Obama Channeled Orszag, Orszag Channeled the Dartmouth Institute

flying cadeuciiIn an open letter to President Obama that I posted here on August 24, I stated that his expectation that the Affordable Care Act would have a deflationary effect was naive. I said he was badly misled by the managed care movement, and that he should never have accepted the movement’s diagnosis (overuse) and solutions (shifting insurance risk to doctors and micromanaging them). To help him understand that, I said I would post criticism of three prominent managed care proponents who influenced him: Elliott Fisher and his colleagues at the Dartmouth Institute, Atul Gawande, and Peter Orszag.

I will start with Elliott Fisher and his colleagues at the Dartmouth Institute for Health Policy and Clinical Research because they have been so influential with the entire health policy elite, not just Obama. I will devote this post and the next to them. I devote this post to demonstrating how influential they have been; I devote the next post to demonstrating how misleading they have been.

The Dartmouth Institute deserves credit for assembling data that shows substantial variation in the rate at which medical services are provided, both within small areas and between regions of the country. This data is very useful for generating hypotheses in need of further research. But the group deserves severe criticism for promoting the conclusion that variation can be explained primarily by overuse and virtually none of it can be explained by underuse, and for promoting “accountable care organizations” and other forms of “integrated care” as the solution that will address their erroneous overuse diagnosis.

Dr. Robert Berenson, a former member of MedPAC and of the Clinton administration, told the New York Times  in 2009, “There remains too much uncertainty about the Dartmouth findings to ground public policy on them.” That assessment is still accurate.

The Dartmouth syllogism

With the exception of Paul Ellwood (the inventor of the misnomer “health maintenance organization”) and his disciples, no group of scholars has had more influence on the health policy elite in the last half century than John Wennberg and the researchers who joined him at the Dartmouth Institute. Wennberg, the founder of the Institute, and his disciples Elliott Fisher, Jonathan Skinner and others published Medicare data in an online document called the Dartmouth Atlas that showed large regional differences in per capita Medicare spending. To take what is probably the Dartmouth Atlas scholars’ favorite example, per capita Medicare spending in Minneapolis has long been about 40 percent of Medicare spending in Miami.

More importantly, the Dartmouth Atlas group wrote papers in which they claimed they had documented the following syllogism:

(1) The regional differences in Medicare spending are due to overuse, not underuse;

(2) the overuse is due primarily to physician “practice style,” not to sicker and poorer people in the high-cost regions;

(3) if the profligate doctors in the higher-cost regions could be induced to adopt the alleged practice style of doctors in lower-cost regions, Medicare and total national health spending could be cut by 30 percent; and

(4) the way to induce the profligate doctors to behave like the good doctors is to antidote the baleful influence of the fee-for-service payment method by subjecting all doctors (the good and the bad) to insurance risk and micromanagement via “accountable care organizations” and other forms of “integrated care.”

In this comment, I will document my statement that the Dartmouth Atlas and the papers based on the Atlas have been enormously influential. I will use Obama and Hillary Clinton as examples of powerful, smart politicians who fell completely under the spell of Dartmouth Institute ideology. In my next post I will demonstrate that the conclusions Fisher et al. have drawn from their Medicare data are grossly inaccurate (and therefore deserve to be characterized as “ideology”). I will probably need a third and fourth post to document my statement that underuse is a far more common than overuse, and to present my criticism of Gawande and Orszag, two men who, like Obama and Clinton, bought the Dartmouth group’s diagnosis and prescription hook, line, and sinker.

Obama attempts to explain the Dartmouth syllogism

I will illustrate the influence that the Dartmouth group has had on Obama with two anecdotes: An interview Obama gave to the New York Times in April 2009, and his reaction to a June 2009 article in the New Yorker by Atul Gawande, an article that was itself heavily influenced by Dartmouth Institute research.

In April 2009 (at which time congressional Democrats were drafting what would become the Affordable Care Act) Obama gave a long interview to New York Times reporter David Leonhardt. Leonhardt asked Obama, “I wonder if you could talk to people about how going to the doctor will be different in the future; how they will experience medical care differently on the other side of health care reform.” After endorsing the myth that costs are high because of overuse (and totally ignoring rampant underuse, high prices, and administrative waste), Obama laid out his understanding of the solution he had heard from his advisors and other managed care advocates:

“And so if it turns out that doctors in Florida are spending 25 percent more on treating their patients as doctors in Minnesota … then us going down to Florida and pointing out that this is how folks in Minnesota are doing it and they seem to be getting pretty good outcomes, and are there particular reasons why you’re doing what you’re doing? – I think that conversation will ultimately yield some significant savings and some significant benefits.”

