Mahan: major crash coming in healthcare

Published 12:00 am Sunday, August 15, 2004

Steve Mahan, CEO of Vaughan Regional Medical Center for the past year, thinks big. In fact he can see so much in his mind’s eye that it keeps him awake at night.

He’s deeply concerned about what he calls the coming “crash” of the American healthcare system, which he sees as inevitable – and sooner than many people expect.

Mahan, an engineer by training, fears that healthcare in the United States is heading for that major crash in the year 2010, when the first wave of 73 million baby boomers begins to retire.

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“Some are forecasting 1.5 wage-earners for every recipient by that time,” he said.

“We are already spending

19 percent of GDP on healthcare and predictions are that the percentage will increase to 30 percent by 2010 if nothing changes,” he said.

“If that is the case we will surely be constrained to have sufficient resources for defense, education and other critical areas,” he added.

The problems are so complex and of such long duration and politicians of both parties have so long refused to face up to what must be done to save the system that a crisis is inevitable, Mahan said.

“Only when we have a crisis – in five or six years when the funds will not be there to support the present system – will we finally act, and then I predict that we will continue to muddle through rather than deal with the matter head-on,” he said in a recent wide-ranging interview in his office. “On the other hand, we may (as a nation) rise to the occasion.”

“Unfortunately six years does not give us time to achieve a major overhaul of the system,” he said. “If we were interested in a fix, we should have started around 1980,” he said.

“Healthcare rationing will have to be instituted. There will be a base level of healthcare provided for all, but only those who can afford it will get more,” he predicted.

Mahan is a man of extensive experience in the healthcare field – more than 20 years –

most recently as a hospital administrator in Ocala, Fla.

Mahan is very modest about his knowledge of the overall healthcare situation and particular issues in the multicounty area served by Vaughan. “I do look ahead at the major forces at play in the system and am pretty good at abstracting the possible consequences of their interplay,” he said.

He was recently named to a task force in Montgomery that is charged with analyzing the situation and coming up with some recommendations for the Legislature in order to deal with the most urgent healthcare matter immediately facing the state – a $140 million shortfall in Medicaid funding in Fiscal Year 2006. One meeting of the group has already been held and another is scheduled for September, he said.

“What they want is a quick fix, to find some way to deal with the Medicaid gap that’s supposed to be coming in Fiscal Year 2006,” he said.

“The way to resolve it is to reduce spending or increase revenues or some combination of the two,” he said.

“One group wants to expand access to healthcare services, improve quality and cut costs. That’s simply not possible,” he said.

“A major problem is in the area of prevention. A large number of people do not have a primary care physician and rely on the emergency room for any and all treatment,” Mahan said.

While there are many people and institutions to blame, Mahan says the American public is largely responsible for the curiously complex healthcare system that has been allowed to develop in this country over the years. All the incentives are wrong, he said. None exist to move us toward the rational allocation of health care in relation to available resources through a competitive system.

“We spend more money per capita on healthcare than any other nation in the world, and we have less to show for it,” he said.

“Other nations – particularly in Western Europe – have made decisions on how much of the GDP they’re going to allocate to health care and have implemented them – especially Great Britain.

“I blame the American people for many of our current problems. “They want unlimited healthcare, anytime they want it and they do not want to pay for it,” he said.

“Most Americans, if they’re lucky enough to have health insurance, have their healthcare paid for by a third-party insurer – the government through Medicare

and Medicaid, a private health insurer or self-pay,” he said.

“The politicians in Washington and elsewhere with the power to fix the system know what the problems are, and have known for a long time. They may not be familiar with all the details, but they know, and they’re not doing anything to deal with the root problems,” he said.

“They’re not acting because there are very powerful interest groups such as the American Association of Retired Persons who have a major say in what is done,” he said.

“In answer to the basic question of why we do not have competition in the healthcare field that has been achieved in other industries and sectors one answer is that consumers do not have information to do comparative pricing.

“I, for example, cannot tell you what price will be charged to a consumer of healthcare services in this hospital because the hospital is only one of several providers who will bill the patient or the patient’s insurance company. For the same reason other healthcare providers are not able to provide this information basic to a competitive system. It prevents a healthcare consumer from shopping

for the most cost-effective healthcare. They simply do not have the information to do that,” he said.

“In sum, what will have to happen is to reduce benefits, shift the financial responsibility for healthcare to those who can afford it or index benefits based on ability to pay,” he said.