Reform’s Tougher Problem by Brian Klepper

Yesterday, Matthew gracefully pointed to my post over at Bob Laszewski’s Health Care Policy and Marketplace Review, which I called "The Tougher Health Care Problem." Bob’s readership leans heavily toward the DC-based health care policy types who may not follow the happenings over here. The policy crowd is a slightly different but very important audience that I hoped might be receptive to a different message than they are typically pitched.

Reform is a complicated topic, particularly because the discussion tends to be so narrowly defined around its objectives: access, quality and cost. But an equally important issue is that American health care is fundamentally about power and money. Achieving reform requires a real understanding of the power dynamics involved.

For a lot of reasons, I’ve come to believe that there’s little point
in trying to get (most) health care organizations to collaborate on
reforms. While I know its very un-PC, and while I understand that every
"advocacy" group believes it has a right to be at the table, the table
is current dominated by these groups and, you may have noticed, we’re
not making much progress toward reform. The major players make little
noises about change, but mostly they’ve retreated into silos where
they’re trying to figure out how to get as large a piece as possible of
the diminishing pie, and get control over the reform process.

Yes, in yesterday’s article I argued that cost is as important an
issue to address as access. But here are a few deeper points that I
also wanted to get out there for discussion.

You’ll note that I keep using the term "meaningful" reform. This is
shorthand for measures that can drive down cost, improve quality and
broaden access. Half-measures – like giving tax credits to people who
can’t afford to lay out the money for health care or coverage in the
first place – don’t count.

1) With few exceptions, we shouldn’t hold our breath for the
leaders of the health care industry to help drive meaningful reform.

We know that as much as half or more of all health care cost is
unnecessary, inappropriate or waste. If reforms involve eliminating
some portion of that waste and the revenues they represent, the
industry will be against it. Nobody willingly gives up money. This is
why the drives to interoperability, evidence-based standards,
pricing/performance transparency, and performance-based reimbursement
have taken so long.

2) Getting meaningful reform will require that Congress sign off
on it. There are only two ways for that to happen. One is that Congress
must somehow become resistant to the health care industry’s lobbying
efforts. (Somehow this doesn’t seem very likely to me.) Or the
non-health care business community must determine that health care
reform is in its interests, find a way to galvanize and mobilize on
change, and exert greater influence
than the health care industry on this issue.

Policy change must occur in Congress, which has demonstrated time and again (e.g., Medicare D)
that it is most receptive to special interest influence. As the largest
single economic sector – one dollar in every seven and one job in every
eleven in the US economy – health care constitutes about 16 percent of
all the lobbying dollars spent on Congress. In 2006, this was about
$350 million of $2.5 billion in total lobbying dollars from all
sectors, according to Open Secrets. Without question, health care is the most influential and powerful lobby.

3) The leaders of non-health care business have two big reasons
to want meaningful health care reform. One is that they’re between a
rock and a hard place on coverage. If their employees lose coverage,
productivity plummets. If they keep it in its present form, employer
costs will continue to explode at multiples of general inflation,
workers earnings and business income growth. (This is why so many large
employers are installing worksite clinics, but that’s another post.)
The other is that if the health care economy, as the larger economy’s
largest component, descends into turmoil, the turbulence will likely
cascade to and disrupt every other economic sector. In other words, it
is in business’ interests to back reform because the current situation
will ultimately threaten the national economic security.

America’s non-health care business leaders are aware that, to a
large degree, they’re being held hostage by a health care industry
resistant to adopting tools and processes for streamlining (e.g., lean
techniques) that other industries installed long ago. Medicine is still
a cottage industry, there is still almost no transparency, there is still more discussion about than action on quality, and most of the industry is still hugely profitable.

4) The most promising scenario for meaningful reform would be for
non-health care business leaders to come together around a set of
structural (not ideological) change principles, jump start a larger
effort that recruits the support of the whole of American business, and
exerts its overwhelming influence on Congress for real change. This is
where the power in America lies, and health care is now a case where
the public interest intersects with the special interest.

The real question is whether the leadership currently exists within
American business to drive an effort that is in the common interest
rather than the special interest.