Obama is clearly channeling Elliott Fisher here. Leonhardt has thrown him a soft lob question, and Obama’s first instinct is to run his mind’s-eye over the Dartmouth Atlas map of the country. He recalls that Fisher et al. are always badmouthing Florida doctors and lionizing Minnesota doctors. But because Peter Orszag and his advisors never told him that the Dartmouth research is defective, Obama proceeds to make a statement to Leonhardt that relies on the folklore promoted by Fisher et al. He tells Leonhardt his “reforms” will somehow bring the wisdom of Minnesota doctors to Florida’s greedy and ignorant doctors.

Let us note first that in 2009, the year of Obama’s interview with Leonhardt, Minnesota’s per capita health care cost when measured by all expenditures (not just Medicare expenditures) was higher than Florida’s – $7,409 versus $7,156 (see this table  at the Kaiser Family Foundation website). Obama’s ignorance of that fact screams for an explanation. [1] The explanation, in my humble opinion, is that Fisher et al. were obsessed with their Medicare data because it fit their bias and were not interested in data on total spending because it did not fit their bias; that Obama surrounded himself with advisors who were blind to the defects in the Dartmouth group’s inexcusably sloppy research; and, therefore, those advisors never warned Obama about those defects.

Let us look next at how silly Obama’s answer is. He says some people he identifies only as “us” will “go down to Florida” (to Miami, Tallahassee?) and “point out how folks in Minnesota are doing it.” Who is “us”? Who will determine “how folks in Minnesota are doing it?” Fisher? Guwande? Which Minnesota doctors will be consulted? All Minnesota doctors? Just the urologists and pediatricians? Will trips to Minnesota by “us” (Fisher and Guwande?) be necessary every year?

And how does Obama imagine the Florida doctors will respond when they are asked “why you’re doing what you’re doing?”

Having sketched out the equivalent of a fairy tale, Obama concludes that his imagined “conversation will … yield some significant savings.” This, I submit, is an example of magical thinking. It is also an example of what happens to smart people who try to translate the Dartmouth diagnosis and the Dartmouth solution into plain English.

Obama’s reaction to Gawande’s article

Those of you who are already familiar with the Dartmouth Atlas probably recognized the influence of the Dartmouth research on Obama’s answer to Leonhardt. You know darn well that Obama’s choice of states – Minnesota and Florida – came right out of the Dartmouth Atlas.

We do not have to rely on inference alone, however, to conclude that Obama was channeling Fisher et al, or more likely, he was channeling Orszag’s interpretation of Fisher et al. We know that Obama was a true believer in the Dartmouth group syllogism because he said so and surrounded himself with people like Orszag who believed passionately in the syllogism. On June 8, 2009 (just two months after the Leonhardt interview), the New York Times reported that Obama had been smitten by the research of the “Dartmouth experts” for at least a year, and that Orszag was the one who turned him on to it. The hook for the Times story was Obama’s infatuation with an article  in the June 1, 2009 issue of The New Yorker by Gawande entitled, “The Cost Conundrum.” Gawande relied heavily on the Dartmouth group’s research. Obama was so taken with “The Cost Conundrum” he made it required reading for his staff. He even took it with him into a meeting with two dozen senators.

Senator Ron Wyden (D-OR) was at the meeting at which Obama brandished Gawande’s article. “He came into the meeting with that article having affected his thinking dramatically,” Wyden told the Times. “He, in effect, took that article and put it in front of a big group of senators and said, ‘This is what we’ve got to fix.’”

The Times noted that the Dartmouth group’s research “has become phenomenally influential on Capitol Hill since it was popularized by Peter R. Orszag, as director of the Congressional Budget Office and then as President Obama’s budget director. Aides said Mr. Obama had been intrigued by regional variations in health spending since before his inauguration. The topic came up at a meeting with Mr. Orszag in Chicago late last year.”

According to Ron Suskind’s book Confidence Men, Orszag was a devout follower of Dartmouth ideology before Obama was elected. “By the time Orszag became head of the CBO in January 2007,” wrote Suskind, “he was carrying the Dartmouth charts to congressional meetings and preaching to anyone who would listen about the ‘evidence-based’ cure for rising medical costs. Although he’d had only a few discussions with Obama during this period about health care, he was comforted to find that the senator knew about the Dartmouth revolution….” (p. 140)

Hillary Clinton tries to explain the Dartmouth syllogism

The third story I’ll tell to illustrate the influence of the Dartmouth group’s research is about Hillary Clinton’s testimony before the Senate Finance Committee on September 30, 1993 in favor of the Health Security Act, the health care reform legislation she and her husband wrote. As Obama did in his interview with Leonhardt, Clinton relied almost exclusively on the Dartmouth group’s research in making her case. And, like Obama, she found it impossible to explain her solution in a manner that made sense to anyone outside the managed care choir.

