Quality or value? A Measure for the 21st Century

One of the founders of the evidence-based medicine movement, Muir Gray

Fascinating, how in the same week two giants of evidence-based medicine have given such divergent views on the future of quality improvement. Here (free subscription required), Donald Berwick, the CMS administrator and founder and former head of the Institute for Healthcare Improvement, emphasizes the need for quality as the strategy for success in our healthcare system. But here, one of the fathers of EBM, Muir Gray, states that quality is so 20th century, and we need instead to shine the light on value. So, who is right?

Well, let’s define the terms. The Merriam-Webster dictionary defines quality as “the degree of excellence.” The same source tells us that value is “a fair return or equivalent in goods, services or money for something exchanged.” To me “value” is a holistic measure of cost for quality, painting a fuller picture of the investment vis-a-vis the returns on this investment. What do I mean by that?

Simply put, the idea behind value is to establish what is a reasonable amount to pay for a unit of quality. Let’s take my used 1999 VW Passat as an example. If my mechanic tells me that it needs to have some hoses replaced, and it will cost me under $100, and the car will run perfectly, I will consider that to be a good value. However, if my transmission has fallen out in the middle of Brookline Ave. in Boston (really happened to me once, many years ago and with a different car), and it will cost me $5,000 to fix, I may say that the value proposition is just not there, particularly given that the car itself is worth much less than $5,000. Given that my budget is not unlimited, I have to make trade-off decisions about where to put my money, so I may instead spend the money on another used Passat that has good prospects.

But in medicine, we routinely avoid thinking about value. There seems to be an overall impression that if it out there on the market, and especially if it is new, it is good and I am worth all of it. This impression is further enabled by the fact that CMS has no statutory power to make decisions based on value of interventions — they are legislatively mandated to turn a blind eye to the costs. Does this make sense? How toothless is our comparative effectiveness effort likely to be if it has to ignore half of the story?

Let us now look at my favorite sticky wicket, ventilator-associated pneumonia, or VAP. Now, the IHI bundle aimed at eliminating VAP consists of 5 points of intervention: 1). semi-recumbent positioning, 2). daily screen for readiness to get off mechanical ventilation, 3). daily sedation vacation, 4). prophylaxis against GI bleeding, and 5). prevention of clots. As I have mentioned before elsewhere, adherence of 95% to all these measures is deemed compliance and may be ultimately used as a quality measure by payers to determine levels of reimbursement. And while each of these interventions is basically “motherhood and apple pie”, applying them blindly and in toto to 95% of intubated patients may be a strategy for disaster. But what is even clearer is that, in order to implement this and all of the other quality improvement strategies, systems need to be put in place that will safeguard against failing to implement these quality measures. The time and resource expenditures needed to institute and maintain these systems, which have not been described in great enough detail as far as I am concerned, have never been quantified. So, what we are left with is a bunch of interventions that, while looking OK individually in clinical trials (until you really start looking at them critically), are likely providing small, if any, gains in quality at the margins, whose investment-return equation has not even been disclosed, let alone balanced. And because budgets are necessarily limited, as are clinicians’ time and cognitive capacities, we need to select a sensible menu of interventions from this practically unlimited feast.

This is the quality conundrum, a clear case of chasing our tails to achieve perfection at the expense of good enough. And while no one in their right mind will argue with the language of improved quality in healthcare, I do think that Muir Gray and his camp are on to something that has been a long time coming. At this time of shrinking budgets, competing priorities and tightening resources, does it not make sense to look at value as a package deal, rather than merely at quality in isolation from its context? Instead of being bombarded by ever-increasing volume of quality measures coming from many directions, would it not be more sensible to prioritize these interventions based on the value that they bring rather than merely on their projected outcomes benefits, so frequently estimated based on data that have very little applicability to the real world? Let’s start asking the question: how much quality and at what price? Without paying attention to this critical balance, we will not only bankrupt the system, but also worsen outcomes paradoxically, as we continue to overwhelm clinicians with infinite minutia that may or may not be generating helpful outcomes.

So, in my book, Muir Gray: score; Berwick: keep trying.

Marya Zilberberg, MD, MPH, is a physician health services researcher with a specific interest in healthcare-associated complications and a broad interest in the state of our healthcare system. She is the Founder and President of EviMed Research Group, LLC, a consultancy specializing in epidemiology, health services and outcomes research. Dr. Zilbergerg is also a professor of Epidemiology at the University of Massachusetts, Amherst. She blogs at Healthcare, etc.

77 replies »

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  2. perceived value, different people will rate quality different but for the most part yes

  3. This is a false choice. What earthly good is quality without value or value without quality? There’s no “value” (which people interpret as low-cost) without a minimum level of quality.

    The point of having choices is being able to find the “sweet spot” for each person that balances the quality they can get with the value they can afford.

    And when it comes to health care, that’s almost always going to be what does the most good for the most people, not the tail ends of the bell curve.

    There would be no distinction here if each and every provider had to have a cost discussion with each and every patient: How much is it? Do I really need it? Is there an alternative?

    This is where 3rd-party payers have actually done a disservice, by inadvertently short-circuiting those discussions for the past 30 years.

  4. Margalit,

    I’m for option number 3. Costs can be reduced in a fair and equitable way. I’m a primary care physician that launched http://www.HealthScepter.com to help patients shop in the forming cash medicine markets. Medication, lab, and imaging costs can all be lowered significantly in the cash markets by up to 80%. One local imaging center (ACR-certified of course) will do MRI’s for $400. Reducing the cost of the same MRI service from $3,000 to $400 = value for the patient, reduced costs for insurers and reduced cost for the system. My work on HealthScepter is “an honest attempt to come up with an equitable solution.”

  5. I am not MD as Hell, but this commenter and I seem to think alike on most issues, because while I cannot and will not speak for anyone else but myself, doctors who think like me take the stands we do because they probably had a strong, solid training experience and gravitated to supervisors/mentors who did not believe physicians sell out to non providers for direction/control.

    Unfortunately, that it not the case for what I believe is the majority of colleagues, and certainly not of the graduates from medicine in general these past 10 or more years!

    Thank you Mr Holt for noting to Mr G to cease and desist his ridiculous accusations!

  6. haven’t seen nearly as many spam post, haven’t been uncontrolably tempted to buy any vitamins read alternative medicine sites since the new system.

    Are the Winstom Sock Pupperty trials over now or just beginning? Wouldn’t any self respecting sock puppet at least put in the effort to set up a dummy email account and spoof an IP? I think any dissenters from the prevailling ideology should be required to provide DNA at that least, right BobbyG? Either that or public dippings in NYT and Daily Kos to see if they float or sink.