Finally, there are important changes afoot in market-based reform. The Health 2.0 meeting
will present discussions of the potential inherent in a market-based
paradigm shift, but one in which many of the important players are NOT
the usual suspects. They are from outside health care.

There are other examples in the works. I mentioned worksite clinics.
The drive toward MUCH larger physician practices; clinical, patient and
purchaser decision support tools; refinement of chronic disease
management; performance-based reimbursement methods; and on and on.

The increasing dysfunction of our current system will make all these
and other approaches more workable. But markets still must work in the
context of policy. American health policy is in desperate need of
reform. But the health industry is conflicted and won’t drive what’s
needed. That impetus must come from outside.

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17 replies »

  1. Maggie;
    You stated:
    “I’m not suggesting that Medicare stop paying for prostate cancer screening (until we have more evidence) but at the least, it could insist men get the information. ”
    Why not stop paying? If the evidence doesn’t clearly point to it will making a difference in outcomes, shouldn’t that choice (and the cost of that choice) fall to the one who will benefit the most from the test: the patient.

  2. Peter;
    This is interesting. Looks like you found a brand name one so that may explain part of it. (I am a pathologist so I don’t know much about drugs; we don’t prescribe them).
    The issue in my case appeared to be that the doc had prescribed 75 mg twice a day. 75 mg was only available at the ridiculous price, but 50 or 100 mg was available at, like, 10-20 bucks. (I guess 40 mg must be another one of the expensive ones. Why on earth? I have no clue.) I called him back and said, how about she takes 100 mg a.m. and 50 mg p.m.. He said fine, and was shocked at the 75 mg price. This made me wonder, do these guys ever look at the price of what they are prescribing, or do they assume everyone has prescription drug insurance and therefore don’t care?
    It was an eye-opening lesson in more than one way.

  3. bev M.D.,
    Searched a Canadian on-line pharmacy for doxycycline. Does this make you feel better or worse?
    Oracea (Doxycycline, USP)
    40mg 30 tablets – $145.00 cad
    40mg 60 tablets – $283.00 cad
    40mg 90 tablets – $408.00 cad

  4. If business will lead the way then what happened to the Leapfrog group? They made unattainable demands. (e.g., CPOE in some ridiculous timeframe) Business will at least have to have someone in their group with knowledge of the issues, particularly the IT issues.
    ps after my daughter’s visit to the dermatologist resulted in 3 prescriptions for acne and CVS wanted to charge me $500+ for them (the most expensive of which was generic doxycycline, for Pete’s sake), I am ready for a little revolution myself.

  5. I thought the call for leadership from the Fortune 500 was a great idea.
    When Social Security was in crisis (which one?) during the 1980s they pulled a bipartisan panel together and came up with ideas. I’m not going to get into that, but the cobbled something together and it worked, at least for awhile.
    The solution to costs and quality and the impacts it all has on our competitive position in the world are boggling. The political sphere has it’s own interests as does the health care establishment. I would very much like to have American business take a gander at this issue and tell us what they think the best approach is.
    Nothing will ever change without tremendous cooperation from all parties. We need to hear from everybody.

  6. Issues:
    What is health care reform supposed to achieve? Access, quality and cost are the best definitions I have heard yet, but I’m still unclear… to what end? Are we doing this to improve productivity, sustain economic output(1/7 of GDP is pretty significant), provide a social benefit or help the poor?
    Non-health care business is hard enough to get moving in the same policy decisions, but health care is fragmented and interests are divergent within the industry. One part of the industry can be enormously profitable at the expense of another. Can anyone rationally compare a solo pediatrician in upstate New York with an outpatient Plastic Surgery surgicenter in LA? How about a laser eye clinic with a not-for-profit community hospital run by nuns? How about a giant pharmaceutical company and a mom-and-pop pharmacy in Charleston? Who’s interests are aligned with the monolith we call health care?
    As for cost, don’t you mean corporate profit? One man’s cost is another’s 401K growth. Our health care system is expensive because it’s good for investors. Any health care reform solution has to take into account the “value” of that “cost”.
    While we acknowledge that this is about money, we musn’t forget that the very basis of universal health care is the transfer of risk from the young and healthy to the old and sick. Ask any insurance guy, risk equals money.
    Finally, I have to point out the one group without a strong voice are those lonely practitioners who develop trusting relationships with patients and are the key to controlling costs.

