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Power to the People: Newt's Battle Cry

MANAGED CARE February 2005. © MediMedia USA
Cover Story

Power to the People: Newt's Battle Cry

The former speaker of the house strongly favors a free-market overhaul of the system that would change the way consumers behave. Should you worry?
Martin Sipkoff
Contributing Editor
MANAGED CARE February 2005. ©MediMedia USA

The former speaker of the house strongly favors a free-market overhaul of the system that would change the way consumers behave. Should you worry?

Martin Sipkoff

Contributing Editor

No one has ever called Newt Gingrich feckless. The former speaker of the House of Representatives fell off the political stage six years ago, only to re-emerge in the new millennium as a ubiquitous commentator on American life. He's a political consultant for Fox News, has his own consulting company called the Gingrich Group, and spends 20 percent of his working life advising the Department of Defense pro bono on Iraq and other things.

He has also turned his critical eye, sharp tongue, and keen intellect on health care. Gingrich doesn't want to change the current system — he wants to transform it by correcting the way people behave. "Transform" is a word he uses frequently in a chapter titled "A 21st Century Intelligent Health System" in his new book Winning the Future.On January 30 the book was tenth on the New York Times bestseller list. Here's the thrust of his idea, from the book:

Virtually every political story about health focuses on "reforms" for our problems: the rising cost of health care, the challenge of the uninsured, the state and federal budget crises, the high cost of drugs, litigation, nursing shortages, doctor unhappiness.... The truth is that the current health system cannot be reformed because its approach is profoundly wrong in three specific areas. First, it emphasizes acute care rather than wellness, early detection, and prevention. Second, it focuses on third-party payments, an area in which the individual has little responsibility, little knowledge, and no control. And third, it relies on paper (i.e. paper medical records and paper prescriptions) rather than information technology.... We need to transform our health care system based on an entirely new set of principles.

Gingrich's three principles for transforming health care

Newt Gingrich's plan for transforming American health care has three key principles:

  • Focus on wellness, early detection, prevention, and maximum quality of life — the individual carries a substantial part of the responsibility for his or her own health care.
  • Provide easy access to information about cost, quality, wellness, prevention, and choice through an information technology system available online.
  • Keep it centered on the individual who has the financial incentives and information to make smart decisions.

To that end, in 2003 he created the Center for Health Transformation on K Street in Washington, D.C. Its members, mostly corporations, pay as much as $200,000 a year to work with Gingrich and get his advice. The center does no lobbying, according to its Web site, but helps to get people with similar goals to meet, and then perhaps to act. Members include BellSouth, Eli Lilly, Wellpoint, IBM, Novo Nordisk, Booz Allen Hamilton, PricewaterhouseCoopers, the Hospital Corp. of America, Mount Sinai Medical Center, the American Diabetes Association, and the National Alliance for the Mentally Ill.

'Informed decisions'

Note the center's name: Using information technology, Gingrich wants to alter health, not just health care or the health care system. His inspiration is to improve the system by improving the people who use the system. That system will cost less, he says, because healthy behavior will naturally result in lower costs.

"We will re-center the system on you as an individual, not as a patient," he says. "If you combine improved attitude, activity, and nutrition you have an amazing impact on avoiding the status of being a patient. This is all predicated on the ability of people to make informed decisions about their own health. First you save lives, then you save money."

Gingrich believes that everything that rises must converge: As technology creates the availability of online, real-time medical information databases, physicians, and patients will use that information to improve their care and lives. At the same time, as health care costs escalate, employers will continue to demand that employees pay more for their own care. The appeal of tax exempt health savings accounts will therefore grow, encouraged by enlightened federal policies. And as people become financially vested in their own health, they'll live healthier.

