John Kitzhaber : Reforming Oregon’s Health System Long Before National Debate Began

SALEM, ORE. —  As architect of Oregon’s plan to revamp its health-care services for the poor and expand the number of insured, John Kitzhaber has been in the thick of the national debate over how to fix the nation’s ailing health-care system. In that role, the liberal Democrat has received as many brickbats as roses.

Among his early detractors were some liberal Democratic soul mates in the U.S. Congress, who had themselves been among the most vocal critics of the nation’s current system. After congressional hearings, Oregon appears close to obtaining a federal waiver, allowing it to deviate from Medicaid law on who its Medicaid program serves and what it covers.

The plan provides all Oregonians with basic health care, but attempts to control cost by curtailing coverage of some medical procedures. Oregon could thus become the first state to ration health care--on the premise that some procedures cost too much, don’t guarantee good health and don’t do the most good for the most people. Underlying the plan is the notion that limited public funds should be spread farther on basic medical services that will make a greater contribution to the good health of a larger number of people.

Kitzhaber, a 44-year-old emergency-room physician and president of the Oregon state Senate, has nurtured the program for four years, while critics have charged that the plan discriminates against the poor. With his prodding, the state has drawn up a list of more than 709 separate procedures, ranked according to their potential to improve the health of the individual. For example, prenatal services for pregnant women would be a priority.

The plan does more than prioritize. It will bring more people into Medicaid, require all employers to provide minimum health benefits and establish a high-risk pool to offer insurance for people with pre-existing illnesses.

But it was the idea of “rationing” that stuck in the craw of critics. For Kitzhaber, who came to the legislature in 1978 with a environmental agenda, the keyword was “rationality.” The nation’s health-care system is now irrational, indefensible in both its wastefulness and the manner it already discriminates, he argues. With a system in crisis, he asks, why attack those who want to try something other than the status quo?

Question: What was the genesis of the Oregon health-care plan?

Answer: . . . . In 1986, we (the state) had a revenue shortfall based on an unanticipated caseload increase in the Human Resource budget. . . . One of the things we did was change eligibility standards for Medicaid. We threw several thousand people off the program. I remember being astonished at how easy that was. . . .

Then I went back to my emergency room and, about six months later, I began seeing the people whom we had dropped out of the system showing up in ER--some with pneumonia because they’d ignored a mild upper-respiratory infection. It was the sort of experience that made me realize those budgetary balancing exercises had very real human consequences. That’s the first time I began to be aware of how we ration health care implicitly in our current system.

In 1987, the Human Resources Subcommittee made that decision to discontinue funding for organ transplants for the Medicaid program. The thing passed without controversy. The point at which people became aware of it was when Cody Howard (a child who died of leukemia after the state declined to rescind the transplant policy to pay for his bone- marrow transplant) became ill, and all the coverage that surrounded that. . . .

The question I kept asking myself was: “What is the policy that would lead us to fund transplants for eight people as opposed to nine or 10 and, if we were gonna put more money into the health-care budget, where should that next dollar go?” We had this huge population of pregnant women and children not being taken care of. Why wouldn’t we spend more money on them before we put more money on sort of rescue care for a smaller number of people?

Q: What’s wrong with the current federal health-care programs for the poor and elderly?

A: In my view, there is no federal health policy. It’s their policy to purchase health care. It’s not to pursue health. Eligibility for publicly subsidized health care in America is based on category. And not on need. I mean, you have to be a member of a certain category--over 65, pregnant, have a certain disease or family status. Just being poor is not enough. Poor women without children and poor men, no matter how impoverished they are, are not eligible for publicly subsidized health care. They basically created a system of the deserving poor who fit into a category and the undeserving poor who don’t fit into a category.

There is also no consistent policy on who should pay for health-care services. For example, you’ve got people in a category--those over 65 on Medicare--who get publicly subsidized health care no matter how rich they are. You’ve got the tax exclusion--which essentially exempts from the definition of taxable income employer contributions to health-care premiums.

So, you have this middle-class subsidy for people with workplace-based coverage. Then you have Medicaid. So everybody in the country has publicly subsidized health care--except the 37 million Americans who aren’t on Medicaid, who are under 65, who don’t have workplace-based coverage and can’t afford a private policy. But the hypocrisy and the irony is those same people are required, through their own taxes, to fund not only Medicaid, but Medicare and the tax exclusion for millions of Americans who basically can afford to pay.

The third problem with the federal system is: It assumes that all medical interventions are of equal value, in spite of this enormous body of research that suggests that a whole lot of what we do in the name of medicine--and I can vouch for this as a primary-care practitioner--doesn’t have an impact on people’s health.

