The Compelling Case for Change
Every individual in this country has a personal story of how they have witnessed dysfunction and brokenness in our American health care system. All 300 million+ Americans have in the very least suffered a really screwed up and indecipherable bill (or set of bills from an uncoordinated system for the same service) with little price transparency and with lack of clarity on what services were actually offered and why. Many of us have been subjected to the extremely frustrating lack of coordination across systems, forcing us to attempt to connect the pieces together. A depressing amount of us have even witnessed ourselves or a loved one being harmed by a medical error or a health system acquired infection. A doleful companion to these visible operational challenges is the fact that we are all increasingly paying inordinately growing sums, over $3 trillion and counting, into health care, while getting increasingly little in return. The 18th Century Scottish philosopher, economist, and essayist David Hume once observed of public debt that, “It must, indeed, be one of these two events; either the nation must destroy the public credit, or public credit will destroy the nation. It is impossible that they both can subsist, after the manner they have been hitherto managed…” One can easily substitute Hume’s concerns with public debt to its modern American equivalent of health expenditures to develop the same sense of urgency. In fact, as the above graphs on cumulative projections of American health care costs and government spending on health entitlements reveals, public credit and health care expenditures are inextricably linked, unsustainable, and crowding out all other areas of government expenditure as well as crowding out what we as consumers would otherwise prefer to spend our dollars on. As will be discussed later, the great tragedy is that we are pouring money into reactive systems of care that do little ultimately to increase our quality of life and life span. It is largely non-value added money that is siphoned off from other valuable areas of the economy. This has to change.
We have a crisis on our hands, and it will take a concerted and united effort combined with a sense of urgency to destroy it. Lately, I have been drawing a tremendous amount of inspiration and sense of personal urgency through the reading of David Goldhill’s Catastrophic Care: Why Everything We Think We Know about Health Care Is Wrong. For those like myself who are industry insiders, consider this a scathing and devastating indictment that we need to absorb, comprehend, and become devoted in our own little corners to remedying. Think of this book as the prosecution’s case against our industry. Do we have a defense? If not, how do we respond? Otherwise, I am afraid that the unsustainable industry as it stands today will be forced to deal with remarkable disruption and disintermediation when consumers and/or governments finally do revolt and demand change of a significant magnitude that will by then be required. Complacency should cease to be an option. For those who believe they are woefully inadequate to the task of understanding the complexity of health care (this group does not have to be mutually exclusive from the previously mentioned one of industry insiders), consider this book a remarkably easy layman’s guide that details what ails our health care system and why it should matter to you. In short, I find this book to be highly accessible and critical for all Americans to read. If it does not apply to you as a prosecution’s case, then it should easily apply to you as an easy to read and understand textbook that covers the range of issues that you as a consumer and voter should be familiar with as it relates to our broken health care systems.
The Prosecution’s Case
In of itself, Goldhill’s introduction is packed with enough vignettes and charges to make one think and feel deeply about the industry. Beginning with the visceral experiences, he presents his own personal stories of fears, frustration, and loss in the forms of how his son and father experienced health care. The former is a tragicomic string of inefficiencies, complacency, and poorly performing systems through an appendectomy, the latter a much more unfortunate set of circumstances that culminated in a hospital acquired infection and ultimately death. Along the way, Goldhill observes both technical and life-saving brilliance incongruously combined with administrative and operational incompetence. His pointed question, which should be our industry-wide challenging refrain is, “why does therapeutic excellence often exist side by side with such backwardness?”