"Over time, we're going to migrate to an individual payment system," says Gingrich. "We have a moral obligation to set a system that says you're going to be safe. An HMO that says to you 'We're going to facilitate your having all the knowledge you need, the best possible health, the best possible access to specialists, the best possible treatment, and we're going to do it in such a way that if you stay healthy we're going to make it less expensive,' people would love that. What they won't take is a system that says we're going to cut you off from the drug you need, restrict you from the specialist you need, because frankly we're going to save the money and your health isn't that important to us."

The system we now have — what Gingrich calls a triangulated system of "conflict, fraud, and frustration"-- is dying of its own inefficiency and complexity, he says.

"If one person pays, a second person receives, and a third person provides the good or service, what you have is a mess. The person who is paying is getting nothing, so it's pure cost. The person who is receiving care is paying nothing, so they have no gratitude and no interest. And the person who is providing knows the recipient is not grateful and the payer is suspicious. It's an absolute downward spiral of distrust and dishonesty," says Gingrich. "A direct buyer-seller system is much healthier. It reduces fraud, corruption, and anxiety. It encourages health care providers to focus on quality, efficiency, and satisfying the patient rather than the insurance company."

Logical?

One key to Gingrich's success as a consultant — in fact, to his enduring status as an icon of the American right — is his self-confidence. He exudes the feeling that his ideas are superbly logical, perhaps radical but so simple that they are inevitable. He sees the transformation of health care as part of a larger political struggle, and views the employer-based, third-party system as a relic of the kind of mid-twentieth century paternalistic thinking that leads to Big Government.

"What makes change is markets and politics," he says. "Part of the struggle is a core argument between the American left and the American experience. The American left doesn't believe that people are smart enough to choose, doesn't believe markets can work, and doesn't understand the economics of being poor. I am for 100 percent health care coverage and everyone in the country being able to acquire coverage, but coverage that incentivizes the right behaviors, that gives you an incentive to take care of yourself. Large corporations are as paternalistic as big government. They all start with the idea that our people are stupid and can't be trusted to make serious decisions."

Gingrich isn't new to the idea of HSAs and consumer-directed health care. In fact, although conservative think tanks promoted the idea in the 1980s, it wasn't until Gingrich became speaker in 1994 that the idea took flight. In 1996, he successfully pushed for a pilot project for tax-free health care accounts.

Since then, change has been slow, but he is encouraged by what's been happening lately. President George W. Bush has publicly stated a firm commitment to the concept — if not the funding — of electronic medical records. "We've got 21st-century medical practices but a 19th-century paperwork system," Bush said during a recent visit to the National Institutes of Health. "Most doctors can't write clearly anyway, so there's no better way to enable our health care system to wring out inefficiencies and to protect our patients."

Bush issued an executive order last April that called for every American having an electronic medical record (EMR) within 10 years.

The concept is nonpartisan. The president and Gingrich are supported in this by Sen. Hillary Clinton, who has proposed legislation that would fund health care technology. Senate Majority Leader Bill Frist (R-Tenn.) has also called for a heavy federal financial commitment to health care IT.

Tax overhaul

Frist has gone even further. He says he wants Congress to consider phasing out the employer tax exclusion — the bedrock of the employer-based system — to be replaced with a national refundable tax credit system, sort of a voucher for purchasing health insurance. That represents a lot of money.

In a Web-based Feb. 25, 2004, article for Health Affairs, the Lewin Group reported that the tax expenditure for health benefits that the federal government forgoes by exempting health benefits and spending from the federal income and Social Security taxes was about $188.5 billion in 2004.

The idea behind replacing the tax exclusion with tax credits is that it would encourage individuals to buy their own insurance and promote individual responsibility, said Frist in the Jan. 20 issue of the New England Journal of Medicine. People would be encouraged to buy health insurance because they could fully deduct the cost, with additional breaks for low-income Americans, he said.

This all sounds great for Gingrich's vision, but reality appears to be presenting some setbacks. When Congress failed recently to fund the new Department of Health and Human Services' Office of the National Health Information Technology Coordinator, he expressed outrage and called it a "disgrace."

