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Health care reform needs a drastic shake-up

North Country Health Services President and CEO Jim Hanko talks about rural health care and possible reforms to control health care costs as speaker Thursday night to a Minnesota Agriculture and Rural Leadership banquet at the Hampton Inn & Suites. Pioneer Photo/Brad Swenson

Incremental health care reform needs a drastic shake-up, says Jim Hanko, North Country Health Services president and CEO.

"We don't yet have any semblance of health care reform in the country," Hanko said Thursday night. "What we have today in our health care system ... is a result of incremental changes. There has not been the will, politically or otherwise, to really enact the reform that the county needs."

And while President Barack Obama is serious at the federal level for reform, Hanko said that in Minnesota, with a severe state budget deficit, proposals offered by Gov. Tim Pawlenty could gut rural health care.

Hanko was the banquet speaker Thursday night at a Minnesota Agriculture and Rural Leadership banquet at the Hampton Inn & Suites, discussing "American Health Care Crisis: It's Not Just a Big City Problem."

"We have a cost in America for health care on a per capita basis somewhere between $7,000 and $8,000," Hanko said. "The closest country in the world to us in terms of cost is Switzerland ... it's between $3,000 and $4,000. It's half of what it costs us, and we unfortunately don't have the best outcomes."

The United States ranks 38th among nations in health measures that include infant mortality, maternal mortality, infection rates, and more, he said. "We're right ahead of Slovenia.

"So we can't be proud of what we have when we have this expense," Hanko added.

Among the reasons for the health care crisis is technology, as each hospital seeks high-cost equipment such as MRIs. That's not the case in rural areas, he said, adding that there are eight MRI companies along a short stretch on France Avenue in southwest Minneapolis, while there is only one from Bemidji to Winnipeg.

"We have to have the technology that people come to expect," he said. "A lot of folks call it a medical arms race. We're all trying to get the latest technology so we look as good as we possibly can."

Market forces don't work in health care, primarily because of what Hanko calls moral hazards -- people who have health insurance with small deductibles will go ahead with high-price testing and procedures without checking for cheaper alternatives or compare prices among providers.

That is changing, however, as people with employer-paid health care may find it cheaper to take a vacation and do a hip replacement in India than in the United States, he said.

Health care costs will rise because of demographics, he said, as the population ages and needs more emergency care and long-term care.

Physicians control 90 percent of costs, Hanko said, which drives up cost. "They are a little bit immune from some of the costs, an there is a moral hazard component to the care provided, because they know the patient won't be feeling the pinch directly."

The problems are multiplied for rural hospitals, Hanko said. It is especially tough to recruit physicians to rural communities, as many graduate with debt loads of $150,000 to $200,000, making them want to seek high-paid specialist jobs in the metro areas.

"Their expectations are of a much shorter day, much more time with family and what they label as a better quality of life," Hanko said, adding that rural physicians work long hours.

"We have a challenge in trying to break a metro view of rural America," he said. "Our best success is in recruiting folks who have come from here. We are very seldom able to recruit an urban person."

Very few new docs go into the primary care specialties -- family practice, internal medicine and pediatrics. "We haven't had a successful recruit in 2½ years," Hanko said. "So many of the family physicians we have went to medical school outside the United States and did residency and training in the United States."

A large problem is government payments to hospitals, especially to rural hospitals that have large percentages of public assistance patients, such as North Country Regional Hospital, he said. Care is subsidized at 80 cents for a $1 in costs.

Primary programs are Medicare, which pays for health services to people over age 65 or those with end-stage renal disease, and Medicaid, which pays for care to the medically needed. Minnesota adds programs for the destitute through General Assistance Medical Care and to the working poor through MinnesotaCare.

In Minnesota, public subsidy rates have been based on 2002 expenses, lowered by nearly 115 percent by three different Legislatures in reaction to state budget woes, he said.

"The state has solved past budget deficits, and the current proposal from Gov. Pawlenty, continues to disproportionately look to hospitals," he said. Lawmakers believe hospitals have the money to absorb the hits, but Hanko said two or three years ago, Minnesota hospitals had an average margin where revenues exceed expenses of about 3 percent. Today, it's minus 2.5 percent.

Current health care cuts proposed by Pawlenty would see NCRH receive $15 million less in reimbursements over the two-year state budget, Hanko said. It would reduce revenues/expenses by 9 percent.

Generally and specifically, Hanko offered his ideas for health care reform, as suggested by a national hospital organization:

E Health care coverage for all Americans, paid by all.

E A focus on wellness, especially curbing obesity and chronic avoidable diseases.

E Provide the most efficient, affordable care.

E Provide the highest quality care.

E Give the best information, through electronic medical records.

Joe Borgerding, a Belgrade dairy farmer, said too many people rely on their employer-paid health insurance with low deductibles to take care of their ills. As a self-employed farmer, he has a health savings account with a $5,000 deductible.

"We are more likely to see that our kids don't eat a bag of potato chips before bed or while watching television," he said. "We're going to make sure our kids aren't going to sit on the couch -- they're outside, we kick them out to get their exercise, because we are connected (to health care costs)."

The solution isn't to add more disconnected payers, he said, referring to universal health care. "It shouldn't be up to the taxpayers, through the government, to solve this disconnect that we have."

In Minnesota's provision of health care, Hanko offered reform as:

E Personal responsibility through wellness and prevention programs.

E Sacrifice, knowing that extending subsidized health care will cost taxpayers more, but curb high-end costs later.

E Make balanced cuts to achieve a state budget, and not disproportionate impacts on rural hospitals.

E Require a supermajority vote of the Legislature when cutting public subsidies that include federal matching dollars. A dollar cut from state funding loses a dollar of federal aid, leaving hospitals with a $2 loss.

E Reduce Medicaid benefits, with Hanko saying Minnesota offers "rich" benefits in areas such as elective surgeries that aren't medically necessary.

E The Health Care Access Fund, which is funded through a 2 percent provider tax, needs to be dedicated to health spending, and not sent to the General Fund to balance the budget.

E Raise taxes.

"I'm willing to be taxed more," said Hanko. "It's another way of saying I hope the state enhances revenue with the means it has, and that's a code for taxes."

"I think we are overtaxed," disagreed Kevin Geerdes of the Farm Credit Services in Fosston. "You might be willing to give more, but we're giving a lot right now. The penalization for going out and working hard and trying to achieve something is getting a little bit grievous."

Hanko, however, argued that the percentage of income for taxes is lower today than it was several generations ago.

MARL Program

MARL is a program of Southwest State University in Marshall and the University of Minnesota Extension Service which offers a two-year leadership development educational experience designed especially for rural agricultural and rural leaders.

The current class of 32 participants includes Kari Howe of Bemidji, regional state Department of Employment and Economic Development representative.

The group spent the last two days at Itasca State Park and touring the Red Lake Reservation's nutrition, forestry and commercial fishing operations, as well as seeing local loggers and a wood products plant.