Healthcare Reform: Where to Start?

2018.10.05 Desert road

Fixing U.S. Healthcare blog has made the case for reform that reins in spending in the whole system. But where possibly to start on such a massive undertaking?  Here are four ideas.

  • Klein’s “Muddling incrementalism”
  • Redefining Price’s “essential benefits” using Oregon-style cost-benefit analysis
  • Rosenthal’s “Salami strategy”
  • Emanuel’s “low-hanging fruit”

Let’s look at each one.

Idea #1:  Muddling Incrementalism

This blog has argued that healthcare is so complex and its economic footprint is so large that any changes to the system must be introduced gradually. This would allow affected stakeholders time to adjust. And it would allow for midcourse corrections.

Ezra Klein, editor-at-large and founder of Vox.com, has also argued that U.S. politics is so polarized — and our 3-branch government so dysfunctional — that consensus on sweeping solutions to our national disputes is unlikely.  Instead, the U.S. will simply muddle through with small-fix work-arounds and piecemeal changes, that is, “muddling incrementalism.” He writes:

The changes needed to make [the U.S. political system] manageable will be less sweeping than the problems might imply, in part because the quality of governance Americans will accept is lower than we might like to believe. When you can’t solve a problem, muddle through it.Policy wonks, in general, tend to underestimate the power (and, to some degree, the appeal) of muddling through problems. We see a problem and assume that there will have to be, eventually, a solution. But we routinely underestimate the public’s capacity to endure dysfunction and its unwillingness to countenance disruptive change.

Klein’s “muddling through” idea is perhaps overly cynical or sarcastic, but its truth lies in underlying pragmatism. We likely can’t – and likely shouldn’t – fix U.S. healthcare in a single bold stroke.

One example of muddling incrementalism would be the gradual lowering the age of Medicare eligibility. This proposal was floated by, among others, Robert Howe, an (unsuccessful) candidate in the 2018 Democratic primary election for U.S. Representative in Pennsylvania’s 10th Congressional District. He advocates “lowering the age [by] one year, each year, for three years and then pausing to evaluate the results.”  This approach would involve a number of complex trade-offs, as pointed out in a detailed analysis by the Urban Institute. In particular, this action, taken by itself, would likely increase total healthcare spending in the short term. Some have argued  that it would paradoxically weaken the resolve boldly to reform healthcare. But it has the virtue of being gradual and incremental. And it could set the stage for further concerted action by Medicare, now more strongly positioned to control costs.

Idea #2:  Redefine “essential benefits”

Do you remember former Health Secretary Tom Price’s idea to relax requirements on covering “essential benefits”?  Eliminating coverage for maternity care, mental health, and substance abuse would have allowed insurance companies to sell policies more cheaply.

This proposal was a key feature of the “Repeal and Replace” bill in 2017. It failed in the Senate, sunk by John McCain’s dramatic “thumbs down” vote on July 28, 2017.

Tom Price’s approach was flawed for two reasons. First, it would have made coverage for these valuable health services more expensive, especially for those who needed them most.  Their total cost would have been spread out over fewer insurance holders, raising the cost for those who did buy coverage.

Second, Price’s approach would have made the cheaper policies penny-wise-and-pound-foolish since they would not include coverage of these vital services.

But Tom Price actually was on the right track with limiting essential benefits. However, instead of eliminating coverage of valuable services, he should have eliminated coverage of low-marginal-benefit services. See my discussion of the Problem of Diminishing Marginal Benefit in Healthcare.

This was the premise of the Oregon Health Plan of 1994. Oregon was able to salvage its Medicaid program by using cost-benefit analysis to design a costworthy package of high-benefit services. Lower-value, high-cost services were excluded from “essential benefits,” making them optional. Please see my YouTube video/transcript and other blog posts in Archives for more details.

Idea #3:  Salami strategy

The “salami strategy” is attributed to the Hungarian Communist Party boss in the 1940’s.  “You slice of one thin piece at a time, until pretty soon you have the whole salami.” This is a variation of “muddling incrementalism,” but has more specific targets. For example, here are some targets suggested by Elisabeth Rosenthal in her book An American Sickness:

  • Regulations to require hospitals publicly to post price disclosures in patient-friendly format
  • State and local taxing authorities to challenge tax exemptions if so-called non-profit hospitals fail to fulfill their charitable mission
  • State attorneys-general to break up anti-competitive oversize hospital conglomerates
  • Regulations to allow commercial insurance companies to contract for “reference prices” for bundled services, such as used by Medicare and Medicaid
  • Congress to untie Medicare’s hands to negotiate volume discounts on drug prices
  • Federal standards to implement interoperability standards for electronic health records and other information systems

Here’s another one:

  • Move toward public financing of health professional training in exchange for service and reduced salary scale. This would remove medical school debt as a driver of doctors fees. This arrangement would also remove incentives for (highly paid) proceduralist care and rebalance toward primary care

Comment: Think about the effect that each one of these relatively small “salami slices” would have on stakeholders – patients, doctors, insurance companies, government, etc. Every one of these stakeholders would need substantially to change business-as-usual. Again, this is an admonition to implement changes slowly and fairly, with advance notice, to give affected stakeholders time to adjust.

Idea #4:  Ezekiel Emanuel’s low-hanging fruit

Another tantalizing approach is to go after “low-hanging fruit.” These are limited specific measures that would have a disproportionate impact. Dr. Emanuel details such targets in his 2018 Editorial in the AMA Journal (full text of article now requires a paid subscription), as cited in a previous blog post.

  • Pharmaceuticals: The U.S. spends $328 billion per year on drugs, twice as much per capita as other rich countries, according to the AMA Journal (JAMA) study (full text of article now available only by paid subscription). If the U.S. could cut drug costs in half, we would save $150 billion annually.
  • Hi-volume, hi-cost procedures: The JAMA study generally showed that the U.S. performs relatively the same number of procedures as other rich countries. But Emanuel notes that there are a “handful” of procedures that American doctors perform up to twice as often as other doctors. Emanuel calculates that the top 25 procedures in this category account for 25% of the difference in overall spending between the U.S. and these other countries. They include hip and knee replacements, Caesarian sections, coronary angioplasties, and cardiac by-passes. He thinks that over-utilization could be cut by requiring doctors to offer to all patients lower-cost, equally effective treatments, amounting to a savings of $75 billion per year.
  • CT and MRI scans: The U.S. spends 10 times as much on these imaging studies as other rich countries. If we cut these costs by half, we would save $50 billion.
  • Administrative: The U.S. spends $250 billion yearly on billing and paper shuffling, 3 to 8 times more per capita than other rich countries. Emanuel thinks that smart use of technology could save us another $50 billion or more. (My rhetorical question to Dr. Emanuel: Is this overspending due to administrative inefficiency or just plain needless fragmentation of the whole system? Inefficiency could be remedied by technology, but system reform would require more than technology.)

These ideas are just starting points.  This blog has also asserted that long-range strategies will be needed to sustain results into the future, lest they meet the same fate as the Oregon Health Plan:

Now, let’s start – Take Action.

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Image Credit

By:  JSPhotography2016 [CC BY-SA 4.0; https://commons.wikimedia.org/wiki/File:Desert_Road_horizon.jpg

 

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