Congress's action — or lack of action — was particularly stinging to Gingrich because his transformation model crumbles without the widespread use of electronic medical records and other health care information technology.

But creation of a nationwide system of electronic medical records isn't going to be easy even if Congress sees the light. A September 2004 paper from the nonpartisan National Health Policy Forum at George Washington University says that the cost of implementing EMRs would run $30,000 for small medical practices and would result in significant practice interruptions. Implementation would also require a cultural shift.

"Embracing the new technology means changing time-honored ways of practicing medicine," said Lisa Sprague, in the paper, titled "Electronic Health Records: How Close? How Far to Go?"

"Putting the EHR into daily practice may be difficult for (some) physicians to accept, as they may see the machine coming between themselves and their patients in a way that jotting notes on paper does not. Others are conditioned to regard data entry as someone else's job. Some have always distrusted and denounced 'cookbook medicine,' in which a physician's experience and judgment are perceived to be jettisoned in favor of a program that treats all cases with the same recipe."

Those physicians should get out of the way, says Gingrich. According to research by the Center for Information Technology Leadership, in Boston, published in the Jan. 19, 2005, issue of Health Affairs, nationwide adoption of EMRs could save nearly $78 billion a year in health care costs.

"As long as you're in a third-party regulatory model of adversarial behavior with maximum paperwork, nobody's going to be happy and it ain't going to get fixed. As long as you're in a paper-based system, people are going to die. Paper kills. I can't say it simpler than that," Gingrich says.

As far as HSAs and consumer-directed health care go, progress has been slow as well, at least according to some researchers, even after the Bush administration ruled in June 2002 that HSAs could be carried over from year to year. The accounts allow people to set aside tax-free savings, but must be accompanied by so-called catastrophic insurance plans that generally require individuals to pay the first $1,000 of their yearly medical expenses, and families the first $2,000.

According to a recent survey of 1,000 people by Watson Wyatt, a benefits consulting company, less than a third of workers with insurance have heard about health savings accounts.

Only 3 percent

After hearing the plans described, 66 percent said the prospect of paying the full price of prescription drugs until the coverage kicked in seemed extremely undesirable and 57 percent said that they did not want to pay higher deductibles, the survey found. According to a separate survey of 500 large employers by Hewitt Associates, only 3 percent said they would offer HSAs this year.

Hewitt did note, however, that 17 percent of employers offer some kind of high-deductible plan, including older types known as flexible savings accounts (which can't be rolled over year-to-year) and health reimbursement accounts (which don't need to be paired with catastrophic insurance and are created and maintained solely by employers).

An HMO lobbying organization sees the HSA cup half full, however. "The market is responding favorably to health savings accounts, with about 438,000 people choosing the new high deductible, lower-premium coverage through September of last year," according to a recent study by America's Health Insurance Plans.

Market acceptance

"These early data demonstrate that the market is reacting very quickly to health savings accounts," says Karen Ignagni, AHIP president and CEO. According to the study, individuals purchased more than four-fifths of the initial health savings accounts (HSAs), with nearly half the covered people over the age of 40, and 30 percent of the individual policies were purchased by people who were previously uninsured.

HSAs, or something very much like them, are as critical to Gingrich's vision as universal IT. His vision "requires everyone to participate in the insurance system," he says in his book. People whose income falls below a federally specified level would receive Medicaid vouchers and tax credits to buy insurance. Large risk pools would be established so low income people can buy insurance inexpensively.

"Furthermore, it should be possible to buy your health insurance online to lower the cost as much as possible," he says in his book. "We should consider allowing people to buy their health insurance from any state that has approved the offer so people are not trapped into plans offered in high-cost states due to the mandated costs passed by their legislatures. People who for libertarian reasons do not want to be insured should be required to post a bond so their health care costs will be covered if they have an accident or an expensive illness."

