Wednesday, November 15, 2006

Why does American healthcare cost so much?

According to the NY Times Business (October 18, 2006) A Lesson From Europe on Health Care at and

“The most obvious difference between [European] health care systems and ours — that their governments provide universal insurance — certainly plays a big role in the cost differences. Look behind the receptionist at your doctor’s office, and you will very likely see a staff of people filing claims to different insurance companies. The insurance companies, meanwhile, employ a small army charged with figuring out how to avoid covering the unhealthy. The administrative costs of our patchwork bureaucracy eat up about 25 percent of health spending… Even in Europe’s single-payer systems, administrative costs account for about 15 percent of health spending, once everything is included, according to the Lewin Group, a consulting firm…. Medicare, which has administrative costs roughly as low as those of other countries’ universal plans. Younger Americans, by contrast, have private insurance, with all its inefficiencies. Yet elderly Americans’ share of national health spending is similar to that of the elderly in other countries, as Arnold Kling, an economist, has noted.”

“So something beside administrative costs is at work here, and it involves a basic cultural difference. Americans seem to be less willing to take no for an answer and more willing to try almost anything, no matter how expensive or how slim the odds, to prolong life. … It has made us obsessed with medical advances and turned this country into the world’s research laboratory. …But much of it is simply wasteful. Expensive procedures …are often no more effective than basic ones, according to research. Yet doctors can keep on getting reimbursed for the expensive ones. ‘Basically, anything that doesn’t kill patients is paid for by Medicare and insurance companies,’ said Jonathan Skinner, a health care researcher at Dartmouth College. …’We Americans tend to treat any rejection of a health claim as some conspiracy by insurance companies, the government, doctors and the pharmaceutical industry. In other countries, people have arrived at a better understanding that health care necessarily involves economic triage …’”
The comment section of the economistsview blog (link above) included a discussion of the higher cost of pharmaceuticals.

At the, at, they explain it this way:

“The Bush team argue that ‘fairer’ tax treatment will slow cost rises and enable more people to get basic insurance. The opposite is more likely. Bigger tax subsidies for health care are, if anything, likely to raise overall spending. Worse, since most tax breaks benefit richer people most, more tax incentives are likely to bring more inequality. They will also reduce tax revenue and worsen the budget mess. Mr Bush's health-care philosophy has a certain political appeal. It suggests incremental change rather than a comprehensive solution. It reinforces existing industry trends. And it promises to be pain-free. Unfortunately, it will not work. The Bush agenda may speed the reform of American health care, but only by hastening the day the current system falls apart.”
Others have argued that direct-to-consumer advertising by pharmaceutical companies also drive up costs because more patients demand from their doctors medications they don’t need. In addition, some make the case that by focusing costs are increased because our healthcare system rewards mediocrity through a “fix it and pay for it again when it breaks” process, rather than focusing on wellness/prevention and rewarding cost-effective sick-care.

In summary, the reasons given for the exceptionally expensive cost of healthcare in the US include: Waste, administrative overhead, Americans refusal to accept economic triage (take no for an answer), taking on the role of the world’s research laboratory, our attitude toward end-of-life spending, cost of prescriptions drugs, HSA tax-based incentives, direct-to-consumer advertising, and a system that rewards mediocrity rather than cost-effective care.

What do you think?

Friday, November 10, 2006

Is the "Moral Hazard" idea a myth?

I came across an interesting article about the way insurance is viewed, called The Moral-Hazard Myth at

The moral hazard idea — which states that insurance encourages risky and wasteful behavior by the insured person since the cost of consumption is paid by someone else — is considered a myth by some when applied to healthcare and is not a reason to assume Health Saving Accounts/High Deductible Helath Plans (HSA/HDHPs) or other methods of cost-shifting will reduce utilization and control costs by making people pay more out of their own pocket for care. They claim this is because, unlike other consumer goods, insured people don’t go to healthcare providers just because it’s free; in fact, most people don’t like to go to the doctor or take medications. Instead, what is most likely to happen when more costs are shifted to consumers is that they will forego routine preventive care and delay getting care for their health conditions. They way this will actually end up increasing overall costs because people will be sicker when finally going for treatment they needed all along. In addition, HSA/HDHPs, etc. replace the “social insurance” model of coverage, which equalizes the financial risk between the healthy and sick by having the well help pay for the care of ill people, with an actuarial model in which older and sicker people pay much higher premiums than the young and healthy who can accept bare bones policies.

What do you think?

Saturday, November 04, 2006

Do we need profound changes now?

On another blog, I’ve been arguing about the need for profound changes in our healthcare system, and to make these changes sooner than later. I proposed is a multifaceted, consumer/patient/community-centered, knowledge-based, collaborative wellness strategy (defined in our WellnessWiki), which focuses on changing the current policies, processes, and practices that reward mediocrity and punish efficiency. This strategy takes a comprehensive approach that would implement a number of tactics that foster continuous improvements in care safety, effectiveness and efficiency by dramatically increasing our clinical knowledge and ability to use that knowledge with the ultimate goal of ensuring every person gets the precise sick-care and well-care needed when it is needed -- nothing more & nothing less -- and to make sure that care is delivered competently and cost-effectively. It is based on an attitude of forever seeking perfection. Executing this strategy would require spending money and time on a transformational process that (a) constrains wasteful, fraudulent and error-prone aspects of our current healthcare system and (b) expands aspects that generate high value, i.e., promotes excellent outcomes with the least necessary utilization of resources.

