeful?

EZEKIEL EMANUEL: Well, the Congressional Budget Office says that we'll get up to 94 percent coverage. I think that's conservative. I think we're more likely to get over 95 percent, 96, 97 percent. Remember, if you take out that 12 million, that's about 3 percentage points.

JAMES TRAUB: That's pretty close to everybody who you could cover because those, you can't.

EZEKIEL EMANUEL: I think we're going to be one or two points shy, but I think we're going to get pretty close.

JAMES TRAUB: That would be a very big achievment.

EZEKIEL EMANUEL: Look, a large part of this depends upon the exchange being a nice place to shop, good products, still affordable, good support for people who've got questions and complicated family relationships, grandparents caring for young kids. Assuming the mechanics of that and the shopping experience improves.

JAMES TRAUB: Let's talk about cost control, because just as big a piece of this is America is bankrupting itself by spending $2 trillion a year.

EZEKIEL EMANUEL: No, $3 trillion, not $2 trillion.

JAMES TRAUB: Sorry. I recall in the early phases of the debate over the legislation the sense of dismay that Obama wasn't really able to attack this problem at its root, the fee-for-service thing. How much have you lost by not being able to do some of the things you hoped you'd be able to do at the outset?

EZEKIEL EMANUEL: Time will tell, and I'm not trying to be evasive. If there is a major disappointment I have in the bill, again, as I pointed out, it's that we didn't do enough on cost control. The main thing I would've wanted is a timeline for shifting most payments off fee-for-service. Now we have doctors, and hospitals, and other providers in two worlds.

One world is we're paying you fee-for-service, which means to make more money, you have to do more things, and you don't get paid if you don't do them. The other world is we're going to give you a set amount of money in some form or another, and you're going to keep people healthy, and the difference between what we would've paid and what you're delivering the care for, that is a margin that we'll split, or you'll get. . . . It's very hard to negotiate. The incentive structures are different, those two worlds are really incompatible, and we don't have enough of the second.

When people say, "We've got a sick care system," of course we've got a sick care system. We pay doctors to take care of sick people. They wait for people to get sick because they don't get paid to keep them healthy. If you pay them to keep them healthy, you will get a very different set of behaviors.

By the way, places that have worked under those different set of incentives do a much better job about keeping people healthy.

While I was waiting in line to take the train up from Philly, I was on the phone with a guy in Milwaukee, Wisconsin, who runs a printing business, and as a sideline in 1991, because his health care costs were going up, he created an onsite clinic and an onsite wellness program. Well, now part of his business is no longer just printing. He's marketing his health program because he has an onsite primary care clinic that he can do for much cheaper, and why is that? Because it's hugely desirable. The average time that one of his workers spends with the primary care doctor—25 minutes. Lots of tests, you don't have to leave worksite to get your health care.

How long is your wait before your 25-minute visit? Less than 5 minutes. Now he's provided this kind of health service to other companies and if you live near the facility of another country, you can go to that facility. He's getting into the health care business.

Over two decades, his price has gotten to be about 25 percent cheaper because he's got better primary care, trying to keep people healthy. He's got a big incentive because he's paying the bill.

I think we need to change the incentives. So one of the problems I have with the Affordable Care Act is we've didn't do enough to change those incentives.

Nonetheless, I believe over time that change is going to come into play. Why? Well, if you look at the exchange, when people go into the exchange and compare, they tend to buy on premium and price, and they want a low price.

How do you deliver a low price? Well, you can cut, cut, cut, but for the long term, the way is that you have to target people who are high-cost users. You have to get in and reshape how you deliver the care, and one of the ways of reshaping it is by changing how you're going to pay. So I see that as a long-term trend.

Again, one of the things that the Affordable Care Act did is it's changed the incentives. It won't happen overnight, but over the next decade, we're going to have a big change in how care is delivered, where care is delivered, and much more emphasis on efficiency, value, making sure that the care we deliver is really high quality and low cost.

There's lots of things we can do about that, taking certain kinds of patients, instead of putting them into the hospital for treatment, putting them at home. They recover faster, they actually have higher quality of care, and you save about 20 percent on a lot of those patients.

Why should you go to the hospital to get your blood test? You're going to be able to go to Walgreens or CVS. They're going to have mini clinics.

