OP-ED

The Five Myths of Healthcare Reform

The arguments that the widespread use of health information technology (HIT), improving health status, expanding outcomes research, implementing pay-for-performance systems, and covering everyone will make it possible for us to afford comprehensive health care reform are commonly cited by people on both sides of the political aisle. It’s all a myth.

Undoubtedly, these ideas will be at the core of any number of health care reform proposals as we begin the 2009 health care reform effort.There is nothing wrong with any of these things and all can make a positive contribution toward improving both the cost of and especially the quality in our health care system. All should be part of a reform proposal.The problem is that none of them would make more than a modest dent in what a reformed system would cost us and not come anywhere near close to
accomplishing the objective of stabilizing our health care costs much less reducing them.

Therefore, any responsible reform effort would not count on any, or the sum, of these things by themselves to make it possible for a reformed American health care system to become sustainable.

Simply put, let’s stop kidding ourselves that these commonly cited improvements can pay for health care reform.

Health Information Technology and Prevention Health information technology is important and can probably do more to improve the quality of our health care system than save us money. Prevention and wellness will also help and would certainly improve the quality and length of life for people who deal with preventable health problems.

But the research on both counts always comes up way short of what politicians argue it can do to save money. In this month’s
groundbreaking Congressional Budget Office (CBO) report on health care reform options, the authors said, approaches €”such as the wider adoption of health information technology or greater use of preventive medical care €”could
improve people’€™s health but would probably generate either modest reductions in the overall costs of health care or increases in such spending within a 10-year budgetary window.

In his comprehensive review of the literature on health care costs in October, Paul Ginsburg found, “Obesity is a significant factor driving health spending, accounting for an estimated 12% of the growth in recent years.” However, any gains from reducing obesity would be concentrated in the short and intermediate period “because some of the savings will be offset by increased longevity and the cost of disease that are most prevalent during old age.”

Both come to the same conclusion—modest gains, worth doing, but nowhere near blockbuster results.

Outcomes Research Outcomes
research has been going on for decades. Let me make it clear I do buy into the Dartmouth arguments that we could improve our costs by 30% if all health care providers followed the course of the most efficient. As Ginsburg pointed out in his literature review, the inefficient use of technology is the key driver in health care spending accounting for an estimated 38% to 65% of spending growth.

The problem I have with the suggestions that more outcomes research will save us money is that more than twenty years of outstanding outcomes research, Dartmouth for example, has not kept our health care costs under control. Why would a dramatic expansion of what we already know do any more?

As Ginsburg points out, “Overall our understanding of high and rising costs is fairly solid. Our most pressing needs are not as much on the research side as on the development side, that is, all of the technical work needed to pursue many of the reforms…”

The CBO found that the net effect on the deficit between 2010 and 2019 for funding more research comparing the effectiveness of treatment options would be an increase of $860 million and “reduce total spending on health care in the United States by an estimated $8 billion over the 2010-€“2019 period (or by less than one-tenth of 1 percent). CBO seems to be saying that more such information will be of small value unless underlying incentives that promote inefficient practice patterns are not changed.

As I posted recently, I have watched and admired the Dartmouth work since 1990. But it is clear that just publishing this information is not enough €”far more importantly there must to be an imperative for providers to adopt it. That comes under the heading, tough cost containment, not more research.

Pay-For Performance There isn’t anything in this health care debate that I can be more cynical about then €œpay-for- performance. As a concept I can’€™t disagree with it. That it sounds good is likely the most important reason it is at the top of so many reformers€™ lists.

But we haven’t agreed on what quality is or how to measure it.

In my mind, €œpay-for €“performance  is just a means of politically rationalizing a way to avoid the upcoming Medicare physician fee cuts and paying the politically powerful providers more. To work, pay-for-performance has to be something better than a sum zero game—it has to be budget negative. The providers, as a group, have to get less than they would have. There must be losers.

The CBO doesn’t see any big savings here either. For example, the CBO estimates that allowing physicians to form bonus-eligible organizations and receive performance-based payments would reduce spending by $5.3 billion cumulatively over ten
years—hardly a dent in a system that will cost $2.6 trillion in 2010 alone.

Universal Coverage We need be certain that anyone who wants to be covered is covered because there is a moral imperative to do so. It is not acceptable for responsible citizens playing by the rules to be denied health insurance coverage for any reason cost or underwriting standards.

