Tuesday, May 27, 2014

Kaiser and the VA: Dangers of Ideological Labeling

One ideology does not fit all.


I think no virtue goes with size.

Ralph Waldo Emerson (1803-1882),  The Titmouse

Critics  equate the VA with socialism.  The  present VA scandal , they insist, will be   what will happen to ObamaCare in the end.  They describe  the VA is an island of socialism within the American system of capitalism.  They  predict ObamaCare will end like the VA, with rationing of care and death while waiting.  They harp the message that socialism with an unbridled bureaucratic practices  is what you will  get with ObamaCare if you embrace the VA's system of care..  

They  believe the sheer size of the VA, and its promises of free care, creates demands that cannot be met, leads to a run on the federal budget,  and fosters rationing by waiting.  And it spoils the salaried physicians who work there, who have  no incentives to become more efficient, but instead  become committed to protecting their jobs within the bureaucracy and perpetuating that bureaucracy.

When it comes to argument that size alone produced the scandal  and will lead to socialism for us all,  I believe this is false ideological labeling.     

Kaiser Permanente comes to mind.  Kaiser has roughly the same budget  has the VA,  owns its hospitals and clinics,   pays thousands of  its doctors on salary,  has an  electronic health record connecting all of its facilities,  and is an integrated system with a central management system - characteristic it shares with the VA.

There are differences, of course between Kaiser and the VA.   At Kaiser, the doctors have their own separate organization that negotiates with headquarters.  Kaiser has its private health plan.    It charges premiums.  It competes with other health plans. It makes a profit. It is private, not governmental.

 Kaiser Permanente is an integrated managed care consortium, Kaiser Permanente is made up of three distinct  entities: the Kaiser Foundation Health Plan and its regional operating subsidiaries; Kaiser Foundation Hospitals; and the autonomous regional Permanente Medical Groups. As of 2006, Kaiser Permanente operated in nine states and the District of Columbia, and is the largest managed care organization in the United States.  

Kaiser Permanente has 8.9 million health plan members (compared to 8.76 veterans served) , 167,300 employees, 14,600 physicians, 37 medical centers, and 611 medical offices.  Last year, the non-profit Kaiser Foundation Health Plan and Kaiser Foundation Hospitals entities reported a combined $1.6 billion in net income on $47.9 billion (compared to $48 million for the VA)  in operating revenues. Each independent Permanente Medical Group operates as a separate for-profit partnership or professional corporation in its individual territory, and while none publicly report their financial results, each is primarily funded by reimbursements from its respective regional Kaiser Foundation Health Plan entity.

Equating Kaiser and the VA with ObamaCare is a mistake.  When Kaiser was founded in 1945, critics, including the AMA,  said it was the forerunner of socialism, but such has not proven to be the case.  Size, it turns out, has its virtues – integration, consistency, and efficiency.

 ObamaCare has a much larger budget - $1 trillion to $2.5 trillion spread out over 10 years, depending on who you ask, the Obama administration or the Office of Management and Budget.  ObamaCare involves nearly a million physicians.   These physicians, by and large, are paid on a fee for service basis.   Physicians, hospitals, and health plans are not “integrated,” although Accountable Care Organizations are supposedly a step in that direction.   Electronic health records, although their numbers are growing,  often did not speak or communicate with one another.    

Kaiser and the VA  will probably survive in perpetuity.  Depending on the political winds and cycles,  ObamaCare may be replaced, repealed, or changed beyond recognition.

Tweet:  Equating the VA’s size  with socialism may be a mistake.  As Kaiser as shown, you can run an organization of similar size without socialism.

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