"It was an early education that finance and health care were directly related: If my patients didn't have insurance, it didn't matter what I did for them," says Kane, who was not much older than her patient back then, in 1971. "It didn't take me long to see that the system was really screwed up."
Kane, professor of health management in the Department of Health Policy and Management, has spent her career worrying about people who aren't getting care or are going broke paying for it. As a professor of management at the Harvard School of Public Health (HSPH), she's using her knowledge of finance (she earned a doctorate in business administration from Harvard in 1980) to force greater financial and charitable accountability from the health system and get health care to more Americans. Recently she's been helping the state of Maine extend health coverage to more low-income families. And as the newest member of the independent, 17-member Medicare Payment Advisory Commission--MedPAC--she advises Congress on how to keep Medicare, the federal health insurance program for retirees, from going bankrupt. Like the Arctic ice cap in an age of global warming, Kane says, Medicare is "melting toward catastrophe."
"Medicare is like an old car that we've been tinkering with--tightening this nut, replacing that radiator hose. But there's this huge crater down the road. People worry about Social Security, but the Medicare Trust Fund is in much worse shape," she says, referring to the pot of funds created with a payroll tax first levied in 1966, the year Medicare was founded.
Using hard numbers gleaned from her financial analyses, Kane works to make health care more equitable, and its institutions more responsive to society's needs. Moreover, she teaches people who aren't accountants--not just HSPH students, but also political leaders, policy makers, and community advocates for the poor, elderly, and disabled--to understand the language of finance, so they can ask smart questions and push for reforms. Is that hospital providing charity care, or avoiding it? Short of cash, or just crying poor?
Because hospitals gobble 30 cents of every health-care dollar spent, they are often the subject of Kane's scrutiny.
"When a hospital claims it doesn't have enough money to take care of poor people, that's when I get mad," says the curly-haired, kinetic Kane, who jokes that she's persona non grata in emergency rooms far and wide. But colleagues say this penny-wise gadfly commands respect for her integrity, her blunt honesty, and her track record in reshaping health policy and legislation.
Can Medicare become a leader in equity, accountability, and cost control? Kane is working toward that goal as part of MedPAC, a group of experts in health care finance and administration appointed by the U.S. Comptroller General.
To Congress falls the job of shaping Medicare--deciding who is eligible, outlining the benefits, setting payments to hospitals and care providers, and establishing premiums. MedPAC's mandate is to advise Congress on issues of quality and access, as well as make recommendations regarding fees paid to health plans and providers.
MedPAC is also thinking hard about Medicare's future in what Kane calls "blue sky," closed-door brainstorming sessions. At the rate costs are rising, by 2011 Medicare will be draining 45 percent of its outlays not from payroll taxes and premiums but from general tax revenues. Under current law, the "45 percent trigger," as this doomsday turning point is known, will spark an overhaul of Medicare from top to bottom.
Benefits could shrink or take longer to get, Kane warns. "Unless we act soon, we could in theory see Congress telling 65-year-olds, 'Sorry, you're going to have to pay much higher premiums, wait longer for benefits, and pay more to use them.' Meanwhile, the under-65 working population may see a bigger chunk of their paychecks going to the Medicare Trust Fund."
In 1966, people didn't live as long as they do now. Retirees needed insurance mainly for hospitalization, and for physician services for heart attacks, strokes, or other acute illnesses. Today, lives can be prolonged with medicines and outpatient care. "So now we've got a growing chronically ill population, with a huge need for primary care, outpatient disease management, and prescription drugs," Kane says.
To modernize Medicare, the Bush administration introduced coverage this year for prescription drugs, a much-needed but costly benefit. To control Medicare spending, in February the president proposed cuts for 2007 in fees to nursing homes, hospitals, home-health agencies, and other providers totaling roughly $30 billion, in accordance with MedPAC's recommendations. But what news reports didn't mention, Kane says, is that those savings will be erased so long as Congress keeps delaying cuts in physicians' fees that are currently required by law.
Congress is in a pickle, Kane says. Without cuts in doctors' fees, Medicare spending will balloon. Yet the threat of those planned cuts--coupled with a relative decline in the incomes of physicians specializing in primary care--has caused medical students to flee that field, considered vital to managing chronic diseases.
What to do?
