WARWICK – I have no argument with the accuracy of Millman’s actuarial projection of the future trends in health costs. I just don’t think they are a reasonable baseline from which to forecast what we are calling “savings.”

They are not really savings, but more accurately, they are an avoidance of a possible future cost increases.

No doubt the actuaries accurately project the trajectory of costs; the problem is that future inflation won’t happen because we will simply run out of money.

We should measure how much we can impact current costs – as they are already too high, thus producing eroding coverage/participation, which is the problem we are trying to solve.

Too much “what,” not enough “how”
I have no argument with any of the specific initiatives and strategies outlined in the plan; they are all “what” we should be doing.

We have been studying this problem [for] a long time, I agree we know what to do about it. The real problem is we don’t know how.

If the goal is to save money, the truth is someone in the system has to make less for that to happen.

I agree that incentives built into the reimbursement or payment system are important, but that only affects utilization, not the underlying costs the system must support.

My example of this problem involves the hospitals, where a full 40 percent of costs now reside. We already know we have excess bed capacity. We even know roughly the amount and cost of the excess, 200 beds and about $100 million a year.

Now, that would be a serious saving. But how are we going to achieve it? By what authority can we close a hospital we don’t need?

If we just wait – letting them all struggle until one eventually succumbs, well that isn’t my idea of an “innovation,” is it?

Can we induce voluntary collaboration among the hospitals? Should we encourage them to merge into a single system?

Maybe instead of avoiding hospitalization we should be driving more primary care volume into the hospitals, thus reducing the unit costs of care there. This may sound crazy, but are we really going to build new infrastructure in the form of patient-centered medical homes or Primary Care Trust centers when everything we need is already in our hospitals, most of which are half empty?

It may already be too late to achieve some of these solutions. Frankly, I think I would be more satisfied with a simple rate-setting solution. Just give OHIC the authority to set the premium rates at the target we define as “success.” Then the insurers will have to go back to the providers and figure out how to reconfigure the delivery system.

We are trying to do it for them from the outside, and those who see themselves as losers will resist. This is too radical, I realize. My point is that the SHIP is not radical enough.

It can’t just say what we are going to do, it has to say how.

Wellness is great, but it may not reduce costs
I have long been a “wellness and prevention” advocate. I know and agree with all the arguments for it and it should be a core goal of reform.

The sad truth, though, is that keeping people alive longer through better health doesn’t reduce lifetime aggregate per capita costs. We should avoid presenting it as a cost reduction strategy. It is a quality initiative that can be funded by other reforms.

The real issue is cost; what about administrative costs?
Managed care turned out to be managed cost because we didn’t know enough to index it to quality outcomes. Now we do.

But access is limited by affordability, so in the end, reform is all about reducing costs, not the rate of increase in costs.

For example, we acknowledge that our system is burdened by more than 30 percent (of total) administrative costs – well over twice what other countries spend.

Yet the SHIP says nothing about it? It seems to me that a non-value added (it provides no actual patient care) activity would be right at the top of our priorities.

Yes, there are initiatives like the health information exchange, and accountable care organizations that should improve the situation on the provider side, but what about the way we pay claims? I just think administrative simplification is a huge missed opportunity.

I have learned not to overwhelm such problems with too much controversial input so I am stopping here. I am aware that our real goal here is to get the grant, and that our advisors probably know well how to achieve that.

I'm sorry that I keep coming back to how to actually solve the health care problem. I am working on that. Thanks for the opportunity to provide this feedback.

Ted Almon is president and CEO of the Claflin Company, and co-chair of the executive committee of HealthRIght.

In an effort to promote conversation and engagement on the SHIP proposal, ConvergenceRI is sharing these public comments offered by Ted Almon. They were drawn from both reading the draft plan and from the presentation made by the Advisory Board on Nov. 20.