When he was comptroller general of the United States, David Walker did not hesitate to voice his opinions about the country's fiscal challenges. Today, he is outspoken about healthcare reform.

Walker says we need to focus on controlling healthcare costs first and make sure we have a system that has a reasonable foundation before we implement universal coverage.

HFMA president and CEO Richard L. Clarke, DHA, FHFMA, recently talked with Walker about cost drivers, controlling costs, the approach to reform, the politics of reform, and what financial executives should do.

Clarke: Last year, you released a movie called I.O.U.S.A., which was advertised as the warning call related to the federal budget that Inconvenient Truth was to the environment. What are your concerns about the federal budget, especially related to healthcare liabilities?

Walker: The federal government is going to have about a $1.6 trillion deficit in fiscal year 2009, which is huge, and that's a problem in and of itself. But, before the current recession, we had-and we still have-a large known and growing structural imbalance between projected revenues and projected expenditures, and that's driven in large part by out-of-control healthcare costs. For example, Medicare alone has $38 trillion in unfunded obligations, and they're going up every year. So clearly, health care has a major impact on the federal budget, and we need to do something about it.

Clarke: You identified a list of cost drivers, including inadequate health and wellness efforts by individuals, perverse payment incentives, lack of coordination, legal liability, administrative complexity, and many other issues identified in the press. In what way are current healthcare reform proposals addressing the cost drivers and the concern that you just raised about the Medicare liability?

Walker: The legislative proposals that have been unveiled to date do not do nearly enough to address the cost drivers that are impacting health care. The primary focus of the legislative efforts so far have been to expand coverage. And to the extent that cost has been an issue, it's been, how do you pay for the cost of that expanded coverage at least over a 10-year period of time?

Some people are saying that we need to have universal coverage before we can control cost and that we ought to focus on coverage first. I think they have it backwards. You cannot reduce cost and expand coverage. That's an oxymoron. Do we need to have universal coverage at some basic and essential level of care? Yes. But we need to also make sure that we have a system that is affordable and sustainable over time.

So ultimately, we're going have to make some tough choices with regard to payment systems, end-of-life care, tax subsidies, premium subsidies under Medicare, what level of universal coverage is appropriate, affordable, and sustainable, along with a whole range of issues that, quite frankly, are not being adequately addressed in the current healthcare reform debate.

Clarke: The actions that are being taken in Congress right now are generally the most politically palatable, even though there's a lot of noise about the variety of approaches that are being proposed. If you were the healthcare czar, what would you do, in what order, and why? In other words, what is the right approach to this issue?

Walker: We need to focus on how we are going to control healthcare costs first and to make sure that we have a system that has a reasonable foundation before we expand the system to include tens of millions more people. Don't get me wrong. I feel strongly that in this country we should have universal coverage for basic and essential health care based on broad-based societal needs, not unlimited individual wants, that is affordable and sustainable over time, but at the same point in time, one that avoids taxpayer-funded "heroic measures."

And by heroic measures, I mean employing certain procedures, technologies, and other treatments in situations where you're not going to meaningfully improve and extend life. Under our current payment systems, people are incented to do as much as they can, not only to make money, but also to reduce the possibility of malpractice litigation (e.g., through the practice of defensive medicine).

We need to focus on cost first, because if there's one thing that could bankrupt America, it's out-of-control healthcare costs.

Clarke: Besides changing incentives within the payment system, what other approaches to controlling costs would you propose?

Walker: The federal government needs to impose a budget for its healthcare expenditures. We need to change our payment systems to where we move away from fee-for-service-based approaches to where we consider alternative approaches, like capitation approaches. We need to pursue integrated practice approaches and alternative care methods, and leverage IT. We need to clearly adopt evidence-based practice approaches that consider effectiveness as well as cost. But in addition to all of those matters, we have to look at tax preferences for employer provided and paid health care and taxpayer subsidies that are being provided to middle- and upper-income individuals who voluntarily sign up for Medicare Part B and Part D.

So it's imposing a budget and changing the payment systems, but it's also changing the type of tax preferences and taxpayer subsidies that are provided to middle- and upper-income individuals under our current system that are not affordable and not sustainable over time and, in fact in some cases, are just downright inequitable.