Someone just told me about a county west of Chicago that had a very low mammogram rate. So a local hospital teamed up with a major department store in a mall to put a mammogram unit right in the lingerie section. [Laughter] Rates went up and women spent a lot more money at the store. Everyone was a winner.

JAMES TRAUB: That's a win‑win.

EZEKIEL EMANUEL: I think that's the new thinking we're going to have.

JAMES TRAUB: That's in the long run. In the short run, you have these mechanisms like the Independent Payment Advisory Board, which are—

EZEKIEL EMANUEL: Uh‑uh.

JAMES TRAUB: No?

EZEKIEL EMANUEL: The IPAB, Independent Payment Advisory Board, is a mechanism put into the bill. It's a group of smart men and women who know about health care. Now we've had a board called MedPAC, which was giving advice to Congress, called the Medicare Payment Advisory Commission, but it's advisory to Congress, so it produces these very nice reports that collect a lot of dust.

Our idea was, if health care costs are going up too fast, let's create a board that has recommendations that have to go into effect unless Congress votes "no," and that was based on the Defense Department's base-closing commission. The base has to close unless Congress came up with an alternative.

That has a threshold. Their recommendations go into effect if health care costs in the Federal Government go up too high. Health care costs haven't passed that threshold so they're not functioning, and my suspicion, and again, one of the predictions I have in the book, is we won't need them because I think health care costs are going to stay moderated.

Again, that presumes certain behavior, certain action by the private sector or certain action by the federal government and Medicare. We're at this point. We've had the bill for four years and now we really need a lot of vigorous action, improving the exchange, more cost control.

JAMES TRAUB: On quality of care, you point out in the early part of the book that for all the crowing that politicians make about America having the greatest system so we can't touch it, the fact is on life expectancy, on infant mortality, and a whole range of issues, the United States ranks way, way down. So what is it in this bill that should really make a person feel confident, or at least reasonably hopeful, that those things are now going to change?

EZEKIEL EMANUEL: We have two specific provisions that are definitely going to improve, and already have, to some degree, improved things in the bill, and again, I think there is a reinforcing mechanism.

One provision is about re‑admissions. Prior to the legislation, if you were a Medicare patient, you went into a hospital, you were discharged, your chance of being re-admitted within 30 days was 20 percent roughly. Well, we have a penalty now put into the bill that if you didn't improve your re-admission rate, you'd lose one percent of your fees. 

I was for it. One percent just sounds like peanuts here. We need 10 percent. Well, it turns out 1 percent has had a big effect because since that penalty went in, you see the re-admission rate going down, down, down.

Not all of that is great transformation of care, a lot of that is gimmickry. But it is forcing every place to really rethink how they're dealing with patients and, in particular, what we call the hand-off, the hand-off from discharge of the hospital back to the primary care doctor, the calling of the patient, making sure they're actually taking their medications, and things like that. That penalty has had a big effect, and I think it's going to improve not just the Medicare readmission.

More importantly, we have a series of penalties related to hospital-acquired conditions, hospital infections, Medicare errors, falls, operating on the wrong part of the body, that are now going into effect, and we've seen since—

JAMES TRAUB: Is operating on the wrong part of the body a widespread problem?

EZEKIEL EMANUEL: It's a problem that should occur zero times, right?

JAMES TRAUB: Yeah, one would think.

EZEKIEL EMANUEL: It's not zero. We want to get it down to zero, and I think, again, we've got a penalty element in that is going to do that. Similarly, we've put in other infrastructure elements, like electronic health records, that are going to incentivize doctors and hospitals to do better.

Finally, I think one of the other elements is you're going to have, again, this reinforcing cycle. You go onto the exchange, you're looking for a cheap plan, but you want to be sure that the low-cost plan is also high quality, so you're going to demand quality assessments.

In addition, big, famous places are going to want to have quality assessments, because they want to show they're giving high quality so that they can command a premium price for what they're doing. So Memorial Sloan-Kettering, a New York hospital, not one of the cheapest places in America, let's just put it that way—their claim is, "We deliver better care," right? "It is true we have a premium price, but there's a reason we have a premium price. All in, when you look at it, we do a better job of delivering the best cancer care. People don't come into the hospital with side effects. They live longer." That's going to be worth a premium if you can prove it.

I think there's now a big push to try to prove by each organization that they really have the best care going, so I think you're going to have a lot of push to both measure and improve your care. I'm an optimist on that score too.

JAMES TRAUB: On all scores, yeah.