  7. Guys. Sorry about the issues with comments. The new WordPress system shunts suspected spam into a “needs to be approved” file. Somehow it captured about 20 or so from your regulars (as well as a ton of spam). The new system is easier to manage than the old one, but it’s not perfect yet. Hang in there please! Lots more improvements will arrive….

  8. “To bad Stupidty can’t get you banned.”

    You’d be gone, that’s for certain. I know that “excapes” you and your own brand of “Stupidty.”

  9. “As far as I know, Dr. D, illegal immigrants cannot vote, Democrat or otherwise, whether they have access to health care or not.”

    Their kids can, and they have the highest birthrate of any Americans. Further they have engaged in election activity, while not the same as voting enfluencing voting should also be a problem, foreigners should not be impacting our elections.

    While the legally can’t vote that hasn’t stopped them from doing so


  10. To bad Stupidty can’t get you banned. For Determind MD and MD as Hell to be the same person they would beed to be bi-polar or suffer from multipersonality disorder. Their writing styles, diction, and experiences are noticebly different. Finally its THCB and they are just posters why the heck would they need to engage in sock puppetry? Its common when people are posters and use it to agree or advance their original post or they use it to make it appear like multiple people feel the same way. How often do you see the two of them post in the same thread let alone agree?

    Now certain commentors that keep making pointless ignorant comments that don’t advance the subject or even address the subject, if we could get rid of them….

  11. “We” don;t need to decide anything if the patient holds his/her money and uses it as he/she sees fit.

    The boomers are toast once the genX and etc. voters get a majority; they will reform Medicare in a moment of time.

    Only the payor can decide value. But if the patient is not the payor, then there is a dissonance that is intolerable in the long run.

  12. I would also like them to look into whether the always hyperbolic and untraceable “Determined MD” and “MD-as-Hell” are a Sock Puppet duo (i.e., the same person posing as different posters). That will get you banned from most reputable blogs.

  13. “So far, no”

    LOL, I would think Nate, above anyone, would have to have his comments reviewed for “moderation”.

  14. ” Anyone else had this problem?”

    So far, no but I liked the old format better.

  15. Can somebody tell me why my comment is not being posted and has this at the top: “Your comment is awaiting moderation”

    Moderation from what? I’m assuming there is a site “moderator” or administrator? Why has this happened more than once? There is no way to report site problems with this new format. Anyone else had this problem?

  16. As far as I know, Dr. D, illegal immigrants cannot vote, Democrat or otherwise, whether they have access to health care or not.

    “…asking providers to provide care for slave labor fees”

    Since you said “providers”, I assume this goes beyond physicians and it includes hospitals. I would say that there is a huge area of acceptable fees between current provider fees and slave labor. Primary care excluded from this statement.

  17. You want to talk about freeloaders, then what is the agenda of the Democrat Party wanting to provide what is basically amnesty to illegal immigrants and then allow them to be in our health care system? I’ll tell you what the agenda is in 3 words: More Democrat Voters. After all, who ya gonna thank for accessing our health care system for what will amount to free, because you think the majority of illegal immigrants are going to access private insurance? No, they will not, they will go on Medicaid rolls, and anyone who argues otherwise is either as insincere as the term comes or is so clueless and mesmerized by the Democrat false rhetoric that they would believe the sky is green if the Democrats said so.

    Ms G-A’s comment of abetting 99 bums to avoid hurting one honest person is in fact that lame Democrat logic, even if she herself is not a Democrat. You are only aiding and abetting dependency, by believing we have to help every single person irregardless of cost for every issue that comes through health care provider doors, and that is not realistic in this day and age. Again, I am not advocating for abandonment or “death panel” ideology, but, something has go to give, and just asking providers to provide care for slave labor fees is not going to encourage or motivate the majority of honest, caring health care workers to stay in such a system.

    The usual suspects will just add in their usual insults and demeaning perspectives of providers, especially physicians, and that is because they have their agenda to force this mind set on the public.

    Wanna bet the loudest advocates for slave labor on physicians themselves go to boutique practices, and not only expect but demand the best and most up to date interventions? That is because the advocates and defenders of Obamacare are the textbook examples of hypocrisy. Just don’t expect them to tell you so.

  18. To focus on Medicare and Medicaid for a moment, I think there are different forces driving the costs of these two programs. Prices per procedure, which is a huge issue for commercial insurance, is less of an issue in the two government programs because both use administered or dictated pricing which, supposedly, bear some relationship to the actual cost of providing care. However, even Medicare pays more per procedure than is typically paid in other developed countries.

    Medicaid is really two separate programs – TANF + SCHIP and ABD. Children beyond the age of one year are comparatively cheap to cover. I’m told that over 35% of the costs to provide care to the TANF (Temporary Aid to Needy Families) population are for maternity care including labor and delivery. These two programs combined account for 25%-30% of Medicaid costs. The real money is in the ABD (Aged, Blind and Disabled) program. Here, we’re talking about huge outlays for skilled nursing care and home health care. There are big opportunities for fraud, including the provision of clearly unnecessary care to drive revenue for nursing homes. These providers need to be subject to rigorous utilization review.

    Medicare, which serves the 65 and older population plus certain disabled people and those who need kidney dialysis, needs a different focus. Here, hospital based care is a more significant cost factor and we need good utilization review as well. There also seems to be a lot of fraud in the areas of durable medical equipment, like power wheel chairs, home health care, physical therapy and simply billing for care that was never provided for care for people who have already died. Access to the Medicare claims database, including aggregate billing by individual providers, could help to expose abuses on a more timely basis and eliminate many of the crooks from the Medicare system altogether.

    To drive more cost-effective care generally, I think we need disclosure of actual contract reimbursement rates paid by private insurers, bundled pricing for surgical procedures and risk adjusted capitation for primary care. The faster we can move away from the fee for service payment model, the better.

    Separately, I would be interested if Steve could provide some examples of lower tier care that the poor would not be eligible for. Are we talking more limited access to expensive specialty drugs, fewer care options at the end of life, or a basically similar benefits package but provided by less experienced physicians and other medical personnel than those who would typically serve the middle class and the wealthy? I think the concept is reasonable but I would like to better understand how you envision it working.

  19. Steve, I would agree with a multi-tiered approach, if the tiers were differentiated by amenities, such as private rooms, orchestras in the lobby and private waiting rooms with personal Bose surround sound.
    I would not favor multi-tiered standards of care though.

  20. I think I started by saying that I have no objection to Barry’s suggested anti-fraud measures, so why mix apples and oranges?
    Medicare fraud has nothing to do with somebody signing up their kid for a free school lunch. Those who fraudulently extract large sums of money from federal programs are usually not in need for a fake pass at the lunch counter.

    You are again going to extremes. How many folks on food stamps drive BMWs?
    The reason these programs are so expensive has very little to do with impoverished citizens trying to get a literal free lunch.

