Q & A on State Health Reform

Everyone agrees. Republicans and Democrats.  Conservative and liberals. Newt and Hillary.  Government should force doctors and hospitals to clean up their act by: adopting electronic medical records, practicing evidence-based medicine, coordinating care, integrating care, and doing numerous other things that all right-thinking health policy analysts have determined they should do.  Trouble is, what everybody knows turns out not to be true.

In the latest three-year, $360 million experiment to improve chronic care, it appears Medicare is going to save not one dime.  (See the New York Times story).

All of which is an illustration of Goodman’s Law of Managed Care, which states: (a) 30% of all health care spending is wasted, but (b) managed care can eliminate half the waste at most, and (c) it costs 15% to eliminate 15% of waste, thus (d) netting the payers zero profit for their efforts.

Without invoking the law, Linda Gorman and Alan Jensen provide a rich smorgasbord of confirming evidence in a new NCPA study.  They conclude:

  • The evidence is mixed on electronic medical records and there are significant concerns about record availability, accuracy and security.
  • Evidence-based medicine is likely to evolve into a means of controlling costs by denying care.
  • Experiments with care coordination have lowered costs in some cases but not in others.
  • Integrated care turns out to cost more than fee-for-service medicine, possibly because of higher overhead costs.

[Note:  there is no question that lack of coordination, integration, etc. is a huge problem.  See the New England Journal of Medicinearticle (gated) “Coordinating Care – A Perilous Journey through the Health Care System.”  But demand-side (government) reforms do not seem to be the answer.]

All of this is bad news for Hillary Clinton and Barack Obama who plan to spend $110 billion and $120 billion respectively on their health reforms.  Hillary in particular is counting on the aforementioned reforms to produce $50 billion a year in efficiencies.

Comments (6)

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  1. drsam says:

    One of the most telling lines in that New York Times article was

    …”“There have been numerous diabetics who didn’t even know what an endocrinologist was,” she said.”

    So here’s a nurse who is supposed to be counseling patients via phone in order to keep costs down and there is the implication that she is appalled at the idea of diabetics being managed by…gasp…a non-endocrinologist.

    Oh my!

  2. James says:


    The New york Times article you cited went into some detail on how the effort was pretty hamstrung from the start. It appears it didn’t work as planned because, well, they didn’t do it right. The same article notes that similar efforts appeared to have worked within the private sector.

    While admittedly too much health care policy work involves peering through rose-colored glasses, some of this stuff actually does work – if done correctly. And, on the other side, if we don’t do anything differently, we are stuck with the same fragmented, uncoordinated, error-prone, wasteful system we have today.

  3. WHF says:

    I think Hillary plans to spend $110 billion, not $110 million. But not to worry. Give me one example where government has ever gotten involved and made things better than the bad old US private enterprise system has done. FedEx and UPS has reduced the USPS to a junk mail carrier. Medicare today costs ten times its original projection. The pay-as-you-go Ponzi scheme we call Social Security is funded by babies, not dollars, and moms and dads two to five decades ago didn’t contribute enough of them to support the coming age wave. It will get worse. The Medicare drug benefit was the greatest example of open air government theft of the incomes of future generations. And the Great Society’s “War on Poverty” — remember that one? We might as well have piled trillions of dollars and set them to the match. Today’s oil crisis and our lack of energy independence was caused by government. The problem with government programs is that they are proposed and legislated by people who have never held a real job in their lives, who have never created a business (which if successful is the embodiment of a solution to a consumer problem), who have never met a payroll, and who are deeply suspicious of markets and prices. Hillary and Barack come to mind.

  4. Stanley Feld M.D.,MACE says:

    Good going John.
    No one has asked physicians what has to be done. The first guy that does wins.

  5. Chris Ewin says:


  6. Nancy Shinn says:

    I think the government needs to step in and help to lower costs of procedures. How much money would be saved if people who are obese could afford to have gastric bypass surgery, or lap band surgery. There are so many costs that are related to obesity, and many people who really want the surgery, but can’t afford it. Why does it have to be so expensive? Then there are those of us who can’t get medicaid, and can’t afford to buy insurance. It is very sad. I am struggling to afford my diabetic medicine. Many times I do without because I can’t afford it.