What Detroit’s bankruptcy means for patients

What Detroits bankruptcy means for patients

On July 18th 2013, the city of Detroit filed for bankruptcy. Early estimates size up Detroit’s as the biggest in history with composite debt figures approaching the ballpark of $20 billion. Through the eyes of a clinician why should we care and what does this mean for our practices.

Detroit is dying.

While filing for Chapter 9 bankruptcy may give the city an extra lifeline, it is by no means a cure. Rather the bankruptcy filing seems more like a palliative treatment to perhaps delay the inevitable. Any physicians practicing in the Greater Detroit Area over the past several decades can confirm that too often the city’s social and economic challenges permeate into the clinic. Likely, the toxic fallout following the reconstitution of the city’s debt, will leave many without the ability to pay for expensive treatments or the desire to invest in preventive services due to significantly shrunken retirement plans.

In addition, many Detroit public employees may lose their current health insurance coverage. Upon renegotiations of employee contracts, to further reduce costs, Detroit may follow the model of Virginia and several other states who have mandated that all part-time employees work no more than 29 hours per week, thus dodging the federal requirement of providing health insurance for all employees working more than 30 hours. Whatever corrective course of action Detroit takes, its bankruptcy will leave many patients on a tighter budget, which will have a strongly negative impact on overall health and will likely have the unintended consequences of raising healthcare costs, putting the same strain on the city that landed them in this mess.

Though those who lose insurance coverage will be able to purchase insurance on the online health insurance exchange set up as a part of the Affordable Care Act, there is an important caveat. The online insurance exchanges were designed with the assumption that enrollment from many young and healthy individuals would help insurance companies develop favorable risk pools to hold down premium costs. The concern is that a mass migration of patients onto the exchange could trigger an imbalance in those risk pools and increase in insurance plan prices beyond what is affordable, especially if too many sick individuals are dropped from their government issued plans.

In the face of these all these maladies, there is an opportunity to change the course of Detroit’s fate. First, let’s take a quick look at some numbers:

  • For fiscal year 2013, the Detroit General Fund is expected to make payments of over $200 million in healthcare benefits with projected FY2014 numbers rounding off at $263 million.
  • The city’s current Other Post-Employment Benefits (OPEB) obligation is estimated to be in excess of $5.7 billion (the majority of which covers retiree medical costs). This is one of the single biggest components contributing to the city’s debt problem.
  • The city’s retiree pool using government funds to subsidize their healthcare currently outnumbers active employees paying into the system by an over 2 to 1 margin, and that figure continues to grow.

Based on these figures, I think it’s safe to say that it’s impossible to exorcise the city’s health care spending and its current fiscal debacle. Current empirical data makes it almost impossible to answer the question of which came first—was poor public health a result of the financial instability or was it poor health that drove the financial instability. My guess is it’s somewhere in the middle, but there’s an interesting thing about feedback loops—they work both ways. Driving down Detroit health care costs just may be the sustainable solution that the city needs to put it on track to financial solvency. Currently, the best way to tackle these rising health care costs is working on managing and preventing chronic conditions.

In 2010, the Center of Healthcare Research & Transformation released a report that showed chronic conditions one of the major drivers of the high healthcare cost. Data from Blue Cross Blue Shield of Michigan showed that the 35% of its patients with at least one chronic condition accounted for more than 64% of its total spending. Specifically, patients with no chronic conditions cost an average of $2,788 per year, patients with three or more chronic conditions cost an average of $27,763 per year­. Partnering up with patients by helping them to embrace healthy habits and reducing barriers to compliance can improve community well-being and decrease spending on chronic illnesses. Some examples include emphasizing healthy eating habits to young children coming in for routine physicals, which can help curb skyrocketing obesity rates. Also, by lowering co-payments for diabetes medications, Detroit can make it easier for diabetics to comply with their care by making it affordable to do so.

Further, if the city health officials of Detroit can improve their preventive medicine programs and make people healthier without driving up costs, they can provide the most crucial resource to jumpstart any ailing economy: a healthy workforce. Several studies have shown that well-integrated and supported health enhancement initiatives have been shown to improve health status and economic productivity. Burton et al demonstrated that workers who reduce their health risks generally see an improvement in productivity whereas those that increase their health risks or remained the same showed decreased productivity. In addition, Yen et al demonstrated that a third of companies’ costs in medical, pharmacy, and absenteeism was associated with increased health risks. Thus, improving the health status of a workforce not only controls costs but also generates increases in productivity, which could help Detroit climb out of the economic rut that they are in.