Politicians on both sides of the aisle have argued for years that getting everyone covered will save us money because it will be cheaper to have them receive proper care early on rather than wait for them to be really sick and then cost us more. That logic is correct. But the savings really aren’€™t anywhere the size promised.

Will covering everyone save us money?

As Ginsburg found, if we insure more people our health care system will cost more not less. “The increase in the percentage of people with health insurance accounted for approximately 10% to 13% of the historical growth in spending.” The uninsured has not contributed to the recent growth in health spending in the aggregate and will not be a driver in the future
unless we find a way to insure more people.

We should find a way to cover everyone. But we should not presume the end result of giving more people comprehensive access to care would save us any money.

Where Are the Savings? I will suggest that successful health care reform will deal with the real villains in our system:

  • The inefficient and wasteful use of technology.
  • Our prices for drugs, devices, and services that are dramatically higher than in other industrialized nations.
  • Administrative overhead.

As Ginsburg’€™s review of the literature found, inefficient use of technology is the key driver in health care spending accounting for an estimated 38% to 65% of spending growth, drug prices are 70% higher in the U.S., physician compensation is 6.6 times per capita GDP for specialists and 4.2 times for primary care compared to 4 and 3.2 in OECD nations, the U.S spends 54% more for the top five inpatient medical devices, and the U.S. spends six times more for administration than the OECD nations.

I accept the premise that our health care prices and overall costs will not likely ever be as low as other industrialized nations because of our higher GDP. But the GDP gap explains only part of it.

Let me also reiterate that including these five things in any reformed health care system will be important—probably more from a quality perspective than a cost saving effort. But, if we want to just keep kidding ourselves we can count on the myths that these five things will give us the savings we need to reform our system. All we will accomplish is making matters even worse when costs continue to explode and the new promises we have made become unaffordable in ways that will make our current health care system look like a bargain.

If we want to get real, it will take a head-on assault on these more problematic villains. That will likely require us to deal more directly with the demand side as well as the supply side.

Robert Laszweski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. Before forming HPSA in 1992, Robert served as the COO, Group Markets, for the Liberty Mutual Insurance Company. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog.

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Andrew WebsterJoannah LewisMGbotetourtDeron S. Recent comment authors
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Andrew Webster
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Hi Robert, With any mention of reform, effectively managing the human side of change becomes central to making any initiative stick, and thereby making it feasible. Further to Joahnnah’s comment about waste and very relevant to reform is a multimedia simulation focused on change management to sustain lean initiatives in a healthcare setting. It is called Lakeview (see: http://www.experiencepoint.com/sims/Lakeview) and it has received positive reviews from healthcare professionals as a means to learn change management principles. As a part of the launch of I can offer demonstrations, and if you contact me at andrew.webster@experiencepoint.com and reference this posting, I can… Read more »

Joannah Lewis
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Interesting topic and blog. This is my first time visiting, and I’m glad I took the time to read through some of the posts. From my own biased view, I wonder why you didn’t include medical claim fraud, waste, abuse and errors as one of your villains? The company I work for finds anywhere between 10 – 30 percent of paid claims to be potentially abusive. Some of what we do is simple and other parts of it extremely complex, but I believe all health plans can do something to prevent these abuses. Some of these abuses are done purposely… Read more »

MG
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MG

What continues to amaze me is that we as a society are so willing to pour so many resources towards the elderly (aged 65+) and this figure is poised to dramatically increase starting around 2012.
The real debate around healthcare is really one that is likely going to be a larger (and more difficult) societal question of just how much of our resources are we willing to shift away from more immediate needs (e.g., defense) and more intermediate and long-term needs (e.g., education, infrastructure).

botetourt
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botetourt

Mr. L–I agree–but it is really hard for me to believe that anyone familiar with our healthcare system actually believes that these 5 things are the answer. Improving health status is a worthy goal for many reasons, but probably requires a decade to show meaningful results. Why don’t you specify the “problematic villains”? In my opinion, the country has yet to reach the appropriate healthcare pain threshold necessary to effect the political changes which will usher in true healthcare reform, and at the moment, there are way too many distractions. Look for something around 2012.

Deron S.
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To say that improving health status will not achieve savings is a tough sell in my mind. If the average Medicare beneficiary has 4+ chronic conditions, 10+ prescriptions, and sees 6+ different providers a year (I don’t have the exact stats in front of me at the moment) the potential for savings is significant to say the least. I’m not sure that corresponding increases in life expectancy could ever offset that. If we increase life expectancy by 5 years, the normal retirement age must be increased by something close to that. I see no way around that. I’d be interested… Read more »