HSPH Professor Helps with Vermont Health Care Reform

December 07, 2011

The Harvard Crimson

William C. Hsiao is not an imposing man. He stands barely five feet eight inches tall and at age 75 affects an air of unpretentious expertise. He speaks slowly, in accented English—a remainder of his immigrant childhood—that expresses his ideas simply and logically, point by point.

Despite his approachability and clarity, the points that Hsiao, an economics professor at the Harvard School of Public Health, has chosen to study and argue are neither simple nor without controversy. Their ramifications stretch around the world, directly impacting millions of lives.

Hsiao is the world’s leading expert on single-payer health care systems. His economic expertise, accumulated through years of research and work in the private and public sectors, is much sought after by governments across the globe. To date, Hsiao has worked with nearly a dozen different countries, analyzing and implementing single-payer universal health care systems from places like Taiwan to South Africa.

“If I was a country or a state and I wanted to set up a public health care system, he’s the guy I would call,” said Robert J. Blendon, a professor of health policy and politics at the School of Public Health. “He’s just one of the best in the world.”

The current economic climate and demographic shifts around the globe have pushed Hsiao’s work to the forefront of international health policy. With governments around the world seeking to cut public expenditures and deal with growing and aging populations, the question of how to contain health care costs has become the topic of conversation in just about every capital. One way to approach that two-pronged crisis is to put in place a single-payer health care system, which provides health care to all citizens through a single, publicly-financed insurance fund with uniform coverage and rates.

Nearly two years after Congress passed the Patient Protection and Affordable Care Act, the prospect of putting in place a single-payer system in the United States is all but dead. Consequently, states have begun to take reform into their own hands.

In the spring of 2010, legislators in Vermont began laying the groundwork for a single-payer system and asked Hsiao to study possible health care reform options for the state. Hsiao’s analysis—part of the Program in Health Care Financing he directs at the School of Public Health—became the basis for House Bill 202, which made Vermont the first state to enact a single-payer health system when it was signed into law in the spring of 2011.

Hsiao’s work in Vermont is making some advocates of health care reform—and specifically of a single-payer model—hopeful that the reform effort in that state could serve as a model for other states, advancing an effort on the state level that faces little to no prospect of success on Capitol Hill.

THE TECHNOCRAT

Hsiao styles himself as a non-ideological technocrat. He isn’t out to prove the ideological superiority of a market-based model or a socialist system—he’s simply out to put in place the best, most efficient health care system possible. And that’s what makes his effort in Vermont so attractive for many health care reformers. While there is significant debate over exactly what such a system looks like, Hsiao’s research seeks to place itself above the ideological controversies of the health care reform debate.

Hsiao’s impact on the world of health care is unique. He is not a politician or a political advocate. Nor is his background primarily in health studies. Rather, Hsiao is trained as an actuary and political economist. Accordingly, his approach to health systems is economic—not moralistic—and largely apolitical.

As Hsiao explains it, his work is based on two fundamental economic dilemmas facing health systems: lack of universal coverage and the rapidly escalating cost of care. The first of these problems is easily fixed but only increases cost. The second is more systemic and can only be resolved with complete systemic reform, Hsiao says.

Single-payer health care, Hsiao’s area of expertise, is one such approach to systemic reform. Though Hsiao is a proponent of this method, he is careful not to label himself as an advocate. He does not lobby or even advise legislation without an invitation to do so, preferring to let his analysis speak for itself.

“I’m trying to do impartial study based on evidence. I will advocate the research results I have produced into policy, but I would not make it a human-rights issue,” said Hsiao. “I just argue it delivers better results.”

Hsiao’s mixed background in economics as well as politics has earned him an atypical footing in the world of health care. Unlike most health policy experts who focus on one aspect of reform, Hsiao considers the whole picture: not only the economics of a health system, but also a country’s politics, history, and culture.

“It’s not a pure economic approach. I consider the political conditions and political forces and what those politics will allow you to do. There are potential constraints, and I am trying to optimize under those constraints,” Hsiao said.

Because those constraints vary country to country and state to state, so does Hsiao’s work and the reforms he proposes. Unlike many private health care consultants, Hsiao does not believe in a one-size-fits-all “cookie cutter” solution.

“The starting points in each country are different. The core that’s the same is that, for you to achieve universal coverage, the government has to play a large role in the financing,” Hsiao said.

In each of the countries Hsiao has worked in—from Colombia to Poland—the government has already sanctioned reform and is prepared to foot the bill for such a system, removing a significant hurdle in many countries wanting to reform. That Hsiao can then tailor a reform plan to that government is only a matter of expertise and analysis, not a matter of politics.