EZEKIEL EMANUEL: Yes.

JAMES TRAUB: Just something you and I talked about before we came down just now, which is one tends to think—or I thought—that, "Okay, the cake has been baked. Now it's just a question of whether or not people eat it."

You made a point, "No, there is a lot that still has to be done." Talk a little bit about the big things that you would say still have to be done.

EZEKIEL EMANUEL: I use a slightly different metaphor, mostly because I'm a runner. So this is not a half-marathon or a marathon where you cross the finish line, you get the gold medal, a silver medal, or whatever, and we all go home. Health care is a constant process of modification.

High on my list are two things we've mentioned. One is we really need to have the exchanges working very well. I think, at the federal level, we need to have a change in the management structure. No one in this room knows who runs the federal exchange. Who's to be held accountable? Who gets up every morning and says, "All right. How do we make it better for the next shopping period coming up in November?"

We have to have that person. That person has to have the resources and ability to actually make that experience as good as possible.

JAMES TRAUB: Is that not some assistant secretary of Health and Human Services or something?

EZEKIEL EMANUEL: Well, you don't know. It is not, and that you don't know is a serious problem. I've been calling for the CEO arrangement. Actually, all the way back to 2010 I thought we needed it, but certainly right after it became clear that the exchanges were not working well. If you look at the ones that have worked well, like Connecticut and California, they have that kind of structure.

JAMES TRAUB: Just as there's an administrator of Medicare, say, there should be an administrator of the federal exchange?

EZEKIEL EMANUEL: Yeah, and not just an administrator. Someone needs to have the right experience. It's a complicated thing. It's not just a website, and the person we need is not someone that they hired from Microsoft or Google. You need someone who knows the insurance industry, understands about product, can market. A large part of this is you have to have people interested. They have to want to come and shop.

You need to relate to the insurance companies so that when someone signs up, you can actually pass the information with Fidelity and know how they're going. There are lots of things that you need.

The second thing, as I mentioned, is we need a lot of real emphasis on payment reform. And there are a lot of things that Medicare can do vigorously without new legislation. New legislation would help, too, to partner with private insurance companies and do its own kinds of payment reform.

We've run a bunch of tests of payment reform, and now is the time to begin to roll those out and to roll out other changes in how we're paying for care to make sure we get high-quality care at lower cost. There are a whole series of things that I would like Medicare to undertake that I think would be effective.

Again, it's not just to save money. Part of it is a lot of these things are better quality. A lot of them involve emphasizing keeping people healthy. If we do save money, remember, seniors who have to pay co-pays, and have to pay part of the cost of their care, will save money too.

Similarly, there's something called competitive bidding. One of the experiments that we put in the Affordable Care Act is, "Look, why should Medicare set prices?" No one in this room, I would say, thinks that government setting prices is the best way to get the cheapest product.

We believe in the free market, and in many ways, the free market has been terrific in terms of getting higher-quality product at lower cost, but lots of things Medicare does set the price for. We tried in the bill to have a competitive bidding process for things like wheelchairs, hospital beds at home, oxygen equipment, and that experiment is an overwhelming success. Prices came down 40 percent and no problem in access or quality.

One, that was done in a few spots. We should generalize it. The bill says to generalize it by 2016, and I'm like, "Why are we waiting until 2016? What's that extra year-and-a-half necessary for?" Second of all, why limit it to wheelchairs and oxygen equipment?

There are lots of other things we could have and competitively bid. Blood tests are mostly automated. Let's competitively bid it. That CT scan? Let's competitively bid it. Maybe you would not run CT scans only between 8:00 a.m. and 5:00 p.m. Maybe your next CT appointment would be at 11:00 pm but you'd be paying a quarter of the price for it.

Questions

QUESTION: Bob Perlman.

The CBO statistics that you quoted, I'm a bit confused on. The latest numbers suggest that, I think, the net increase or decrease of uninsured Americans is about 10 million and the cost I think is $1.4 trillion, so I'm not sure. I'm trying to understand where that's going to generate efficiencies.

The second issue is, from an insurance perspective, why didn't you abolish the state regulation of insurance companies, which would have led to even greater efficiencies at perhaps lower costs?

EZEKIEL EMANUEL: On the first point, you're right. So the data is that about 10 million people who didn't have coverage now have coverage. But that's the first year, and on the CBO projections, no one anticipated, "We're going to get 50 million people in year one."