The main rebuttal to my proposed strategy is that there is no need for profound changes since our healthcare system is fine the way it is -- there is not healthcare crisis, it’s largely media hype. We should, therefore, let things change incrementally (step-by-step manner) as they have in the past. After all, we’ve made great strides in our healthcare technologies, medicines, and procedures over the years and will continue to do so if we just let market forces do their thing. And on top of that, our country doesn’t have the money to drive profound change with comprehensive strategies even if we wanted to do it. So, instead of discussing comprehensive strategies, we should limit our focus to a few tactics aimed primarily at controlling costs without spending a lot of money in the process. In terms of dealing with safety problems, it was suggested that we settle for now on getting rid of dangerous providers.

I will briefly discuss how I responded to each of these and look forward to you comments.

The vast majority of healthcare providers are intelligent and compassionate people who work very hard and do the best they can in a broken system that reward mediocrity and waste. Dedicated researchers have made wonderful breakthroughs in medicine, genetics, and medical devices that help keep us alive longer than ever with an improved quality of life. And health IT companies are developing ever better tools. Nevertheless, there is a healthcare crisis as discussed here and here.

While I agreed that changes should be done incrementally since we can’t do it all at one time, and while I agreed that we’ve made great advances over the centuries, I argued that the incremental changes should be accomplished whenever possible with leaps, not baby steps. The first leap would be to develop a “big picture view” of all the complex interacting problems with our current system. The second leap would be to use this broad & deep understanding to define and endorse a comprehensive strategy detailing all the changes necessary to solve the healthcare crisis in ways that bring the most benefit to the most people, including universal coverage and continuous quality improvement. The third leap would be to prioritize the tactics from most to least important and likely to succeed. The forth leap would be implement those tactics. And the fifth leap would be to learn from our successes and failures in a knowledge feedback-loop process that continually improves the strategy and tactics.

One reason for leaping ahead with a sense of urgency, imo, is that failure to do so will just prolong and exacerbate our problems by fostering inertia and complacency. I say this because our country has a tendency to seek superficial, short-sighted, failure-prone solutions designed to maintain much of the status quo; we tend to shy away from profound changes that “rock the boat.” Secondly, if we have the technical ability to make profound improvements in care safety, effectiveness and efficiency – which I claim we do – then why wait? Is it because we lack the will? Lack the money? Lack the leadership? Are afraid? All these things? Probably. So, shouldn’t we be focusing on ways to overcome these constraints, rather than giving into them without a fight?

Let’s assume for a moment that we have the will, courage, resources, and leadership to realize profound change. What might we focus on first so we can deal with the healthcare crisis in “bite sized pieces” rather than all at once?

Well, a majority of healthcare spending in the U.S. has been attributed to people with chronic (lifelong) conditions that can be especially difficult and expensive to treat, especially since patients do not always comply with the medical regimens, and because they may have multiple comorbidities for which evidence-based guidelines don’t exist, and there are difficulties coordinating care among many different providers working with the same patient. What should be done?

I suggested that one key factor common to dealing with all this is knowledge. Treating chronic and complex conditions safely, effectively and efficiently requires that we know a great deal about such things as: (a) patients’ problems, strengths, weaknesses over extended time periods, including physical and psychological signs & symptoms, genetic markers, attitudes and emotions, social support networks, etc.; (b) patients’ preferences (e.g., regarding quality of life issues as related to the consequence of treatments); (c) appropriate evidence-based guidelines and how to implement them; (d) self-care methods and motivators; (e) patients’ medical history; (f) what all the providers treatment a patient are doing so care can be coordinated across the entire healthcare continuum; (g) the effectiveness of care delivered through ongoing feedback; (i) whether medications prescribed are contraindicated (e.g., are likely to cause unacceptable side effects or and adverse event by interacting with other meds); (j) providers most qualified to deliver the care; etc.

Obtaining and using this knowledge effectively may require: (a) a commitment to ongoing clinical research; (b) development, evolution, and dissemination of evidence-based guidelines (including outcomes studies and consensus conferences); (c) cooperation and collaboration among healthcare professionals; (d) case management; (e) information exchange technologies (including interoperable EHR/EMRs); (f) next-generation personal health records (PHRs) that give patients ongoing feedback and reminders; (g) clinical decision support technologies (including diagnostic aids); (h) clinical guideline and outcomes research technologies; (i) patient education technologies; (j) methods for fostering patient compliance; (k) provision of mind-body medicine (e.g.,; (l) transparency tools; (m) greater understanding of complementary and alternative interventions; (n) patient advocacy; and more. An enhanced disease management program would offer some this (see http://curinghealthcare.blogspot...-and-what.html/).

This is a comprehensive solution of profound changes. But not everything needs to be done at once, and not every patient needs it all. The objective would be to make it all available as soon as possible, so every patient could get what they need when they need it.

Some of the most pressing things to do, imo, are to administer comprehensive biopsychosocial diagnostic assessments, use and evolve existing evidence-based guidelines and develop new ones that address multiple comorbidities, enable better patient data sharing, provide ongoing feedback to patients about their health status and maintenance, learn how to motivate patients to comply with the medical regimens, develop and use effective decision-support tools, implement patient safety processes, supplement sick-care with well-care, and empower consumers to select the providers and health plans best suited to their needs.

I don’t see this as being biting off more than we can chew, but I do think it requires profound changes. Can our country afford to pay for these profound changes? Should we even bother discussing how to do it? Are there easier and cheaper solutions worth consideration? What do you think?