Checking In With Chip Kahn: ‘Potential for Hospitals and Our Patients To Be Big Winners’

Charles “Chip” Kahn III, president of the Federation of American Hospitals, has been a major player on the Washington health policy scene for nearly 25 years. As head of the lobbying group representing investor-owned hospitals, Kahn helped negotiate a deal in June among the hospital industry, the White House and the Senate Finance Committee. The hospital industry agreed to $155 billion in Medicare cuts over a decade as long as the reductions did not take effect until coverage of the uninsured occurred. But the industry is still fearful of President Barack Obama’s proposals of a public health plan option and an independent commission to have broad authority over Medicare spending.

After more than a decade of working for the House Ways and Means Health Subcommittee on Health, Kahn in 1991 joined the Health Insurance Association of America as executive vice president. In that role, he conceived the “Harry and Louise” ad that helped defeat President Bill Clinton’s reform efforts in 1994. He became president of the association in 1998. In 2001, he became president of the federation.

Kahn talked with KHN correspondent Phil Galewitz. Here are edited excerpts:

Q: How do you see the hospital industry faring in the overhaul legislation so far?

A: The hospitals have been for reform all along, so I see the potential for hospitals and our patients to be big winners in this process.

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Kahn was behind 1994’s famous “Harry and Louise” ad, which helped turn public sentiment against President Clinton’s health reform efforts.


Checking In With Chip Kahn: 'Potential for Hospitals and Our Patients To Be Big Winners'

Q: You made a deal with White House and Senate Finance Committee, but you still oppose parts of the House bills?

A: The public option we are uncomfortable with in the pure form in the House bill. The new payment system doesn’t help very much because it is still controlled by the Secretary of [Health and Human Services]. It creates an unlevel playing field in which hospitals are not going to have much option to get higher reimbursements than Medicare (which pays less than private insurers and reimburses hospitals about 80 percent to 90 percent of their costs).

We are not against the public option as an alternative to private insurance. We are just opposed to a public option that is controlled by the HHS secretary and pays any kind of rate that is based on Medicare (fees). We see that as counterproductive … We would prefer to negotiate with a private entity.

Q: So you are disappointed with the direction of the overhaul legislation?

A: We are not disappointed at all because we think the Senate Finance Committee is working on an alternative model that would be fine with us. The president will get his option for commercial, private insurance and we are comfortable with what we understand are the main features of the Finance Committee bill, which is to let us be able to negotiate with private (insurance plans.)

Q: Do you see anything in the health overhaul bills that will slow rising health costs?

A: I think near-term savings will be slight, but they do offer possibilities. Having health coverage for so many new people has two effects: It will increase the use of health services for people who now forgo services that they cannot afford. And, some more expensive care may be avoided by people seeking care earlier because they will have coverage. No one has calculated those effects, which I think will be very positive.

Q: Why do you oppose giving an independent commission broad power to change the Medicare payment system?

A: I think the idea is part of fuzzy thinking that makes the assumption that we have answers, that we have silver bullets and reasons why those silver bullets have not been applied is because someone lacks the political will. If we have a silver bullet, I would argue that it would be applied. We have a lot of general thinking about what may reduce the cost curve without arbitrarily cutting prices but we don’t have a lot of good science and experience to see what works.

Q: The well known “model health systems” such as Mayo Clinic and Cleveland Clinic say the answer to improving care and lowering costs is to move to a Medicare payment system that rewards (doctors and hospitals that coordinate an individual patient’s care for) quality and efficiency. Do you agree?

A: Integration of services is the direction we ought to be going in, but we have an un-integrated system for most Americans today and getting from Point A to Point B is not going to be easy. And the evidence when we get to Point B that it will always be less expensive is unproven at this point.

All those institutions (Mayo, Cleveland Clinic and Geisinger Health System in Pennsylvania) do wonderful things, but in inner-city LA or rural Iowa where independent doctors are in independent practices with freestanding hospitals, you are not going to get integration overnight. We should experiment with new payment system. But I think we have to be careful with our expectations.