Health Reform Part III: Sound and Fury

Close your eyes and try to think of every health reform plan you've ever heard of – beginning with Hillary Clinton's plan about 15 years ago right up through Arnold Schwarzenegger's plan today.  Think left and right.  Think big and small.  Don't overlook the self-serving plans devised by hospital, insurance and drug company trade groups. And don't overlook Len Nichol's plan, which is supposed to be rooted in the Old and New Testaments and the Koran.

Yes, I know.  No one should have to do this on a full stomach.  So you may want to put this exercise aside for a few hours and then come back to it.  But if you really concentrate, at least three or four dozen plans should easily spring to mind.

In a previous alert, I argued there are three important questions to be asked of one and all:

            1. Does the plan force anyone – any patient, any doctor, any nurse, any hospital, any insurer, any employer, any government agency, any anybody anywhere – to choose between health care and other uses of money?

            2. Does the plan force any provider of care – any doctor, any nurse, any hospital, any anybody on the provider-side – to compete for patients based on price and/or quality of care?

            3. Does the plan allow patients now trapped in schemes that ration care by waiting – Medicaid, S-CHIP, Medicare, emergency room free care, VA system, CHAMPUS, Indian Health Service (Indian Health? yeah, why not?) – to have the same access to doctors, hospitals, clinics, etc., that privately insured patients have?

If the answer to the first question is "no," the plan will not control costs.  If the answer to the second question is "no," the plan will not improve quality.  If the answer to the third question is "no," the plan will not increase access to care. If the answer to the full set is "no, no and no" (and I believe in almost all cases it is "no, no and no"), the plan is hardly worth talking about.

Two hundred years from now, anthropologists will look back on our era and wonder why there was so much sound and fury over plans that from the get-go could not possibly succeed.  To help them out, I plan to entomb this Alert in a cornerstone somewhere.

Health care is a complex system.  It may be the most complex of any social system. Complex systems cannot be managed, planned, controlled, etc., from above.  If they are functional, it is only because the people down below face good incentives and feedback loops.  If 300 million potential patients make just 10 health care decisions every year, that's 3 billion decisions on the demand side of the market alone.  No one can manage, plan, control, etc., 3 billion decisions, to say nothing of the supply side of the market.  The problem with all of the plans you have been thinking about is that they all violate this principle.

How do we know if the participants in a complex system face good incentives and good feedback loops?  We can begin by asking whether they have the power to make things better.  Although the three questions above are very good questions, here are three that are even more fundamental:

            4. Does the plan allow doctors and patients to freely recontract, so that a better, higher-quality bundle of care can be provided for the same or less money?

            5. Does the plan allow providers to freely contract with each other to reduce costs or raise quality?

            6. Does the plan allow the insured and the insurers to freely recontract in order to change the boundaries between self-insurance and third-party insurance and arrive at more desirable allocations of risk?

The really disconcerting thing is not that the answer is "no, no and no" for all of the plans.  I'm sure you already anticipated that.  The really troublesome thing is that the answer is "no, no and no" for the current system.

Sorry if I ruined your day.

Comments (13)

Trackback URL | Comments RSS Feed

  1. Vijay Goel, M.D. says:

    These are some terrific points and I agree that it is sad that many of the “reforms” being trumpeted do not seem like long-term solutions.

    Your point on feedback loops are the most important of all– many plans create incremental improvements over today but ignore long-term consequences of those actions (think implications of Medicare fee schedules formed in the 60’s driving procedure-based specialty medicine today and taking talented physicians out of the Primary Care role due to its lack of incentives)

    It will be tough to create a healthcare system that adapts with change and rewards providers/systems that innovate along the lines of cost, quality, and service. But ultimately, in a world of exploding numbers of technical and scientific discoveries, we will need a robust, adaptable system to funnel those discoveries into high quality, readily accessible services for the US population.

    In my blog article on evaluating health systems, I discuss a few additional points for evaluating proposed plans:
    1) Separating “insurance” from chronic care and network contracting
    2) System is accountable and responsive to changing conditions over time (e.g., can’t just decide to raise tax rates when budgetary projections are off)
    3) System has means of optimizing for individual needs not met by the system (e.g., doesn’t include laws precluding private purchase of additional care like Canada)
    4) Creates opportunities for innovation

  2. Regina Herzlinger says:

    Love this one!