    Barry, I also think taxes should go up, but they should be used to provide national health care coverage to all, automatically, so nobody has to cheat their way into the exquisite Medicaid system.

  21. “My problem is liberals never admit there are free riders, welfare queens, and bums. ”

    I work at a trauma center on the wrong side of the tracks. I work with the scum of the earth, if it is ok to be non-PC. I see some of these people almost every day. But, it is not like the old AFDC days. Most of the people on Medicaid, the poor people, are the working poor. Also, even the scum have kids, unfortunately. Rather than obsess over the minority of bad people, I would like to address the needs of the majority of these folks who are decent folks who dont make enough money to pay for health care. I have no problem in principle with not providing care for some of those truly awful people, but tell me how we can realistically do it? (BTW, the last time I looked, welfare moms, on average, have about the same number of kids as everyone else.)

    So much of first world medicine is going to be expensive no matter what we do. Premie care, just to take one example, is expensive everywhere. It takes too many people and too much specialized equipment. If you make $6,000 a year, even a $1,000 CT scan is a big deal.

    You are correct that we cannot afford care for everyone on our current path. The problem is that the percentage of people who cannot afford care will just keep growing. We need to bring down costs for everyone. We know it can be done since it is done in every other first world country. If, as part of that solution, we have a two (multi) tiered approach so that those who are not paying for their care get a lower level of care, I have no real problem with that. My caveat wold be that it not actually add to costs in the long run by delaying needed care. Here I am thinking HTN and DM and fending off ESRD and CAD/CHF in particular.


  22. so its even worse, great way to ruin a sunday Barry.

    I’m giving up, I’m going to the sugar shack to join the underground economy. Medicaid, Food stamps, and welfare for me, then with all my maple syrup money I never claim I can buy the BMW and my 10 month vacation when the sap isn’t flowing. Why work when Margalit is begging for the chance to give it all to me for free.

  23. Nate — Actually the total cost of Medicaid is north of $400 billion including both the federal and the states’ share.

  24. To follow up on my last comment, I think we need to do the following with respect to the entitlement programs:

    The big potential savings in Medicare and Medicaid gaming is reducing provider fraud – mainly by doctors and hospitals. It would also be helpful if the extensive Medicare claims database, including aggregate payments to individual physicians, were made available to outside analysts. This is currently prohibited by a 1979 court decision but appropriate legislation could presumably change that.

    For the means tested entitlement programs like Medicaid, food stamps, housing vouchers, subsidized school lunches, etc. we need to go after the individual gamers using the strategies I mentioned previously – national ID cards and rigorous income verification by the IRS.

    Many people say they would be fine with government programs and spending and the taxes to finance them if they perceived that the money is spent wisely. The fraud and gaming makes taxpayers cynical and resentful which has a corrosive effect on the society and the culture. They feel like they are being played for chumps. Liberals, I think, would help their cause if they were more on board with reducing excessive or inappropriate payments to the gamers and fraudsters.

    Finally, to bring government spending and the revenues to pay for them into closer alignment, taxes need to increase, not just on higher income people but the broad middle class as well. Since I said I would prefer a broad income base with lower marginal rates, here is a list of the major changes I would recommend, most of which affect me personally.

    1. Phase out the tax preference for employer provided health insurance over five years.

    2. Phase out the mortgage interest deduction over ten years.

    3. Limit the charitable deduction to the extent that it exceeds 2% of adjusted gross income. Personally, I would give just as much to charity without the deduction.

    4. Limit the deduction for state and local income and sales taxes and local property taxes to the extent that they exceed 5% of adjusted gross income.

    5. As long as the top marginal rate is 28% (the 1986 Tax Reform Act level) or lower, income from capital gains and qualified dividends should be taxed at the same rate as ordinary income.

    6. The middle class and lower middle class could be protected, at least for the most part, by raising the standard deduction while, if necessary, the Earned Income Tax Credit for the working poor could be increased as well.

  25. When we are young and idealistic its common for our beliefs to make no sense, by the time we are tax paying adults and voting we better have our S*#$ together.

    ” better 100 bums get a free ride than one honest person suffering unnecessarily.”

    ” I do agree that we are wasting resources on two bit gamers and small time thieves, but I hardly think they are the main driver to the financial collapse of health care financing.”

    Have you ever taken the time Margalit to actually think this out? To do the math on your beliefs?

    If 100 bums get benefits for every honest person that is 99% waste. Obviously you were being rhetorical but where is the number you are ok with? Right now we have documented 10% of Medicare benefits are outright fraudulent and much more is wastes or paid to non deserving people. Medicaid eligibility, which is in such terrible shape most states can’t even do an accurate audit, the known number is 13%+.

    Medicare is over 500 billion a year, that means we know we are losing 50 billion for sure with the true number closer to or over 100 billion.

    Medicaid is around a 200 billion program meaning we are losing at least an additional 26 to 50 billion.

    No white collar crime even begins to get close to 80 to 150 billion a year. Do you think 80 billion a year wouldn’t make a difference in our healthcare system? What we lose in fraud would have balanced our budget in a number of years.

    If you’re OK with the current waste and fraud how hi are you willing to let it go before you admit it is a problem?

    “I am not willing to sit in judgment on who is, or is not, deserving.”

    You already do.

    “those who seriously raid the tax payers’ cookie jar are more of the five-thousand-dollars suit & tie type than the hoodie and flannel shirt type.”

    You clearly have decided the hoodie and flannel shirt type are deserving and those that have been successful are not. You are willing to turn a blind eye to fraud committed by those you deem deserving but will be the first to arms when you think someone successful is benefiting. What’s amazing is how you have brainwashed yourself to not see the hypocrisy. This is exactly why we will never find a solution as long as Liberals have a voice. No system built on abuse and graft will ever be sustainable and Liberals won’t allow any system not built on such. If you can’t feed your preferred classes and buy votes you rather everyone suffer, honest and crooks.

  26. Margalit – I don’t have any love for the lobbying aristocracy either, but we have a money driven political system and structure and what the lobbyist are doing is not illegal, at least for the most part. The more government programs and tax preferences we have and create in the future, the more constituencies we will have that fight to protect them with lobbying money. On the tax side, I’ll take a broad base and lower rates like we had from 1987-1989. On the discretionary spending side, we should shrink the scope of government and get rid of programs that have outlived their usefulness or were never effective in the first place starting with ethanol subsidies.

    Regarding your comment that waste and fraud in benefit programs is mere collateral damage and it’s better to tolerate a hundred freeloaders and bums than risk one honest person going without benefits I think is exactly the mentality that makes these programs as expensive and fraud ridden as they are. The attitude among too many of the federal, state and local government employees who are in charge of determining eligibility seems to be: If it doubt, put the money out. After all, we mean well and besides, it’s not our money anyway. By contrast, a relative of mine sees who works for the Social Security Administration sees himself as a guardian of taxpayer resources. His objective is to ensure that the right claimants get the right amount of benefits at the right time. We need more like him in that role.

