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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Chrisbev M.D.GingerBZagreus Ammonjd Recent comment authors
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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.


Well I think you’ll like this much better.
100mg about $64 for generic.

bev M.D.
bev M.D.

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… Read more »


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

bev M.D.
bev M.D.

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.


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… Read more »

Zagreus Ammon

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… Read more »


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… Read more »


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… Read more »

Barry Carol
Barry Carol

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… Read more »

maggie mahar
maggie mahar

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… Read more »


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.


“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… Read more »


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,… Read more »

Barry Carol
Barry Carol

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… Read more »