One option everyone's talking about, Kane says, is "pay for performance." The idea is to pay providers more if they meet certain quality standards, particularly when managing chronic diseases, such as asthma and diabetes. "When doctors submit claims to Medicare, you can require them to show that they gave appropriate diagnostic tests and achieved good results," Kane says.
Will these strategies make health care better and cheaper? That's the bet. Kane points to evidence from the Veterans Administration health system, where doctors must comply with certain treatment standards. Studies show that, for patients with chronic diseases, care delivered by the VA costs just two-thirds of what comparable care from fee-for-service providers costs.
MedPAC's members are "pretty much in agreement" on how Medicare must change, Kane says. "We need to articulate a clear plan and show a vision of how to get there. It's a matter of whether we can convince Congress to act fast enough."
In an ideal world, she says, Medicare would start keeping people healthy from birth. "We haven't had the imagination to do that yet," she says. "That would be a blue-sky idea."
Health care for all
For working Americans, health insurance has long been not a right but a perk of the job. But in some parts of the country, including Maine, where the economy is based on small and mid-sized businesses, many employers can't afford to offer insurance. And when they do, many low-wage earners can't afford the premiums.
Kane got tapped to help Mainers after delivering what she laughingly calls her "If I were the Queen of Maine speech" to the Portland Chamber of Commerce. Many of Maine's far-flung hospitals, she told the group, lacked competition, and weren't nearly as efficient as they could be. When Democratic Governor John Baldacci's staff got wind of Kane's talk, they asked her to help them deliver on the promise of a 2002 law called the Dirigo Health Reform Act.
"Dirigo"--the state motto, "I lead"--is revolutionary because it asks state government, private insurers, hospitals, and employers to work together to make the health system leaner. The law asked hospitals to voluntarily curb spending and cap profits; meanwhile, insurers were expected to negotiate with hospitals for lower rates, and then funnel the dollars saved into low-cost, state-subsidized health insurance plans called DirigoChoice and MaineCare Expansion.
As of December 2005, 9,000 Mainers had signed up for these plans, which were launched initially with a one-time contribution of $53 million from the state. To help fund the plans going forward, Kane was asked to estimate savings resulting from the Dirigo legislation--and to defend her methodology, which she did before the state's Superintendent of Insurance at a closely watched public hearing last November.
"The money's there," Kane believes, to sustain the low-cost plans. The Superintendent agreed--and announced that insurers were obligated to pay $43.7 million to fuel Dirigo in 2006, a sum equal to just 2.4 percent of claims they paid in 2005. As Dirigo's low-cost health plans pick up subscribers, insurers, hospitals, and care providers alike should save money, Kane says. That's because more people will seek preventive care and pay their bills instead of relying on emergency-room visits, a high-cost, last-resort option that wastes health-system resources.
"Nothing's easy in health reform," says Dirigo's architect, Trish Riley, director of the Governor's office of Health Policy and Finance. Still, she has high hopes for Dirigo's success. As of March 31 of this year, she reports, Dirigo's health plans had served more than 16,000 subscribers. Also in March, the Dirigo initiative won national recognition as one of 50 "Top Government Innovations" for 2006 by the Ash Institute for Democratic Governance and Innovation at Harvard's Kennedy School of Government.
Maine's private insurers, the Chamber of Commerce, the Maine Hospital Association, and some self-insured businesses, however, are less impressed. They have brought suit in court to contest the savings methodology and support legislative changes to fundamentally alter the program's financing. Governor Baldacci calls Dirigo a "work in progress." In one scenario now under consideration by the state legislature, Dirigo's health plan subscribers would forge an alliance with enough purchasing power to become self-insured.
"Everyone wants health care, but nobody
wants to pay for it," Kane says, reflecting on Dirigo's uphill climb.
"The health care
crisis isn't just about money; it's about values. What kind
of society do we want to be?"
In June 2005, Kane testified before Congress to the "raw, mean" lengths to which some nonprofits go to make under- and uninsured patients pay bills. "We've seen instances of unhooking patients from IVs," she says, "forcing them to put charges on credit cards, driving them into bankruptcy."
This kind of behavior has moved Kane to do some of her most high-profile work. Her career started with a bang when she helped the attorney general in Texas sue a Houston nonprofit hospital for denying poor people care, even as it reaped profits from a gourmet restaurant and duck-hunting lodge. The state passed a law requiring nonprofits to raise their charitable standards, Kane says, and today it "still has the highest standards of all 50 states'."