  27. “I think a lot of that has come from the taxpayer and was not earned.”

    The financial bailouts proved this. If this was honestly earned then we wouldn’t be in this mess now. What also comes from the taxpayer to prop up dishonest unregulated money flipping is, unemployment benefits, massive un-collectible property taxes, welfare payments, food stamps, education layoffs, etc. If we did not pay for these things then how would we measure corporate failure? There is a lot of history in bailouts for the unregulated wealthy as well as local tax breaks to corporations. Part of why the health care uninsured remain hidden is there is no way to measure the collateral damage.

    “what about those that don’t work or work poorly? Unless your mentally or physically incapable I don’t think we should have any handouts.”




    “Welfare, foodstamps, Medicaid, public housing should all require labor paid at the rate of $5.00 an hour to get them.”

    Labor where and paid by whom? And do you expect the children to also work for $5/hr? Have you looked at the ratio of line ups to jobs offered? Tell you what, in order for the high paid benefactors of all the above bailouts why shouldn’t they work for $5 an hour, or donate labor to stand in front of all the people they’ve hurt?

  28. I disagree, Nate. I am not willing to sit in judgment on who is, or is not, deserving.
    To your point and Barry’s point, I do agree that we are wasting resources on two bit gamers and small time thieves, but I hardly think they are the main driver to the financial collapse of health care financing. I think Bobby’s assessment is correct in that those who seriously raid the tax payers’ cookie jar are more of the five-thousand-dollars suit & tie type than the hoodie and flannel shirt type.
    I would be fine with anti fraud measures like the ones you describe Barry, but I have to confess that my tolerance for the lobbying aristocracy robbing us all blind for no particular reason other than sheer greed is much lower than my tolerance for someone buying a pint of liquor with food stamps worth a few bucks.
    I think we need to deal with whatever provides the biggest bang for the buck first.

  29. “My problem is that I see gaming of the system everywhere.”

    This is precisely why Libertarianism has thus far been proven full of [bleep], empirically.

    The United States of Scamerica. Shortly to again be on visible display by the grifters working as we speak to cash in big-time on the Japan Earthquake / tsunami tragedy.

    And, in coda, I would readily proffer a BET that the clean-nails, top-shelf, politically connected scammers virtually obliterate by dollar volume any ill-gotten gains, in the aggregate, of those totemitc Welfare Queens and other “moochers.”

  30. Margalit – I, for one, have absolutely no problem in paying taxes to help people who genuinely need help. My problem is that I see gaming of the system everywhere. It includes doctors and other medical providers who commit fraud against Medicare and Medicaid. It extends to people who claim dubious injuries to qualify for Social Security disability benefits. Then there are those who hide or understate income to qualify for more food stamps, housing vouchers and subsidized lunch for their kids than they are legitimately eligible for if they are eligible at all. Tax fraud by people who earn income that is not reflected on W-2 or 1099 forms is a huge problem. With modern technology, we should require everyone, at least over the age of 16, to have a national ID card with a name and address, a picture and a finger print or some other biometric identifier. As a taxpayer, I don’t think it’s too much to ask people who are applying for government benefits to at least prove that they are who they say they are and to expect their income to be verified by the IRS before benefits are approved. It’s amazing to me that there are people who are barely literate, yet when it comes to applying for government benefit programs, they seem to have PHD’s in gaming the system.

  31. “better 100 bums get a free ride than one honest person suffering unnecessarily.”

    Problem Margalit is all the free rides are causing honest people to suffer unnecessarily. You would be the first to say the poor need better healthcare, why aren’t they getting it? Because we can’t afford it. Why can’t we afford it? Becuase all the money spent on people who don’t deserve it. For some reason the Democrats always pick the free loaders over the honest people.

  32. You know Nate, I think the hand-outs to free-riders and bums is just collateral damage of liberal programs, just like tax cuts to wealthy thieves, who never created a job in their life, is collateral damage of conservative policies.
    Nothing can ever be perfect, but to borrow from the legal system, better 100 bums get a free ride than one honest person suffering unnecessarily.

  33. Yes and we should do everything we can to help those people. My problem is liberals never admit there are free riders, welfare queens, and bums. None of the liberal programs ever address the problem of those that don’t earn help or do anything to prevent these programs from being abused. If liberals didn’t waste so much money on those that don’t deserve it we would have more then enough money to help those that do

  34. Nate, whichever way we go, we always end up at the same point: hand-outs.

    I am not going to debate your aversion to free-riders and bums, but I want to ask an honest question and I want an honest answer.

    Do you understand that there are many decent, law-abiding, God fearing, hard working people, holding sometimes 2 or 3 jobs, and working as hard if not harder than most, who cannot afford comprehensive medical care?

  35. On the last point not at all. I disagree with a large portion of Wall Street Activity. I think the way people manipulate the market and bet for corporate failure is contradictory to the original concept of corporations selling stock. The way George Soros made his money is even worse, I count on there being a special place in hell for people like him.

    ” I think that if you work more, or work better, you should make more.”

    Does that apply to the converse, what about those that don’t work or work poorly? Unless your mentally or physically incapable I don’t think we should have any handouts. Welfare, foodstamps, Medicaid, public housing should all require labor paid at the rate of $5.00 an hour to get them. Oddly people always want to complain about and demand more from those that are working but never ask anything of those that aren’t?

    How does income distribution matter in a discussion of poor not paying anything for their benefits?

    If we discuss broad tax issues or funding of benefits paid with local and state taxes then I would agree. If you are discussing Federal matters and matters specific to federal taxation then local and state taxes are not relevant.

  36. Yes, Steve, corporate profits peaked at about 40% from the financial services sector during the last decade at the height of the bubble — about 3 times what one could legitimately expect from an “agency function.”

    This was accomplished by recursively bundling and flipping/re-flipping increasingly “bad paper” gussied up to look like just swell securities. The business model became all about an unsustainable combination of transaction fee income while concomitantly shoveling risk out the door. I worked in subprime risk modeling and management from 2000 to 2005, so I saw this stuff up close.

    The upshot of all that huge swindle is to a large degree why we now have this intractable economic mess. Humanity in general has been running an increasing sustainability deficit since the mid-1980’s, but, given the very loose coupling of cause and effect and long boomerang times, it “excapes” most people.

  37. “If you really want to go to school Steve I can drop you off.”

    This is what I said. ” At present, payroll taxes, in terms of revenue collected”


    Table 2.1, Receipts by source. I will round off. In 2010 income tax revenue was $900 billion. Payroll tax was $864 billion. (If you prefer links to CBO data or BEA those easily found or I have them archived.)