“He combines cutting-edge technical knowledge with a keen political sensitivity and practical experience on how to get things done,” said Michael R. Reich, a professor of international health policy at the School of Public Health.

Hsiao did not begin his career in health policy or economics. He immigrated to the United States from China as an adolescent when his father became an economic adviser to the Chinese Nationalist Party’s United Nations delegation.

After graduating from Ohio Wesleyan University in 1959 with a degree in physics and mathematics, Hsiao earned certification as an actuary, securing his first job at the Connecticut General Life Insurance Company. But a few years after he began there, Hsiao found the work unfulfilling, feeling he was doing little good for the world.

He responded with a sharp change of course into the public sector and his first foray into health policy. By 1970, Hsiao was chief actuary of the Social Security Administration and a major player in U.S. health care. He did not hold the position for long but consulted for the organization in the 1970s to help rescue it from insolvency.

Work in government satisfied Hsiao, but he felt underqualified to be dealing with health policy on such a large scale. So, still in his 30s, Hsiao changed course again, beginning studies at Harvard. He earned a master’s degree in public administration in 1972 and a Ph.D. in economics in 1982, accepting a position at the School of Public Health.

Hsiao began studying single-payer health care systems when Taiwan commissioned him to review their system in the late 1980s. Since then he has worked on five continents and almost a dozen countries, as well as consulting for organizations like the World Bank and the World Health Organization.

Hsiao is currently conducting a nationwide health care survey in China through collaboration with seven Chinese universities and the support of UNICEF. In addition, through a partnership with the World Bank, Hsiao and his team are undertaking an experimental health financing project in 100 communities in rural China affecting nearly two million people.

In early December, Hsiao will travel to Malaysia to begin a three-year study there with a team of professors and analysts.

But despite his highly visible work outside of the classroom, Hsiao has remained an active teacher throughout his career, teaching three courses at the School of Public Health this fall.

THE VERMONT EXPERIMENT

During the debate over the 2010 Patient Protection and Affordable Care Act, the single-payer system was scrapped early on, and the reform effort shifted toward a bill that would significantly expand coverage without putting in place a federal single-payer option.

In the writing of the bill, the 2006 health care overhaul in Massachusetts, which also did not include a single-payer system, served as a model. Now, advocates for a single-payer system hope that Vermont can serve as a model during future efforts to reform the health care system on either the state or federal level. If so, Hsiao’s work will be on center stage.

Given the amount of gridlock and partisan rancor on Capitol Hill, Hsiao says that the only hope at widespread reform may be on the state level. Though reform in Vermont is still early in the implementation process, experts predict that if it succeeds, the state would likely become an example for other larger states to follow. California, Oregon, Pennsylvania, Minnesota, and Colorado have all approached Hsiao in recent months to solicit his help in possible reform efforts in their states.

“If Vermont is up and running and seems successful in the next five years, it could affect presidential agendas in 2016 and beyond,” Blendon said.

According to Hsiao, the problem is that while the Affordable Care act extended coverage to nearly all Americans, the inefficiencies latent in the system were left unchanged, allowing health care costs to continue to soar. The problem, he says, is a systemic one related to how Americans approach health services.

“Right now our whole structure is if you get sick I treat you and I get income. If you do not get sick, I don’t get paid. It’s not rocket science to see that is unsustainable,” Hsiao says.

In other words, doctors have an incentive to treat sick patients after the fact, rather than prevent sickness beforehand, a much less expensive approach.

“The mistake the United States made is that we poured so much money into health care and we postponed our reforms for so long, we’ve created very powerful stakeholders,” says Hsiao. “They are so invested, they make it so difficult, if not impossible, to reform the system.”

But if the health care overhaul in Vermont can show that it maintains the quality of care while at the same time reducing costs, advocates for a single-payer system hope that the state’s system can be implemented in other states or used like as a model for a federal overhaul akin to the way the Massachusetts system featured in the 2010 health care debate.

After it enters full operation in 2015, the Vermont law is estimated to save the state 25.3 percent annually compared to current health spending.

Critics of the law assert that the new system is likely to decrease the quality of care, lead to increased wait times, and reduce salaries in the health care industry, decreasing incentive for potential health care workers to enter the field.

But if Hsiao and his colleagues are able to present data after the law’s implementation that contradict these claims, the Vermont law could become a powerful counterargument to conservative claims against a single-payer system.

—Staff writer Nicholas P. Fandos can be reached at nicholasfandos@college.harvard.edu.