Top of Mind: Charlie Baker, Extended Version

By James Burnett | Boston Magazine |

Boston editor James Burnett: What do you think is the one thing that could have the most impact on improving healthcare?

Charlie Baker:
Since you have this on [gesturing at recorder], I’m going to give you a long answer, and you can always shorten it.

If you want to change the healthcare system in the U.S., the place to start is the way Medicare pays for services. …The irony is while we don’t have a universal coverage system, we do have a single payer in the sense that everyone’s payment methodology ultimately gets converted into a Medicare equivalent. So if I choose to pay a group of hospitals and docs one way, they will take that way of paying them and they will convert it to a Medicare fee-for-service equivalent, to keep score. You know, “What am I getting paid as a percent of Medicare?” And Medicare favors technology, transactions, and volume. Medicare does not pay much at all for time—never has. And as a result we have a system that’s built around that basic operating model.

…[So] I would change the way Medicare pays. I would pay more for time, and less for technology. And I think because Medicare is such a bigfoot on the system overall, I think what would happen almost immediately is you would see the system that would be more oriented toward time and a little less oriented toward technology.

JB: How much does patient demand factor in?

CB: I think it’s one of these things that, you know, they sort of feed on one another. People, generally speaking, like the new-new thing. If you look at the way this works in most other countries, they put a little more emphasis on understanding more about how we apply what we already know, a little less emphasis on whatever the next new thing is.

JB: The changes in Medicare—that would have to be a federally mandated thing.

CB: The feds would have to do it, although to hear the new administration talk, to hear Senator [Judd] Gregg, Senator [Max] Baucus talk, to hear Senator [Ted] Kennedy talk, they all seem to be saying that one of the fundamental solutions to healthcare reform at the federal level is going to have to require a change in the way Medicare pays for services. And they’re all basically saying the same thing: More for time, less for technology.

JB: How big a deal is the $1.1 billion in the stimulus bill set aside for comparative effectiveness research?

CB: Well, it turned out to be a really big deal. …That seemed to have generated as much noise in Washington as almost anything else in the bill, which is really interesting to me because a) it’s not a lot of money, and b) it’s not a new idea. It’s a concept that’s been banging around in federal policy discussions for a long time, and it’s built on this notion that the feds have a tremendous stake in the cost of healthcare—we kind of all do—and maybe we ought to put some of that stake into studying what works and what doesn’t.

JB: And so do you favor it?

CB: I’m for it. Yeah, I think at the end of the day, we should do more of this kind of research, not less. I think the big debate on it ends up being about what’s the process we’re doing it, how do you allocate the funds, what’s the right way to organize it.

JB: Because then you get into the whole “rationing” argument.

CB: I don’t think it’s the rationing issue as much as it’s this argument about who do you want making a decision about care delivery, a bureaucrat or a doctor? Right? At the end of the day, if it does end up being the kind of thing where the bureaucrat makes the decision instead of a doctor, that’s a problem. In my mind the thought was always, You do the research the same way you do a lot of the basic research now: Feds fund it, research is done by research institutions, okay, published in peer-reviewed journals—I mean, I wouldn’t think the process would be that much different. And then the information becomes incorporated into the way it becomes available in the practicing community, and the practicing community incorporates it into the way they make decisions.

JB: Does it frustrate you that your organization is part of an industry where the trend line, at least in terms of public perception, is headed downward?

Sure! Yes! …I think people around here work pretty hard on trying to make the products that we offer and the services we provide both understandable and accessible and affordable. But I’m acutely aware that affordability has been a hard one to achieve over the course of the past four or five years. Now, the interesting thing is if you look at the trend data back to 1965 or so, it’s not that much different now than it was then—it was always growing at about 2 percent more than GDP on an annual basis. That’s been pretty much the number for 40 years. What’s different now is the cumulative impact of it. What it was doing when it was 5 or 6 percent of GDP, it wasn’t anywhere near as obvious to people as it is now that it’s 16 or 18 percent.

The other thing is, back then you didn’t have the same cost differential between what the public sector was paying for services and what the private sector was paying. You’re now in a situation where the private sector’s probably paying 40 percent more than the public sector’s paying for most services. And that has created a much greater awareness for those people who have purchased insurance from us that they’re carrying a pretty heavy load here for the Medicare program, the Medicaid program, and the uninsured population. Which they weren’t carrying 20 years ago, when Medicare and Medicaid were more or less paying their fair share of the puzzle.

JB: How optimistic is it that something significant will be done about healthcare reform in the next few years?

CB: You know, the big problem with healthcare reform has always been—and this is true whether you come at it from the right or the left—that your preferred alternative to getting what you want out of reform is the status quo. So unless you’re getting exactly what you’re looking for out of reform, most people fall back on the status quo as their second choice. So that’s made it really hard.

JB: The whole devil you know versus the devil you don’t…

Exactly! So that’s made it really hard for people to go all the way to the devil they don’t know, all right? But I would say that in the past few years, there’s a growing consensus in Washington that doing nothing is simply not financially sustainable. And therefore, the devil they don’t know, warts and all, is looking like a more viable alternative. And I think that’s going to lead to a much more intense and much more meaningful conversation than the one we’ve had previously.