Q: Why were some federal officials so critical of the Oregon plan? What was their interest in preserving the status quo?

A: Some of it’s based on misinformation. Some of it is very irrational. . . . Medicaid and Medicare were created 25 years ago, in a different world, when the elderly were all poor and the kids weren’t quite as poor. . . . It’s just the opposite now. And medical science and . . . technology were different. . . .

They have made absolutely no changes in the way those programs operate. (The federal government) simply mandate services (to the) states, which, of course, have to balance their budgets.

The state’s only way to deal with that is to either reduce eligibility or find other implicit ways to ration services. State Medicaid programs are collapsing all around the country. . . . The current federal system is indefensible.

Q: Can you explain the different facets of the Oregon program?

A: The program, essentially, is targeted first at insuring the uninsured. . . . We have about 120,000 people who would be picked up when we expand Medicaid to 100% of federal poverty level, and about twice that many people who are living above the federal poverty level and not eligible for Medicaid--the working poor, if you will--will be included.

When we get the federal waiver, it triggers the implementation of an employer insurance mandate. It requires (employers) to offer the same level of coverage to that 280,000 people above the federal poverty level. So the two pieces of legislation essentially create a universal-access program.

A third piece of legislation requires all (insurers) to participate in a risk pool for people who were unable to purchase insurance in the market because of pre-existing conditions. . . . It also authorizes the state to market its package to small businesses.

Q: The prioritizing system has been called “health-care rationing.” Is that the appropriate term?

A: I think what we’ve done in setting priorities is rationalize resource allocation. When you change Medicaid eligibility standards or where you--as in New York, for example--cut provider reimbursement rates to the point that they will not see pregnant women, you have rationed people out of the system. The current system . . . makes a list of four people, and draws a line and says people above this line get everything, whether it’s effective, or not and people below the line get nothing. What we’ve basically done is said . . . everyone deserves to be in the health-care lifeboat. And then we said lets take a rational look at what a benefit is in terms of the health that it produces. Because we very strongly believe that the purpose of this exercise is not to guarantee people access to health care, but to make people healthy. . . .

Q: Do you expect that at some point you’ll have to deal with a lot of emotional issues because some people will still be left out?

A: I think you’ll have some. Unquestionably. But the fact of the matter is what most people need is not organ transplants, and MRIs (Magnetic Resonance Imaging) procedures. Most people need things like immunizations, treatment for hypertension, for diabetes, things that are very, very common, that are very cheap and easy to provide. . . .

Q: Have you had any interest from other states about duplicating the process?

A: We’ve had tremendous interest among the states--I would guess in the neighborhood of 15 to 20 states have contacted us. Some of them, Colorado, for example, have actually drafted similar pieces of legislation. I’m not sure that this is an appropriate model for everyone. I don’t think you can just take this and drop it in another state. . . . But I think the inquiries we have received is symptomatic of the fact that federal Medicaid mandates and current federal non-policy in this area is destroying the ability of states to deal with a host of other things--including education and housing--that probably have a more significant impact on people’s health . . . .

Q: There’s a renewed interest in some sort of a national health-care system. Do you see that is coming because of all the problems that the system is having?

A: While I’d like to be optimistic about it, they’ve toyed with that idea for probably 50 years. . . . I endorse the concept of a national health-care program. You cannot solve this on a state-by-state basis, and the only reason Oregon’s taking this step is that we’ve got half-a-million uninsured Oregonians, and we can’t wait for the federal government to do something. You know they’re dying, they are suffering needless pain and suffering because of that inaction. Having said that, I think the pressure’s clearly building. But . . . the innovation is going to start at the state level, because we aren’t paralyzed by that kind of budget stasis that you see in D.C. If states are allowed, with appropriate safeguards, to try different approaches as demonstration projects, I think a consensus will build for some kind of national action.

Q: You’ve been in a unique position for a physician--you’ve been able to affect policy. Do you think the average physician has the power to help make some changes?

A: . . . . I couldn’t have done this without the very active support and, I think, visionary attitude of the (medical associations). They’ve come out on this limb with me and have involved themselves actively . . . because they are very troubled by the current system. . . . They know there is already rationing in health care. They’re being forced to become the rationing instruments for a society that refuses to recognize what’s going on.

Q: You plan to leave the Senate in 1993. Do you think you’ll go back to practicing medicine full time?

A: Probably part time. I do want to continue the practice primarily here, because I think that provides you with a unique and valuable perspective when you’re trying to change the system--to understand how the policy changes actually affect the delivery of primary care. So I imagine I’ll split my time between that and working on the public-policy debate--and then maybe do a little fishing afterward.