Health care (business) in Miami must change
On June 8, the New York Times published an article entitled, “Health Care Spending Disparities Stir a Fight,” by Robert Pear. In the article, the writer describes an epiphany experienced by President Obama and the controversy he has provoked by sharing this newfound insight and demanding that something be done about it. Here is the gist of the insight:
Dr. Elliott S. Fisher, one of the Dartmouth researchers, diagnosed the problem this way: “Medicare beneficiaries in higher spending regions are hospitalized more frequently, are referred to specialists more often and have a much smaller proportion of their visits to primary care physicians.””
In his blog last month, Mr. Orszag wrote, “The higher-cost areas and hospitals don’t generate better outcomes than the lower-cost ones.”
This insight is important because it may explain as much as 30% of America’s inflated health care costs.
The Times article has special relevance for Miami, which, as the highest-cost area in the country for the Medicare program, plays a starring role in the story. Moreover, in Miami, the problem of over-treatment does not affect only the elderly. Miami is also one of the highest-cost areas in the nation for private health insurance.
To its credit, The Miami Herald has published various articles making reference to the Dartmouth findings — most recently on the soaring local rate of Caesarean deliveries. Unfortunately, the response, if any, has been muted. Have local employers, who are paying for Miami’s medical extravagance in their insurance premiums, blown the whistle on over-treatment? Have our two largest employers, Miami-Dade County and the School Board, reacted to the current revenue crisis by looking under the hood at what is driving their health care costs? Have the academic leaders of the local programs that train health care professionals shared the Dartmouth findings with their students and urged them to take action on them? It does not seem so — but, when you think about it, that should not surprise us.
Health care looms large in the Miami economy, and generates vast wealth and much employment. Think of an institution that might focus concern about the excesses of the system, and then think of where its leadership or revenues come from. Hospitals, pharmaceutical companies and other suppliers to the industry, insurers, diagnostic facilities and their owners and executives, as well as physicians and other providers of health care, are major beneficiaries of the excesses of the system. In turn, they are major benefactors of political candidates, universities, the media, employer associations and civic and charitable organizations. In a sense, those who perpetuate the culture of medical excess are indeed local heroes: medical overtreatment, while we may suffer from it, is also a major profit center for our community, pulling billions of dollars into the local economy — probably more billions than even Medicare fraud. It appears that so much money runs through the local health care system that it anesthetizes the doubts of all who might question the way it accumulates.
According to the Times story, not everyone in Washington is buying in on the Dartmouth observations. John Kerry is doughtily defending the teaching hospitals of Massachusetts, and Bill Nelson is defending the Medicare mills of Florida. However, even if Washington is eventually able to agree on the problem, the solution will not be easy. The problem is deeply rooted in the incentive structure of American health care.
Today, most health care is provided under fee-for-service contracts. This is a problem. Piecework may work reasonably well for sewing shirts, but it definitely does not work well in a situation where the same person bills you for telling you what services you need and then bills you for providing them. The financial incentive for the provider is obviously to decide that you need a lot of services. Reducing the price of the services is not a solution — the provider will simply bill for more complicated services or increase the frequency with which they are provided. Having someone looking over the provider’s shoulder is also not effective — a health care provider worth his (her ) salt can always come up with a good reason why a patient should have a particular service. Clearly, then, the solution is to change the incentive system. For example, one way that has been tried is to pay the provider a certain amount, per assigned patient per month, whether the provider treats the patient or not. Problem: under such a system, the financial incentive is to provide as little treatment as possible.
Lest we all simply give up, it needs to be understood that there is an answer to this problem. Moreover, it is not a theoretical solution or a scheme that works in some other country but might never work here. Rather, we are talking about a home-grown, American system which has been used for decades by American institutions like the Kaiser Permanente health plan, the Veterans Health Administration, the Mayo Clinic and the Geisinger Health System — all of which are recognized for providing high-quality, cost-effective care. How they achieve that result is no secret. Rather, the system that has been demonstrated to work in all these organizations is simply this: pull together, under one clinical and financial roof, as many as possible of the people and institutions that provide the health care services we need, including physicians, hospitals, clinical laboratories, diagnostic facilities, pharmacies and other providers of health care. In all the programs mentioned, the organization is non-profit or governmental.
The individual health care providers are on salary and are working as part of a team which, as a team, is accountable for both quality and cost.
The incentives to over-treat or to skimp on care are absent because there is no profit in doing so for the organization as a whole or for any individual in the system.
Simple and effective as the solution is, to create the kind of health care system we need, in order to improve quality and reduce cost, is politically challenging. As Americans, we tend to have a deep and abiding belief in the private market: a practically religious conviction that, whatever the actual results, competition at every level must lead to the optimum result: on the other hand, we also believe in teamwork, and there is no reason that there could not be more than one integrated health care system in any community of a certain size. Implementation of a new health care system will require a major change in attitude among providers (many of whom are quite comfortable with the present entrepreneurial system) and also among consumers (who like the idea of being able to see the provider they want, when they want). However, if the incentives are properly set up, it should be possible over a period of time to move in the right direction.
My prediction is that health care in Miami will change, as it must; however, we may be among the last to board the train.