    “When I specifically discuss federal taxes why do you bring up local and state taxes? ”

    I think that total tax burden is important. You are free to disagree and only state federal income tax numbers, but from my POV, that gives an incomplete picture. I think all taxes matter.

    “Or maybe you just never knew that fact has nothing to do with the argument? Maybe the logic excapes you but we should expect people that work to have more income and wealth then those that don’t. ”

    I thought you worked with numbers? If the top 1% makes 25% of the income, then if they were paying taxes at the same rate as everyone else, we would expect them to pay 25% of the tax. The denominator always matters. Feel free to make an argument against a progressive tax structure, but income distribution always matters.

    I run a group that pays itself based upon productivity. I think that if you work more, or work better, you should make more. However, I do not believe that all of that growth at the top over the last few years came from productive work. IIRC, 40% of growth in the aughts was in the financial sector. I think a lot of that has come from the taxpayer and was not earned. I assume you disagree. I think that those who rent seek effectively are not really earning their money. Those who get special tax deals, are not really earning their wealth.


  38. Welfare Queen myth? You mean there never were any welfare queens?


    Over 21% of residents remain in public housing more than 5 years and nearly 17% of residents remain in Section 8 housing for more than 5 years.

    “The primary source of income for 30% of public housing resident households, 15% of residents of Section 8 housing and 32% of Housing Choice Voucher residents is through wages.”

    If 30% are earning income from wages then that means 70% aren’t. If 70% aren’t earning much income then they aren’t paying payroll taxes. Sort of kills your first argument Steve.


    “Thirteen percent of the population had been in public housing for more than twenty years, 17% for ten to twenty years, 21% for five to ten years, 23% for two to five years, 11% for a year or two, and 16% had moved during the past year.”

    13% 20+ years, thats a lot of welfare

  39. If you really want to go to school Steve I can drop you off.

    ” they are ignoring payroll taxes and state and local taxes.”

    Payroll taxes are a little over 7%. Low income person makes what 20K, if they work at all that year. That would be $1400 right? How much is the child tax credit? Working what ever tax credit? The $350 checks that got sent once or twice. Even after adding in payroll taxes what they get back in tax refunds still gives them a net zero or negative tax bill.

    When I specifically discuss federal taxes why do you bring up local and state taxes? And how much of a person’s local and state taxes go to Medicare and SS exactly?

    “He also forgets, amazing how this is always forgotten, that income and wealth, especially wealth, have become very concentrated at the top.”

    Did I forget? Or maybe you just never knew that fact has nothing to do with the argument? Maybe the logic excapes you but we should expect people that work to have more income and wealth then those that don’t. I didn’t think that needed stated but just in case, FYI everyone someone that works while you don’t will most likly have more money and assests then you.

  40. “I think a consumer looking the doctor in the eye saying “you want to charge me what?” is the quickest way to solve the cost issue.”

    Doesnt happen, at least not in my practice, even with people who have HSAs. Most people are not hyper informed internet denizens. Most are older sicker and worried. While people may be willing to dicker over the price of smaller items that they are more likely to understand, on the big ticket items, my experience is that they do not. If anything, I think a lot of patients are more likely to treat major procedures/treatments as a Veblen good.

    But then, I am specialist. Maybe it is different in the PCP world.


  41. You might want to read Pollack’s recent piece. The welfare queen myth is largely gone. Yes, you can find one every now and then, but then you can also find right wingers who live up to the worst stereotypes made about them. Neither are true. Most right of center people are decent people who disagree about a few policies with those on the left. Welfare is no longer like AFDC. People rarely find a way to stay on it for life, absent mental or physical issues. The absolute number on welfare is much smaller than in the past.

    The problem lies with the very large number of working poor. Health care costs have grown past their ability to afford care. If current trends continue, that will include more and more of us. We can just let those working poor go w/o care, and join them some day, or try to find a way to bring down costs (or both I guess). The rest of the first world has lower costs. I think we should also.

    Just for fun, let us flesh out some of Nate’s numbers. He is referring to income tax. When someone uses the numbers he quotes, they are ignoring payroll taxes and state and local taxes. At present, payroll taxes, in terms of revenue collected, are almost exactly the same as what we get from income taxes. He also forgets, amazing how this is always forgotten, that income and wealth, especially wealth, have become very concentrated at the top. In short, never accept a numerator w/o a denominator.


  42. I’m pratical and a realist, if you define equitable based on opportunity we can agree, if you measure equitable on outcomes then we won’t. Let me assure you though there is no way on earth to have an equitable system measured on end results. Poor people can not under any free system have access to the same services and treatments as the rich. You either have to tell the rich you are not allowed to spend your own money on care or tell the poor they won’t have access to treatments other people do and instead have a basic fair coverage. This is where academic and liberal ideology always fail, they like to pretend this decision doesn’t exist. Everyone can have everything, its not possible. Until you answer this question you can’t begin to solve any of the others. Once you do answer it then all the others fall together pretty quickly.

    Cost are easy to estimate, once you know who you limit then determine your budget then once you have that it is easy to calculate what benefits you can deliver for that budget.

    I believe over consumption is also a problem but it is becuase it doesn’t cost the consumer. If the doctor was spending the consumers money they would be more efficient. I don’t know of, have not heard of, and can not envision any system that would solve this that doesn’t involve consumer responsibility. Until it is there money they just won’t care. If someone has any ideas how to solve excessive care without consumer responsibility I would love to see it.

    I think a consumer looking the doctor in the eye saying “you want to charge me what?” is the quickest way to solve the cost issue. Throw in some tort reform and a touch of technology and we could solve that problem real easy.

    When have politicians ever tried to deliver fair equitable benefits? I don’t think your optomisitic I think your nieve for believing that is actually politicians goal. Since Medicare Politicians have always claimed they are trying to accomplish esxactly what you want, every time they do the exact opposite. Obama pulled the same BS. Nothing in his bill accomplishes any of what you say needs done. It does make people more dependent on Washington though. It will increase the power and influence of Washington though. It will increase the billions of dollars flowing through Washington.

    Until you answer the first question, who is going to be limited the rich denied the ability to buy their own care or the poor access to unlimited top notch care, nothing else matters.

  43. “My opinion is we have a cost issue that needs to be resolved before anything else. Apparently you disagree with this?”

    Strange as it may sound, I do agree, Nate.
    The question is how do you go about reducing costs and there are many ways. One way is to reduce the number of consumers, the second way is to reduce the quantity of services consumed, and the third way is to reduce what we pay for unit service.
    I would like to exclude the first option right off the bat, and that includes limiting some consumers to only consume some services but not others. This goes to the consideration that whatever solution we come up with, must be equitable, and I don’t expect you to agree on this one.
    The second option would equate to rationing, if applied blindly across the board. If applied on a case by case situation, I think most people would agree that there is a level of consumption that is either fraudulent, frivolous or completely counterproductive and sometimes plain harmful. My opinion is that a large amount of over consumption is not initiated by consumers, but instead, it is encouraged (to put it mildly) by those providing goods and services to the medical complex.
    The third option is highly overdue, and as we discussed before, service prices in the US are significantly higher than other comparable countries. This option too should not be blindly applied across the board. Some services should see cuts in reimbursement and others, like primary care, should see drastic increases.