If that sounds a bit heavy-handed, Gingrich is not apologetic. "I'm not a libertarian in the classic sense," he says. "I'm a Theodore Roosevelt Republican. I believe in the Food and Drug Act. I want clean water. I want information to flow to you in a regulated manner so that it is accurate information. I'm talking about a shift toward individual knowledge, power and responsibility, in an electronic system that has no paper. A shift to an early detection, early prevention, wellness-based system of health management, producing a doctor integrated into a totally different kind of system with a substantially different attitude."

A substantially different attitude, indeed, from a man who has made attitude an art form. "This issue is a moral issue. It's a matter of life and death," says Gingrich. "The economics are secondary."

'Nobody washes a rental car'

Managed Care sat down with the former speaker of the House of Representatives recently to discuss his ideas to overhaul health care and place more responsibility on the individual. Newt Gingrich advocates personal responsibility, the end of paper medical records, consumer-directed health care, and mandatory health insurance or a posted bond for everyone as the way to transform the American health care system.

MANAGED CARE: You're nothing if not optimistic. You appear to have a strong faith in the individual, basing your vision of health care transformation on the individual's ability to make informed decisions. Is this realistic?

NEWT GINGRICH: We have 400 years of American experience. This is a country made up of people with courage. Hasn't it been pretty consistently the pessimists who lost? So I start with the idea that the American people are pretty smart, pretty self-reliant, not perfect, but they believe in energetically pursuing the future. The places we are in trouble are the places we avoided competition, we avoided information, and we avoided giving the consumer the right to choose, education and health care being the two best examples. We want you as an individual to think about your health even when you're completely healthy.

MC: How can you change human nature?

GINGRICH: It's not human nature. It's an acquired set of habits. Starting with the decision in 1943 to go to a third-party system, we've turned health care into a rental car. Nobody washes a rental car.

MC: So the current system removes patients from the ability to make informed decisions?

GINGRICH: That's what I'm saying. You've got to change the way medical schools work, got to change continuing medical education. By the way, it's not complicated. All future medical education will be 24/7, real-time, online, and demand-pull. That is, the doctors will learn when they have a patient who has that problem. They will have a professional obligation to check in real time, even on something they know a lot about, whether something has changed in the last 72 or 96 hours, because the rate and complexity of scientific change is going to be so dramatic that no person is going to be able to keep it in his mind. Either medical schools will adapt or they will be replaced by other freestanding institutions.

MC: Can you describe the effect of these changes on health plans?

GINGRICH: If you're a strategic leader at a health plan, you start with the idea 'What would a personally centered concierge system be like, in which people came to my HMO because it offered them a better experience, with better outcomes at a lower cost because it organized information in a way that let them have greater security with less effort?' Think about going to a really first-class hotel somewhere and you want to know how to go to a really good restaurant. HMOs should think about how to be a knowledge system, how to deliver knowledge to you about how to find the right medical professional, and should want to make sure the medical professionals have the right knowledge delivered to them. And I want it all to be seamless and convenient. What the systems have to worry about is that someone is going to come along with a totally different model and just take market share. Wal-Mart emerged because Wal-Mart figured out a totally different way of delivering goods and services. People will migrate in this direction because it's a better quality of life with better health and ultimately at lower cost. Think of Henry Ford and the rise of the Model T. The first stage of that was a revelation to everyone.

MC: What will force this change? What is the political reality that will force this change?

GINGRICH: That you're killing people by not doing it. What we haven't had yet is politicians who have understood that the country's interest is radically different than [the interests of] lobbyists and special interests. That's going to change radically in the next few years because the cost is now so great and the gap between what we could be doing for you and what we're actually doing is so great.

MC: How can an intelligent health care system cope with unintelligent, unmotivated people?

GINGRICH: They don't do as well.

MC: And that's OK?

GINGRICH: It's reality. But I'm distinguishing between the willfully unengaged and people who have genuine problems. I'd be very tough culturally on the people who are willfully unengaged. You want an ultimate safety net that is the government. You can be a conservative and be for a fairly aggressive, nonbureaucratic government.