Ezekiel Emanuel on ‘Reinventing American Health Care’

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In the final month of open enrollment for the federal and state-run health care exchanges, one of the architects of the Affordable Care Act (ACA) has published a new book that offers an inside look at health care reform.

In Reinventing American Healthcare: How the Affordable Care Act Will Improve Our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System, Wharton health care management professor Ezekiel J. Emanuel, a special adviser on health care reform to the White House from 2009-2011, provides a history of the health care system, an examination of the ACA and an exploration of what the future holds for health care.

Recently, Hoag Levins, managing editor of digital publications at the Leonard Davis Institute of Health Economics (LDI) at the University of Pennsylvania, interviewed Emanuel for Knowledge@Wharton. In this discussion, Emanuel critiques the execution of the ACA, explains why many more changes will be needed and argues that ultimately, “the ACA has been a big step in the right direction and is catalyzing positive change.” (Read a review of Emanuel’s book on the LDI website.)

An edited transcript of the conversation follows.

Hoag Levins: The title of your book is Reinventing American Healthcare, and the subtitle is How the Affordable Care Act Will Improve Our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System. Were you at all concerned that the subtitle is too confrontational or absolute? Were you concerned that it might turn off some of the readers whom you would otherwise be able to influence?

Ezekiel Emanuel: I do think that the description there — the complexity, the inefficiency, the expensive, error-prone system — is well accepted. Before the Affordable Care Act, we did have the kind of system that was terribly expensive and inefficient. It had a lot of people uninsured. The Affordable Care Act is going to make a big dent in each one of those [issues,] and I make that argument in the book, although I should say the book is not just an argument about the Affordable Care Act. It tries to educate people about the health care system — how various parties get paid, how insurance came about in the United States, all the efforts over a hundred years of trying to reform it, how the Affordable Care Act got passed and what is in the Affordable Care Act. Then I do make predictions about the future.

Levins: In the book, you take the Congressional Budget Office (CBO) to task. You talk about the tyranny of the CBO, and you say that although the CBO scores are objective and non-partisan, they are frequently wrong. You talk about the bias and how it can create real harm by [creating] roadblocks for important and worthy legislation, and you cite instances from three decades of wrong CBO estimates. How did the CBO scoring impede the ACA, and if there had not been CBO scoring, how would the ACA be different?

Emanuel: First of all, I also say that we need an umpire. I recognize that the role the CBO plays is absolutely essential. You have to have someone who is going to objectively assess a bill. But I also indicate, as you point out, that they have an institutional bias. They are always willing to, say, discount savings and assess higher costs than you might because if they are wrong – if things do not cost as much or they save more than they anticipated — they think there is no harm done to the system. Part of what I wanted to point out is that there is harm done to the system. [For] good ideas that might have saved, they say, “No, it is really not going to save, or it is only going to save a little, or it might even cost.” They may be wrong on that and inhibit a lot of good ideas from coming forward. I do cite three decades of cases — from the 1980s, 1990s and the 2000s — of major health care legislation where they simply have underestimated the savings that could be achieved.

The Part D Medicare drug benefit is an excellent example. Their cost estimate was 40% too high. That makes a very big difference in setting policy, especially when every politician is constantly asking, “How does it score?” — which means, “Does it save money?” There are a lot of programs that we wanted to put in to the Affordable Care Act that didn’t score or did not score as much as the CBO would say, and that means that when you are bargaining, you do not retain [those programs] for the bargain because … you cannot get as much savings from them. I point out in the book that there are lots of [instances] where there is no precedence, so [the CBO] just guesses. Again, I did not want to fault them. I did want to just indicate how it creates a certain kind of mindset. Everyone thinks they have this model that really does predict the future. Well, they have a model. It does not predict the future terribly well, and to constantly be trying to guess what they are going to score [a program] inhibits a lot more creative policy thinking than we might otherwise get.

“In a democracy, you cannot expect a perfect A+ bill. You are going to get compromises that policy makers would prefer not to be there.”

Levins: Of the potential elements for the ACA that did not score, which one was the most important that you thought should be included and regret that it was not?

Emanuel: In general, and this is separate from scoring, the thing I am most frustrated by is that we did not have more payment reform in the bill. That’s a very important element to get us off the fee-for-service system — which encourages using more services and the particular types that are highly paid — to a system that doesn’t encourage people to just use services but actually keeps patients healthy, keeps them out of the hospital. That is a very important switch and, again, this is a case where I think the CBO scoring was less favorable to those changes.

