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How to transform Alaska's health care system into something we can afford

  • Author: Charles Wohlforth
    | Opinion
  • Updated: December 28, 2016
  • Published December 28, 2016

Alaska's health care cost crisis is not as complicated as it looks.

In this series of columns, I've tried to simplify the issue by following the money. Health care spending is devouring Alaska's economy and government budgets. Where is all that money going?

In asking that question, we don't need to talk about national issues, such as the Affordable Care Act, drug prices, health trends, CEO salaries, or doctors' student loans. If Alaska had only those problems, we would be in far better shape than we are today.

Alaska's spending and cost increases exceed the rest of the country so dramatically that just getting down to the high-end of average would be a major victory.

With national issues out of the way, following the path of our money is fairly straightforward.

We pay too much for care. Providers and hospitals, as a whole, cost too much. That's the key differential from the other states. Alaska's cost of living, transportation challenges, malpractice insurance and harsh climate are smaller issues in comparison to excessive profit and compensation.

The competitive forces that hold down prices elsewhere, mostly through insurance companies negotiating with providers, don't work in Alaska because of our small size and isolation from larger markets. Many specialists have monopolies and there are too few hospitals for robust competition.

State policy has made this problem worse, as I discussed in a previous column and will cover more in my next one.

But I'm skeptical that competition among providers could ever control prices in Alaska. Our population is too small to support many competing specialists and hospitals.

Traveling outside Alaska for care is an option for some procedures — an option insurance companies support and many Alaskans are using — but it isn't a solution to the lack of competition.

Without competition, the remaining prescription for high costs is managed care.

Alaska Natives already enjoy this kind of care. At Southcentral Foundation, which provides primary care to 65,000 Natives in Anchorage and around the region, east to the Copper River and west to the Aleutians, teams of salaried medical professionals work with patients for overall health, not to earn fees from individual examinations or procedures.

Managed care eliminates the incentive to do more medical procedures and charge more for them. Ideally, a single organization is responsible for the overall health of members, whose payment is the same regardless of what services they need.

When combined with a team approach, evidence shows the concept can save a lot of money and deliver good results.

In Anchorage, Southcentral's Nuka System of Care includes behavioral and mental health, vision and dentistry, education, youth and elder programs, suicide prevention and many other services. Patients are called customer-owners and become part of the team of providers.

Southcentral Foundation President and CEO Katherine Gottlieb, left, and Cook Inlet Tribal Council President and CEO Gloria O’Neill appear at the Alaska Wellness Summit in August. (Loren Holmes / Alaska Dispatch News)

"You're not expected to just be a patient who walks in the door and says, 'Help me, I'm sick,' " said Southcentral CEO Katherine Gottlieb. "It's now a journey of wellness together."

Surveys of patients and employees show high satisfaction and Southcentral won a prestigious national quality award. It reduced emergency room and hospital admission each by 36 percent from 2000 to 2015. Visitors come from all over the United States to study its work.

Southcentral costs about $500 a month per member, mostly paid by the federal government. That cost does not include hospital care.

I could not find a comparable cost for the same services in the private sector, and Southcentral did not provide a total cost per member for all care. (One of Alaska's serious deficiencies is a lack of research on these issues.)

But from experience, I know many in Alaska paying for unsubsidized health insurance individually would be delighted by the price.

Could non-Native Alaskans get managed care?

Managed care systems only work with a large population that spreads the risk of high-cost patients. It also requires patients to give up individual choice. You have to be willing to go along with the team concept, which means seeing doctors the organization chooses — doctors on salary without a profit motive.

The system has worked in states with smaller populations than Alaska, but not here. In 1998, the Legislature passed a poison-pill law that requires managed care organizations to allow members to see any doctor they choose, defeating the central concept.

But the state could change this. Besides repealing the law, the state could use its buying power to create a managed care organization that private employers and even individuals could join.

In addition to saving money and improving health, a managed system open to all would create real competition for private providers, holding down everyone's costs.

In its current self-insurance plans, the state covers 17,000 employees and dependents and 69,000 retirees and dependents, according to the Department of Administration. Alaska has another 58,000 other public employees in state and local government, school districts and the university (not counting dependents).

A managed care system for all those people would be more than large enough to share risk.

What would that look like?

I don't think I would want the government to hire my doctor, but the state could contract competitively to set up a managed care system. Hospitals already operating here would have the facilities to bid on such an opportunity. Or, perhaps, a firm like California's highly regarded Kaiser Permanente managed care system could come to Alaska.

Every system has problems and managed care produces horror stories just as traditional care does. Not every outcome would be improved nor all waste eliminated.

But only transformation can save Alaska's health care system, our economic competitiveness and government finance. We must reroute the path of our money to create a better system.

Almost everyone I talked to while writing these columns, including the top people at hospitals, insurance companies, state agencies and doctor organizations, agreed it is too late for small or incremental solutions.

But politics is a serious barrier to major change. Those on the receiving end of the money flowing through the current system would lose if we changed it to something fairer and more efficient. And they have plenty of power to fight back, as I'll discuss in my next column.

The views expressed here are the writer's and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)alaskadispatch.com. Send submissions shorter than 200 words to letters@alaskadispatch.com or click here to submit via any web browser.

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