    So basically, Nate, I believe that the situation can be remedied without pushing grandma under the train and without leaving vulnerable populations to fend for themselves. Maybe I am a bit too optimistic in my assessment, but I don’t see anybody making an honest attempt to come up with an equitable solution and this is very disappointing for me because I thought this administration would at least try.

  44. ” For every one of those moms, there are multiple others that, in a particular year, will use no services although they did contribute, so it should balance out.”

    ???? Margalit, if it balanced out we wouldn’t be having these problems. The whole reason we have healthcare reform and all these discussions is because it doesn’t balance out.

    We can’t afford to deliver federal benefits currently, if you were to increase benefits for those in Medicare and Medicaid to federal levels we would be bankrupt in under 5 years. That is not even touching those in private insurance. This is where arguing with you gets frustrating. Medicare and Medicaid are not sustainable at current benefits, and you want to increase those benefits. There is a major disconnect here. Do you disagree that our current system is not financially sustainable? Are we spending to little of GDP on healthcare today? Everything I read from you makes it sound like we are suffering a quality problem only and cost is not an issue.

    My opinion is we have a cost issue that needs to be resolved before anything else. Apparently you disagree with this?

  45. First of all, this was the original question:

    “” I am OK with some folks using more than others.”

    And doing that every year of their life?”
    That welfare mom is NOT using more medical care than others every single year of her life, so people don’t do that as a rule.

    And I am OK with that mom not ever contributing to the system. For every one of those moms, there are multiple others that, in a particular year, will use no services although they did contribute, so it should balance out. Isn’t that what you calculate for your folks? Just add the number 0 as a possibility. Will it make it more expensive for the others? Yes.

    Back to education, if you don’t listen in class, you are actually making the whole system more expensive for me. You will need counseling, special education services, tutoring and possibly will have to repeat some grades. You may also affect other systems, by ending up in jail, which is awfully expensive for everybody. So your bad decisions, are costing society quite a bit of money. Not to mention that education is an expected cost and very much under one’s control (unlike some health issues), but we cover it anyway.

    As to the cost of education being lower, that is true, but if we establish that we are agreeable to the transactional principle, than quibbling about price is secondary.

    The basket content question is not something I can answer on the fly. I would think it will require national debate, weighting how much taxes we are willing to pay against freedom to choose crazy therapies, but generally speaking, I would expect it to contain what the federal employees plan currently contains. What’s good for the goose, should be good enough for the gander.

  46. Whatever, “nate,” just carry on with your juvie insults of everyone with whom you disagree on any point of contention. You and your relentless characterizations of everyone else as “idiots” are a waste of time. I shall not bother you further, “nate.”

  47. BobbyG, so that would be;

    anonymity false
    Strawmen false

    how many more times do you want to be called out before you give up your worthless post and contribute something meaningful?

  48. “Nate, nobody does that “every year of their life”, and you know that too.”

    Margalit when does a welfare mom living in section 8 housing covered by Medicaid every pay a penny of federal taxes or contribute to her insurance cost? Basic logic shows these people exist.

    “Are you ok with people never making a financial contribution to the system?”

    You answered this question yes. This is the problem with you liberals, you contradict yourself in the same paragraph. If they never make a financial contribution then they obviously always get more out every year then they put in. Would you like to finish the argument with your self then give us an answer. On the other hand if you claim both sides of the argument your always right half the time.

    Education last 12 years, maybe 16, and cost a couple hundred thousand. Insurance last up to 100 years and can cost 10s of millions. Terrible comparison margalit. If someone doesn’t pay attention in school they just don’t get an education. Poor health decisions drive up the cost for everyone else. Its different when your bad decisions harm others.

    Why should the system pay for routine services people know they are going to have? Are you trying to design an inefficient system? That goes back to the whole problem, when people don’t have to pay they waste care.

    What do you want to be in the national basket Margalit?

    ” the entire calculation is skewed, incorrect, and, I am willing to venture an assumption here, more expensive on average (repeat: on average).”

    What calcualtion is schewed? Besides Medicare none of these calculations are schewed.

  49. Artfully chosen inflammatory anecdotes do not suffice to make a policy case that trumps all other consideration. Add “perfectionism fallacy” to your arsenal of non sequiturs, I guess.

    Moreover, one could parry with numerous (and equivalently biased) anecdotal examples of “people born into unearned wealth that live their whole life in unearned wealth? Or are you arguing that there are so few it doesn’t matter?”

  50. So BobbyG are you claiming there are no people born into welfare that live their whole life in welfare? Or are you arguing that there are so few it doesn’t matter?


    “Child Support Solutions got its start in 2002 after my book received an enthusiastic reception,” she explains. “I realized that there were a lot of people out there facing this kind of problem.”

    One of them was a lifelong welfare recipient who, by age 28, had 10 children by eight different men. None of them were contributing to child support. “We helped her to identify six of the fathers, and today she’s getting child support from six of them,”

  51. “And doing that every year of their life?”

    Nate, nobody does that “every year of their life”, and you know that too.

    “Are you ok with people never making a financial contribution to the system? Should someone that never pays a penny for insurance be entitled to all the same treatments and medications as someone that pays in more then they consume?”

    Yes and Yes.
    Substitute education for insurance and medical care in your questions, and you will see that the principle is pretty much the same. You may not agree with the principle, but that’s a different argument.

    A national basket does not have to be just for expected expenditures. It should include everything the system can afford to pay, at the current taxation level, for any occurrence, be it common or unusual or catastrophic. That doesn’t mean that people pay for unneeded services. It just means that the calculation is global. You have been doing this for a very long time, so I am pretty comfortable that you know how to calculate the risk and the necessary contributions.
    As long as you have pools for old people, pools for poor people, pools for the children of poor people, pools for wealthy, pools for veterans, pools for the sick, pools for every type of employment you happen to have at a certain time, the entire calculation is skewed, incorrect, and, I am willing to venture an assumption here, more expensive on average (repeat: on average).

  52. Straw Man (tiresomely) is the use of dishonest, inflammatory characterizations of others in order to distract from the real issues. You do it all the time. Knocking down straw men is one thing you truly excel at.

    Case in point:

    “And doing that every year of their life? Are you ok with people never making a financial contribution to the system? Should someone that never pays a penny for insurance be entitled to all the same treatments and medications as someone that pays in more then they consume?”

