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Saturday, February 20, 2010

Reviving the Health Care Debate Yet Again

While the DC snow event of 2010 has briefly put the brakes on the health care debate, Washington is slowly digging out. With the thaw comes the renewed debate as to where this all goes. The Health Care Summit is scheduled. Whether this forum will actually generate any real debate or product is doubtful. It is a political forum located in a city which is focused on politics and I see it as an opportunity for posturing more than anything else. 

The health care debacle has been years in the making and is based upon an essentially flawed structure which has been baked in at multiple levels. True reform cannot be imposed from above since the drivers of the so called "reform" are those with the largest vested interest in maintaining some form of the status quo. So what is the status quo?

Jeffrey Flier and David Goldhill wrote a nice OpEd piece in the WSJ yesterday which highlights what I believe is the key element of present system and culture which is driving us off the cliff.  Goldhill, both in the piece with Jeff Flier and an earlier piece in the Atlantic Monthly (which I blogged about earlier - How Health Care Killed my Father), highlight the key can't fix the problem until you have the correct diagnosis. They state:
 To establish an accurate diagnosis of our health system's flaws, we must examine the symptoms. Medicare is headed for bankruptcy. Its administrative payment system increases costs while suppressing innovation and responsiveness to medical needs. Medicaid delivers suboptimal care while driving state budgets into the red. 

Our system favors treatment—especially costly treatment—at the expense of other options. All payers, whether government agencies or private insurers, seem unable to rein in health-care costs. A majority of Americans with employer-based insurance are seeing their wages stagnate as compensation shifts to funding health benefits, even while they remain at risk if they become ill or change jobs. And ballooning costs are putting health insurance out of reach for an increasing number of people. 

While these symptoms are clear, discussion of their cause has been muddled in recent debates. Instead of blaming insurance companies, hospitals, physicians or government, we need to recognize that over the past 50 years we created incentives that have encouraged more expensive—rather than better—care. 

The two most important incentives are the tax advantage conferred on employer-based and low-deductible insurance and the administrative structure of Medicare and Medicaid. These incentives have helped to create a system that has left most Americans unaware of the enormous sums spent on their care. The government's willingness to meet rising costs with ever greater spending and subsidies has also undermined efforts to discipline costs or to seek alternative approaches to organizing care. 

The result is that neither extending the current system to more people nor maintaining the status quo are acceptable options. A household of average income with children sees roughly one quarter of its compensation fund health benefits, out-of-pocket expenses, and Medicare taxes. The share of seniors' income devoted to out-of-pocket health spending exceeds that borne prior to Medicare. The uninsured are only the tip of this iceberg. For most Americans, health costs crowd out other goods and threaten growth in living standards. A successful approach would aim to reform misplaced incentives.

There is a lot of information in these few brief paragraphs. In my opinion, the barriers to change reside in both the political culture of Washington and the culture of American medicine. The culture of medicine has embraced the aggressive use of more expensive interventions, whether diagnostic or therapeutic on the assumption that any incremental investment which may translate into better patient outcomes is an investment which is always worthwhile, no matter what the cost or limited benefit. We have been able to justify this on the basis of championing the welfare of our patients while simultaneously deriving financial benefit. Any legitimate and effective reform to rein in costs will ultimately come into direct conflict with this dominant culture which hides self interest beneath the veil of patient advocacy.

Perhaps I am being overly harsh upon my own profession since I do believe that most physicians do make decisions driven by what they perceive to be the best interests of their patients. At a micro level, each of the individual decisions is influenced by individual physicians acting as a “choice architect”. Behind their counseling is the assumption that patient resources (time and money), which are always limited and can be invested in any number of arenas, are always best invested in health care. 

Since health insurance has created what amounts to be a giant shell game and shields patients and doctors of the true flow of money, patients don’t actually realize that their commitment to money to any given medical investment takes away resources from something else. What appears to be the use of someone else’s money is ultimately their money. The insurance vehicle (whether public or private) just guarantees that is use will be opaque and likely wasteful.

The culture is Washington is also driven by self interest. Any solution which ultimately shuttles less money and power through Washington diminishes the influence of government. Although it may seem I am stating the obvious, it is worth stating. Those attracted to the political realm are those attracted to politics and they tend to be those who are believers in deploying political solutions to problems in general. Problems arise when one attempts to deploy political solutions to problems not amenable to political approaches. When government, at multiple levels, used political power to deploy a flawed insurance based model to dealing with health care payments, it appeared to address problems in the short term Furthermore, this resulted in increasing funds flow through government and with this increasing political power. For a while, everyone came out ahead. As long as the system was sustainable, patients got care, doctors got rich, and politicians got influence. Everyone was happy.

The problems have arisen because there are no brakes on the system. The incentives are aligned to drive unlimited and uncontrolled growth. None of the parties has incentives to limit their individual harvesting of benefits. If the public can continue to reap increasing use of the health care system without directly impacting their individual bottom lines, why not? Political agents are incentivized to facilitate this either through deficit spending or attempts at administrative price controls. They can buy votes with someone else’s money and the public does not actually see that they are being fleeced.

Physicians and health care systems, when placed in positions where they experience price pressure, have shown themselves to be remarkable adept are ramping up volume or exploiting high margin services. While savings may be identified in specific areas through specific initiatives, overall costs keep on rising. Cost controls initiatives begin to appear like the game of wack-a-mole and the mole always seems to win. The behavior of any given individual or business is not evil or criminal. They are simply acting as rational players and maximizing their returns in a system where the incentives are simply screwed up.

The question is how to fix the incentives and who can fix the incentives? The present system needs to be disrupted or it will bankrupt us and it is not likely to be disrupted by those entities which are presently entrenched.  More later...  

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