[Also,] the CBO scoring tends to evaluate each individual change as opposed to putting them all together. For a complete change that involves IT, disease management, identifying high-risk people [and] putting in place interventions that have not been regularly and rigorously tested — the CBO does not really have an idea about savings, or does not think it can actually estimate with reliability. A lot of places have seen those changes [lead to] a directional savings and a pretty good savings. But [they do] not meet CBO standards for including in their model. That kind of experimentation does not get highly ranked.

Nonetheless, I recognize the important role of the CBO. We cannot work without it in Washington, but I do think we, including the CBO, ought to recognize the biases and flaws and try to figure out ways to counteract them.

Levins: In your frequent media appearances and interviews over the last couple of years, you have been perceived to be a staunch supporter of the Obama administration and the ACA. Parts of this book, which are pretty critical, seem to have a totally different tone. Is this a dramatic departure for you to be so critical of internal White House management procedures now as opposed to the stance you took publicly in the past?

Emanuel: A lot of people have tried to pigeonhole me. In point of fact, when the exchange went bad, I had a pretty detailed critique in the New York Times about what they needed to do to solve the problem, including appoint a CEO. They have not done that. I have tried to be balanced in what has gone wrong and what has gone right. I have been pretty out in the open. I think it gets drowned out by the fact that I do think, in general, the ACA has been a big step in the right direction and is catalyzing positive change.

But there are plenty of things, especially around the execution, that I think could have gone better. I am disappointed we still do not have menu-labeling regulations. I have been disappointed about PCORI – the Patient-Centered Outcomes Research Institute – not being aggressive enough. I have been pretty up front about that, but not everyone notices all the nuances of an academic. I am generally quite positive. The bill did address many of the problems we had in the system, and I have often said it is not a perfect bill. In a democracy, you cannot expect a perfect A+ bill. You are going to get compromises that policy makers would prefer not to be there, but politics dictates that they are.

Levins: You mention this CEO issue. In the book, [you look at] what went wrong inside the White House managerially. It is sort of inside baseball, but can you explain a little bit about why a different kind of CEO might have made a difference in the way that Healthcare.gov went bad?

Emanuel: You need to view the exchanges and the federal exchanges as an e-commerce site. We should not view it as a program in the government like the VA benefits. It is much more analogous to, say, Amazon or other e-commerce sites. In that regard, it needs to be run like an e-commerce site – not like a government program issuing regulations.

That typically will require a CEO. It will require a highly talented staff. It will require constant tweaking of the exchanges, the rules, how you want to show people what their options are and educate them…. I was up front about that, beginning in 2010. I thought this was necessary for proper execution.

If you look at the successful state exchanges – like Connecticut, like California – they have had that structure where they have had someone — typically with insurance company or exchange experience — being able to collect the right team and basically every morning get up thinking about how we are going to make this better. How are we going to work with our suppliers – the insurance companies? How are we going to work with our customers to make sure they are having the right experience, or how can we can adjust what we are doing to make it better for them? That is the proper way to run this thing — again, [based] on the idea that this is more an e-commerce site than a government program.

Levins: Back then, did anyone actually say to Nancy-Ann DeParle [then-deputy chief of staff for policy in the Obama administration] that we should have a CEO of this type?

Emanuel: Yes. First of all, I do not think it was her decision. This was a decision inside the White House, and I cannot tell you why they did not go that route. As I mention in the book, there were political considerations. The administration had been criticized about having too many czars of this and czars of that, and they were worried about additional criticism. But I think, as has become clear over time, getting the exchanges right was critical politically, and even if you took short-term criticism for appointing a CEO and creating this structure that would run it like a business, in the long-term it was clearly not optimal to fail to do that.

Levins: In the book on that point you write in a very positive way, “There is no reason to despair or give up on health care reform itself. As many high technologies have shown, it is possible to bounce back from flawed website rollouts, but this is only possible if relentless focus on execution becomes a reality.” Has the White House changed, and is it relentlessly executing this correctly?

Emanuel: When they appointed Jeff Zients to … rescue the exchanges and website, he was focused. The recent Steve Brill article [in Time magazine] does show that they really worked 24/7. They got a really top-flight team. That lesson should not be lost on them. That is what you need when you launch. Let’s remember that Twitter was not a flawless launch. Lots of other companies have had problems with launching their websites and have come back to be very successful, and I certainly hope that the White House is paying attention to that.