    Yeah, lifelong shiftless, mooching, Cadillac-driving, lobster-and-prime-rib eating Welfare Queens get getting every single benefit as the Warren Buffets.

    Get serious.

  53. comming from BobbyG who couldn’t define strawmen to save his life, maybe you should go look strawman and anonymity before you waste time for the readers?

    Where exactly was this strawman argument? I won’t hold my breath waiting for you to respond, just like you shut your mouth after the anonymity comment.

  54. “Sometimes simplicity has its own rewards.”

    Medicare and its lettered supplement plans is probably the easiest to understand and most simple insurance plan out there. Its also the most expensive and most fraud ridden.

    “The problem I see, is that we cannot even have an educated national conversation about a basket of standard benefits, because the public system is fragmented into sub-systems”

    Why does the fragemented systems make it harder, I would disagree with you and say it makes it easier. Instead of trying to find one basket that covers the needs of poor, rich, young and old we have defined systems for each. To me it would seem much easier to create such baskets in our system then countries that have universal plans. Does Medicare really need the same preventive benefits as SCHIP?

    ” I am OK with some folks using more than others.”

    And doing that every year of their life? Are you ok with people never making a financial contribution to the system? Should someone that never pays a penny for insurance be entitled to all the same treatments and medications as someone that pays in more then they consume?

    Things started going wrong when Medicare was passed to protect grandma from prolonged illness but did the exact opposit. There should be no national basket of benefits because insurance shouldn’t cover ANYTHING you would expect to happen in a given year.

  55. Nate, I have no doubt that the tax system is fraught with fraud and inequities, but you cannot build a case for how health care should (or should not) work based on the fact that the IRS is less than competent, or that tax policies are not to your liking. This requires a separate conversation.

    People make poor decisions regarding many things, not just free medical care. Uneducated poor people may make what seems to you as poor decisions, but their environment dictates that these are the only decisions they can make. Perhaps we should busy ourselves with eliminating those environments instead of making sure they all drop dead as MD as HELL suggested in another thread here.
    BTW, Medicaid folks cannot get the brand name instead of the generic, and I think you know that. They can’t even get the coated caplets in some cases.

  56. Barry, I do agree that the term insurance has very little to do with health care and we should probably start thinking about it in a different way. I also agree that one cannot expect to obtain an unlimited amount of services from a tax financed, or even privately financed, pool of money to be used for medical services, but I am OK with some folks using more than others. This is no different than other services provided through taxation. If you have 10 kids, you will be using more education services than if you have 1.
    I think the problem with medical care is that we cannot see clearly how one’s use of services benefits society as a whole. Some people use more law enforcement services than others, but we understand how that benefits us all and don’t mind so much.
    Should there be a sensible ceiling to how much medical service you can expect from the system? Of course. There is such ceiling in every other tax financed service. The question is how low should that ceiling be before people start feeling crushed by it, and most importantly, who should define that ceiling. Since you mentioned Israel, I would be fine with that ceiling, and I know it very well.
    The problem I see, is that we cannot even have an educated national conversation about a basket of standard benefits, because the public system is fragmented into sub-systems for the poor, the military and the elderly, all with different rules and regulations and the private system is just a Darwinian jungle. Sometimes simplicity has its own rewards.

  57. The issue of Value v. Quality in healthcare represents a disconnect, as who really holds the value-proposition is not clear. Margalit is correct in describing the conundrum from a first-person perspective ala “the patient”, however remember that cost is a key component in the value calculation. Most of the end consumers (patients) expect the quality to be “perfect” or the best it can be and since in most cases they are minimally involved with the cost end, the concept of value is moot.

    Such is confirmed when looking at ‘who’ is really concerned about the value proposition in healthcare (government, insurers, employers).

    While it is true that value can be defined in non-monetary terms (time, pain, quality of life), until the cost issues is in someway tied to the consumer in a more direct fashion, the utility of value is limited. Additionally, I believe the ‘indirect’ cost issues (ie higher taxes, premiums, shifting resources) are too disconnected to have a day to day impact at this point.

  58. BobbyG don’t express my opinion for me, I am more then capable of expressing myself and your not nearly inteligent enough to even figure out what my faviorte ice cream is let alone social or economic issues.

    The real difference between me and people like you and Margalit is when I tell someone I am going to give them something I actually intend to do so, your perfectly fine promising a cadilliac plan and delivering a pinto.

    Society can only afford a certain % of free loaders. When people consistently take more from society then they contribute eventually you reach a tipping point where it all crumbles. We are very close to reaching that tipping point. People like Margalit want to pretend there is no point, 99.9% of the population can consume more healthcare then they pay for and somehow the remaining .1% will pay for it. Obviopusly she is not living in reality and doesn’t give any thought on how we actually accomplish what she says we should do.

    “(if you are to be believed, in light of your posting anonymity)”

    Posting anonymity? FIrst and last name aren’t enough? What do you want my social security number and date of birth? Comment sums up your ignorance perfectly. You don’t even know what anonymity means but you saw someone else use it when they had a weak intelectual argument so you throw it in.

    “If they don’t pay taxes because their income is too low, then all is well.”

    By who’s measure Margalit? If you can’t afford to eat then you should get free insurance? Or if you can’t afford 3 cars, a big house, and monthly vacation then you shouls also get free insurance? What ever level you want to set this bar at, if it effects 10% of the popualtion society can cover that. 20% creates a noticeable shift in wealth. What about when it hits 30% margalit? 50%? Do you recogonize that at a certain point those that are left can’t contribute enough to cover all those that don’t?

    Do you deny there is any connection between people getting free insurance and their consumption? There is plenty of information out there showing that people make poor decisions when it does not effect them. Why take the generic over the brand if it doesn’t effect your insurance premiums? Why not go to the most expensive hospital even though their outcomes are no better if your not paying the bill.

    Have you given any thought at all to the outcomes of your beliefs?

  59. Margalait – There are two main factors that make healthcare different from an insurance perspective. First, an unusually small percentage of people account for a hugely disproportionate share of claims costs in any given year. Second, doctors’ decisions to order tests, prescribe drugs, labs, imaging, physical therapy and the like, admit patients to the hospital, consult with patients and perform procedures themselves drive most healthcare costs that are ultimately paid by insurers, Medicare, Medicaid and the VA. When patients are largely insulated from the cost of their care because they are eligible for one of the taxpayer funded programs or have commercial insurance, they, for the most part, don’t care about costs once they have satisfied their deductible. The bottom line is that the potential demand for care can easily far exceed what society can afford and risks crowding out numerous other worthwhile investments including education and infrastructure. This is why every society rations care one way or another. In Israel, for example, the newest ultra expensive specialty drugs to treat cancer and other diseases are simply not covered. The UK and Canada make patients wait for non-life threatening procedures though they are good at primary care and pretty good at emergency care.

