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The Trillion Dollar Conundrum

In Tuesday’s Wall Street Journal Op-Ed pages, physicians from Harvard and University Pennsylvania Medical Schools criticize subsidies for expanding the use of health information technology (HIT). The physicians cite a recent review article that failed to find consistent evidence of cost savings associated with HIT adoption. If true, this is bad news for the health economy, as supporters claim that HIT could cut health spending by as much as $1 trillion over the next decade.

How can something that is so avidly supported by most health policy analysts have such a poor track record in practice? In a new NBER working paper by myself, Avi Goldfarb, Chris Forman, and Shane Greenstein, we label this the “Trillion Dollar Conundrum.” One explanation may be that most HIT studies examine basic technologies such as clinical data repositories, while most of the buzz about HIT focuses on advanced technologies such as Computerized Physician Order Entry. In our paper, we offer a rather different explanation for the conundrum, one that would have eluded physicians and other health services researchers who failed to consider the management side of HIT.

My coauthors on this paper are experts on business information technology. They are not health services researchers. When I approached them to work on this topic, they insisted on viewing HIT much as one would view any business process innovation. As I have learned, this is by far the best way to study most any issue in healthcare management. Those who advocate that “healthcare is unique” – usually by ignoring broadly applicable theories and methodologies—often strain to explain data that are easily understood using more general frameworks. Such is the case with HIT.

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GOP to Uninsured: Drop Dead

“We are now contemplating, Heaven save the mark, a bill that would tax the well for the benefit of the ill.”

No, that’s not Senate Minority Leader John Boehner, Rush Limbaugh or any of the other usual suspects complaining about the cost of health care reform. Rather, it’s the beginning of an editorial in the Aug. 15, 1949 issue of The New York State Journal of Medicine denouncing attempts to provide every American with health insurance. Sure, 90 percent were uninsured then, versus around 15 percent, today. But what’s amazing is the way the overheated arguments by conservatives have changed hardly at all in six decades, as evidenced by an op-ed in the July 15, 2009 Wall Street Journal entitled “Universal Health Care Isn’t Worth Our Freedom.”

Here’s the August, 1949 New York State Journal:

Any experienced general practitioner will agree that what keeps the great majority of people well is the fact that they can’t afford to be ill. That is a harsh, stern dictum and we readily admit that under it a certain number of cases of early tuberculosis and cancer, for example, may go undetected. Is it not better that a few such should perish rather than that the majority of the population should be encouraged on every occasion to run sniveling to the doctor? That in order to get their money’s worth they should be sick at every available opportunity? They will find out in time that the services they think they get for nothing ­– but which the whole people of the United States would pay for – are also worth nothing.

And here’s Dr. Thomas Szasz from the July 15, 2009 Wall Street Journal:

The idea that every life is infinitely precious and therefore everyone deserves the same kind of optimal medical care is a fine religious sentiment and moral ideal. As political and economic policy, it is vainglorious delusion. Rich and educated people not only receive better goods and services in all areas of life than do poor and uneducated people, they also tend to take better care of themselves and their possessions, which in turn leads to better health….We must stop talking about “health care” as if it were some kind of collective public service, like fire protection, provided equally to everyone who needs it….If we persevere in our quixotic quest for a fetishized medical equality we will sacrifice personal freedom as its price. We will become the voluntary slaves of a “compassionate” government that will provide the same low quality health care to everyone.

Of course, there’s been some progress. Six decades ago, the kind of views expressed by Szasz and the New York Journal represented the medical mainstream. Today, even the most troglodyte are not suggesting the repeal of Medicare and Medicaid.

On the other hand, in those “pre-spin” days so long ago the health-insurance-for-all opponents of the past were forthright about the consequences of their principles for others. Today’s conservative fulminators prefer to forego mentioning the 20,000 preventable deaths each year – about 55 people each and every day – among those without insurance coverage.

The other great difference sixty years has made is the racial and ethnic composition of the uninsured. The uninsured today are disproportionately minority. Nearly one in four (36 percent) are Hispanic, 22 percent are black, 17 percent Asian/Pacific Islanders and just 13 percent white. The impact of those figures is clear. While nearly one third of Texans have no health insurance, the Republicans who dominate its Congressional delegation have shown no particular urgency to address a problem primarily affecting low-income Hispanics. (Fifty-eight 58 percent of the uninsured in the state are Hispanic, according to Kaiser Family Foundation figures.)

It’s important to remember that none of the Republican presidential candidates in either the primary or general election presented a serious plan to cover all the uninsured, nor have any of the Congressional GOP critics of Obama’s plan done so. In other words, the difference between the Democrats and the Republicans on universal access to health care, then, is not a difference on government should help accomplish this goal but whether the goal itself is worth pursuing.

Put differently, for those Americans who can’t afford medical care (or are afraid that they won’t be able to in the future), the GOP has a clear reply: drop dead.

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Connecting finance to coverage

Repeating his message that Health Costs Are the Real Deficit Threat OMB Director Peter Orszag goes into the not exactly friendly territory of the WSJ Opinion pages and explains that practice variation is unnecessary and wasteful, comparative effectiveness research is a good idea. and that changing financial incentives for providers is necessary if we are ever to get health care costs under control.

The question is, how much of this gets included in the woffling coming out of Sen Max Baucus’ Senate Finance Committee? Here’s the press release on the options they’re considering. It’s a little like Stalin in 1930 saying, ‘the people are starving, we may collectivize the Kulaks, or we may rent them their farms back, or we may do nothing, or all of the above”. OK you may think I’m kidding but they give four different options for what a public plan may look like, six different approaches to small group and individual market reform (none of which deal with the smallest employers), and nothing about Orzsag’s concept of “changing financial incentives for providers”. Apparently that’s unrelated to insurance reform. (Yes yes I know they’ve floated some trial balloons about that too….)

What worries me is that because of the downturn and Orszag shining the light on the finance issue, we may have the chance to both fix coverage and finance. But I don’t see this all happening together.

So far I haven’t seen anything to change my mind about what’s going to come out of this process. So to bore all of you still reading I’m going to repeat what I said when I reviewed Tom Daschle’s (remember him?) book Critical.

So my guess is that the Federal Health Board, if it gets established, will get defanged by lobbyists immediately. The consequence of that is that the mish-mash of an “expand what we got now” system will cover a few more people at a lot more cost (as has been the Massachusetts experience). That’s OK because suddenly we’re rich (or at least suddenly the government is pretending it is!). But in a few years the stimulus will end and health care costs will have kept going up. Then we’ll realize that due to more cuts in Medicaid & subsidies for the working poor, and continued cream skimming and bad behavior by private-sector health plans, enough people have fallen through the cracks of the incremental expansion that we’ll be back where we are today again.

CODA: Click here to have some fun as to what happened when Baucus lined up 13 Democratic economists to talk about health care to his Committee and somehow couldn’t find even one who was in favor of single payer…

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