This former Reagan administration official is working to change how health information is processed. However, that's only part of the solution.

Jeanne Scott is on a mission of atonement. Back in the early Reagan years, she served as senior counsel in the Health Care Financing Administration's Office of the General Counsel. Later, she came to rue her role in adding to the paperwork burden of America's hospitals, pharmacies, and physicians. As she notes on her Website,, she "was personally responsible for having deforested vast acres of land for this paper now plastering the health care industry."

She is making amends by working to change how information is processed in health care. She helped found the Association for Electronic Health Care Transactions (AFEHCT), served on the board and executive committee of the Workgroup on EDI in Health Care (WEDI), and helped draft the original "Bond Bill," which became the administrative simplification provisions in HIPAA. She has headed an industry task force on the issues of health care privacy and security.

A lawyer with an impressive collection of lawyer jokes, Scott has worked as a lobbyist for the Catholic Healthcare Association and for health care technology companies. Now based in Arizona, she frequently addresses industry gatherings. She spoke recently with Senior Contributing Editor Patrick Mullen.

MC: What's the most urgent issue facing health care in the United States?

SCOTT: Number one is that there's no money to pay for solving all the other problems. We need fundamental systemic changes. The most urgent problems are the uninsured, the rising cost of health care, and the collapse of the American system of employment-based health insurance. For fifty years, the deal was that if you get a job, you get health insurance. We don't have a viable alternative, despite the president's talk about consumer-driven health care and health savings accounts. These are not workable options.

MC: Why not?

SCOTT: Health savings accounts don't do diddlysquat to cut the actual cost of caring for truly sick people. In a macro sense, we're just nibbling around the edges of the problem. About 5 percent of all Medicare beneficiaries represent 43.1 percent of all Medicare costs. Fifty percent of Medicare beneficiaries only spend 3.6 percent. They're relatively healthy, between ages 65 and 75. That sick 5 percent is not going to get well because we go to HSAs. They're still sick and we treat them or, if we really want to save money, we don't treat them. With HSAs, people suddenly realize they're spending their own money, and those who are healthy and don't spend much on health care get a great deal. Healthier people aren't the problem. The problem comes from caring for the very sick. The real spending doesn't set in until beyond age 75. We have horrendous issues in health care — I can think of 27 or 28) — and short of raising taxes, which is unlikely, we don't have the money to deal with them.

MC: Depending on whose numbers you believe, the Medicare trust fund is heading toward insolvency in about 12 years. Can that be prevented?

SCOTT: It could happen sooner than that. Just last year, President Bush ran around talking about how Social Security will go bankrupt in 2042, and we've got to do something because the sky is falling. The Medicare trust fund will go bankrupt sometime in the twenty-teens and maybe even sooner. When I turn 65 in 2008, I want my damn Medicare.

MC: What's the solution?

SCOTT: We have to raise the eligibility age for Social Security and Medicare to 70. President Bush brought the subject up a couple years ago in a speech, got tons of bad press, and hasn't said a word about it since. Social Security was raised to 67, but Medicare is still 65. If we raise the ages to 70 or even 72, it'll take effect somewhere down the road. When President Reagan and Congress raised the Social Security eligibility age to 67 in 1984, they made sure the change did not take effect for a long time. People born between 1943 and 1959 have to be 66 to get their full benefit, and those born in 1960 or later have to be 67. People born in 1943 turn 66 in 2009. Raising the age for Social Security saves all sorts of money because Social Security pays benefits regardless of need. That's not true with Medicare. People who are 65 are much healthier than they were a hundred years ago, even with the problems of obesity. We're healthier than we were 100 years ago by a substantial margin. Medicare is great for people turning 65 because a large number of people between 55 and 65 aren't insured, and their health problems are still relatively minor. Of course, if you really want to save money on Medicare, raise the eligibility age to 80 and just take care of people at the end of life.

MC: Assuming that won't happen any time soon, what are other parts of the solution?

SCOTT: We have to make smarter use of health information technology. I probably disagree with President Bush 95 percent of the time, but I agree with him on the need to rely more heavily on proper use of health information technology. Appointing David Brailer as National Coordinator for Health Information Technology gave this effort a focus that it had never had before. Now, of course, Dr. Brailer's moved on. CMS continues to push hospitals in the area of standards. One part of the Medicare Modernization Act of 2003 created a federal Commission on Systemic Interoperability to integrate health information over the next decade through linkable electronic medical records. I fully support that.

MC: At what point does health care financing become so desperate that health reform returns to center stage?

SCOTT: We're already there. Baby boomers start turning 65 in 2011. Give people a program like Medicare, that provides free care to an extent, and don't be surprised when costs go nuts. My own mother, God rest her soul, wanted to call 911 every time she had a headache, since Medicare paid for it and she didn't have to. I would shudder and try to explain that, actually, we do have to pay for it. I guess she was willing to let the next generation worry about it.

MC: You've said that the Medicare Modernization Act includes a demonstration of rationing under another name. What do you mean?

SCOTT: They use other words. Nobody wants to talk about rationing. They call it effective and efficient utilization of services, use of best practice guidelines, allocation of services, outcome measurement and research, financial effects on the health care marketplace of altering incentives for care delivery and changing allocation of resources. All the buzzwords are in there. It boils down to the fact that we can't spend everything on everybody. In Germany, if you're 66 years old, the national health institute won't pay for your coronary bypass surgery. They don't consider that an efficient allocation of health care resources. You can get one yourself if you can afford it. That's rationing of health care. When I give talks on this, I joke that I'm an attorney, so you can trust me, and I'm telling you that "efficient allocation of resources" equals rationing.

MC: However phrased, is what they're talking about necessary?

