Clear Thinking About Health Care and Money

Google News no longer indexes ScienceBlogs, but they continue to link
to drivel like this, from the Wall Street Journal:

Star Spending Spree


August 25, 2007; Page A6

Austin, Texas

Give George W. Bush credit. He's drawn a lot of criticism for not doing
more to control federal spending over the past six years. But he is now
deep into a spending fight against a sacred liberal program. And he
isn't backing away.

In recent weeks, Mr. Bush has confronted Congress over the State
Children's Health Insurance Program -- which is substantially funded by
the federal government and up for congressional reauthorization this
year. Mr. Bush understands Schip has become a wedge for expanding
government-run health care in Texas.

In 1997, Congress and President Bill Clinton created Schip to provide
health insurance for children of families that are living up to twice
the federal poverty line. Many Republicans foolishly thought they could
create a limited health-care program for kids and avoid ending up with
full blown HillaryCare. What they didn't seem to appreciate was that
Schip was itself a baby step toward universal health care...

...It would be easy for Mr. Bush to give in on this fight. He is, after
all, in the twilight of his administration. But next month, he'll
square off against Congress to oppose an incremental advance of
socialized medicine. We are fortunate he is today willing to do so at a
time when Republicans in his home state were quick to abandon the fight.

Forget all that for a moment.  To think clearly about this
it may be helpful to take a few steps back and start with some basic

First of all, perhaps the most important question: How much
health care worth?  The short answer is that a thing is worth
whatever people are willing to pay for it.  Start the price
then raise it until people start to squawk.  When they start
walk away instead of buying, then you know the worth of the thing.

Right now, we are spending about 16% of GDP on health care and related
expenses.  People are starting to squawk and walk away.
for the sake of argument, let's say that health care in the USA is
worth 15% of GDP.  

OK.  That is how much money we have to spend.  Now,
we have
to decide the best way to spend it.  Obviously, we want to get
biggest impact for that money, meaning the greatest improvement in
economic productivity.  For the sake of argument, let's
that Ms. Stout was speaking for the Wall Street Journal,
the WSJ speaks for the Nation's economic interest.  We want to
reply to her/their arguments.  So we are just looking at the
  href="">There is
a clear relationship between health care and productivity.
 Productivity, of course, is where wealth comes from.
We want to invest in health care, to increase productivity, to increase
wealth.  What is the best way to get a good return on the

The reason I take this approach is simple.  Often, arguments
health care finance reform get all tangled up in how much it costs.
 Often, it seems, it is forgotten that there can be costs to not
spending the money.  

Let one kid grow up with untreated lead toxicity.  Lets's say
that instead of
contributing $40,000 per year to the economy, that person ends up
contributing $20,000 per year, because of brain damage.  Over
a span of 50 working years, the
economic impact is negative one million dollars.  Yeah, we
saved a
few thousand by not testing and treating, but it sure cost us a lot in
the long run.  Clearly, that is a bad investment strategy.

With this approach, irrelevant factors are clearly seen to be
irrelevant.  Why should you pay for someone else's healthcare?
 Well, because it costs you more to not
do so.
 Because that person who did not get health care might end up
being the one who fixes the brakes on your car, or welds the beams on
that interstate bridge you just drove over, or who inspects the luggage
that goes in the cargo hold of the airplane you are taking to Bermuda.
 We do not want neurotoxins in those people's brains.
 It is
in everyone's best interest for everyone else to be
 (Just as it is in everyone's best interest for everyone else
have a good education, but that's href="">another

If you look at this as an exercise in investing 15% of our GDP, with
the endpoint being a maximum return-on-investment, it becomes clear
that we have a unified national interest in the process.  We
get wrapped up in the issue of which individuals get what, because that
is not how we are assessing the outcome of our investment.  

...But what about the unemployed adult mother who gets health coverage
paid for by the same program that covers her indigent children?

If you want to fret over that, then you can try to
model the problem
differently.  But if you do that, you end up with a model that
so complex, that the problem becomes intractable. (Denying funding to
illegal immigrants would href="">save
only about 1.25%, for example.)  If you start
out with the assumption that health care finance reform is a problem
that we need to solve, then you need to find a problem-solving model
that can lead to a solution.  If you use a model that is too
complex, then it does not lead to a solution.  That

...But it's the principle of the thing!

There is more than one principle here.  The overriding
is that the problem must be solved.  Therefore, we must choose
model that leads to a solution.  Choosing a model that leads
nothing may keep one of your principles intact, but it violates the
first principle.

Getting the problem solved is alway the first principle.

In order to get the problem solved, we need to keep our focus where it
belongs.  Some of the rhetoric being tossed around --
medicine," government-run healthcare," "HillaryCare" -- puts the focus
in the wrong place.

All health care takes place at the point of contact: the doctor-patient
relationship.  Health care is not run by government, it is not
by insurance companies.  It is run by a collaboration between
patients and their health care providers.  

Currently, the financing of the enterprise is a
non-intelligently-designed mesh of
government, insurance companies, and private payers.  Financing
the enterprise is not the same as running it.
 Granted, the one
who pays the bills does have a great deal of control, but it is
imprecise to conflate the two concepts.  I assume that most
want the bulk of the control to rest in the doctor-patient
relationship.  So let's make that our second principle.
we need to solve the problem.  Two, we want to solve the
is such a way that the bulk of the control remains in the
doctor-patient relationship.