You have to ramp up for all sorts of reasons. I don't know how many of you are in the marketing or education business, but getting Americans to hear that they need health care—"Here's how you get health care and here's what you have to do"—it's not going to be overnight, and even all the kerfuffle we've had, it's going to take time for people to get into the system, especially people who've been excluded from the system for a while.

Even the CBO projections have it ramping up over three or four years. There's a great tendency of, "We've done it. Let's lift up the pot. Is the water boiling?" No, it's not boiling yet. It's getting a lot hotter, but it's not boiling.

Second of all, that $1.4 trillion you mentioned, that's a little on the high side. That's a 10-year number, not a 1-year number. The American health care system, over that period of time, will spend close to $35 trillion. It's about 3 percent of total spending for getting us from about 15 percent of people uninsured to about 5 percent of people uninsured.

JAMES TRAUB: That's the cost of implementing the legislation?

EZEKIEL EMANUEL: Yeah. No one said you weren't going to pay more if you're going to insure 30, 40 million more people. But per person, it's going to be lower cost.

QUESTION: Ron Berenbeim.

There's one aspect of health care cost that I didn't hear discussed, and—

EZEKIEL EMANUEL: Oh, there's many more than that.

QUESTIONER: Yeah. One big category, and that's pharmaceuticals. Let me give you just three examples that are on my mind, and you can probably think of many more.

One is being able to purchase pharmaceuticals outside of the United States, having a global competitive bidding process.

Another example is the consolidation process in the pharmaceutical companies. I personally was happy to see that the AstraZeneca and Pfizer merger fell through.

The third is just the incredible amount of money that pharmaceuticals spend on advertising. I asked a business school colleague of mine, who's an expert on marketing, "Can you compare them to some other industry in terms of the amount of money they spend on advertising?" I said, "Is it as bad as cosmetics?" He said, "No, it's not that bad." He says it's about like cereal. I'd like your thoughts on that.

EZEKIEL EMANUEL: The pharmaceutical industry is incredibly complex. Let's begin from, I think, two important numbers.

Number one, it accounts for about 10 percent of total health care spending, maybe 12 percent. It's not the big giant in the room.

By the way, the big giant in the room? Hospitals. We spend almost a trillion dollars on hospitals. That's about the equivalent of the South Korean economy, for those of you who want to keep score, just on hospital care.

Drugs are in third place, and by the way, they've been the same, 10, 12 percent, for a long time. What we've had also over time is a shift so that we've got lots more generic.

Now more than 80 percent of drugs taken are generic, and what we have are these super-expensive specialties coming to dominate because the regulatory pathway makes it easier for them to come on the market. The consequences are these are super-expensive drugs. They're $50, $100, $200, $300,000-per-year drugs, and I think that's what's causing real worries.

Some of them, let's be clear, they are great. This new drug for hepatitis-C by Gilead, $83,000, $1,000 a pill—it's a cure. Now how many people would not pay $83,000 for a cure of hepatitis-C? On the other hand, there are—I'm an oncologist. Did you mention that I'm an oncologist?

JAMES TRAUB: I did not. He's an oncologist.

EZEKIEL EMANUEL: I'm an oncologist. We've got a lot of drugs at $100, $125,000 that don't cure, and add weeks to life. There I think people are like, "Why are we doing this?" So one needs to be careful.

No place opens a worldwide competitive marketplace for bidding. We do have high cost when it comes to the brand name, but we have very low cost when it comes to generic. Our generic costs are much cheaper, for example, than the generic prices in France.

Now there are things I think we can do. You might do reference pricing, so you've got a lot of drugs in a class and we should only pay for the lowest-cost drug in a class. There may be things we want to do to change the regulatory environments, so having a $1,000 drug for these orphaned diseases is not so incentivized, and getting more common diseases is done.

The last thing is that there are only two countries that permit advertising to the public for pharmaceuticals. One is the United States, the other is New Zealand. Truth be told, I think actually a lot of the drug companies, if they could all hold hands, jump off a cliff, and say "no," together, they might actually like it. A lot of this is just rearranging the deck chairs and not actually—they haven't gone from 10 percent to 20 percent.

But that's not happening so I think we're in this game like helmets in hockey, where you've got to get everyone to agree to it or no one sees it in their advantage to do it. I just don't see how that's going to happen.