What’s interesting is that it’s usually coverage that drives the debate around healthcare reform. This time I actually think cost is going to be right there with coverage in the larger picture. Now, that’s kind of the optimistic view, which is that you can’t solve the coverage problem if you don’t do something about the cost problem. You can’t really solve the cost problem if you’re not serious about it, so you actually have to do some things that disrupt the system—probably for people like me as much as anybody else. The pessimist in me thinks that we’ll do a whole lot of things that just sort of push the problem off, and actually makes it worse down the road then it is now. And, you know, it’s anybody’s guess as to which one we end up with….

JB: Did the debate change for your industry? If you listen to Michael Moore, the insurers are the “bad guys.”

CB: As a general rule…I think we insurers for the most part are always going to have a certain amount of negativity attached to us. But that’s because for all intents and purposes, we’re the ones who are told to stuff 50 pounds of stuff in a 20 pound bag. The intermediary is always the bad guy in a situation like this. …We’re the ones who are supposed to make sense of patient demand, new technologies, new capabilities, government underfunding, and employer expectations. You sort of put that all together and it’s a big, hairy ball of twine. And I think being the “bad guy,” if you want to put it like that, is almost unavoidable.

But I get enough positivity from the letters and the e-mail and the phone calls and the people who stop me on the street and at business meetings saying, “Your plan is the greatest! Let me tell you my story,” that I share with everybody who works here, that I don’t have any trouble getting out of bed in the morning. There are a lot of people who depend on us and I think we deliver on that, day in and day out. …I feel okay about our place.

JB: How has this job changed the way you come at healthcare politically?

CB: …I didn’t really appreciate how incredibly powerful the influence of Medicare is on the basic day-to-day operations of what most people think of as traditional healthcare until I came here and started to see how it played out. It was amazing to me. …So that would be number one—how incredibly important Medicare is to the whole ship in ways I never understood. I’m not even sure if Washington understands how influential Medicare is on everything else.

The second thing would be a much better understanding of the difference between managing a public program, where you have beneficiaries for whom you’re the sole solution available, and being in a competitive market. …If we don’t prove our worth to [our customers and members] every single day, they may not come back. Which creates a sense of urgency around what you’re up to and how you make decisions that’s just different.

In the public sector, you’re in the news every day. Everything you’re doing is open-book. And you just get used to the fact that the media’s gonna write about what you’re doing. It just is, okay? But when you’re in the private sector, if you show up in the media, it’s usually bad news. And it’s usually worrisome for your customers, and troubling for your employees, and disruptive in a way that when you’re in the public sector, it’s just part of the game. That was really interesting for me. I was completely desensitized to the notion that every day was potentially a front-page story. It actually made me less inclined to get overly worked up when we were making a lot of bad news here in the late ’90s, when we were going through the turnaround and all the rest. But I did get a far deeper appreciation for how disruptive and troubling that was to customers and people around here.

…That was one reason we started sending out e-mails, every Friday, to staff. Every Friday: “Here’s what’s going on, here’s what’s gonna happen next week, here’s what’s gonna happen the week after, here’s what we’re gonna do about this, that, and the other thing.” Part of my objective was to try and stay ahead of the news cycle, but part of it was also to give people something to say on the soccer field and in the grocery store to their spouse when they went home at night. And to keep people from being just constantly surprised by what was coming out in the news.

JB: Let’s go back to how the job has affected the way you look at it politically. The second part of your answer, you kind of get to that idea about the market keeping you honest. People have options.

People have options!

The first part—the market’s so rigged…

CB: “Rigged” would be your word and not mine.

Um, slanted? Influenced?

CB: Influenced! Definitely influenced.

JB: But it can’t adjust, because one dominant player is so influential.

I can say with virtual certainty, day in and day out, I know more what’s on the minds of my members at Harvard Pilgrim, and our customers, than Medicare has a chance of knowing. We collect daily data on who’s calling us, what they’re calling us about, with an account on the member’s side. We know what issues are hot, why they’re hot, when they’re hot, and we’re there to deal with them. We spent a lot of time talking to our members on the account design, the plan design on our products and messaging and all the rest. It may not always look like it, but they have a tremendous amount of input into what we say and how we say what we say. Obviously the one thing that Medicare has that we don’t is just unbelievable scale and the power of the federal government.

…I don’t think there’s clear consensus in this country politically between the notion of a mixed model versus all the way one way or the other. There’s tremendous ambivalence, based on every survey I’ve ever seen. Do people want no choice? Of course not—people want choices. Do they want more choices, so many choices that they’re confused by their choices? Probably not. Do they want Medicare for all? At some level, yeah, until you actually explain to them what that means, and then it doesn’t look so good anymore. Do they want private plans providing all the services? No. To some extent, part of it is that while people might not feel great about us, their general view about government overall isn’t all that high, either.

JB: The merger between Mass General and the Brigham—a net positive for the people of Massachusetts?