SCOTT: Yes. [CMS Administrator Mark McClellan, MD, PhD] has said that in the future, Medicare will only pay for what works. This gets us back to health care information technology. We don't know what works today. On Star Trek: The New Generation, when some minor character gets blown up or has a rock dropped on him, he ends up in sickbay with smoke rising from various orifices. Dr. Crusher rushes in and waves her tricorder over the poor schmuck, and by the end of the episode he's up and healthy again. This is supposed to be 350 years in the future. Thing is, we have machines that can provide body scans. It's just that they fill whole rooms today. This is a matter of miniaturization. We're not that far from having relatively small portable machines, maybe not as small as Dr. Crusher's tricorder, that provide a good analysis of a patient's condition. The question is what to do with that knowledge.

MC: Can you give an example?

SCOTT: My mother passed away five years ago when she was 80. In her last five years, she suffered from a litany of major health care problems: geriatric diabetes, chronic obstructive pulmonary disease, lupus, and congestive heart failure. Eventually, it all came together and she wasn't able to survive. When a patient with this profile presents herself to Medicare in the not-too-distant future, we'll be able to analyze all of this patient's diagnostic information, acuity levels, and demographic information. We know she grew up in southwestern Pennsylvania, and played on slag heaps outside the coal mines as a little girl, and came home covered from head to toe in coal dust. That's why she had COPD, even though she never smoked. If we choose to spend $300,000 to treat this patient aggressively with the latest physical therapies, medications, and surgical procedures, we find that the outcome expectancy is she will live 12 to 15 months. That's a lot to spend on someone who will live barely more than a year. If we try primarily drug therapies, perhaps we spend $30,000 for a life expectancy of 11 to 13 months. It's still a lot of money. Palliative care and pain relief might cost a few thousand dollars for seven to ten months. Computer software exists to make these calculations more accurately than a physician could. A physician's assessment has about a 60 percent accuracy rate. The software already has an accuracy rate of 70 percent to 75 percent. The question is, who makes the decision?

MC: So the challenge is more social than technical?

SCOTT: Exactly. Of course, the technical capability will keep improving. Today, the example I gave might be based on 30 cases of 80-year-old women with comparable illnesses. If we had 30,000 cases, the accuracy gets above 90 percent. It becomes the social question: Which option do you want to choose? What if I add another twist, and tell you that the woman who lived 15 months died in the hospital hooked up to all kinds of machines, while the woman who lived seven months died chasing her great grandchildren around the back yard? We have to put quality of life into the formula. Ultimately, a decision has to be made by the physician, the patient, or the patient's family, perhaps consulting with the clergy.

MC: There was much concern about how the rollout of Medicare D would go. What's your sense of it?

SCOTT: People who got their primary drug benefit through state Medicaid plans and had to transfer into a Medicare plan had problems. Most states filled the gap because Part D gave them less than what they were getting under Medicaid. These are poor people who had a lot of hardship. States had no guarantee that the feds would reimburse them, and it's still an issue.

MC: Is the prescription drug benefit too complicated for mere mortals?

SCOTT: Non-dual eligible seniors were more thoroughly confused by the multitude of choices than I think people expected. I helped my husband and my father, who turns 90 this year, choose plans. I'm an expert in this, and I still had to make several phone calls to make sure they were making the best choices. Spend time on «» trying to figure this out and you'll end up in tears. I can't imagine a 75-year-old retired autoworker with a high school education trying to make heads or tails of the options. There's been a lot of anguish and confusion. People who didn't sign up face penalties when they do sign up. Some who chose a $9-a-month plan are now hitting the doughnut hole, which means they won't get any coverage for the next $2,200 in drug costs. That manure started to hit the fan this summer, and it will hit harder between now and the mid-term election.

MC: What do you expect will be the top of the health care agenda in the 110th Congress?

SCOTT: They may have to finish the job on HR 4157 [on health information technology]. Assuming that's passed, they'll have to do something to reform provisions of the 1997 Balanced Budget Act that have hit physician payment hard. As far as you can project, to 2012 or 2014, docs' Medicare reimbursement faces annual decreases averaging 4 percent to 5 percent. That's impossible. We may see legislation containing a form of pay for performance. If Congress is going to do anything, it'll have to be in 2007, before the presidential campaign heats up. If they don't, the AMA is saying doctors will resign from Medicare.

MC: How real is that threat?

SCOTT: I think it is an idle threat. The Government Accountability Office recently said it found pockets here and there of doctors refusing to take Medicare patients. It has a potent public effect. The public gets scared when it hears that Grandma's doctor isn't taking Medicare patients any more. The president's budget would cut hospitals by something like $65 billion over the next five or six years. Their payment is getting squeezed too, but their lobby isn't as strong as the doctor lobby. Another part of the Medicare Modernization Act of 2003 is something called a Medicare funding warning. It calls for a rolling review of Medicare funding and spending. If, in any seven-year period, outlays exceed 45 percent of funding for two consecutive years, the president must send to Congress a Medicare funding warning as part of his annual budget message in February. That provision will probably kick in next year. Congress then has 15 days to introduce legislation to find ways to cut back Medicare expenditures. The changes don't have to go into effect in that year; they could have a five-year or a ten-year plan. If they don't pass that legislation by July 30, the problem gets kicked over to a commission, which can impose changes. Congress loves this, which is why they passed it. They don't have to vote on cutting Medicare. It's the same way they handle their own pay raises. They get what they want without ever having to record a vote on it, then go home and say, "I didn't vote for raising the eligibility age to 70 or 72," which the commission theoretically could do.

MC: Thank you.

The interviewer, Patrick Mullen, is a former managing editor and editor of Managed Care. He writes from his home outside Cleveland.

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