It isn’t just the performance aspects of our health care system that causes alarm. The other side of the formula is the price of health care. It would be one thing if we could say, “sure, it’s bad, but at least it’s cheap!” But with health care creeping up on 20% of GDP, that is appallingly and depressingly not the case. Here is a thought experiment: what would be going on in the streets and in the media if we woke up tomorrow to $15.00 per gallon gasoline prices? I dare say this would inevitably become the subject for major political and social upheaval. And yet, this is exactly the type of inflation that has occurred over the last few decades in American health care. The critical distinction is that the dramatic inflation has been hidden from us, even though it still has just as significant of an impact to our bottom-line, take-home cash. In the book, Goldhill uses the simple example of a woman named Becky who works at his company: “Becky will actually contribute over $10,000 into American’s health care system this year – most of it through payments she is not aware of…even if we somehow tame the explosive growth in health care costs (literally reducing cost growth to zero), our system already assumes that Becky will pay well more than $1.2 million over her lifetime. And that’s assuming she never has a major illness, in which case she will almost certainly pay much more. Becky is pouring far more money into our health care system than she imagines.” Indeed, I would add that this out of sight and out of mind aspect of funding health care access is the primary reason we have increasing take home pay inequality in America, as I covered in a separate blog post.
“Why does therapeutic excellence often exist side by side with such backwardness?”
The Foundational Industry/Government Error
Goldhill articulates what he believes to be the primary culprit in our combined system of rising costs and operational backwardness – a funding and care selection model he indicates is defined by what he calls “Surrogates.” In this group, you could lump commercial insurers as well as government models such as Medicare and Medicaid. Goldhill observes that, “The dominant health insurance model requires us to turn over our role as consumers to what I call Surrogates: private insurers, Medicare, and Medicaid. The theory is that only the Surrogates have enough knowledge to control excess care, enough market power to discipline rising prices, and enough vested interest in our health to drive greater safety and quality. But the past fifty years suggest the theory is wrong; the Surrogates themselves create many of the incentives for bad behavior in health care…American health care relentlessly expands the definition of medical need, engages in administratively complex and nontransparent practices, and overinvests in expensive technologies because these actually serve the institutional (and financial) needs of the Surrogates. Conversely, the health care industry underinvests in service, safety, and efficiency, because these are not the Surrogates’ priorities (even if they are our priorities).” Of course, there is a lengthy history here on how we got to this point of over-reliance on Surrogates, some of which is covered in a separate post, where I will admit to relying heavily on Milton Friedman, and another separate post where I borrow heavily from Dr. Michael Accad’s wonderful Alert and Oriented blog.
The Insulated Island of Health Care
A large part of the appeal and readability of Goldhill’s account is that his analogies, connections, and consistently simplistic and relatable terms he coins keeps the reader engaged and understanding of typically complex themes. One such term is “The Island of Health Care.” Any time you see this, you know you are entering into the zone of incomprehensible and nonsensical ways of doing and defending the ways in which health care operates. On this topic, Goldhill levels these charges:
Health care experts often make confident, absolutist assertions that appear truly ridiculous when held up to the mirror of the world outside health care. For example, they write about how technology is inexorably driving up the cost of care, often while working on a powerful laptop for which they paid a few hundred dollars. The secretary of health and human services says that catastrophic health insurance isn’t real insurance because it doesn’t pay for routine expenses; apparently, she’s never had an auto or homeowner’s policy. Truly brilliant analysts argue that health care can never be a normal industry because the need for care is so concentrated that in any given year roughly 70 percent of care is used by only 10 percent of the population. But a far greater concentration of spending in any given year is the rule for almost every other universally-consumed expensive good or service; surely, they know that we don’t use insurance to pay for purchases of homes, cars, weddings, and college educations?……Sure a person hit by a bus or having a heart attack has a unique ‘demand curve’ for medical services. But the fact that some health care is truly urgent doesn’t mean that all of it is…most care is no longer of this type; the biggest share we spend on health care now goes toward identifying and managing long-term conditions…Yet this new reality as barely intruded into the way we think about, pay for, and manage care. It’s like organizing the entire care-service business to protect us against only the possibility of a tire blowout on a highway……Forget the rhetoric: our health care system isn’t an example of ‘socialism’ or ‘profit-driven medicine.’ In fact, it is such a strange beast, I’m not even sure we have an appropriate label for it. The best analogy might be the Galapagos Islands, set so far offshore from the mainland of industry evolution and economic laws that is has produced odd, anomalous creatures of policy and regulation.
