It is doubtful that few, if any, in the city of Houston are greater scholars of the health care reform bill than Dan Wolterman, president and CEO of the Memorial Hermann Healthcare System, the state's largest non-profit health care organization with more than 20,000 employees.

The 2,000-page bill sits behind his desk in the new tower at Memorial Hermann's Memorial City Medical Center. And, yes, he has read it all.

With more than 27 years experience in the health care industry, Wolterman is often invited to speak about the status of health care in America and health care reform before various local, regional and national groups and organizations. And the conversation inevitably moves to the Patient Protection and Affordable Care Act, signed into law in March 2011.

CultureMap sat down with Wolterman recently to discuss the current state of health care and his view of the changes coming in health insurance for all Americans. Following are excerpts from that conversation.

CultureMap: What is the basic problem with health care today?

Dan Wolterman: We need a more coordinated approach to how we deal with the uninsured and the poor who need access to health care in this community. We have a lot of resources being thrown at it. But it's uncoordinated. It's duplicative. And we're not getting value for the dollars we spend. I would love to see a coordinated community-wide effort to help deal with the problem of access to health care for the poor.

CM: The new health care bill is supposed to resolve that, isn't it?

DW: I don't believe that it's all going to change and here's the reason why. This is not a criticism of the bill. My role is to be apolitical so the bill is what it is. It does give access to health insurance but it's not necessarily going to be a panacea for Houston.

We lead the country in the uninsured, about 33 percent. Under the bill when it goes into play in 2014, it specifically excludes undocumented individuals. An undocumented individual cannot get insurance coverage either under this bill or even if he has the proceeds to go buy it himself. They are prohibited from obtaining it and insurance companies can't sell it to them.

CM: What does that mean for Houston?

DW: Most people say that of the 33 percent that are uninsured, anywhere from 12 to 17 percent is made up of the undocumented. So we believe that we are going to have 15 to 16 percent still uninsured at the end of the day, a number that the rest of the country won't have. The only access to care that they can then have is in our hospital emergency rooms.

And (with the new law) there's no payment because the federal government, in order to pay for the health insurance of the other Americans, is taking away what is called Disproportionate Share Hospital payments. That pays entities like Memorial Hermann that does so much charity care. They're taking those dollars away to insure these others.

Now in other parts of the country that don't have the undocumented problem, that's fine. But for us, we're still left with the undocumented and now I get no additional funds to help offset my costs, which we had been getting. It still didn't cover all the costs but it helped cover some of the costs. Now, we're going to be left without those safety net dollars but still having to take care of a very high percentage of the uninsured.

CM: But you still have to provide for the undocumented?

People say then just don't care for the undocumented. Well, federal law says that we have to serve everyone who comes to the emergency room. It's called EMTALA, the Emergency Medical Treatment and Active Labor Act and it requires hospitals and ambulance services to provide care to anyone needing emergency health care regardless of citizenship, legal status or ability to pay. So everybody knows that's out there. So we have to take care of them.

Even it we didn't, it becomes a public health hazard for this community. If individuals are walking around with a communicable disease and spreading it across the community because they have no access to care, no way to get medicine, then Houston is not going to be a healthy place and that will start to have a drag on our economic prosperity as a growing community.

We have to find a way to treat all individuals in this community in a systematic fashion. I don't want to get into the debate about immigration whether it's good or bad. To me they're human beings that have a health problem and we have a moral obligation to do something about it.

Then the real argument is who should pay for it. As a health care provider, I'm more interested in the care than in who should pay for it.

CM: So this is a challenging problem on many levels.

DW: The problem with the health care reform law also is that it really doesn't attack the fundamental problems driving the cost of health care in this country. It does not get at the issue of over-utilization of the system. By that I mean too many tests being ordered, too many hospitalizations.

And that's all being driven by our reimbursement system, which historically has been what is called fee-for-service. A doctor or a hospital doesn't get paid unless a patient comes in ill and you provide a service to them to help cure them and you get paid. You don't get paid for prevention and wellness.

The fee-for-service system has been around for a long time and as health care costs grew, payers, whether the government with Medicare or Medicaid or commercial insurers, wanted to ratchet down what they pay a doctor or a hospital. So when they ratchet that number down, all the doctors and hospitals do is add more volume.

I remind people that the cost of health care isn't the cost of what you pay a physician or a hospital. It's what you pay that's price times volume, that equals costs. People forget about the volume. It's the volume side that has driven up the cost of health care in this country. And this bill does does nothing to change the reimbursement system.

Fee-for-services is not a reimbursement system that you find in very many other countries. It's usually some kind of fixed payment per year per person system. The providers are then incentivized to keep you healthy and well because they are getting only a fixed amount and it's better to keep you healthy than wait for you to get sick and then take care of you.

CM: Are there other areas of concern with the health care reform law?

DW: There's a second issue of the bill — that there is no requirement for individual accountability for good health and that's been a perplexing problem. People say, well we can't put it in because this is America and people can do whatever you want. And I agree. This is America and people do have choices. They can choose to smoke. They can choose to abuse alcohol or be obese or whatever it may be. I'm not refuting that.

But I think there ought to be a consequence to that action. It's costing society and everyone else who is trying to do the right thing.

So whether it's an incentive for people to stay healthy and they get a big deduction off their insurance premium or there's a negative where you add to somebody's insurance cost, there ought to be some consequences to your individual health choices. We need to get our hands around that as a country.

CM: But at least everyone will now have health insurance and we can resolve those issues?

DW: There is a big problem with this bill in that the underlying premise is that more people will be insured. I'm not a believer in that personally. I've spoken all over the country on this. And there are now studies coming out. There was one that said 30 something percent of employers will drop health insurance in 2014.