Levins: Back to a subject you mentioned: payment reform. On the issue of switching from a fee-for-service  system to a more episodic one, I have gone to any number of seminars and conferences where this is a sore subject. But I have not heard anyone actually present a plan to achieve that. There seems to be a great deal of confusion and inertia. No one knows what to do. How do you take a $4 billion-a-year urban health care network and completely un-build its revenue systems at the same time you build something else that is not exactly defined.

Emanuel: In chapter twelve, I do talk about health reform 2.0. I [include] a section about getting more alternative payment models to fee-for-service, and I do have a plan actually…. I would suggest that there are three or four steps that would be very important to this, and as you point out, you are not going to get, for example, the University of Pennsylvania, to be able to go from fee-for-service to alternative payment models overnight.

“Let’s remember that Twitter was not a flawless launch. Lots of other companies have had problems with launching their websites and have come back to be very successful.”

The approach is, let’s give it a guide path but all agree [on] some pre-defined time period. I say a decade, so 2022 is my time point. By 2022, 75% or 80% – pick a number – is off fee-for-service. That gives everyone sufficient planning time and ability to shift. Then you pick particular areas where you think you can move off the fee-for-service system quickly and allow the hospitals and health systems to experiment.

Step one is that we have had a recent Medicare experiment called the Acute Care Episode (ACE) Demonstration…, which pays bundled payments for cardiac procedures and orthopedic procedures – stents, cardiac catherizations, coronary artery bypass grafts (CABGs), pacemaker placement, hips and knees…. That has shown to save some money and improve quality of care. That is a place to start. It is very defined.

The bundle used by Medicare in the demonstration is not perfect, and we would like to try an experiment to expand it to include shared decision-making at the start, so every patient undergoing these procedures is given an information sheet or a video to see whether they want in or out. It includes rehabilitation after the procedure, as well as a guarantee for up to six months that anything that goes wrong – say with the hip replacement – is going to be covered free of charge. You can phase that in pretty quickly because we have evidence it works. Then you take another area like cancer, [which] is a very good area because we have a lot of guidelines. We have a lot of agreement on how patients should be treated, and [we can] begin to identify very high-volume, high-cost cancers that can be bundled.

This provides you a pathway forward to move off the fee-for-service system into a system where people are not paid to do more, but [are paid] to do higher quality care efficiently. That is a plan that can take us to 2022 and shift a lot of payments off the fee-for-service system.

Levins: That is a great plan in theory. The question is, within the ACA, how do you actually get hospital systems to begin to do this?

Emanuel: One of the smart provisions we put in the ACA was that the Secretary of Health and Human Services has the authority, without getting additional legislation to nationalize, to take an experiment – a demonstration project – that has shown to either save money and/or improve quality and nationalize it across Medicare. She does not need to go to the hospital. She can say, “All right, in two years we are going to start paying this way,” and then give them two years to figure out how they are going to do it.

Let’s remember, we have a lot of really smart people running these health systems, including the University of Pennsylvania. You tell them what the rules are, and they will adapt to those rules. I have no doubt about it, and they want those rules…. A lot of doctors and health systems feel like they are caught in two boats at the same time: They are paid fee-for-service and everyone is telling them, “You have to improve the quality of your care; you have to become more efficient.” Yet they are not being paid to do those things. I think they would prefer to be paid to do that, so they wouldn’t lose money while trying to improve the quality of their system.

Levins: You also get into graduate medical education…. You indicate that the students coming out are simply not prepared for modern-day, digitally based, team-oriented care…. You say it must be changed. What are the changes that you think should be made?

Emanuel: First, we ought to shorten medical school. Second, we ought to have some focus on training people in team-based care and training people in digital medicine as you point out. How do you work with various wireless monitors at home or wireless compliance devices at home? People need to be trained for that.

We also need to train them in the outpatient setting. Right now if you are in medical school, an intern or a resident, the vast majority of your time – 90%-plus of your time – is spent treating patients in a hospital, whereas in the new system, fewer patients are going to be in the hospital. Doctors are going to spend much less time treating patients in the hospital. Yet that is how we train them. So we need to emphasize that you now have to provide half the training outside of a hospital. That is complicated. I recognize it. Again, this is not a change that can happen overnight, but you have to give deadlines; otherwise no one will have an incentive to change their system.

We need to train doctors much more in management: Change management (how do you actually manage change?); negotiations because they are constantly negotiating with their colleagues or their patients or payers; … strategic planning; how to use data [and so on].

