Last week, Jeff Goldsmith, who enjoys a reputation as one of health care’s more thoughtful commentators and advisors, wrote a curious post on this site. He puzzled over Kaiser Family Foundation Chairman Drew Altman’s failure to gush that the 2007 health care inflation rate had moderated to 6.1%, down from 13.9% in 2003. While acknowledging that, yes, the drop in inflation is likely a low point in a larger cycle, he noted that, on an $800 billion base, the drop in premium growth freed up some $62 billion in capital for American business, funds that might be applied to better purpose.
Jeff theorizes that
cost sharing has, over a number of years, compelled families to be more
careful about their use of health services."
And he points to other influences that might have contributed to cost declines, including
"soggy admissions growth for hospitals, the
plummeting demand for expensive heart care (and the reduction in heart
attack admissions to hospitals), record low rates of prescription
drug cost growth, which stem from the explosion in generic drug options," and declines in nursing home census [on the public financing side].
He chides the health care community’s Chicken Littles who, presumably, live in an alternative reality, sit around hand-wringing, repeating "Ain’t it awful," but don’t get that this drop in explosive cost growth is really a sign of how many improvements there are in the system’s function. He says, as though confident that he’s dispensing wisdom,
"Sometimes it seems like it’s the only
game in town. If you want to see moderating health
costs as a problem, and are creative enough, you can think of reasons
why this is bad. And how helpful is that?"
And he concludes by cheerily reminding us that, placing our problems
in a perspective of continuing progress and with a can-do attitude, we
can fix our problems.
"The good news is that we are a resource-rich and inventive
society that is perfectly capable of finding the answers. But, while
we’re at it, it is worth considering that one reason why health cost
growth is moderating is that we are doing a bunch of things right. It
might even be that the lower rates of increase in cost reflect slow but
measurable progress in our battle against intractable human illnesses
such as heart disease and cancer."
Its always nice to have Pollyanna over for milk and cookies, but as Steely Dan said, "The things that pass for knowledge I don’t understand." One marvels that this nonsense can pass for serious argument.
I spend a good deal of my time working with business leaders from
non-health care organizations. They are apoplectic over their growing
inability to afford health benefits for their employees and their
families, and over the health industry’s obliviousness to skyrocketing
costs. The reality for employers and employees who pay for coverage is
that it consumes an increasing share of their resources, and its a
While its great to see even a momentary decline in cost growth down
to only 2.3 times general inflation, Mr. Goldsmith’s Big Event was,
after all, a single data point in a larger stream of unrelentingly
rampant health care inflation. Worse, when understood in the context of
cost-per-unit-benefit, the comparison between the premium costs of
yesterday and today are not apples-to-apples. Benefit structures are
significantly skinnier than they were 5 years ago, and the
out-of-pocket costs higher. In other words, 2007’s premium inflation
isn’t "only" 6.1%, but must be framed against a reduced benefit.
And then there are the cost drivers. There is no question that
there’s been some progress in the health care front. Medicare’s finally
decided to stop paying for hospital errors. There’s activity on the
transparency front, including the recent ruling requiring CMS to hand
over Medicare physician data to the advocacy organization Consumers’ Checkbook.
On the science front – and to the financial chagrin of interventional
cardiologists and device manufacturers – it’s become clear that optimal
drug therapy outperforms non-drug eluting stents. Uptake of EMRs and
best practice guidelines is accelerating, and a new era of information
flow from the Health 2.0 movement promises to move the locus of health care’s power increasingly toward patients and away from corporations.
But all these steps forward are still congealing. They have not
created meaningful efficiencies and savings yet. As a practical matter,
most health care processes and outcomes are still opaque to purchasers
and patients. Quality management systems remain in their infancy.
Fee-for-service reimbursement continues to be the dominant paradigm,
rewarding more care rather than the right care. And primary care, the
most valuable clinical specialty, remains critically undervalued.
And even though health care reform is back on the table, the most
important domestic issue in polls and a centerpiece of every Democratic
Presidential candidate, there’s little reason to believe that
meaningful change can occur as long as Congress remains susceptible to
the lobbying of this economy’s largest business sector. After all, the
half of health care cost that is waste is a big portion of health care
organizations’ bottom lines. Will health care’s business leaders
willingly agree to lose ground financially?
Call me a glass-half-empty kind of guy, but I fail to see that a
slight, arguably cyclical moderation in a longstanding and ferocious
economic trend is cause for rejoicing, especially when there are so
many other signs that the fundamentals remain unchanged. Nor do I see
how it is helpful to suggest to non-health industry business leaders –
whose understanding of the gravity of the crisis and whose support for
serious solutions is critical to its resolution – that we’re coming
out of the storm when proof of progress demands significant leaps of
I’ve generally been a fan of Mr. Goldsmith’s work, but not this
piece. I’ll be the first to cheer when there are substantive
enterprise-wide improvements in health care. But the simple measure and
trends he points to aren’t enough. Worse is his suggestion that the
rest of us are just too dumb and "neurotic" – yes, I think that was the
word he used – to appreciate progress. Coming from a guy of Jeff’s
stature, that sort of pop psychology is pure arrogance. It also conveys
to our potential allies, America’s business leaders, that we don’t
grasp what’s going on and that the crisis is beginning to resolve.
As far as I can tell, we do and it isn’t. Which means that one of us must not understand the situation.