Aug. 23 (Bloomberg) -- If you are anything like me, you have spent the last 10 days listening to President Barack Obama and his Republican challengers accuse each other of being the meanest miser when it comes to denying health care to seniors. Unless you are an actuary or have a fondness for, and facility with, budget math, you were probably left wondering what and whom to believe.
That’s the good news. The bad news is, nothing that has been enacted (the Patient Protection and Affordable Care Act of 2010) or proposed (Republican Representative Paul Ryan’s “Path to Prosperity”) addresses the fundamental problem plaguing the U.S. health-care system: It is designed to manage disease rather than promote wellness.
Where do Middle East potentates go when they get sick? The U.S., of course. This country has the highest success rates when it comes to treating disease.
America’s life-expectancy rates, on the other hand, pale in comparison with other developed and developing nations, even though the U.S. outspends them by a huge margin (see below). Imagine what the U.S. could do if it harnessed its resources and talent and focused on disease prevention.
Some communities have already taken the initiative, creating accountable care organizations (ACOs) that use an integrated model for patient care. Cheshire Medical Center/Dartmouth-Hitchcock Keene, for example, introduced “Vision 2020” in 2006 with the goal of making Cheshire County, New Hampshire, the U.S.’s healthiest community. Cheshire is one of 32 pioneer ACOs selected to test new models of health-care delivery and payment -- paying for results, not volume -- as provided in the Affordable Care Act. Medicare will eventually pay ACOs a lump sum per patient, allowing providers to share in any cost savings compared with traditional fee-for-service plans.
The challenge of saving Medicare from insolvency in 2024 would be easier if seniors had lived healthier lives. It would be a lot easier if the system corrected the perverse economic incentives that reward doctors for unnecessary procedures.
“Nothing changes until the people giving the care change the care,” says Don Berwick, administrator of the Centers for Medicare and Medicaid Services from 2010 to 2011. That requires “redesigning the way care is given into an integrated system, with primary care as the base.”
That point is hammered home in an independent film, “Escape Fire: The Fight to Rescue American Healthcare,” directed by Matthew Heineman and Susan Froemke, an official selection at the 2012 Sundance Film Festival. The documentary combines facts and figures with personal stories from doctors and patients, and innovative ideas from leaders trying to transform the industry.
The film title is a story in itself. It comes from a 1999 speech that Berwick gave at the Institute for Healthcare Improvement, a nonprofit organization in Cambridge, Massachusetts, where he was president. In it, he compares saving the U.S. health-care system to what has become standard practice for fighting forest fires: intentionally setting fire to an area to divert an oncoming blaze. This is known as an escape fire.
The analogy to health care? An out-of-control menace for which there are simple, not easy, solutions.
Consider some statistics about U.S. health care from the film, all from reputable sources:
-- The U.S. spends $2.7 trillion a year on health care; 30
percent of that is wasted and doesn’t improve health.
-- The average per-capita cost in the U.S. is $8,000; the
average for the developed world is $3,000.
-- About 187,000 people die annually from medical errors or
hospital infection, the third-leading cause of death
after heart disease.
-- The U.S. spends $300 billion a year on pharmaceuticals.
-- Twenty percent of patients account for 80 percent of the
More than a third of adults and almost 17 percent of children in the U.S. are obese, a dramatic increase in the past 20 years, according to the Centers for Disease Control and Prevention. Obesity is a key risk factor in many preventable causes of death, including heart disease. Without a shift in the trend, which requires a change in lifestyles, the U.S. will spend as much as $1 trillion a year in 2020 just treating the consequences of obesity, one-fifth of all health-care expenditures.
Yes, there are things that can be done to reduce costs, such as paying providers for outcomes -- low readmission rates, for example -- not procedures. Making patients aware of the cost of treatment will help at the margin, as economists like to say. Because the lion’s share of medical costs is for the treatment of chronic illness in the last two years of life, comparison shopping for the cheapest provider isn’t really an option.
That’s why health care is somewhat immune to normal competitive forces. For starters, “there are no markets in health care,” says Craig Clark, a physician and lawyer who is a partner at Radiology Consultants of Iowa in Cedar Rapids. “It’s like politics: It’s all local.”
Second, “the demand curve is not set by the patient,” he says. The cost to the patient for an expensive procedure is often a small co-pay of $20 to $40. Price, therefore, doesn’t play its traditional role in consumer decision-making.
Third, as mentioned above, there is little relationship between the quality of care and what the provider is paid. Finally, the system itself encourages unnecessary treatments. Hospitals buy up private practices so they “own” the doctors, which means they “own” the patients, which means they control the insurance payments, Clark says. Such a “monolithic delivery model” perpetuates itself through self-referral within the hospital-based system.
Health care is a complicated subject requiring experienced professionals to come up with innovative solutions that can be tested on a small scale before they are universally adopted. Unfortunately, time is running out.
Many folks seem thrilled Medicare has become the subject du jour on the campaign trail. I’m not so sure. Health care seems much too important to be left to the politicians.
(Caroline Baum, author of “Just What I Said,” is a Bloomberg View columnist. The opinions expressed are her own.)
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Today’s highlights: the editors on why we still need affirmative action and on why the Bundesbank should put up or shut up; Susan Crawford on the consequences of the Apple-Samsung patent case; Ezra Klein on Romney’s vaporous Medicare promise; Jonathan Mahler on football, concussions and ESPN; William Silber on how Paul Volcker restored the Fed’s credibility on inflation; Will Wilkinson on how Paul Ryan can be a Randist and a Catholic.
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