Clarke: Most of what we've talked about relates to tax policy, which is primarily at the federal level, and coverage or payment issues, which are somewhat at the federal level. What role do you see the private sector playing in all of this? Do you see a different role for the private sector as opposed to the public sector and for employers and employees?

Walker: At the present time, a majority of health care is provided by the private sector. I think that's likely to continue to be the case. The federal government pays about a third of all healthcare costs in this country, but they're the payer. They're not the ones that are providing the services.

The fact is that all parties-including insurance companies, employers, suppliers, and a variety of other players who are part of our overall healthcare system-need to recognize reality: that the current system is badly broken, that we pay roughly twice per person what any other industrialized nation pays and we get below-average outcomes on a societal basis. That is unacceptable and unsustainable. Every major player has to figure out what can be done to be able to deliver quality care in a much more cost-effective manner and before we bankrupt this country.

Clarke: Given those issues, do you think that as a country, we have the political leadership and the political will to make these changes, and in some cases make decisions that some would classify as rationing or denying a treatment that they may believe is effective, but maybe effectiveness studies have demonstrated otherwise?

Walker: Our current political process is dysfunctional. The simple fact is that a vast majority of our elected officials today view their position as a job, and they want to make a career out of it. They tend to want to give their constituents what they want. They tend to want to tell their constituents what they want to hear rather than what they need to hear. They tend to want to allow them to have the dessert before they eat the main course. And that's what's happening with regard to health care. Everybody wants to focus on how can we expand coverage to the uninsured, how can we improve quality, and how can we ensure portability, insurability, and privacy.

At the same time, the real challenge is how are we going to be able to afford and sustain our healthcare system in a way that won't bankrupt the country, that won't undercut our competitiveness in an increasingly competitive global economy, and that will reduce the number of bankruptcies that individuals face because of catastrophic healthcare costs.

I believe that in order to make those tough choices, we're going have to engage the American public in ways that they've never been engaged. We're going to have to have a series of forums and leverage the Internet in order to state the facts, tell the truth, take the heat, and talk about the tough choices that are going to have to be made in order to be able to address our healthcare system and address coverage, cost, quality, and personal responsibility issues.

The current debate is based on a flawed process. Washington has come up with legislation and now is going out to talk to the public about it. That is backwards. The public needs to be engaged first, then legislation needs to be drafted, and then you re-engage the public. Ultimately, we're going have to make real tough choices in installments over a number of years. Yet we haven't even agreed on what the desired outcomes should be. No wonder we have a problem.

Clarke: My sense is that the current political leadership is less likely to lead that transformation. Where do you see that transformation coming from, and who would lead that effort?

Walker: I believe that, to make progress in connection with extraordinary challenges, you need extraordinary processes, because we currently have a dysfunctional democracy. Therefore, we're going to need to create some type of statutory fiscal future commission that would be unlike any commission that we've ever had before. This commission would be composed of some elected officials, some representatives from the administration, and a number of qualified, capable, and credible nongovernment officials, some of whom would be politically independent, meaning no party registration, in order to be able to engage the American people, to state the facts, speak the truth, take the heat, and talk about the tough choices. They are also going to have to help people understand there is no free lunch and that it's not a matter of whether the current social contract is going have to be renegotiated; it's a matter of how and when.

It's not a matter of whether or not taxes are going up. It's only a matter how much, when, and in what manner. And the sooner we recognize those realities, the better. Yes, we can have some type of level of universal coverage but it should be more basic and essential coverage, like preventive/wellness and catastrophic, than what's being talked about now. We cannot afford and sustain the type of universal coverage that is currently being discussed.

Clarke: Our members are finance executives, accountants, and financial analysts primarily in hospitals. What advice would you give to them as they think about their own organizations and in what role they might play in trying to drive down costs?