In her opening statement to the Finance Committee Clinton referred to “Dr. Jack Wennberg at Dartmouth,” and said, “You can look at different parts of our country where Medicare is delivered at a cost ranging between one and three times greater…. To use one of Senator [Dave] Durenberger’s [R-MN] favorite examples, if you are in Duluth, Minnesota, you will take care of a Medicare patient at one-half the cost in Philadelphia.” (pp. 13-14)

She mentioned the Mayo Clinic (located in Rochester, Minnesota) several times: “We also know that the reorganization of health care into different kinds of ways of delivering it than we currently rely on are much more efficient. There are many examples: the Mayo Clinic….” (p. 13) And a minute later she said, “I think most of us on this committee would be more than pleased to get all our health care from a Mayo Clinic.” (p 14)

What exactly did Clinton think Minnesota and Mayo Clinic doctors did that made them so efficient? She didn’t say. The best she could do was the vague phrase “reorganization of health care into different kinds of ways.” This is about as confusing as Obama’s fairy tale about bureaucrats arranging a “conversation” with Florida doctors to discuss what “folks in Minnesota are doing.”

Note also Clinton’s invocation of the myth that the Mayo Clinic is less expensive than other clinics. Like the myth that Minnesota costs are below average, the myth that the Mayo Clinic is unusually efficient owes its existence to the Dartmouth Atlas. As the Washington Post put it, “Mayo and the other model centers – which tend to be in the Upper Midwest, Mountain West and Pacific Northwest – have gained their current stature because of Dartmouth University research showing that they spend less per Medicare patient than their counterparts elsewhere….” [2]

Clinton also mentioned Hawaii as a place where people she didn’t identify were doing good things she didn’t specify.

When she completed her opening statement, the committee chairman, Daniel Patrick Moynihan (D-NY), made this sarcastic remark: “Mrs. Clinton, I have to say to you, the one option you have not considered sufficiently in this whole plan is we could just move half the population to Minnesota and half to Hawaii, our problems would be solved. [Laughter]” (p. 14)

Anyone who reads the entire transcript of that hearing knows Clinton was as prepared as any human being could be. But as we saw with Obama, it’s just not possible for even the most intelligent and prepared person to translate managed-care speak into understandable English. By relying so heavily on the Dartmouth group’s misleading Medicare data, by failing to explain what she thought Duluth doctors were doing that Philadelphia doctors were not doing, and by failing to explain in plain English how the Health Security Act would reduce spending in Philadelphia to Duluth levels, Clinton set herself up for Moynihan’s demeaning characterization. The fact that the audience found Moynihan’s remark funny indicates they sympathized with his assessment of her presentation. [3]

Our next lesson

In this lecture in my imaginary series of remedial health policy lectures for Obama, we have discussed the immense influence of the Dartmouth Institute on Obama and, by implication, on Congress and the entire health policy elite. In my next lecture, I will discuss the two most important defects in the Dartmouth group’s research on regional variation in spending: (1) They relied only on Medicare spending, which accounts for 20 percent of all spending; and (2) they failed to risk-adjust their Medicare data to reflect factors outside physician control.

[1] The study that contained the 2009 Minnesota and Florida spending numbers was not published until 2011. So the study itself would not have been available to Obama in April 2009 when he sat for his interview with Leonhardt. But the data on state-level spending had long been available at the Office of the Actuary within CMS. Had he asked for that data, Obama would have seen that Minnesota’s per capita spending for all its residents, not just its Medicare recipients, was roughly equal to the national average during the 1980s, then as managed care spread in Minnesota in the 1990s, rose to about 10 percent above the national average by the 2000s.

[2] I will document my statement that the Mayo Clinic is unusually expensive in a future post.

[3] Near the end of her testimony Clinton said: “… Medicare patients are being taken care of extremely well in Arkansas, Iowa or Minnesota, at one-half or one-third the cost of what is being paid for Medicare patients elsewhere. We want to bring the costs in those other states down. That is the whole theory behind what we are doing.” (p 40). That statement, perhaps more than any other, reveals how bewitched by the Dartmouth research she was. That statement condensed into a few words the multiple mistakes the Dartmouth group made. Medicare spending was not a good proxy for total spending; all variation was not due to overuse and, therefore, the high-spending states should not be forced to reduce their spending to the level of the low-spending states; and even if that was a good idea, Clinton and Wennberg et al. had no idea how to do that without harming patients. But never mind. The Dartmouth syllogism was, as Clinton put it, “the whole theory behind what we are doing.”

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9 replies »

  1. Per capita Medicare spending is lower in Hawaii than in any other states. It can’t be totally because of recent transplants who have good jobs and presumably aren’t yet eligible for Medicare. Moreover, most poor people over age 65 or disabled are eligible for Medicare as well whether they are also on Medicaid or not.

