Thursday, August 23, 2012

Canute the Great and Controlling the Cost of Health Care 

About a thousand years ago, Canute the Great, a Dane, was King of England and a big chunk of Scandinavia.  Legend has it that one day he set his throne by the sea shore and commanded the tide to halt and not wet his feet and robes. 

I am reminded of that by the recent enactment of another piece of health reform legislation by the Commonwealth of Massachusetts, this time focused on cost control.  Though I haven’t read the 300-page bill, I conclude from the article about it in the August 1 issue of the Boston Globe that the approach being taken is not that much different from that of Canute and the tide.  The Massachusetts government is declaring that health care costs will not rise more rapidly than the growth of the economy as a whole.  It then admonishes providers to conform to the limit and sets up new government agencies to watch them as they try. 

Much faith seems to be placed in the conversion of the payment system from fee-for-service to HMO-style capitation (euphemistically referred to as global payment).  The law requires Medicaid and state employee plans to convert, but only urges private insurance to do so.  Commentators doubted that the private sector would rush to comply. 

According to reports, the tide did not respond to Canute’s command.  We’ll see if health care providers in Massachusetts are any different.

Saturday, August 11, 2012

Creative Destruction 

I’m reading Why Nations Fail by Acemoglu and Robinson and just finished a section on the failure of the Soviet Union.  Pages 129 to 132 discuss the various attempts by the Soviet government to induce people to work harder and more imaginatively by means of various schemes of rewards and penalties.  As a general rule, they failed.  Bonuses for increased production led people to hold production down so as to make increases easier.  New and potentially more productive methods were avoided because they might fail or productivity might diminish during the transition. 

It all caused me to wonder whether we in America might be doing the same thing in health care.  Government is trying to control cost by implementing schemes like “pay for performance,” imposing penalties for failing to implement electronic medical records, and prescribing standards of “meaningful use” as a condition of grants for implementing information technology.  Providers are undoubtedly gaming the system by devising clever ways to respond to the inducements without making the changes necessary to achieve cost reduction. 

Like the Soviet government, we are afraid of the potential consequences of competition and of turning people loose to innovate and experiment.  For example, what if it turned out that with evidence based protocols and an effective system of supervision by highly trained specialists, bright college graduates with the proper aptitude and six months of training could do knee replacements with outcomes better than those now being experienced at two-thirds the cost?   

All of that sounds pie-in-the-sky but is it any more radical than replacing travel agencies with the Internet and personal computers or replacing local, family-owned stores with Wal-Mart? 

What we are talking about here is what Acemoglu and Robinson call creative destruction, which they argue is essential for enduring economic progress.   Our failure to permit creative destruction in health care may be important as a reason for high and rising cost.

Sunday, August 05, 2012

Deductibles and Clinical Responsibility 

Health insurance policies with high deductibles are advocated on the grounds that they cause people to be more prudent in the use of services.  The assumption is that fully insured patients have a tendency to demand health services they don’t need and to opt for high cost services when less expensive ones would do just as well.  Presumably, having to bear some significant part of the cost will cause patients to be less likely to make unreasonable demands. 

The issue raises the questions of (a) whether the financial incentives created by the high deductibles have the intended effect and (b) whether there are unintended consequences. 

Those questions were explored in a column that appeared on the op-ed page of the July 29 issue of The Boston Globe.  The column was stimulated by the personal experiences of the author, one Joanna Weiss, with a high deductible policy she and her husband had taken out on their children. 

Although there is a dearth of data on the subject, Ms. Weiss cited anecdotal evidence that at least some people elect high deductible policies based on a gambling logic; a calculation that they will save more by electing lower premiums than the high deductibles will cost.  Others are responding mainly to the lower premiums without thinking very much about how they will pay the high deductible if they ever have to.  Some of them later find they can’t afford the high deductible and go without needed services as a result.  

The other question the issue raises is that of how responsibility for health care decisions should be allocated between patients and providers.   Under what circumstances and to what extent should patients make their own decisions about care? 

In the past, that question arose in the context of physicians.  It was commonly said that a physician who treated himself (they were mostly men then) had a fool for a doctor and a fool for a patient.  Presumably, the same would be true of a self-treating patient. 

All of the discussion about patient involvement in medical decisions has the danger, it seems to me, of relieving providers of responsibility that ought to be theirs.  I think they should be publicly and privately accountable for their decisions and patients should have a say when the differences are too close to call, but I think we need a system in which providers have the basic responsibility for deciding what patients need and which tests and procedures are the most cost-effective.

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