CB: I think it depends upon how you want to define the objectives of the merger. …If you think back to 1993 or whenever it was that it took place, the big fear was that if you had all these big hospitals in downtown Boston slugging it out, you would create a medical arms race where everybody would have to do everything and be at every kind of service. And that would be wildly expensive, and not remotely efficient or effective. …People’s big fear was that if they all stayed as independents, that you’d have a proton beam machine in every provider organization, which didn’t make any sense at all.

[The merger] probably helped from a research point of view, in terms of applying for accessing and securing federal grants. It probably helped [boost] presence in the national stage. …And it certainly created an organization that had the capacity to build a lot of clinical information technology, which over the course of the next few years is supposed to produce some significant improvements in care quality and cost-effectiveness. But that’s kind of a potential opportunity at this point.

That’s the promise, I guess, of the merger, which was that eventually they would get around to being able to clinically integrate downtown services, community services, and wrap it all up into organized, integrated delivery system.

JB: Because of the expansion into other markets, not just downtown or in Boston proper, you have a proton beam race happening in a different way…

CB: That’s a real concern, and one that’s been expressed by a lot of people, not just me.

There was a study that was done after Harvard Pilgrim got into trouble. The state community healthcare commission…did a big analytic of what had happened to healthcare costs, 2000 through 2001, and one of the conclusions was that healthcare costs have risen at a pretty steady clip through the 1990s and the first couple of years of this decade. So the question was, Why is everybody so financially in trouble if, in fact, the growth rate at that point was 6 or 7 percent a year, and inflation was 2 or 3 percent? The argument was, it’s growing at twice the rate of inflation, so why is everybody so worried about this?

And what we figured out, when everybody dug into the data, was that we were starting to replace low-cost community capacity with high-cost, mostly downtown capacity. And so the question became, Is that a good thing or a bad thing from the public policy point of view? The low-cost folks can deliver the same quality as the high-cost folks—should there be some kind of policy to preserve some of that?

…That trend basically continued, and it continued throughout most of the course of the past six or seven years. And proponents [of expanding high-cost capacity] would say you’re going to end up with a better-capitalized and a more integrated care-delivery model at the than you would have had before. Others would say that you’re going to have a more expensive system that doesn’t necessarily deliver a level of care that’s any better then what was there previously. I think the jury’s out on which one is right, but I certainly have sympathy for the latter group when they talk about this issue, because intuitively, it makes sense to me.

JB: In general, given the financial climate, is there a sense that what has been accomplished by Massachusetts’ healthcare reform will endure?

CB: I said from the beginning that I thought the test for this over the long term would not be whether or not we could get people enrolled. It would be whether we could sustain the costs—whether we could make it affordable to the government and to the participants over time. That’s still the $64,000 question, probably more like the $64 million question, and on that one I think we still have our work cut out for us, bigtime.

JB: What’s your family hospital?

We’ve been Harvard Vanguard patients since my wife and I were first married. Our kids go to the same pediatrician that they started seeing when the one who’s now 18 was a year old, at the Kenmore center. And I go to the same doc and so does my wife—hers at Post Office Square and mine at the Kenmore center. All three of our kids were born at Beth Israel. …That’s not an impertinent question.

Going back to a Globe piece from 1998…

That was a long time ago!

Let’s see if you remember this, from the subhead: “Charlie Baker may be the smartest man in state government. Could that be why he turned down the chance to run for lieutenant governor?” You said in the same piece that “if I didn’t bite now, why would I ever?” So what are we to make of the speculation that has you considering a run for governor next year?

CB: By the way, there are a lot of women who worked with me in state government who pointed out that the story said I was the smartest man in state government.

Fundamentally what it comes down to is: Do you actually think you can make a difference? … We’re a state that’s been losing population for a long time. We’re a very expensive place to live and do business. We’ve got all kinds of issues and problems that look a lot like other states only more so, because of our cost structure and our cost of housing and a few other things like that. So the question I’ve always struggled with is, Can I bring something to the table that’s going to help with any of that? Before you even get to the question of, you know, could you actually win, you gotta start with whether you think you could actually get anything done. And in some ways, that’s a hard question to answer. Because it’s not obvious. It’s not clear.

JB: How many times do you think you could consider running before actually running becomes problematic?

CB: The way I think about it is a little different, which is, if you get into a race, the quality of your ideas and your commitment to the race are going to demonstrate to people, whenever you do it, whether you’re serious about it or not. And I think that’s not time-bound.

JB: So it’s not a now-or-never calculation, for you.

CB: I don’t think so. Let’s put it this way: I cannot think of an industry in which more people have been down, out, gone, then come back and succeeded than politics. I just finished reading A Prayer for the City, which is this unbelievably cool book about the first term of Ed Rendell, who was basically viewed as a has-been when he decided to run for mayor of Philadelphia, back in late ’80s, maybe. Honest to God, it’s one of those books, if you pick it up and start it, don’t plan to put it down, because it’s beautifully written.

 JB: What’s your decision-making process like?

CB: I’m a talk-to-a-lot-of-people-and-go-with-my-gut person.

JB: Is there a timeline on when you need to have the “do I think I can make a difference” question answered?

CB: Yeah.

JB: I ask because this issue comes out in April.

CB: You won’t be behind the news.

JB: So your decision is still months away.

CB: Yep.

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