  7. Thanks for the shout-out, Barry.
    A few more thoughts about Medicare. Since this discussion is already political, I’ll take it a step further: expect Medicare to accelerate its reform efforts if/when Democrats get control of both houses of Congress and the Presidency in 2008. The healthcare industry lobby is solidly Republican. It is as much a source of support for Republicans as trial lawyers are for Democrats. Though Democrats do of course get influenced by physician, hospital, pharma and insurance lobbies, it is considerably less than Republicans. There is a quite good chance they will dominate Federal govt. after ’08 with a clear mandate for healthcare reform….clearer and stronger than the one Bill Clinton had in 1992.
    Medicare (along with Medicaid) is an obvious and relatively low-resistance place to focus that reform. When it comes to expanding coverage, Medicare already has a pretty good reputation and would be as easy a sell for “socialized medicine” as we are going to get. It’s either Medicare-for-all or something like the Massachusetts model.
    And when it comes to getting the best bang for our collective buck, you don’t have to legislate change with Medicare. You can simply say: if you don’t follow best-practice guidelines where we have them, you won’t get paid as much. Or, if you aren’t using a CCHIT-certified EMR that is part of a RHIO by 2014, you can’t receive money from us. Medicare is already considering the Medical Home model of integrated care as well as a payment structure which consists of mixed capitation and fee for service.
    As always, the greatest worry is that the ignorance of the average voter will be overwhelmed by the will to mislead of the vested interests. This is far more true of reform to the quality/cost structure of healthcare than it is for reform to our access problems. Even executives of most large companies have no clue about the lack of correlation between the intensity of treatment and the quality of the outcome, for example. How is the average voter going to get excited about it?
    I think they’ll only get excited about it when universal healthcare comes and they have a bigger deduction from their paycheck. In the meantime, a quiet, slow revolution behind the scenes, led by wonks at CMS and elsewhere, is where quality&cost reform is most likely to happen.
    Matt, I don’t know if you can do polls on this site, but I’d be interested to see what the readers here would guess as the date universal healthcare legislation passes. My own guess is that SCHIP expansion happens in 2009 (if not sooner), and effectively universal coverage is passed in 2011, effective in 2012. And my guess is that it is more like the Massachusetts model, actually, than Medicare-for-all. Idle wonkery, to be sure, but enjoyable idle wonkery.

  8. Barry, I understand what profit is and enjoy it when I make it. But as we have discussed here before healthcare does not lend itself to comparisons like other products and services. The healthcare industry has created the secrecy it operates under and we will have to pry it from the hand of their own dead body before we get any transparency. I welcome a company’s profit when they achieve efficiency and sales growth through their own skill in an efficient market but I do not accept all profit blindly as if it were a god. There are many devious ways to achieve profit. The healthcare industry seems to know them all. But I understand that the next phase of this debate will be so called consumer driven healthcare as we are led down the path of blind obedience to “the market”, but in the end it wil be just a way to accumulate as much cash as possible till this profit generating party comes to an end when the 6%-10% compounded cost increases cannot be sustained.

  9. Peter,
    I think you’re too cynical. I observed lots of industries and companies within those industries over the last several decades. One thing they all have in common is that some are more efficient than others and, as a result, have lower cost structures. The more efficient producers can earn an above average return on capital while offering either lower prices than the competition or more service. Assuming we had robust price and quality transparency that can be easily accessed by both consumers and referring doctors, those price and quality differences will be noticed and acted upon. An imaging center that does the job for less will earn more business. The pharmacy that charges a lower price for the same drug will capture market share. A high quality, efficient physician practice that makes good use of electronic records, develops a reputation for good outcomes and cost-effective practice patterns will increase its share of referrals from PCP’s. It’s not rocket science. The low cost providers of identical services, the cost-effective physician practices, the efficient hospitals and the renowned centers of excellence in areas like cardiac care, cancer treatment, organ transplants, etc. will win business and earn good profits while the less efficient will either be forced to improve, lose market share or go out of business altogether. This is the way markets work, but they require transparent and accurate price and quality signals in order to work. In this context, quality would measure both patient outcomes and the cost-effectiveness of physician practice patterns. For the vast majority of medical encounters, there is no reason why markets cannot work in healthcare as well. Profit per se is not a dirty word.