There is a lot that needs to be done to change the medical education we have had. One of the ironies is medical education really took the structure it has today [from] the Flexner Report [which was published 100 years ago]. The medical system has changed a lot. The kinds of treatments we are giving to patients have changed a lot. You would think that medical education should change more than it has.

Levins: In your book, you go through various trends as you look forward and make predictions about what is going to happen. You say this is a brave task.

Emanuel: I recognize the stupidity of making predictions mostly because Phil Tetlock – who is a professor here at the Wharton School and at the University of Pennsylvania – has written a whole book about how dangerous it is for experts to make predictions. I recognize that it is difficult, but I also recognize that it is essential. All of us are making predictions about the future, whether you are running a hospital, whether you are a doctor or an investor. You are making predictions about how the future is going to evolve. I thought, I have got a lot of experience and knowledge; I will make some predictions. Again, I have learned from Phil Tetlock that you have to be very specific. What exactly quantitatively is the prediction — if there is a quantitative prediction — and give a specific date. I try to be as rigorous as possible, and I know that I might be held up to laughter and insult if my predictions turn out to be wrong.

Levins: One of those predictions is that in the next six years, at least 1,000 hospitals across the country will close, and you suggest that the community should not fight this – either those who work at those hospitals or the patients who use those hospitals. Can you explain that more? Why would we want to see 1,000 hospitals close and just let it happen?

“There is nothing inherent or necessary in the ACA being viewed as negatively as it is today. It could have been different.”

Emanuel: First of all, the hospital occupancy rate in the United States is now under 70%. That means that there are lots of beds that are not being occupied, and there are a number of hospitals under 50%. They should not necessarily be there. Take Vermont. For a population of 400,000, they have 11 hospitals. That is just unnecessary.

Second, as I mentioned, one of the reasons we are going to see hospitals close is because of a lot of care that hitherto had been delivered in hospitals can be delivered more effectively and at less cost at home or in other settings. There is no reason to go into a hospital, for example, for a colonoscopy. You can do it in an outpatient setting at a cheaper rate and with the same kind of quality. Many patients who we used to admit to the hospital, for example, for exacerbations of emphysema or congestive heart failure can be treated just as well at home. So we will see that shift.

If you treat people at home, the nurses who were once working the halls are now going to be visiting patients at home. They are not going to be unemployed. If the main worry about closing a hospital is employment – we will lose important high-paying jobs – we are going to shift those jobs to other services in the health care industry. While you might say I am a cost-control hawk, when it comes to health care, I am also a realist.

We are not taking a system that now is spending $2.9 trillion on health care and reducing that to $2.6 trillion. The only question is how fast or slow it goes up from $2.9 trillion to $3.2 trillion or $3.3 trillion. To the extent that it is on the upward slope, that means more people are going to be employed in the health care system. More services are going to be delivered and, therefore, when we close hospitals we should not look as if all of that is going away. It is going to be redeployed in other areas.

People who were coming in to those hospitals are not suddenly going to need health care services. They are going to need them in a different way, in different facilities or maybe at home. If you are worried about the employment part, that is going to employ plenty of people, and again, it is going to be better for patients. We should remember the main goal of a health care system is not employment. The main goal of a health care system is keeping the population healthy.

Levins: We are talking about updating the law. In the book you say the ACA is an enormous thing. It will make significant changes, even as it will need further modifications and revisions. Andrew Dreyfus from Massachusetts [recently visited the Wharton School.] He and others talked about how the law there has been significantly amended six different times since it was passed in 2006. They anticipate ongoing endless amendments because of corrections, because of unintended consequences, and so on. The ACA … is now like a non-dynamic law. What do you see happening as this non-changeable law pushes forward and cannot be corrected? Is that sufficient to cripple the ACA, or where is that going to go? It seems in the poisoned atmosphere of Washington, it is unlikely that it will be amended. Is that fair?

Emanuel: I think what Andrew Dreyfus says is right. Health care is dynamic. We similarly need policies and laws and regulations relative to health care to be dynamic and to respond as the system evolves, as flaws are found. Ironically, if you talk to people in Washington – when they are not engaged in the partisan battle – there is a lot of agreement about the kinds of changes they want to be put into place. But we are locked into what seems to be an endless battle over the soul of the ACA.

That is unfortunate. I think almost everyone – no matter whether you are Republican or Democrat – believes it is unfortunate. We are probably going to fight two more elections on the ACA – the 2014 election and maybe the 2016 presidential election – and then my hope is we will be able to get to saying, “All right, it is the law of the land. Let’s deal with the problems, and let’s see if we can improve things.”

