Will These Ideas Fix U.S. Healthcare?

Almost everyone agrees that the U.S. healthcare system needs to be fixed. For example, each of the 2016 Presidential candidates promised to fix it. Now that the election is over, heated debate continues over 2 basic questions:

  • What, exactly, is the problem?
  • How, then, should it be fixed?

My answer to the first question is: Relentlessly rising, unsustainable costs. See more details.

This post looks at a range of answers to the second question about fixes, and whether they will work.

Bottom Line: All of these ideas can make a contribution to curtailing costs, but only external “limit-setting budgeting” cost controls like the Oregon Health Plan (OHP) of 1994 will “bend the curve” of built-in increases driven by low-marginal-benefit care.

  1. Competition
  • Example: Brookings Institution expert opinion article 
  • Valid point: In a free market, the law of supply and demand brings prices down to a lower “equilibrium point.”
  • Politics: Market competition is attractive to libertarians, since as a matter of principle they support market mechanisms rather than government intrusion.
  • Flaws: First, U.S. healthcare has evolved into a complex web of special tax treatments, byzantine regulations, and impenetrable insurance reimbursement policies, not a truly free market. Second, a truly “free,” unregulated market would have unintended consequences such as peddling unethical and unproven treatments (think snake oil and laetrile). Third, markets ignore care of some low-income sick people who cannot afford to pay for care or insurance.
  • Conclusion: All health policy experts welcome the principle of market competition to whatever extent possible. But competition alone has never worked (because it does not really exist in US. health system), could not work (without rebuilding the whole health system from scratch), and should not work (because in its most extreme form would neglect some of the sickest and poorest).
  • Rating: Good in theory but ignores today’s practical Reality.
  1. Efficiency
  • Example: NEJM Catalyst article
  • Valid point: Alignment of payment incentives, targeted care coordination, and innovative technology use can make healthcare delivery more efficient and effective, and would (slightly) reduce cost.
  • Politics: This is apolitical, along with “home, mother and apple pie”
  • Flaw: Delivering low-value care (like ineffective drugs or marginally beneficial testing), no matter how efficiently, is still low-value.
  • Conclusion: We all presume that care will be delivered as efficiently and effectively as possible, but this approach will only add a “drop in the bucket” of cost. Moreover, this alone will not change the trajectory of healthcare spending increases driven by low-marginal-benefit care.
  • Rating: Efficiency is a given, but has only small effect in the short run and none in the long run.
  1. Value-Based Payment
  • Examples:
  • Valid point: These innovative payment models reward not only efficiency but also elimination of wasteful or other low-value care.
  • Politics:  Technical, apolitical
  • Flaw: ACOs are cumbersome to implement. Only highly integrated systems are able to assume and manage risk. ACOs needs a large enough population over which to spread risk, thus likely will not work well in small-sized or rural communities. Individual PCMHs, while effective in small communities with high concentrations of complex patients, likely will not have a broad impact on wasteful and low-value care on a national scale.
  • Conclusion: The ACO approach is a complicated “engineering” solution that over time might converge with the idea of value-based (high benefit for cost) priority setting underpinning the Oregon Health Plan of 1994, and should be pursued in parallel with the OHP. PCMHs work best for complex, high-risk populations, but likely would be expensive “overkill” for populations at average risk.
  • Rating: ACOs could possibly squeeze out low-marginal-benefit care eventually over time, but ACO approach is cumbersome, not directly targeted at the root cause, is unworkable in small communities, and is so far unproven.

Note: See explanation of ACOs and PCMHs

  1. Single-payer finance system
  • Examples:
  • Valid point: Americans pay a 25 – 30% garnish on commercial health insurance premiums to pay for “administrative costs” (and insurance company profits). Switching to a single-payer system would streamline insurance (and have other benefits to standardizing care)
  • Politics: This approach flies in the face of the American tradition favoring “free enterprise” and would threaten powerful vested insurance interests. In the face of this political blowback, Massachusetts and Obama concluded that only a hybrid public/private system that preserved commercial insurance was politically feasible in 2006 and 2009, respectively.
  • Flaw: Single-payer would make a one-time “dent” in total healthcare spending, but would only postpone the “day of reckoning” for total healthcare expenditure, since in itself single-payer would not necessarily control relentless cost increases driven by low-marginal-benefit innovations and other wasteful healthcare, unless other constraints were added.
  • Conclusion: Currently still political anathema (though less so than even 2 years ago). Single-payer would not control relentless cost increases unless coupled with OHP-style budget caps.
  • Rating: Single-payer would have a large one-time impact, but would not, in itself, curtail relentless growth driven by low-marginal-benefit care.
  1. Other payment system reforms
  • Examples:
  • Valid point: American healthcare’s payment system is a “Perfect Storm” of built-in cost increases (See Segment 5 – Why So Expensive?)
  • Politics: 100 years of “special treatment” quirks are currently built into the healthcare system; each quirk now has a well-financed special interest behind it protecting it in Washington
  • Flaw: Doctors and hospitals have proven unbeatably resourceful in driving up their reimbursements, usually with some justification but all too often not. Dr. Rosenthal herself notes that other countries’ successes in controlling costs have been based on cost controls imposed from outside the system itself so that providers cannot devise lucrative workarounds
  • Conclusion: Payment reforms should be pursued, one by one, for their own sake, but external controls, such as the OHP, will be needed to effectively restrain relentless cost increases.
  • Rating: Ineffective at curtailing low-marginal-benefit costs

6.  Obamacare (Affordable Care Act, ACA) – hybrid public/private health system

  • Examples:
  • Valid points:
    • Achieves (nearly) universal coverage, which raises consciousness of healthcare as a “public good” rather than just a “market arena”
    • “Individual mandate” raises consciousness of total “national health expenditure,” ultimately paid by citizens as taxes , wage garnishes, or premiums, rather than as a hidden (free) “employee health benefit”
    • ACA has provisions facilitating ACOs, PCMHs, price transparency, and cost-benefit research (Section 6301) – See 4. Value-Based Payment, above
  • Politics: See Wikipedia entry, linked above. Opponents of President Obama (including many conservatives, libertarians and aggrieved white blue-collar workers) conflated the law with the politician, ultimately polarizing civic discourse about U.S. healthcare in general
  • Flaws: ACA proponents admitted that the law’s main object was universal coverage, not cost control; they envisioned future refinements to address cost, once the principles were established of universal access and cost awareness
  • Conclusion: Necessary but insufficient political step towards constraining relentless cost growth
  • Rating: Generally ineffective, but politically necessary

7.  Oregon Health Plan (OHP) model of “limit-setting budgeting”

  • Example: See Segment 9 – Big Fix (with more details in Reference links)
  • Valid point: OHP was a political, administrative, and public health success in 1994
  • Politics: Won broad political support in 1994 (due to extensive public engagement)
  • Flaw: Failed because “political winds” deteriorated into partisan opportunism; supporters tried to salvage with a compromise that ended first-dollar coverage, which was a “deal-breaker” for low-income patients. See also FAQ- Why OHP Failed
  • Conclusion: Proven and effective. Other innovations will be adopted in service of the overarching goal of costworthy care.
  • Rating: Precision targeted at the root cause (low-marginal-benefit health services), broad political appeal, proven success.

Bottom Line: All of these ideas can make a contribution to curtailing costs, but only external cost controls like OHP will “bend the curve” of built-in increases driven by low-marginal-benefit care.

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