QUESTION: Marion Dreyfus.

I used to work for Pfizer, and as you know, you don't get drugs unless you get paid. The development costs over 10 years, 15 years, $2 billion dollars a drug—that doesn't happen for free. If you don't pay people for their development in R&D [research & development], you won't get the drug, so that is a very important thing.

EZEKIEL EMANUEL: I absolutely totally agree with you. You have to pay for drug development, but, let's just be clear, some of what they've done is junk. Some of you may know about this Purple Pill. Ever hear about this Purple Pill?

It's the AstraZeneca Purple Pill, and what AstraZeneca did is they had a compound that had two forms of the compound. They were mirror images of each other, and only, I think, the left one was active, and the right one wasn't active. In the original pill, they sold you both, and it worked.

They isolated the left. They package it as a Purple Pill, they heavily advertise it, and it worked no better than the previous compound, but it was branded. They had the exclusivity on it.

That wasn't research. That was junk, waste. Pure, total waste.

Now, they do do a lot of great stuff and it does cost. Whether it costs $1 billion or $2 billion, not clear, but let's get down to the profit margin.

I agree. It is very difficult to develop new drugs but they are incredibly profitable companies. Pfizer is at 15 percent, way above almost every other industry. Gilead is about 50 percent, way above every industry. It's not like we're investing a lot of money and we can only do this by super-high prices.

We have super-high profits, too. It's not clear to me we need super-high profits to continue good research.

QUESTIONER: I come from England where you have very cheap medical care that is universal, and the care is poor, and recovery rates are very bad.

EZEKIEL EMANUEL: I agree. We don't want that.

QUESTIONER: Elementary economics 1.1 is you cannot give superior health care for a lower price. It just doesn't happen like that. Doctors are leaving in droves. Hospitals are bowing out of the whole situation. How can you maintain both high care and lower cost, lower prices?

EZEKIEL EMANUEL: That is an excellent, excellent question. I grew up in this health care system at Harvard in Boston where we used to hear, repeatedly, the following mantra: "There's cost, there's access, there's quality. Pick two out of the three, that's all you can have."

You can have high access, high quality, but you can't have low cost. You can have low cost, access, but you can't have high quality. That has definitively been shown not to be true.

QUESTIONER: Really?

EZEKIEL EMANUEL: Yes.

QUESTIONER: What planet? [Laughter]

EZEKIEL EMANUEL: I'll tell you what planet! Planet Earth. Because the United States, when it comes to health care spending, is not on planet Earth. We are spending 18 percent of GDP on health care. The next highest country is at under 12 percent. Switzerland, which I just mentioned, is at 11.3 percent.

They're not perfect in Switzerland, I already said that. France is, by the way, last and France is consistently rated number one in terms of quality in the world. No one in the health care field that I know of will tell you, "18 percent, $3 trillion dollars, do we need to spend more?" The answer is, "No."

Why do we have it? Because we have not focused, again, on keeping people healthy. We've focused on treating them when they get sick. We have not focused on treating them in the most efficient manner, and I can give you lots of examples from my area of oncology where we spend a lot of money for no better quality.

Let me just give you one: radiation therapy for breast cancer. A few years ago there was a randomized trial—now we have multiple randomized trials—taking women for radiation after they've had the lump removed, seven weeks of treatment, which was the standard in the United States, versus three weeks of treatment at slightly more intense doses each time.

It turns out to be equivalent in terms of clinical outcomes, equivalent in terms of cosmetic result, equivalent in terms of side effect; but the three-week treatment is about two-thirds the cost of the seven-week treatment. That's higher-quality care, because the woman goes in less frequently, equivalent clinical outcomes, cheaper, and yet, in America, 80 percent of women get seven weeks of treatment today.

Why? The radiation oncologist gets 30 percent higher pay. We could do cheaper care that's better, and I can give you lots and lots and lots of examples like that through the health care system. You can have high-quality care at lower cost.

QUESTION: My name is Carole Bahou, and I'm a recovering medical social worker, and I want to thank you for your candor.

Nobody who doesn't live under a rock these days would even attempt to run any organization without a computer, including me. However, given that the issue of access to health care has been so viciously politicized in this country for years, long before Barack Obama—we're the only people on the face of the earth that think we're going to give forever. That's my personal opnion.