In his 2012 commencement address to Syracuse University, famous screenplay writer Aaron Sorkin told the story of his college roommate, Chris, who would mock Sorkin for subscribing to Time and Newsweek magazines. As a fellow student of the theater, Chris believed Sorkin was wasting his time with what seemed to be a strange idiosyncratic interest global politics and news. However, through those magazine subscriptions, Sorkin remembers reading about a strange new illness that was ravaging the country and the African subcontinent, they were calling it Acquired Immunodeficiency Syndrome (AIDS). He lost touch with Chris after college, but after several years, he ran into a mutual friend who informed him that Chris had passed away as a result of complications from AIDS. Sorkin remarked, “Am I saying that Chris would be alive today if only he’d read Newsweek? Of course not. But it seems to me that more and more we’ve come to expect less and less of each other, and that’s got to change. Your friends, your family, this school expect more of you than vocational success. Don’t ever forget that you are a citizen of this world.”

Though I haven’t discussed global issues in this post, Sorkin’s message still resonates. Detroit’s problem is not a local phenomenon. It is the same problem that afflicts our communities, our towns, and our states. Physicians practicing in most metropolitan centers in the U.S. face similar hurdles as those in Detroit, if not greater. Policymakers can no longer remain agnostic to the deeply interwoven tapestry of social health, economic health, and physical health. Detroit’s bankruptcy is not strictly an economic problem, and it need not be solved by simply economic means.

Birju Rao is a medical student.

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  • Guest.

    The Washington Examiner put together a list of the 10 reasons that Detroit went bankrupt.

    1.Detroit’s population has shrunk 60% in 60 years
    2.Detroit has the highest unemployment rate of any major US city
    3.Detroit has $18 billion in general obligation debt
    4.Public employee pensions obligations are huge
    5.Too many public workers (1 for every 55 residents)
    6.Poor pension management (e.g., trips to Hawaii)
    7.Former mayor convicted of 24 felonies (uh-oh)
    8.Public service is failing; 40% of the street lights don’t work
    9.Crime is up; it takes 58 min for police to respond to calls
    10.Entire city is hallowing out. 78,000 abandoned buildings

    • Guest

      Those aren’t all REASONS Detroit went bankrupt. A lot of those are the RESULT of Detroit being broke.

      The reason Detroit went bankrupt is easy: Democrats, Corruption, and Entitlement.

      • Anthony D

        And Liberals.

      • bill10526

        New York City is a “Democratic” town despite its electing Republican mayors in recent years. Yet New York recovered from the depths of social chaos in 1975 to great success today.

        Without the concentration of automobile industry facilities, there is no reason why Detroit should be a major American City. Detroit should be assisted in its downsizing. I suggest buying land for state parks and wetlands.

        • Sandra K.

          In the past, when boom-towns ceased to be viable places to live and earn enough to keep your family on, everyone just moved. That’s where we got “ghost towns”. I agree that maybe we just need to accept that Detroit is a city whose time has come and gone. It’s time for everyone to move on. Imagine what America would be like if, in those early days, the government forced productive citizens in wealth-producing towns and cities to subsidize all residents of ghost towns to just stay put and never move on to greener pastures. We probably would have never expanded as a country.

    • Paul

      Numbers 1, 2, 8, 9, and 10 are the result of policies that also lead to bankruptcy.

      Numbers 3 and 4 are unrealistic economic planning on the part of incompetent elected and appointed officials.

      Number 5 is the result of ridiculous public sector job benefits, contributing to number 4, and subsequently 3.

      Numbers 6 and 7 are simply criminal behavior by officials who thought themselves untouchable.

      Bottom line, bad irresponsible stewardship by public officials who never took a long view of Detroit’s future, but instead promised everything to anyone who votes them back in, while they skimmed off the top. Now the chickens have come home to roost.

      Which political party and what political ideology has governed Detroit? God help us if the same idiots start running healthcare.

  • Guest

    Well, since Obamacare is so awesome, it’s really a blessing that they’ll all be on Obamacare rather than the evil system of the past.

    It’ll make them healthier, and save them money, and benefit the whole country. They should be rejoicing.

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