The “Imperial” Health System
“Imperial Health System” is another one of Goldhill’s lexicographical innovations. What I enjoy most about this section is his focus on what actually matters to our health, largely forgotten and neglected in all of our political rhetoric and tug of war – our society and our lifestyles. This is what health care industry parlance is increasingly calling “Population Health,” although a fair amount of this term is still very much being used for inside the four walls of the hospital activities. Speaking of the Imperial Health System, Goldhill states that, “of the 34 rich countries in the OECD, the United States ranks a low 27 in life expectancy. Whenever a new study on comparative life span is published, most commentators draw conclusions about the weaknesses of our health care system, especially our unique lack of guaranteed universal access. Many note that we rank low in life expectancy (and other measures of general health) ‘despite’ spending so much more on care than any other country. This casual and universal conflation of health care and health represents the greatest triumph of imperial health care – a true hijacking of language. Despite all truly extraordinary achievements of medicine – and its promise for our future – health care remains a relatively small factor in determining life spans. We know what really matters in both length of life and physical well-being: income and education; minimization of smoking and substance abuse; diet and exercise; family life and public safety. The reason Swedes, Japanese, and Italians live so long isn’t their (very different) health care systems; it’s that they live like Swedes, Japanese, and Italians. And the reason Americans and Britons are on the lower end of longevity rankings isn’t our (again very different) health care systems. It’s that we live – and eat and exercise – like Americans and Britons.”
One interesting tidbit that Goldhill serves up is the fact that although he is a lifelong Democrat, his stance on the Affordable Care Act is that it doubled down on everything that already existed that was wrong with health care. His skepticism is made evident when he indicates that, “The whole bill is based on the fundamentally weird (but apparently bi-partisan) idea that ever more expensive health care can somehow be made affordable to all by clever financial engineering. The ACA is less a reform of our health care system than an extension of its past principles to their logical end.”
Like it or not, health care is an industry…
It may seem jarring and unseemly to think of institutions chartered with providing life-giving and life-saving care as also an industry focused on making money, but this is a reality and I would argue is a benevolent, not a malevolent force and we need to use it even more and in more transparent and consumer-driven ways. I could do a whole section on the fact that industry combines the virtue of profit-making prudence with many other virtues such as generosity, justice, mercy, etc., but for expediency I direct the interested reader to check out Deirdre McCloskey’s book Bourgeois Virtues for more on that topic. For his part, Goldhill states that, “We may not like thinking of health care as an industry, but it is one. Roughly 15 million Americans now earn their living from health care; forty-eight of the Fortune 500 largest companies are in the health business. The majority of people in this industry are motivated by a desire to do good, to help others. But they are also driven by their economic incentives. As a business, health care has done very well by the conventional wisdom that care is fundamentally different from everything else (can you imagine anyone proposing with a straight face that antitrust laws be suspended so that a region’s oil producers, refiners, and distributors be allowed to cooperate to achieve lower prices? Well, that’s essentially the premise behind Accountable Care Organizations, a key structural reform in the ACA
The reason Swedes, Japanese, and Italians live so long isn’t their (very different) health care systems; it’s that they live like Swedes, Japanese, and Italians. And the reason Americans and Britons are on the lower end of longevity rankings isn’t our (again very different) health care systems. It’s that we live – and eat and exercise – like Americans and Britons.”