Given that scenario and given what we now know about the porousness of digital data, I am concerned about the safety of our medical information. Granted, hospitals have to have it, doctors have to have it. I'm really concerned about that, and I don't want it to be used for either political purposes or marketing purposes. Do I sound like a paranoid old lady?

EZEKIEL EMANUEL: There are really two elements to it. One is shopping on the exchange, where not a lot of personal information is being given, and there has been no breach. I can assure you, the hacking is constant and there's been no breach and no result and the security is pretty darn good.

Second of all, let's talk about electronic health records that are on the system. You have not heard, despite, again, lots of attempts, I assure you, the kinds of Target problems or the Citibank problems that we've seen in lots of other industries.

We have very good protections in the HIPAA [Health Insurance Portability and Accountability Act] rules about data privacy. I'm not going to guarantee forever in the future we're never going to have a breach, but largely it has not happened in health care.

Second, let me say, prior to the Affordable Care Act, prior to your ability to get health insurance regardless of your health status in a marketplace, data breaches were a serious issue. If your information got out, you might not get health insurance.

Now it doesn't matter in the same way. You're not protected for everything. There's still problems with long-term care and disability insurance and things like that, but you are protected for health insurance. I think that is a major, major change.

The risks associated with a data breach are much lower now under the Affordable Care Act than ever before, and it's not as if people haven't been paying attention to this.

I think you're absolutely right. We have to be concerned. We have to constantly be vigilant, and no one can guarantee there will never, ever be a breach. But let's compare the health industry with all the other industries.

QUESTION: I want raise the whole issue of the role of the physician because there's different groups of physicians. You have large groups of very unhappy, dissatisfied physicians. You have a group of really despondent physicians. Other groups of physicians are hopeful in this thing.

You don't see much attention really spent focusing on what can be done within the medical communities for retention and also really doing the kinds of changes that are necessary, vis-à-vis primary care, beginning to move in the direction of collaborative care, etc., etc.

We're focusing on so many things that we're working on, but the physicians in general, if I could say as an overview, are taken for granted. Somehow they're going to be there however the system is set up and carried out. That is a real concern to me.

EZEKIEL EMANUEL: I couldn't agree with you more. We are in a moment of a very big transition. No one can predict accurately where the world is going. I've got predictions in my book. I think I have pretty good knowledge, but I recognize, I spent a number of pages talking about the perils of predictions.

One of my colleagues at Penn, a guy named Phil Tetlock, is the world's leading expert on forecasting. He's constantly reminding me about how bad it is. He asked hundreds of economists to make tens of thousands of predictions, and they weren't so hotsy-totsy. He constantly reminds me.

I think this is one of the major reasons doctors are very anxious. They don't know how the landscape is changing. Are they going to be winners? Are they going to be losers? I actually think the future for doctors is quite good, and here's why.

Whatever the system, you can't run health care without doctors. They are going to be integral. And you can't reform the system without doctors. Anyone who's tried to impose it on them knows that is doomed to failure.

On the other hand, the need and what they're going to have to do is going to change. It's no longer going to be doctor-patient, it's going to be team-patient, doctor is the captain of the team.

They are going to have to be able to use big data in a way they haven't done before. They are going to have to actually track patients in a way they haven't done before, for patients who aren't getting the health care services they need. They are going to actually have to work outside the hospital and office much more frequently, probably returning to things like house calls.

All of this I think is for the good, but it is an adaptation. Any time—we all know this from personal experience—you've got to change, it creates uncertainty, creates anxiety, people get fearful. I think this is a natural reaction to a moment in history where there's just a lot of change. When is it going to settle down?

Well, there is, as I said, going to be constant change, but the rate and amount of change is going to settle down towards the end of the decade when the structures are going to be much more in place and clear. But I actually think for doctors it's a really helpful moment.

Now, we're going to have a different blend. We're not going to need as many specialists as we have now. We're going to need a lot more primary care doctors. I'm sure that creates anxiety among specialists. That should be naturally so. But I also think that people who elect to go into primary care and certain specialties that we can predict are going to need high demand, things are going to look up for them.

I think, again, doctors are integral. You can't run a health care system without them, but they're going to have a different role than they have in the past, and that's all to the good. I think for doctors who are interested in trying to shape, this is a great moment of trying to shape the future.

JAMES TRAUB: All right. Well Zeke, thank you that was a stupendous performance.

EZEKIEL EMANUEL: Thank you.

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