I went on TV with Bill O’Reilly, and he said to me, “Look. I do not want to talk about the ACA. It is the law of the land. It is coming into being. I want to talk about responses to it, and for example, how doctors are responding or not responding and do not want to participate in the ACA.” I took that as … revealing. I wish he would say it on the air because I think that would change the discussion and allow us to move forward.

I have talked to a number of staffers of Republican senators and congressmen, and they recognize and actually have a lot of agreement with the things I want to propose. When I talk to conservative health policy experts, there is a lot of overlap – 60%, 70% overlap – between my views and their views. We could actually make a lot of progress if we put the ideology behind us and tried to improve the health care system in this country. Again, I was involved in enacting the ACA and helping to design various provisions. I recognize that it is flawed. It is not a perfect bill. As I said before, it is not an A bill. You are not going to get perfection in a democracy. The health care system needs to be constantly tweaked. The idea that we do it once and for all is just false.

Levins: Looking down the same road, in the book you talk about how the ACA has been a great achievement for President Obama. At the same time, it has wounded him politically really badly. You also say that you think down the road that history will actually look back at him and smile. Tell us how and why.

Emanuel: Not many people are students of American history…. Harry Truman – when he was actually president – was not very popular. Some people do not fully remember, but in 1948, he was more or less written off. Everyone was sure he was not going to be reelected. Even the Chicago Tribune published “Dewey Defeats Truman” on election day.

Here is a guy who is not very popular, and a lot of the things he did – integrate the Army, drop the bombs on Hiroshima, the Marshall Plan, NATO, the Cold War – were [not popular] at the time. He was not popular for integrating the Army. The Marshall Plan barely passed the Senate. He had to call it the Marshall Plan instead of the Truman Plan to get it to pass. Not a very popular president. Now we lionize Harry Truman, and we think he is a near great president behind Washington, Lincoln and Franklin Roosevelt. He stands with people like Teddy Roosevelt and others as a near great president.

The Affordable Care Act is going to play the same way. Once it plays out, once it begins to transform the system, if in fact even half my predictions are true, it gets health care inflation down to GDP. It transforms the delivery so we really are taking care of the chronically ill and the mentally ill. You will see people say, “Wow, this really did make a very positive move in the system. It was a very important change.” It is going to take a decade to see those effects, because we are dealing with such a complex part of the economy.

I would also say the wounds that politically have been suffered because of the ACA are a result of bad communications about the ACA – what is in it, what it means for the average person – and the bad implementation of the exchanges. Neither of which were inherent or necessary. Both were, as I say in the book, somewhat self-inflicted. The Obama administration did not do a particularly standup job either of communicating around it or executing. There is nothing inherent or necessary in the ACA being viewed as negatively as it is today. It could have been different.

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Join The Discussion

3 Comments So Far

Herman Hurwitz

I am old enough to remember the advent of Medicare in 1965. It was described as the end of US Medicine as we knew it. Now try to touch or change it! It was and is far from perfect, but a series of tweaks and adjustments have made it a universally recognized and expected benefit.
There is no reason that the most powerful and richest nation on the planet should have millions of people with no access to coordinated care as well as spend 17+% of GDP on less than optimal healthcare. The ACA will undergo similar tweaks and adjustments to improve upon it and I predict that it will achieve the same status as Medicare enjoys today

R Bryant

Too complicated, too expensive with too much government involvement, making for a heavily socialistic solution in a capitalism based economy!

Roger McKinney

I don’t think Emanuel shows much knowledge of the healthcare industry. The ACA did nothing but take all of the laws mandating insurance coverage and make them federal. It changes little other than forcing the uninsured to buy insurance. The main effect of the law so far has been to dramatically increase copays and deductibles in order to keep premiums from rising too much.

Changing from a fee for service payment system to payment for episodes is an ancient idea. Insurance companies have tried to push the medical industry into it for many decades with little success. And there is good reason for the lack of success. Payment for episodes puts the risk of loss onto the doctor or hospital, neither of which are trained to handle actuarial risk. It’s bet left to insurance companies.

The real problems with healthcare costs are many, but the chief are the fact that employer-paid premiums with Medicare and medicaid provide unlimited demand for a scarce resource. But the resource is more scarce than necessary because of government licensing and thereby restriction of the supply of healthcare.

A better book on the industry is John C. Goodman’s “Priceless: Curing the Healthcare Crisis,” http://www.independent.org/aboutus/person_detail.asp?id=1556