Is Gentrification Good for the Poor?
My first trip to Boulder and the CU campus was in 1981. I was fortunate enough to get onto the floor of Folsom Field for two fabulous Rolling Stones shows. I was impressed with the beauty of the Boulder foothills and the CU campus on that warm October weekend. However, actually attending college was the furthest thing from my mind.
That was a long time ago, but if it wasn’t for Mick and Keith, I wouldn’t be involved in reforming health care in Colorado. I didn’t study health care economics in Boulder, but less than a decade after CU, my economics background has put me right on the cutting edge of health care reform in Colorado.
In 1991 I was nearing the completion of my undergraduate degree at University of California, Santa Barbara, studying economics without math. I mistakenly thought it would be easier. My adviser at the time recommended taking a couple of upper division classes in environmental economics. In my naïveté, I viewed this field as a fledgling new application of economic theory. There were many articles to read, but I specifically remember reading two on water economics. At that time, they were decades old and I thought, “What a revolutionary professor he had to have been to be researching water economics at that early date.” I felt a connection to CU-Boulder when I saw that Professor Charles Howe was a professor of economics at that campus.
I was the first in my family to get a college degree after graduating from UCSB. The sense of accomplishment was satisfying, and I thought it was enough. When it wasn’t, graduate school became the next item on my list to try and I knew it had to be CU-Boulder. I wanted to meet Professor Howe. Luckily, I became his teaching assistant for one class and he was one of my advisors for my master’s thesis. Mission accomplished. After a brief detour in the PhD program, I realized I was more of an applied data nerd than a theoretical one. I was excited to look for work where there would be lots of data.
I found it when I joined the Colorado Department of Health Care Policy and Financing (HCPF) in June of 1999. The department is responsible for the administration of the Medicaid and Children’s Basic Health Plan programs as well as others, covering the health care needs of over 600,000 Colorado lives with an annual budget of $3.6 billion. I found a home with over 20 million rows of annual data and only one other recent CUBoulder economics graduate student to analyze it. Since then, we’ve added a number of people out of all facets of the CU economics department; folks like Ann Dueñas, Chris Underwood, David Eastman, Ling Cui, Joshua Block, Luke Rodgers, Kristina Short, Jessica Wagner, Erika Yoshino, Kara Southwell, Tania Berg, and a number of people from the CU Denver economics department. We’ve also contracted with Miles Light and Richard Wobbekind from the Business Research Division, and we’re always looking for new, qualified talent.
I am proud to be a part of the enormous progress the department has made in the last decade in its analytical understanding of the population it serves and to be part of the 25 other department colleagues with an economics background. The department has discovered that developing good policy requires people with a strong analytical background, something CU-Boulder has historically provided to us.
My first three years at HCPF were spent embroiled in managed care lawsuits, which focused on the calculation of rates and whether managed care programs (Health Maintenance Organizations) were more cost effective than fee-for-service (pay as you go without much oversight) programs. During that time, I learned the difficulties in accurately analyzing health care data. I witnessed the ease and legitimacy with which different actuaries arrived at different results, and started to wonder if managed care really did lower health care costs in publicly funded insurance markets where low reimbursement rates are prevalent. How does public insurance fit in to the overall health care picture? And what is the most cost effective way to deliver it?
There are no easy answers to the questions; in fact, there is a healthy national debate on the subject. For instance, the state currently provides public health insurance for approximately 12 percent of insured Coloradans and spends approximately 12 percent of the estimated cost of health care in Colorado. With this statistic, it appears that the state is bearing an adequate share of health care costs in Colorado. However, without an understanding FACULTY NOTES (cont.) of what the other 88 percent of health care costs are spent on, or who they are spent on, it is difficult to ascertain what efficiencies can be gained by integrating or transforming health care without causing unwanted cost shifting or other negative externalities.
Over the next few years, it will become imperative to better understand how the private and public insurance markets interact and overlap as individual states grapple with health care reform options. Understanding how to minimize the cost shift from the public health insurance market to the private insurance market plays a central role in transforming health care. A better understanding of the interaction between the public and private insurance markets may allow for a more efficient allocation of resources and therefore increase coverage and improve outcomes without increasing total health care costs.
For example, a common philosophy for an efficient health care system follows the basic tenets of economics and business with some high-level health care reform concepts:
Mandatory coverage: this eliminates the free rider effect where the healthy uninsured population (who could afford some insurance coverage) becomes ill and uses emergency department services or other expensive treatments rather than having access to preventive care all along. This also increases the critical mass for some demographic groups and widens the risk pool. With mandatory coverage, populations with differing levels of risk can be grouped. Competition among providers and health care plans: where incentives are used for good performance or outcomes. With multiple actors in a competitive market place, value and efficiencies are gained.
Basic coverage: a defined basic health care benefit for all. Personal contribution would be based on income, where low- or no-incomes receive care similar to the Medicaid model, but extra services cost extra, with a sliding scale based on income. Discretionary health care needs should be handled differently. Buyins should be allowable based on income level.
Delivery model: a variety of options from full risk bearing plans to non-risk, managed feefor-service with incentives for good outcomes and performance. Some options may not be viable in certain geographic regions in Colorado.
Employer sponsored insurance: create standards for employer contributions based on some metric that takes employee size and revenue into account. Clearinghouse: some mechanism to ensure information on each competitive plan or provider is standardized, comparable, and understandable.
Clearinghouse: some mechanism to ensure information on each competitive plan or provider is standardized, comparable, and understandable.
The idea is to create an equitable, value-based, and competitive system where resources are allocated as efficiently as possible. However, some of the points above may not be attainable at the state level and can only be accomplished when there is a national solution.
For me, characteristics of an efficient health care system include perfect information among private and public health insurance participants, where costs are not shifted from the public to the private market, where health records are easily accessible to all health care providers, where good performance and outcomes are rewarded, and where federal financial participation is maximized. An important facet of an efficient health care system, where value and coverage are maximized, involves a symbiotic relationship between the publicly funded and private health care insurance markets.
Every time there is a new policy issue, new reimbursement methodology, or any other idea related to publicly funded health care, the task of determining if it is a reasonable financial investment for the state of Colorado comes through my division. There isn’t time for years of study or anonymous peer review. We get quick turnarounds and our analysis leads policy discussion the very next day. If it wasn’t for the training the majority of my staff has received through the economics programs in the CU system, I don’t think people would be looking at our department as a leader in Colorado health care reform. Every day, I’m reminded how important good data analysis is in producing good policy.
Today is an exciting time to be a part of HCPF. The department’s involvement with Colorado Regional Health Information Organization (CORHIO) and the newly created Center for Improving Value in Health Care (CIVIC) has allowed me to expand on my interests—understanding health care efficiencies and promoting the use of standardized electronic health care data. I know health care economists will play a central role in finding a solution. My training at CU-Boulder has allowed for quality analysis, which in turn has led me to this exciting place of health care reform where data is plentiful, and market forces are at work to understand and create effective and efficient systems to serve indigent Coloradans. To consistently accomplish these goals, the department is always looking for some good data nerds. Give me a call!
John Bartholomew is currently the chief financial officer at the Colorado Department of Health Care Policy and Financing and the recipient of the 2008 Colorado Health Foundation Fellowship. He began his career at the department as an entry level statistical analyst after graduating from CU-Boulder with a master’s degree in economics in 1999. John has also served on the board of the Denver Association of Business Economists since 2000. He can be reached at 303-866-2854 and john.bartholomew@state.co.us.