  10. I commented on Brian’s piece on Bob Laszewskis blog. (Basically, I just said that I agree entirely about the problem, but am not certain that Fortune 500 employers are the people who can/will/want to provide the leadership for a variety of reasons which I won’t repeat.
    Here I just want to add that I tend to agree with Barry: Medicare is well-positioned to lead reform–and cut waste–because it has the clout. Whether or not drug-makers, device-makers, hospitals or some specialists like Medicare’s reforms, very few can afford to give up Medicare’s business. It’s too big.
    Thus, Medicare can do what the VA has done: negotiate for much lower drug prices, insist on comparative-effectivness information before agree to pay for a new procedure, test, drug or device that may or may not be better than what is already on the market, but is almost always more expensive. The fact that something is approved by the FDA just means that it is “better than nothing” (since you only to test your product against a placebo to win approval).
    These days, the FDA is not doing its job. Too often, the physicians on its panels have a financial interest in the outcome and the FDA doesn’t ask enough questions about effectiveness–and cost-effectiveiness.
    But Medicare could do what the FDA isn’t doing by using panels of disinterested physicians and scientists to decide whether or not Medicare will cover something–based on evidence-based research.
    Finally, one example of waste in the system. Just today, the journal Cancer, came out with a piece quoting the American Cancer Society saying that we just “don’t have sufficient evidence about the value of early screening and treatment of prostate cancer” and therefore it is “inappropriate” for doctors to “recommend” PSA screening for prostate cancer to average-risk men over 50. The ACS also says it would be “inappropriate to discourage PSA testing.” Instead, doctors should “offer” (not recommend) screening, discussion the “potential benefits, risks and harms of screening with patients”, and let the patient decide. (The National Cancer Institute said the same thing last June.)
    In the meantime, 2/3 of men on Medicare go for PSA screening–and eventually many of them will be diagnosed with prostate cancer. (AT some point in their lives 20% of American men are told they have prostate cancer.) But since it is a very, very slow-growing cancer, the vast majority will not die of it–they will die of something else first. They won’t even experience symptoms or know they have it–unless they are diagnosed. Once diagnosed, many will be treated, and in a significant number of cases treatment will result in incontinence, impotence, or other unpleasant side effects.
    In the meantime, as both the American Cancer Society and the National Cancer Institute acknowledge–we don’t have hard evidence that early detection and treatment saves lives or even slows the progress of the disease.
    Yet Medicare spends billions on screening and treatments without even insisting that men be given full information on the potential benefits, harms, and risks of screening and early treatment. . . . I’m not suggesting that Medicare stop paying for prostate cancer screening (until we have more evidence) but at the least, it could insist men get the information. When given a full explanation of the pros and cons in “shared-deicision making” programs, research shows that a significant percentage of men decide not to be screened, and if screened diagnosed, a significant percentage decide against treatment–becuase they know that there is a good chance that they will never experience symptoms, and because they are not willing to risk the side effects of treatment (long-term impotence and incontinence)
    This is just one example of waste, which leads to a question: Would executives of Fortune 500 companies understand enough about the research and literature on prostate cancer screening to realize that perhaps Medicare should take a closer look at how men are routinely sent for screening and treatment? OR would Fortune 500 execs, like most people think “why of course
    everyone over 50 should have PSA tests; we all know that early detection cures cancer!”

  11. Barry I again fear that your mild cost reduction reforms would only be used as a platform for higher profits as we have seen healthcare has NO interest in lowering prices or reducing cash flow. You assume the savings will be passed on to consumers, I doubt that.
    And this statement;
    “It is long past time for CMS to move from its former status as a big dumb payer to using its market clout to provide the leadership necessary to deliver more healthcare value for taxpayers’ dollars.”
    Will require reforming our “paygo” political system first – you won’t pay, I won’t go.