    In other types of insurance including life, auto, and homeowner policies, these issues don’t apply though life insurance becomes prohibitively expensive beyond a certain age. An offshoot of health insurance is long term care insurance. Only about 8% of the older population has it because it costs more than most people can afford. And, it turns out that the industry significantly underestimated its claims costs so premiums are in the process of rising significantly and some carriers have exited the market. As Nate says, even for taxpayer funded health insurance, if the vast majority of people wind up taking out more than they put in over the course of their lifetimes, the model is simply not sustainable.

    Finally, the wealthy will always be able to buy up, go to another country or otherwise access care that most people can’t afford. I have no problem with that as long as the scope and quality of care available to the broad population is widely perceived as “good enough.” At the end of the day, we need to set limits on what insurance will pay for but we need to do it fairly.

  60. Nate’s ostensible concept of government is dollar-in-dollar-out-, per capita, period. In other words, why have ANY government at all? (Indeed, why not just eliminate the “middleman”?) To Nate, the very concept of “commonwealth” (to the extent he gives it any serious thought whatsoever) is anathema. The rich and poor alike should have the utterly equal Libertarian Right to sleep under the bridges as they “wish.”

    Nate, I know this escapes you, but the very concept of “insurance,” should it have any moral value proposition at all, is simply “socialist.” But, then, YOU have gotten along just fine (if you are to be believed, in light of your posting anonymity) being a “middleman.”

  61. “Even the 30-40% that pay no federal taxes?”


    If they don’t pay taxes because their income is too low, then all is well.

    If they don’t pay taxes because they are engaging in illegal activities and fraud, then the law should deal with them separately from this particular issue discussed here.

  62. How much each person contributes is really meaningless. What matters is how much they take out. All the billionaires in the country are only worth a trillion or so. We spend 2 trillion a year on healthcare, someone besides the rich has to pay. If majority of the country pays nothing and 90% use more then they contribute there is no sustaoinable way to deliever that.

    “In my mind, patients = taxpayers”

    Even the 30-40% that pay no federal taxes?

  63. Margalit and Barry –

    Two excellent comments.

    Like I said, operationally defining “quality” is a relative piece of cake (though, more difficult in health care).

    BTW, I would commend to everyone the myriad observations of health care economist J.D. Kleinke (Google him, and search for his YouTube’d presentations).

    “Pay levels for most jobs are a function of skill, education, responsibility and DANGER.”

    Except in the Extremistan (see Taleb) of entertainment, ‘eh. Or, Wall Street.

  64. Barry, I don’t understand the distinction you are making between patients on one side and taxpayers and insurers on the other.
    In my mind, patients = taxpayers and money that insurers are spending = patients’ money. Therefore, all money patients spend on medical care is money that belongs to them in the first place. This is indeed an aggregate view of the money pool and some patients have less of a stake than others, but if you want to look at them in aggregate, it is their own money they are spending.

    So perhaps the problem is not which group owns the money, but how much each individual has contributed to the pool. Perhaps letting folks have more care than the monetary value they contributed is not palatable because it is a form of wealth distribution. And perhaps when saying that we should consider value for what the pool gets in medical care and then allow the wealthy folks to contribute less and use the remainder to buy extra care for themselves is another way of saying that we should ration care by ability to pay. And ration it is, because we just reduced the money pool enough to create scarcity of means to buy care with.

  65. Unfortunately, the notion of value has been a foreign concept in the healthcare debate in the U.S. for a long, long time. Patients think they should have access to any service, test, procedure or drug that has even the tiniest possibility of helping them no matter how much it costs and that someone else (taxpayers or insurers) should pay for it. Doctors, for their part, never considered it part of their job to know or care about costs. As the author of the post noted, Medicare, by law, cannot even consider costs in its coverage and payment decisions. This all needs to change.

    QALY metrics or some other approach that attempts to balance costs and benefits is NOT rationing. It’s a reasonable effort to ensure that we get sufficient value for our healthcare dollars by balancing costs vs. benefits in a world of finite resources. Organ transplants, by contrast, are rationed because there aren’t enough to go around. Medicare and private insurers generally cover these procedures, but, since there aren’t enough organs for everyone who could benefit from a transplant, we developed elaborate protocols to determine who gets them and who doesn’t.

    We make these tradeoffs between costs and benefits all the time in all other areas of life. Pay levels for most jobs are a function of skill, education, responsibility and DANGER. Environmental regulations take costs into account though there is some disparity among agencies related to how much to value a life or a life year. If we could improve the quality of our air and water slightly by forcing industry to spend another $100 billion a year and maybe avoid one or two premature cancer deaths, that doesn’t mean we should do it and we don’t. The same logic should apply to healthcare. Of course, if people want to spend their own money on low value or futile care, that’s their choice.

  66. If we want to apply the value example of the VW Passat to health care, then the story must be told in first person by the VW Passat. I doubt very seriously that the Passat will consider a trip to the junk yard for itself as superior value to having its transmission fixed, whatever that may cost.

    The problem with defining value in medical care is that those defining the term are looking at it from a population perspective, while those subjected to this definition are evaluating from a personal perspective and the two only rarely align.

    Pure quality on the other hand, is much easier to reconcile on personal and societal levels, although probably harder to measure than dollars.

    So I would stick with Dr. Berwick on this one.

  67. This is a very interesting post, thank you. In a number of fields, “quality” is fairly easy to operationally define and subsequently evaluate. I began my “quality” career in 1986 in a forensic-level environmental radioanalytical / mixed waste lab in Oak Ridge — “forensic” meaning that a good bit of our work was subsequently bound for use as evidence in exposure / contamination cases (“mixed waste,” btw, is Nasty Chemical Goop like PCBs, Dioxins, etc, also laced with radionuclides). “Quality” was principally just statistical “quality control” (SPC), i.e., can you consistently demonstrate bench-level ability to hit with +/- x% on assays of reference standard across the spectrum of parameters and matrices, as required by both regulation and contractual stipulations?

    In many other fields, “quality” compliance to contractual standards is similarly easy to define and assess.

    Medicine is indeed different though, given, among other factors, the much looser coupling of cause and effect (and related huge numbers of frequently transient variables at play). You can do a lot of things “wrong” and still have a good outcome, and vice versa. Seems to me that, historically, much of “quality” in health care has been simply of the “process compliance” flavor. Now we’re proposing to bring “outcomes” into the mix on a huge (uncontrolled) scale (e.g., “CER”) to further refine our notion of “quality” (we hope).

    You are right to bring up the issue of “value” as yet another potentially significant, higher-order nuance, notwithstanding the QALY heartburn it will give numerous critics (including the GlennBeckistanis who will continue to scream about “rationing” and death panels”).