But it was in 1993 that Kane earned a national reputation for taking nonprofits to task. Back then, Boston's commissioner of health and hospitals was urging the city's elite teaching hospitals to do more for disadvantaged patients. Citing the costs of training doctors and doing research, the hospitals' CEOs declined. Having heard them say "'We can't afford to give free care'" too often, the commissioner, Judith Kurland, hired Kane to inspect their bottom lines.
The "Kane Report" sparked a nationwide furor. Boston's teaching hospitals weren't poor after all, Kane showed: They had over $1.1 billion dollars in discretionary funds--represented by cash reserves, investments, parent corporations, and new facilities, many with empty beds. Just what did teaching hospitals owe their communities in exchange for foregone tax payments worth millions?
"It's just spin--smoke and mirrors, pretending they're all poor," Kane remembers, shaking her head. "Come on, be honest: You're sitting on millions in cash."
Kurland says Kane's study was "so well done, it was incontrovertible." Massachusetts' Attorney General Scott Harshbarger agreed, and asked all nonprofit hospitals to make public their charitable activities, such as prenatal care clinics and free cancer screenings, every year. Other states followed suit. Whether such reporting is voluntary, as it is in Massachusetts, or required by law, it has forced hospitals to be more public-spirited. Soon Congress may step in as well. Some members say they will set federal standards to force nonprofits to deliver on their community-service obligations if the hospitals do not do so themselves.
With that study and others since, Kane has won new respect for community-based hospitals. In a six-state study for the Pioneer Institute for Public Policy Research, a conservative think tank, in 2004, Kane showed community hospitals to be as good or better than teaching hospitals when it comes to childbirth, appendectomies, and other routine procedures. Those data are now proving useful to companies and state agencies--including Massachusetts' Group Insurance Commission, which negotiates premiums for 250,000 state employees. The Commission recently moved to a low-cost, high-quality health-plan option that channels employees to community hospitals, which are markedly more affordable because they generally don't invest heavily in teaching, research, and highly specialized facilities.
Kane champions consumers' interests in other ways as well. Consider her work with the Department of Corporations when Blue Cross of California became a for-profit organization. After sponsoring low-cost health plans as a nonprofit for 50 years, the organization converted to for-profit status. But by law, it had to spin off the value of its cumulative tax exemptions to form a charitable foundation.
"The CEO was looking to hand
over $150 million," remembers Kane, chuckling. "I was asked by the
commissioner of the Department of
Corporations to come up with a real number. Ultimately, the Department,
along with Consumers Union and the state legislature, was able to step
in and say, 'No way--try $3.2 billion.' " In 1996,
that vast sum established the California HealthCare and California
Endowment foundations, two of the largest drivers of health policy
the United States.
Dunham says that in 2003 she asked Kane to examine New Hampshire's tax-exempt hospitals to find out "who was in trouble, and who was only feigning heart pain." Kane enlisted several students, who, deputized as assistant state attorneys general, persuaded guarded hospital CFOs to release their financial statements. Those data are now public--as they should be, Dunham says, helping state agencies "allocate money where it's needed most."
Kane's students have penned what is perhaps the most widely read of all "Kane Reports." A Community Leader's Guide to Hospital Finance: Evaluating How a Hospital Gets and Spends its Money is a Cliff Notes-style primer, used by citizens seeking to hold hospitals accountable to their needs.
Kane's phone rings often. If it's not a grassroots group calling for her expertise, it's a state agency or a health plan CEO. Or it's a student from HSPH's Masters in Healthcare Management program, which Kane directs. This innovative two-year program helps physician-executives master the language of finance and become better managers.
Of Kane, Dunham says: "Ninety-nine percent of health finance experts are humorless, and you can't understand a word they say. To find someone who's not only willing to explain it to you but take a leadership role that's perhaps unpopular is lovely."
Former HSPH Senior Lecturer in Health Policy Nancy Turnbull, who recently was named president of the Blue Cross Blue Shield Foundation of Massachusetts, has traveled with Kane to China, Brazil, England, and Poland to study their health systems. "What makes Nancy effective and powerful," Turnbull says, "is that she shines a light into areas where others fear to tread, but that are at the heart of why systems operate as they do."
Karin Kiewra is editor of the Review and associate director of Development Communications.
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