Copyright © 2001 The Seattle Times Company
Editorials & Opinion: Tuesday, January 23, 2001
Guest columnist

Our health care is great, just don't get sick

By Kathleen O'Connor
Special to The Seattle Times

We have some of the world's best medicine and the finest technologies. We enjoy some of the world's finest physicians, nurses and health-care professionals. People come from all over the world to get care here - the University of Washington Medical Center; Virginia Mason; Children's Hospital and Medical Center - not to mention Harborview, Swedish and Fred Hutchinson Cancer Research Center. I cannot even begin to name the physicians and clinics that provide some of the best health-care services money can buy.

But our medical infrastructure is being gouged by inadequate and misdirected funding.

Here's what happened. The federal government set limits on what it would pay doctors and hospitals. They ratcheted down rates for hospitals and doctors and skilled nursing facilities and almost everything they could to control Medicare costs. The feds and the state jointly pay for Medicaid, so it is subject to rates set here for hospitals, doctors and long-term care facilities for Medicaid patients.

Add to this the squeeze from managed care. While the government was clamping down on one end, the commercial insurers were doing the same on the other end at the behest of employers. Ironically, managed care ended up increasing costs over time, because of its administrative complexity. Physicians and hospitals added people to manage the rules and regulations. Even insurers' administrative costs rose to 15 percent in four years.

While provider cash flow was going down, their overheads were going up. Now, less than 50 percent of every dollar they receive actually goes to patient care, according to a study by the Washington State Medical Association. These practices were also harmed by their participation in managed-care contracts in which they assumed part of the financial risk of patient care. Management is impossible without good data, and neither health plans nor providers had adequate timely information to make good management decisions.

Providers were also hit hard when the rest of the economy took off. The labor market tightened and it became increasingly difficult to get some entry-level positions. Especially hard hit are home health care and long-term care services that rely on entry-level workers to care for the elderly and disabled.

Initiative 601 put a 2 percent lid on what can be spent from state revenues. Additionally, Initiative 695 eliminated the car-license tax, which was a major source of public health funding. Over the next three years, 39 counties will lose $32 million in public health and services.

The teachers' salary increase takes money out of the general fund, which means the 2 percent increase comes from a smaller revenue base. So the 2 percent is off a smaller pie.

What this all means is with the top funding priorities being transportation and education, major cuts are proposed in health and human services - nearly $300 million - to keep a balanced budget. But, the safety net hospitals and doctors offered is largely no longer there. Hospitals only have about 1 percent operating margin - they can hardly be expected to absorb more charity care. Thirteen hospitals have had negative margins for nearly four years.

Because of the state initiatives, not only are programs being cut, but rates for Medicaid services - which are already about half of the commercial insurance rates - are being reduced as well in order to try to find ways to pay for services.

The irony is that we do not have to make these choices. We have funds that could help us navigate our way through these funding messes without dumping frail, elderly people into the night.

One thing is for sure in Olympia. Everyone says they have never seen it worse. Now is the time to seriously reconsider what we have done. The governor's meeting with some health-care representatives on Jan. 29 is a step in the right direction.

Kathleen O'Connor is a health-care industry analyst and speaker based in Seattle, and publisher of the O'Connor Report (oconnorhealthanalyst.com)

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