Walker: Providers in hospitals and all the professionals that are associated with the hospital industry need to recognize the reality that we need dramatic and fundamental changes in connection with our overall healthcare system in order for it to be successful and sustainable over time. They need to consider alternative compensation approaches for physicians. They need to consider integrated practice alternative care approaches. They need to determine how best to integrate and automate records to reduce costs, improve quality, and protect privacy. They need to learn the lessons from those providers who have demonstrated less costs and more effective outcomes in their respective industry and areas, and the sooner that that happens, the better.

It's better to control your own destiny. It's better to try to make changes proactively and on your own initiative rather than to be forced to change based upon rules that are dictated by others.

Clarke: What's likely to happen on healthcare reform issues this year?

Walker: I believe that it's likely that some healthcare reform will pass in 2009, but it will be dramatically scaled back from what the president and the congressional leadership initially sought to do. It's much more likely to take the form of health insurance reform than comprehensive healthcare reform. There may also be a move to adopt an individual mandate and federal subsidies for those less well off to help with the cost of any mandate.

But one thing is pretty clear: The tough choices will not be made. The can will be kicked down the road, and ultimately, we need to begin a meaningful citizen education and engagement effort to prepare the way for very tough choices to make sure that we have a successful and sustainable healthcare system in America.

The president has committed to pay for any healthcare coverage extension over the next 10 years. And while that clearly represents progress as compared to President George W. Bush 's efforts in connection with Medicare prescription drugs, it's still not adequate.

We need to consider the cost of any healthcare coverage expansion beyond 10 years as well. Furthermore, we can't just pay for expanded healthcare coverage. We also need to achieve a significant reduction in the tens of trillions of dollars of unfunded healthcare promises that the federal government has already made. We also need to bend the total healthcare cost curve down rather than up. To do otherwise is like adding a wing to a house built on a sinkhole of sand with a flawed foundation, leaky plumbing, a roof that needs to be fixed, and that is mortgaged for more than it's worth.

Clarke: Let me end with a question about the Peter G. Peterson Foundation. What is the foundation about, and what does it hope to accomplish?

Walker: The Peter G. Peterson Foundation's mission is to promote more fiscal responsibility and accountability today in order to create more opportunity tomorrow. In particular, we are focused on trying to improve federal financial responsibility, how we can address our escalating deficits and debt, how we can reduce our dependence on foreign lenders, how we can improve our savings rates, and how we can enhance overall personal responsibility and accountability.

Clearly, healthcare costs are the single largest driver to this nation's escalating deficit and debt levels. It's not the only driver, but it's the single largest driver. Therefore, we are very concerned with and very engaged in connection with healthcare reform initiatives, recognizing that costs need to be focused on as a first priority, but at the same time, we need to achieve some level of universal coverage. We need to enhance quality, and we need to improve personal responsibility at the same time.

David Walker serves as president and CEO of the Peter G. Peterson Foundation, New York, N.Y. As CEO, he leads the foundation's efforts to promote federal financial responsibility and personal financial responsibility in order to keep America strong and the American Dream alive.

Prior to his current position, he served as the seventh Comptroller General of the United States and head of the U.S. Government Accountability Office (GAO) from 1998 to 2008, spanning both Democratic and Republican administrations. Appointed by President Bill Clinton and confirmed unanimously by the U.S. Senate, he was an outspoken, nonpartisan advocate for addressing the major fiscal and other sustainability challenges facing the country. He also enacted transformational reforms within GAO and the accountability profession, both domestically and internationally.

Prior to his appointment to run the GAO, he served as a partner and global managing director of Arthur Andersen LLP and in several government leadership positions, including as a public trustee for Social Security and Medicare from 1990 to 1995 and as assistant secretary of labor for pension and welfare benefit programs during the Reagan Administration.

Although no longer the U.S. government's chief auditor, Walker continues to serve as a global accountability expert as chairman of the United Nations Independent Audit Advisory Committee. He also serves on the boards of the Committee for a Responsible Federal Budget, the Partnership for Public Service, and the Advisory Board of Toffler Associates. In addition, he is the executive counselor for the American Society for Public Administration and a member of the Trilateral Commission

Walker has authored two books (has a third scheduled to be published in early 2010 entitled Comeback America), is a regular media commentator, and is the subject of the 2008 documentary I.O.U.S.A.

Publication Date: Thursday, October 01, 2009

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