  12. “The most promising scenario for meaningful reform would be for non-health care business leaders to come together around a set of structural (not ideological) change principles, jump start a larger effort that recruits the support of the whole of American business, and exerts its overwhelming influence on Congress for real change. This is where the power in America lies, and health care is now a case where the public interest intersects with the special interest.”
    I agree with this. It seems to me that there is a tremendous oppty for large employers, possibly pairing with private equity firms who might provide the upfront capital, or even with managed care firms, to create a commonly owned consolidation platform for health care providers and to drive best practices through that entity. However, there are many legal obstacles like the risk of being dragged into malpractice suits, and also many consolidation vehicles have failed, in large part due to the destabilizing effect of constant regulatory change. So governments would have to step in and mitigate these risks (which they create in the first place) or it will never happen.

  13. I will play my one-note song now. Missing from this is a simple variable: Will.
    All of this argument is about arguing about how to argue. It’s about who will find the requisite monetary motivation to do something – almost anything – about the situation.
    Have we all become so lazy that we allow money, and only money, to make our moral choices for us?
    I really do believe – call me crazy – that the first step is for our entire nation to figure out that everyone deserves the care of a medical professional. No one must prove, monetarily, that he or she is worthy of mercy.
    We move so quickly to judge people based on their evident choices. We often assume a sick person is that way because he or she is lazy – not because some of those choices on the way were forced upon that person by circumstances. Poor people can’t afford good food, nor can single parents find the time to work out. Despair often leads to a collapse of self-maintenence. We assume that person is morally weak, unworthy of interest.
    This is one place we must draw the line. Medicine is not about moral judgements. It’s about pity and mercy and generosity. Anything else is a jungle.
    Decide we want it. Then we can figure out how to do it. Until then, everything else is just a noisy excuse not to do anything.

  14. One more thing. Jd’s suggestion that CMS could mandate that doctors and hospitals implement interoperable electronic medical records by a date certain if they want to remain approved to be paid to see Medicare patients would be very useful, in my opinion. Such a requirement could also be a catalyst to drive doctors to reorganize into much larger multi-specialty group practices in order to better afford and utilize technology. While there is no silver bullet to fix our healthcare system, there are a lot of silver pebbles. If I could have just one pebble very soon, however, it would be robust price and quality transparency.

  15. I think there is potential for CMS to provide some leadership here. The recent decision to no longer pay for eight preventable errors in hospitals is a step in the right direction. Making all of its DRG and other reimbursement rates available on a free, user friendly website would be another. Senator Clinton’s idea of a Best Practices Institute would also be helpful assuming the best practices were developed with heavy input from experts in the medical specialty societies. An aggressive effort to promote more widespread use of living wills and advance medical directives could help to reduce often unwanted care at the end of life. If PCP’s, who account for so many referrals to specialists, had robust price and quality information at their disposal, they could make more cost-effective referral decisions without affecting their own income. It is long past time for CMS to move from its former status as a big dumb payer to using its market clout to provide the leadership necessary to deliver more healthcare value for taxpayers’ dollars.
    Democrats in Congress want to extend health insurance to the currently uninsured, and they also want a long term fix that would shield the middle class from the Alternative Minimum Tax. At the same time, they have agreed to operate under PAYGO budget rules. Since both of these initiatives are extremely expensive and even eliminating the Bush tax cuts for people with income above $200K will not be nearly enough to cover the cost, the Congress should have considerable interest in finding ways to safely drive down utilization of healthcare services. To a lesser extent, so should the states who are also under pressure from rising costs for their share of the Medicaid program.

  16. “4) The most promising scenario for meaningful reform would be for non-health care business leaders to come together around a set of structural (not ideological) change principles, jump start a larger effort that recruits the support of the whole of American business, and exerts its overwhelming influence on Congress for real change.”
    If that’s the “most promising” then that means crisis will lead reform. I don’t think the diverse group of non-health business “leaders” can/will come together. Each has their own industry agenda that comes before healthcare for employees. I think they will continue to off load their health costs to employees, and to government (taxpayer) where possible. Once enough individuals become uninsured/underinsured and the cost of the trickling down of costs becomes too much of a burden then it will be grass roots action that starts to override health lobby money. But don’t expect this to be a soft landing. Don’t forget it was a diverse group of business leaders that helped defeat “Hillary Care” rather than use that as a platform for real reform.