  3. Dr. Bob says:

    You are right on. Only a few caveats. Health care should never be based solely on competitive pricing. In primary care, huge numbers of FMGs will cut prices because they are still earning much more than they would at home. And the quality is not there. And how does one rate quality in the primary care arena? Specialty and procedure oriented care can be qualitated and quantitated. And primary care is going to disappear as a profession unless something is done about reimbursement. Fewer and fewer young physicians are going into primary care because of the inequities in compensation. There is no good way to look at quality for a “thinking doctor” vis a vis a “doing doctor.” For years, I would diagnose a cancer, a surgical emergency, a metabolic illness, get my $0-50 office visit, and the specialist would glean thousands for subsequent care.

    Yes, the free market is the only way to go after we solve the questions I have raised. Competitive pricing for everythign beyond the actual delivery of care; hospital charges, drug costs, etc can be well established, but no one has ever been able to define what the actual cost is per day for someone hospitalized. The variables are myriad, and must be included in any algorithm developed.

  4. Michael Parkinson says:

    I’m with you I’m afraid.

    Cost control is key and only more true transparency at the medical service level (not plan), turning the “benefit” back into dollars for the consumer to purchase with and creation of functioning market will do. Perhaps we could accelerate the buy-in to markets, transparency and consumer driven if we defined “up front” what ARE the more legitimate public sector functions of health care (as I believe). The dichotomous views of “all govt/public” or “all market/private” can’t get us there practically or politically.

    It’s entertaining but sad to watch battling generational ads – AHIP with seniors defending their Medicare Advantage plans versus kids who pitch for insurance coverage funded by the Robert Wood Johnson Foundation. August will be quite a month.

  5. Stormy Johnson says:

    Well done, John!

  6. Franklin Raines says:

    This is good.

  7. Betsey Urschel says:

    Thank you for this valuable information. You are doing a stellar Job!!!

  8. Stanley Feld says:

    This article is absolutely wonderful and on target. You are terrific.

  9. Mark Litow says:

    This is excellent. It made my day and didn’t ruin it. I intend to use this in thinking through possible reforms as guide posts; now all you have to do is work on the other 300 million or so.

  10. Robert Blandford says:

    I think my approach ( answers yes for all except question 1.

    I set up an account, funded in part by the government and in part by the individual, that can be spent only on health care, but in any way the individual wants. The only way that it can be spent other than on health care is to pass it on in the individual's estate when they die. I guess that's something.

    Seems to me that there has to be some restriction, otherwise more people will end up on charity. I want to keep the number of people on charity to a minimum so that they will not have the political power to make the charity (aka safety net) too generous.

  11. Ritutapan says:

    Thanks John, for the informative post. I can say your analysis is just amazing — especially the questions you are raising are really wonderful!! It made my day.

  12. Linda Gorman says:

    Thank you again for an informative post. However, I do wish people would stop quoting the Institute of Medicine’s estimate of medical errors.

    In 2000, Troyen A. Brennan of Boston’s Brigham and Women’s Hospital published a commentary in the New England Journal of Medicine. In it, he said that the results from the two studies of medical care errors that were the basis of the IOM report were misused. He was one of the investigators who did them. In his words, “neither study cited by the IOM as the source of data on the incidence of injuries due to medical care involved judgments by the physicians reviewing medical records about whether the injuries were caused by errors. Indeed, there is no evidence that such judgments can be made reliably.” He also characterized the IOM recommendations as “giv[ing] the impression that doctors and hospitals are doing very little about the problem of injuries caused by medical care…yet the evidence suggests that safety has improved, not deteriorated.”

    Another 2000 commentary by McDonald et al. in JAMA pointed out that the IOM figure of 98,000 deaths was extrapolated from the Harvard Medical Practice study. That study looked at 173 actual deaths in a 1984 hospital admissions database of 31,429 acutely ill patients. Though the study’s authors said only that adverse events may have contributed to the 173 deaths they identified, the IOM simply assumed that each individual died as the result of the errors and extrapolated the results to the entire population. McDonald also notes that the IOM also claimed support from another study that found medication errors caused 7,000 deaths in the United States in 1993. Fortunately, subsequent correspondence in the literature showed that this number was vastly overstated because deaths from drug abuse had been included in the medication error classification. A 2001 article by Hayward and Hofer revisited the topic, and found that the IOM wildly overstated error rates.

    A 2004 article in the CMJ by Baker et al. compared errors for hopsital patients in the Anglosphere. The U.S. had considerably lower error rates. While the best error rate is zero, the IOM statistic is being used in policy discussions to paint the U.S. system as deficient compared with those in which government exercises more control.

  13. […] by jccaldara on Jun 18 2009 | Health Care, PPC ***Linda Gorman debunks the Institute of Medicine numbers on medical errors, and gets a full post on for her […]