…so we need to create true consumers for the industry to function properly
This post has the great risk of parting the reader into a natural left versus right camp, but one benefit of Goldhill’s book is that I sincerely believe he is trying to find and articulate a consumer-driven solution that might appeal to both the sides of the left/right political spectrum. Goldhill consistently returns to the necessary role of consumers making decisions in the market in any industry, and no less so than in health care. He holds up the example of Singapore above all as the health care model he appreciates the most. There is a role for insurers there, but they are not the comprehensive surrogates that they have become in America. In other words, they actually function like insurance companies. Singapore subsidizes health care funding for the poor, but the consumers themselves make decisions on how to spend those dollars across all income spectrums. The contemporary equivalent of this in American policy debates would be funded health savings accounts for Medicare and Medicaid. To these ends, Goldhill strikes his balance between left and right forces here, and adds his observations on just how bad for consumers this market is today. Here is one health care consumer analogy that Goldhill pulls out that would be amusing if it were not so tragically true of how health care interacts with consumers: “Can you imagine taking your care to a body shop and, moths later, receiving a separate bill from the guy who reattached the fender? And the shop saying it couldn’t discuss the matter with you? The real premise behind restoring the primacy of customers is to force providers to chase us with lower prices, fewer errors, and better service. On the Mainland, we actually do relatively shopping around; sellers offering discounts and better service find us. It’s our current Surrogate-driven system that forces us to do the work and get pre-approval for reimbursement, to discover which facility is good at which treatments, to find a doctor, to coordinate the work of specialists, to negotiate price, to uncover safety records. Simply put, health care performs badly because it can get away with it.”
I really like this point about sellers here. Too often, health care experts make the point that consumers are not educated enough to make their own decisions. This assumes that consumers have to be perfectly informed, and since they can’t be, they might as well rely entirely on the Surrogates. Goldhill makes the point that we don’t have to be perfectly informed for a functioning market. In a consumer-driven market, sellers will be forced to innovate on the marketing and outreach and customer services aspects as well on the actual performance of their business. They will have it in their interests (of survival) to educate and inform the consumers. Competition will be driven by pricing and outcomes transparency. Only in this type of market paradigm will we see prices hurtle down and outcomes increase.
The ACA is less a reform of our health care system than an extension of its past principles to their logical end.
The Policy and Industry Changes Required
The health care mess is so complex and is several layers thick that there are many ways to propose consumer-driven corrections. Many of these that I am personally favorable to were highlighted in the early days of Paul Ryan’s “Better Way” set of plans for health care reform. Goldhill lays out his own proposals that I think have the merits of threading the left/right needle that might make it politically feasible. Much remains to be seen on what will come out of the united GOP’s ACA repeal and replace plans, and Goldhill’s ideas preceded the contemporary debates by a few years and may not have any impact on the debate. Still, given the choice between the status quo (assuming failure of the GOP to move replace all the way through), I would take Goldhill’s prescriptions, including government oversight and management of some forms of catastrophic insurance, any day of the week. The important factor is that the majority of the market should move to consumer-driven decision-making, which is the benefit of a Health Savings Account driven reform model. In Goldhill’s words, “…to recognize that change is inevitable and unpredictable; choice, dynamism, and competition of ideas (and business models) are essential to progress. Ironically, in the one service where the potential human benefit from innovation is greatest – health care – all our impulses have been to enact policies that impede choice, competition, and all the dynamism they unleash….Creating a more prominent role for consumers doesn’t mean eliminating that of the government’s: it means making consumers, rather than industry, the government’s partner in pursuing health policy. Even in Singapore, government plays an essential role in health care. Critics often label this attempt to rebalance forces as ‘free-market health care.’ Well, this book proposes national cradle-to-grave catastrophic health insurance, mandatory health savings accounts, large-scale health grants for the needy, rigorous enforcement of price transparency and antitrust legislation, and a national health database. Only on the Island of Health Care could this be described as ‘free market.'”
This effectively means allowing government a role in ensuring that the person who has that urgent accident or that fatal disease are well-taken care of. It also means that the much more significant impact consumer, the one with diabetes and heart failure, begins to be a conscious consumer of how they interact with and the value they get out of the health system. Furthermore, it starts to provide the much-needed incentives to both consumers and health care industry players to actively seek and reward healthy lifestyle choices in much more meaningful ways than the current policy of tinkering at the margins with value-based payments.
For the industry’s part, much of the current market direction and focus is on interoperability of systems, cognitive computing/artificial intelligence, predictive analytics, and preventive care. Let’s hope that the bulk of these efforts and industry innovation focuses less around volume targeting and billing/revenue optimization (where much of “innovation” has occurred in the recent past) and more around the health, wellness, and fabric of our community/social determinants of health that matter. Let Americans become more like the Japanese and Swedish, and let’s slay this health care monster, before it slays us.