The Health Fork

Do you think it's possible to demonstrate with a single graph the fallacy behind every wrong-headed solution to the problem of rising health care costs? Here it is:

Health Care Spending

I call this graphic the "Health Fork," because it reminds me of a tuning fork and it has the power to fine tune potentially sloppy thinking. Once the diagram becomes widely known, it can serve several useful purposes:

  • A postcard version could be used by journal editors to signify rejection of poorly conceived manuscripts, thereby saving the time and money costs of peer review.
  • A placard version could be used to visually reject ill-advised health policy speeches instead of hissing and booing.
  • A gold-plated version could be worn as a lapel pin by clear thinkers so the two of you will know who you are at the next event sponsored by the Center for Health Systems Change.

[Note: additional uses for the Health Fork- including the most creative and most amusing uses – have been deleted by the internal NCPA editorial censor]

Anyway, here's the story:

Basic Problem: Health care spending is growing at twice the rate of growth of income. If that trend continues, health care will eventually crowd out every other form of consumption. This spending path is illustrated by the upper line in the graph.

Solutions That Work: There are really only two: (1) on the demand side, someone must choose between health care and other uses of money; and (2) on the supply side, health care must be produced in a competitive market, which means providers must compete for patients on the basis of price and quality.

Solutions That Don't Work: The solutions that work are so unpalatable to so many in the health policy community they have become unthinkable. So the only thing left to talk about, hold conferences about, etc., are solutions that don't work. Among these are proposals (some otherwise commendable in their own right) that may lower spending at time t* in the diagram, putting us on the lower spending path. But once the change has occurred, spending continues to climb at twice the rate of growth of income. Note: a downward parallel shift in the cost curve does not prevent inevitable disaster; it merely delays the onset of disaster. Here are a few examples:

  1. We All Keep Our New Year's Resolutions. We eat less, drink less, smoke less, exercise more, etc. These are good things to do, and they would cause a one-time lowering of the spending line. But from that point on, costs would grow at the same rate as before.
  2. The Commonwealth 15. Fifteen ideas for controlling costs, that is. The New York Times endorsed the whole batch, and I suppose Commonwealth should get some credit for imagination and creativity. Could you think of 15 cost-control ideas that do not require anyone, anywhere to choose between health care and other uses of money and do not require any provider, anywhere to compete for patients? I couldn't.
  3. Administrative Costs. People who have never in their whole life complained about bureaucracy froth at the mouth over the thought of private health insurance overhead. Even if they're right about their claims and even if we could eliminate the excess burden (putting us on the lower spending line), from that point on, the rate of growth of per capita spending would change not one iota.
  4. Squeezing the Doctors. Most other developed countries try to reduce spending by reducing the pay of providers. Whereas US doctors earn five times the average wage, in Germany and Canada it's only about three times, and in Sweden and Britain it's 1½ times. Suppressing provider incomes, however, does not lower costs; it merely shifts those costs from patients and taxpayers to providers. Moreover, disguising true social costs in no way reduces the rate of change of those costs.
  5. Copying Other Countries. The United States spends more of its income on health care than any other developed country. Or, so everybody says. Trouble is, in modern health care systems nobody ever faces a real price for anything. As a result, no country really knows what it spends on health care. By physical count, the US is not profligate. We have fewer doctors per capita, fewer hospital beds, fewer hospital stays, etc. However, on paper the US experience looks like the upper growth path, while the experience of other developed countries (with many costs disguised) looks like the lower path. The slopes are the same, nonetheless. For the past four decades, the US rate of growth of per capita health care spending (4.4%) has been right at the OECD average (4.5%)!

To order Health Fork images, specify postcard, placard or lapel pin version and send lots of money to the NCPA.

Comments (12)

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  1. Bill Crounse says:

    As always, I enjoy your perspective. Maybe you should run for office. On the other hand, you could never get elected because what you say is not only the truth, it actually makes sense.

  2. Brett Skinner says:

    Great article!

  3. James A. Cooley says:

    I enjoyed the graph and agree with many of the points, but have to disagree with you a bit on point one. My own look at the impact of properly done wellness and disease management is that they produce cumulative savings, as opposed to one-time. The City of Odessa actually CUT their spending on health care by 40 percent ($5 million to $3 million annually) through aggressive wellness initiatives.

    Their presentation to the recent Texas House Committee on Public Health public hearing on the wellness interim charge was pretty compelling stuff. It is worth catching a replay of it (it is Internet archived).

    Now, one may argue that we will never move to an effective system of healthcare focused on wellness and chronic condition management without other reforms that introduce market principles, facilitate information flowing, and align incentives. I would tend to agree and see on a daily basis how fragmented information and misaligned incentives discourage fundamental reforms. But, one of the fundamental reforms we need is a health care system that actually encourages HEALTH. If we don’t move to that model, anything else is pretty much doomed to failure.