  2. Just as an aside, the Scottsdale, Arizona Mayo clinic does not accept Medicare insurance AND hasn’t for many years!

    Since the health insurance industry is largely controlled by the States, a Medicare expansion for universal health insurance would reduce the employment of many citizens at the local level.

    The Design Principles for Managing a Common-Pool Resource (CPR), e.g., the portion of our national economy devoted to healthcare, already exist with volumes of supportive research. As a beginning for continuing education about economic CPR, I recommend “Managing the Commons” written by 2009 Nobel Prize Winner, Elinor Ostrom, and first published in 1990.
    I am aware that our nation’s Medicare eligible population doubles in the next 10-15 years AND our world-wide turmoil will continue to worsen, if for no other reason than the United Nations estimate of a world-wide population at 10 Billion in 2050 (now 7 Billion). Finally, we are currently headed to a National bankruptcy from the excess expense of our nation’s healthcare. My admonishment to us all is the following. If we continue to do what we have always done, we will continue to receive what we have always received: Parkinson’s Law (as in C. Northcote Parkinson). Our goal for healthcare reform should be a reduction in our nation’s maternal mortality ratio by 75% and a reduction of our national cost of healthcare as a portion of our national economy by 25%, both, over the next 10 years, community by community. As an aside, it is likely that @400 women died with a pregnancy in 2013 because they were living in the wrong nation. It represented a loss of nearly $500 Million in social and economic capital for our nation’s citizens.

    see: nationalhealthusa.net

  3. Ironically, Hawai’i is considered one of the healthiest states, but not for the native population. Most of the healthy are recent transplants who eat well, exercise and have good jobs. The native Hawai’ians are typically poorer with worse health outcomes and many on Medicaid.
    The government wants one size fits all medicine. It doesn’t work that way.

  4. There are also differences in the incidence of fraud (think Miami-Dade County, FL), differences in defensive medicine in response to more or less litigious locales, differences in hospital capacity making it more likely that patients will be admitted at least for observation if there are plenty of empty beds, and yes, differences in patient expectations. There can also be differences in the frequency of checkups for patients with diabetes, asthma and hypertension and differences in how “this is how we do it here” translates to higher or lower costs in one region vs. another. Finally, lower per capita Medicare costs in Hawaii may be attributable to better diet and more exercise in the population of that state.

  5. Even if every treatment for every illness were managed by the same protocol throughout the U.S.–and you were perfectly scientific in your approach and followed these protocols–you would still have much geogrphic variation because:

    Different ages require different doses or different drugs.
    Different races often require different treatment. e.g. hemoglobinopathies; tumor incidences.
    Different body mass indices require different doses.
    Different wishes by patients–overriding protocols–because of cultural differences.
    Different baseline blood pressures, e.g., in areas of high salt intake.
    Different genomes in cultural cul de sacs.
    Science can change between a look see at Portand and a look at LA.
    Local availability of drugs can vary. Shortages very common. Substitution of drug A for B.
    Environmental differences in different localities. E.g. altitude and temp and humidity.
    Different Medicare intermediaries may not reimburse similarly, so total spent looks different.

  6. Kip
    So much of what you allude to has a time context component. With the retrospecteocope, a great deal of what you say shakes out. However, seven years ago, variation patterns outside of Mcare were not as well studied. The data was there, as you state, but not fully formed and analyzed. The Zack Cooper paper in 2015 and the McAllen relooks got gobs of attention, and Atul Gawande has recanted, and even the Dartmouth folks changed their tune. They realize volume and prices mean different things to different payers and regions. Orszag has written in his Bloomberg column on some occasions how commercial pricing and Medicare volume need different approaches.

    I think most of the thought leaders nowadays–on both sides of the aisle–have shifted their strategy based on what we know now. The ACO issue and whether that can be all things to all people is another matter. Right problem, the wrong solution perhaps.

  7. As Niran Al-Agba observes: “who assembled data and interpreted it then drew incorrect conclusions that they then based health care system decisions upon”…..this is amazing…..faulty hypotheses being imposed on the entire system…..and being driven by supposedly smart and well educated folks who are so intellectually arrogant they don’t bother to proceed with proper testing, rigor and caution.

    Thank you Kip Sullivan!

  8. Kip – thanks for laying this out. I am sure a bunch of health policy people are going to extol on how terrible FFS is and how you must be incorrect about Dartmouth. Basically I am reading about a bunch of “noctors” who assembled data and interpreted it then drew incorrect conclusions that they then based health care system decisions upon and those ultimately have turned out to be ineffective. How about we listen to what physicians think is best for patients and healthcare in general? It may come as a surprise to others reading this, but when one treats patients for a living, one has some experience from which to draw conclusions as to what will work in the long run.