Is a single-payer, universal-coverage system consistent with the second
principle?   href="">Yes:

Consider Denmark, which spends
approximately nine
percent of its gross domestic product on health care, compared to
nearly 17 percent in the United States. Denmark has designed its
health-care system to support the relationship between patients and
their personal physicians. Practices are set up to handle same day
appointments and walk-ins. Off-hours care is readily available and
primary care doctors are reimbursed accordingly. An online
infrastructure makes electronic medical records available to physicians
and hospitals throughout the country. Because of these practices,
health outcomes are better in Denmark, patient satisfaction with care
is much higher and per capita medical costs are much lower.

The current system rewards physicians for going into specialty
practices, and doing procedures.  Specialty are costs more
primary care.  Emergent and urgent care costs more than
care.  A system that rewards physicians for being primary care
providers, and for being available to their patients, would both
increase patient satisfaction, and reduce costs.  Granted, a
free-market approach does have some advantages, but the advantages do
not translate into better care or reduced costs.

So, getting back to the principles: we've got a pot of money to spend,
we've decided that the way we are spending it needs to be reformed, and
we want to spend it in a way that maximizes productivity while
retaining control in the hands of patients and their physicians.
 Where should the money go?

Do we want to spend it by paying people to shift papers from one stack
to another (which is what private insurance companies do)?
 No, of
course not.  In order to figure out what the most efficient
way to
spend the money is, we should look at the existing systems and see
which are most efficient.  In the US, that would be Medicare
the VA health system.   Those observation are
perhaps, but true.  

Remember the href="">Walter
Reed scandal?
 Think that reflects badly on the VA?  Take a look at
facts.  It was managed by IAP, headed by a former Halliburton
official.  According to href="">Army

The committee wants to learn more about a
letter written in September by Garrison Commander Peter Garibaldi to

The memorandum “describes how the
Army’s decision to
privatize support services at Walter Reed Army Medical Center was
causing an exodus of ‘highly skilled and experienced
personnel,’” the committee’s letter
“According to multiple sources, the decision to privatize
services at Walter Reed led to a precipitous drop in support personnel
at Walter Reed.”

The letter said Walter Reed also awarded a five-year,
$120-million contract to IAP Worldwide Services, which is run by Al
Neffgen, a former senior Halliburton official.

They also found that more than 300 federal employees
facilities management services at Walter Reed had drooped to fewer than
60 by Feb. 3, 2007, the day before IAP took over facilities management.
IAP replaced the remaining 60 employees with only 50 private workers.

“The conditions that have been described at
Walter Reed are disgraceful,” the letter states.

Just in case you are thinking that privatization is always better, just
remember the Walter Reed scandal.  

Fair enough.  But what is it about a universal-coverage,
single-payer system that keeps control within the sphere of the
doctor-patient relationship?  Simplicity.  The fewer
hands the money passes through, the better.

The whole hope of managed care was that the process of management would
hold down costs while retaining access and quality.  That has
failed.  Micromanagement turns out to soak up more than it

There is a role for management in cost control.  However, what
works there is a broad kind of management, as opposed to the
case-by-case, procedure-by-procedure, visit-by-visit "management" that
characterizes HMOs and traditional insurance companies.  (Many
companies that don't call themselves HMOs engage in the same kind of
micromanagement that MOs do.)  

What works is something called " href="">disease
management."  From Wikidepdia:

...As opposed to epidemiology, which is
generally concerned with sudden or persistent virulent outbreaks of
disease, Disease Management is concerned with common chronic illnesses,
and the reduction of future complications associated with those

Illnesses that Disease Management would concern itself
with would include: Coronary heart disease, Kidney Failure,
Hypertension, Heart Failure, Obesity, Diabetes, Asthma, Cancer,
Arthritis, Depression, and other common ailments...

The idea is to identify the conditions that are most prevalent, and
which account for the greatest costs.  Then, management is
applied selectively, in an evidence-based manner.  This selective
management can have a large payoff, while minimizing intrusion into the
doctor-patient relationship.  

The key to understanding disease management is to appreciate the fact
that the payoff occurs over years and decades.  This is on no
interest to a traditional insurance plan or HMO, since people tend to
switch plans every few years.  

Plus, the management structure of publicly-held companies does not
promote an emphasis long-range planning. Bonuses are give based upon
last year's performance, not the performance in the next decade.
 The best way to promote such a long-term vision is to place
the financial risk in an enduring entity (the federal government), and
to have a patient population that is stable over a very long time frame
(the entire population).  

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Privatization has no role in the financing of health care delivery. The reason is that private, for-profit entities must satisfy two conflicting priorities: A fiduciary duty to maximize return on investment, which they can only do by limiting care or services; and then a moral, ethical and sometimes explicitly contractual duty to provide that care, and those services. We are in a bind in this country, because the pharmaceutical and insurance industries have found that it's cost-effective to purchase the sympathies and votes of legislators and other government officials. The legislators and government officials then reward their benefactors with corporate welfare, such as the Walter-Reed example mentioned above.

Whatever happens, we need a system that is truly designed to deliver health care, not distribute or restrict monetary sources. We need to ensure that we reduce or eliminate the profit-motive for restricting health care.
This can be done in either the private or public sector, but I am not optimistic it will be done in either.

I agree -- a first-rate posting.