  4. Charles Van Way says:

    Great article, John. You’re right, we need a competitive marketplace. But…. the first step is to have a marketplace at all. Presently, there is no marketplace. None whatsoever. A physician can send you a charge, but your insurance company will decide whether to pay it, how much to pay it, and when to pay it. Hospitals are almost as badly off. Worst of all – speaking as a physician now – insurance companies change their prices without notice, and won’t even disclose their price tables before we sign up to join their physician panels. The government programs are a little more open, but Congress plays games with reimbursement every year, and the states are worse. This isn’t a marketplace. It’s a sophisticated form of mugging.

    I’m a surgeon, and I do a number of different operations. I could post a list of prices on the Internet, in the daily newspaper, and on my office door. Wouln’t mean a thing, because my prices are not how I get paid. I get paid by whatever the insurance companies and/or the government decide that operation is worth.

    Compete on price and quality? We could do that. But we’ve not been allowed to do that for the past 50 years. Don’t talk about competition. Fix the marketplace.

  5. Just like a child, I watched with fascination as the soft-drink bottles rolled off the assembly line. The big machine washed them, assembled them, moved them along the conveyor belt, filled them, capped them, and put them into cases. I counted 12 different operations which the system performed. Then I realized something: almost all of those operations relied on gravity. The bottles had to stand upright. The fluid had to flow downhill and remain in place in the bottles. The caps had to slide down the column and rest on the lips of the bottles before the machine crimped them in place. And so on. The fellow who invented this system knew he could not repeal the law of gravity. And he knew he needed to harness, not oppose, that force. His machine was in sync. I wish he could appear before the Congress and at a session of the Presidential candidates. He needs to tell them that when you invent systems they must not try to contradict the laws of nature; they must work together. But the rules politicians try most to repeal and oppose are the laws of human nature, laws which cannot be invalidated even by a unanimous vote. And if you try to run things counter to them, nothing works. Like Communism. It was a nice idea, everybody working for everybody else, but it went against the grain. Check with the Soviet Republics. Look at both sides of the Berlin wall—prosperity on the privatized West, “devastation” (that’s Greenspan’s word) on the centrally controlled East. Just take control of health care away from the individual, and you have the National Health Service of the U. K., where one million people are currently in line waiting for hospital admission. Or forbid private medicine, as in Canada, where 40 weeks is the average to get orthopedic treatment and where 35% more women die of breast cancer than in the U. S. Is nationalized health care running smoothly in Germany? Ask the 15,000 of 20,000 university physicians who went on strike in March of 2006. However, we’re getting there. The most pressing example in the U. S. is the removal of control of the health care dollar from the people who earned it and owned it. Almost half (46%) of the $2.1 trillion health bill is now paid by government (how do you like the quality of this half—including Medicare, Medicaid, and Veterans’ benefits—compared with the private half?). Another third (33%) is controlled by insurance companies who in turn are responsive only to the employers. Only 12% of the American health dollar is paid by individuals. So what is the individual citizen to do? Will he economize with money he can’t control? Does he wash his rental car? Only if he is allowed to own his private fund—as in Health Savings Accounts—will the laws of human nature begin to operate again. Only then will he ask the prices, compute the risks and benefits. The Kaiser study shows a one-third drop in expenditures where HSA plans are in effect. The Congress, and the President, and the people need to agree on systems which resonate with—and amplify–nature’s immutable laws, not conflict with them. They need to get in sync.

  6. Doug Carr says:

    I have been reading your comments off and on for several years . The ” Health Fork ” is the best by far in terms of putting U.S. vs. the World Re: Health Care costs in proper perspective. We have spent the last 30 years shifting the costs around and around and surprise that does not work; we increase access to government subsidized health care and that does not work any better.

    We need to come to grips with the tough reality of either rationing all health care or rethinking how we sell/market the Solutions you allude to below that Do Work. Alternatively we can do nothing and keep talking about the problem until it implodes ( catastrophic failure ) and then pick up the pieces and start over.

  7. T Rosenwasser MD says:

    Thank you for your insightful emails. Actually, most of them are very simple – just like the wheel is simple, but seems to have been cryptic until its “invention”. The Health Fork is one of the best.

  8. Keith Voogd says:

    Thanks for the great visual aid. I have enlarged the Health Fork to small poster size and hung it in my office. Nonparsimonious solutions (and not just those related to issues of health care spending) are now addressed with a sad shake of the head and a wistful glance at the simple, yet elegant, Health Fork.

  9. Chris Ewin says:

    Agree with your chart and the squeezing of doctors.

    In regards to solutions:

    “Solutions That Work: There are really only two: (1) on the demand side, someone must choose between health care and other uses of money; and (2) on the supply side, health care must be produced in a competitive market, which means providers must compete for patients on the basis of price and quality.”

    (1) on demand side, choice is a reality for patients, but not a real solution…just a statement..

    (2) on supply side, I agree completely…The spoke in the hc wheel are primary care physicians which seem to be a dying breed. It’s physicians that have to change their practice styles to fix the system.

    We are the suppliers and the ones that determine what tests are ordered and which physician needs to be referred to. Cutting out the middleman in primary care is the key…

  10. Daniel says:

    I couldn't understand some parts of this article The Health Fork, but I guess I just need to check some more resources regarding this, because it sounds interesting.

  11. Sam Read says:

    Here is more on this and many more topics at this site.