And here's the reason why. In 2014, employers who have 50 or more employees have a mandate to offer insurance. It also says though that if you do not wish to offer your employees insurance then you can opt out and meet the law by paying a $2,000 penalty per employee per year. The problem with that is that today a current employer now pays about $12,000 for a family policy. Health economists say that by 2014 that number will probably be $14,000 or greater. So if it's costing you $12,000 today, or $14,000 down the road, and you can opt out at $2,000, why is an employer staying in?

And I've tested this. I spoke in Phoenix recently, where I spoke to 34 of the 50 largest employers in America. At the end of the day, I said to them "How many of you are actively thinking of dropping health insurance?" Every hand in the room went up. Not one single hand remained down.

When I asked why, they reinforced what my thoughts had been all along. One, "our shareholders are going to say that the dollars are too big. These are large international employers. And the gap difference is too big of a savings. Shareholders are going to demand that we do it."

Number two, "We are competing in a global economy today and the price of our product has embedded in it the high cost of health care in America for buying insurance. We're competing against China and Japan and Germany, who only have this amount of health care cost in their product. My product can't be priced competitively and we're losing market share. So now the shareholders are going to say, 'Wait a minute if you can go from $14,000 to $2,000 and use that savings to reduce the price of product and now you're competitive, you sell more products'."

(Wolterman used Memorial Hermann as an example. Heath care costs last year were $108 million. In 2014, under the opt-out plan, Memorial Hermann would be required to pay only $44 million in penalties by opting out. "I save $64 million that could go to health care services. It's a compelling argument against why offering health insurance," he said.)

CM: But aren't there some legal issues at the moment regarding the requirement that everyone get health insurance?

DW: Yes, the second mandate is the individual mandate which is under challenge by the court system. Let's assume it's constitutional. An employee goes to state health insurance exchange where he's offered insurance at the bronze, the silver, the gold or the platinum level. He's looking at a $6,000 to $7,000 spend for the bronze, but he can opt out too. The penalty is $98. He can opt out for $98.

For middle income Americans or even lower income Americans $6,000 or 7,000 is a big number. My premise is that most people will opt out. This is the biggest flaw of the bill.

CM: But what if someone opting out suffers a catastrophic illness or some such?

DW: It's not an issue. Say that I elect not to insure anyone in my family. We're healthy. My wife gets hit by an 18-wheeler and I learn that it's going to be a long, drawn-out recovery, a $1 million issue. The first thing I do is place a call to the state health insurance exchange and say I need insurance and I'll take the platinum policy, effective immediately. They cannot deny that because of this thing called pre-existing conditions. Under the bill no pre-existing condition can be a basis of denying insurance. So I can buy insurance anytime I need it.

So if you can get out for $98, and Americans will probably start getting knowledgeable about this, and no pre-existing conditions can keep you out and you can at any time opt in and opt out, why would you buy health insurance? So I think the uninsured will go up in the country.

I think employers will exit. I think individuals will not buy and then they will only buy when they need it. People say I'm wrong. They say that in Massachusetts, 98 percent of the people are insured. Yes, but that's not for the entire year. Data from insurance companies reveals that the average health policy is held 5.5 months. If you dig below that, they will tell you they buy it when they need it, when they have an event, and they drop it the moment the last bill is paid. That's why it's 5.5. months.

If you really want the uninsured problem to be fixed, you should have set the opt out penalties closer to the current cost of health care to make it really difficult for an employer to opt out or an employee to do it. But that's not what we have. And so the bill's got to be fixed . . . One way is to give a person only one time a year the ability to opt in or out of the system. You opt not to take it if you get ill during the year, you're rolling the dice, you can't come in.

We can't deny you at the beginning of the year for a pre-existing condition, we've got to insure you. But you made that decision, you could've bought health insurance, that's your decision we're not going to bail you out.

CM: This is disturbing information. What next?

DW: The bill's got to be fundamentally changed, to change the incentive. There are a lot of flaws in this bill.

I still believe in the fundamentals of the bill, but even Congress doesn't understand it. Most people haven't read it. Congress hasn't read it by and large and they don't know what's in it. I've studied it. Give speeches on it. There are some good things in the bill. I don't want to trash the bill. We need to insure everybody and give them access to health care.

The problem is that there are more fundamental flaws in this bill because it's a patchwork of different concepts and they just threw it all together and it just doesn't work.

CM: What's your final take on this?

DM: Let's don't get caught up in the health reform bill. Those of us who've been in the industry for a long time, whether it's a physician or a health care executive, the great majority will say in a moment of honesty that the system is broken. It has been broken for a long time. It needs transformational change.

The current system is unsustainable. It's unsustainable for the patient. They can't get access and they can't afford it. It's unsustainable for business. They can't afford it. And its unsustainable for the federal and state governments. It's causing them to run huge deficits. We have to change it and frankly the system can be changed to be better.

So the question is how and when and that's where the big debate is. No one can come to an agreement. Everybody has different ideas. I believe the provider community has to rise up and come up with a common system that we think is in the best interest of the patients and quality of health care and propose it. I think if we wait for the government to come up with a system, it will fail. But the providers are so mixed in the thinking on how to fix this that we haven't even come close to putting a solution out there.

CM: Where do you personally intend to go with this?

DW: As I approach 55 and start thinking about the latter days of my career, one of the things I'd like to go out as is as being one of the people who helped drive a transformation of the American health care system. One that's better for the patients, better for the providers and affordable and sustainable financially for the country. It's going to take courage, creativity and innovation. I'd like to be a part of that.

I dread the alternative. The alternative is on a collision with government controlled health care.