Consensus

Big business has a plan. The health insurance companies have a plan. Tom Daschle has a plan. Max Baucus has a plan. Teddy Kennedy is about to have a plan. And the chattering class is exuberant over the idea that a consensus is emerging on health reform. With respect to the twin problems of cost and quality, just about everyone seems to hold these positions:

 Consensus Point No. 1: I AM NOT AT FAULT.
 Consensus Point No. 2: Somebody else is at fault; and, not to put too hard an edge on it and you may have to read between the lines to see this, but a reasonable inference is that DOCTORS ARE AT FAULT.
 Consensus Point No. 3: Again, not to put too hard an edge on it and you may have to read between the lines even more diligently, but once you do you will surely conclude that we must FORCE DOCTORS TO CHANGE THE WAY THEY PRACTICE MEDICINE.

Seeing all this agreement makes me so giddy I want to immediately go rewatch "Twelve Angry Men" for the umpteenth time.


"Glory Days"

Consider by way of analogy my treating the NCPA employees to Caesar salad for lunch. Why Caesar salad? Because I find that people can think more clearly about salad than they can about health care.

Now because the salad is free to the employees, I can't let them order whatever they feel like ordering. The moral hazard problem would be too great. And because of the problem of bilateral bargaining with asymmetric information, I can't let prices be agreed to willy nilly. So I make a list for the chef of ingredients and prices I'm willing to pay. For example, so many sprigs of Romaine lettuce at x cents a pop, so many croutons at y cents, so many raw eggs at z cents. Then there's the task of stirring the dressing, the task of sprinkling the Parmigiano Reggiano cheese, the task of tossing, etc. – each with its own respective price.

Yet when we all sit down to eat, the salad is not very good. For one thing, the lettuce is wilted. (I forgot to specify nonwilted lettuce.) The croutons are stale. (I forgot to specify fresh ones.) The dressing isn't consistent. (I skimped on the fee for stirring.) There are no anchovies. (I left them off the list.) And the quality of the ingredients is inconsistent. (Every price I selected was, of course, the wrong price.)

Lessons From Our Lunch.

Question: What is dumber than asking a chef to prepare a salad by pre-determined, individually-priced tasks?

Answer:   Holding conferences, giving speeches and writing papers deploring the fact that the chef's preparation was uncoordinated, not cost-effective, not of high quality and not adhering to best practices.

Question: Is there anything dumber than complaining about the chef?

Answer:   Yes. Thinking we can make things better by improving on the list of tasks and the list of prices.

Question: Once we are in this silly predicament, is there a way out?

Answer:   Yes.

(a) Liberate the chef. Let him propose ways of repricing and repackaging his services and accept every offer, consistent with higher quality and lower cost.

(b) Liberate the diners. Let them manage their individual shares of the cost and be free to enter into any contract they choose to negotiate with the chef.

With any luck, eventually we will get a real market.

Comments (22)

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  1. Ken says:

    Terrific post, John. One of your best ever.

  2. Bruce says:

    Ditto Ken’s comment. Also, people can think infinitely more clearly about salad than they can about health care.

    Maybe some day you will be honored in Psychiatric textbooks for having discovered the Healthcare/Salad Syndrom.

  3. Joe S. says:

    This should be required reading for all the people at CMS.

  4. Brent says:

    I would certainly rather watch “Twelve Angry Men” than attend a typical health policy conference — especially in Washington,DC.

    At least the twelve men were able to agree on a rational solution to a problem

  5. Roger Beauchamp says:

    John
    Great blog post! Even some economists seem to leave out elements essential to a competitive market, like individual freedom and choice.

    Dr. Beauchamp

  6. Frederick W. Ford says:

    The whole salad would taste better if we had a single-payer, medicare for all system where patients could freely chose what doctors and hospitals they wish to be treated by. Eliminating for profit insurance companies from the mix would save doctors millions in overhead expenses trying to get paid by thoussnds of different insurance companies and save employers, cities & towns billions in health care costs to cover their employees. Support HR 676, John Conyer’s bill to create a National Health Insurance Program. Learn about the ease of single payer at this site: http://www.grahamazon.com/sp/index.php

  7. Dr. Darrell L. Dean says:

    In a keynote speech at the IHI Annual Forum, on December 11 in Nashville, John Kitzhaber, MD excellently outlined a different view (his) of what is needed for health system reform. It might be worth it to review his plan. It is much different than any I have heard of and focuses on “health” rather than “health care”. He also refers to Private vs. Public financing. There are some references in his plan that recall the “Oregon Health Plan” he authored while Governor of Oregon.

  8. Mike says:

    Nice article.

    Some experts argue that we have a price controlled system because physicians were less than reasonable when billing Medicare before the fee schedule. Ideas?

  9. Robert Blandford says:

    Frederick W. Ford: Here’s another approach, not blessed by any politician. Hope you like it:

    http://www.bipartisanhealthplan.com/hlthplan.htm

  10. Robert S. Berry, M.D. says:

    John,

    Thanks for the article. Yes everyone seems to have a health plan. TN Governor Bredesen boasted about his revolutionary limited benefits plan on the editorial page of the WSJ last month. It then ran in our local newspaper, which was a little more than I could stomach so I responded and the newspaper ran it. I didn’t have enough room to mention that my few patients who have Cover Tennessee have told me that no doctor in this county accepts it. People might think it is the doctor’s fault, but it will ultimately doctors who control access.

    Governor Bredesen’s recent editorial, “Tennessee and Health Insurance,” leads readers to believe that Cover Tennessee has been a resounding success. He said that his “Chevy” model health insurance plan “sure has worked for…thousands of…Tennesseans” and “at a cost far below conventional plans.”

    Upon further investigation, however, it appears that Mr. Bredesen’s “Chevy” plan is getting a lot more mileage in publicity, including the Wall Street Journal, than where the rubber actually meets the road.

    According to the December 2008 issue of Health Care News, CoverTN now insures only 15,000 out of nearly 600,000 uninsured Tennesseans. It has also cost taxpayers $251 million, which means that if all of these 15,000 had been insured since its inception three years ago (a better assumption would probably be half that), then the annual cost per life covered has been about $5,500 – more than Mr. Bredesen’s estimate for a “comprehensive health-insurance policy.” In other words, Bredesen’s “Chevy” has provided limited benefits to less than three percent of uninsured Tennesseans at more than “Cadillac” rates.

    Rarely has so much money done so little for so few.

    One of the few, Dottie Landry, whom he mentions as an example of the program’s success, was twice charged over 10 times what she would have paid at my insurance-free medical practice. Ms. Landry paid $9,000 for the care of a tick bite that made her very sick. An uninsured diabetic patient with an infected bruise to his shin paid nearly that amount at a nearby hospital for several days of IV antibiotics. After he was discharged in practically the same condition as he was admitted – with a fever and a red, painful leg – he made his way to my practice. For a total cost of $406, we incised and drained his large, infected hematoma, packed and repacked the resulting abscess cavity for two weeks until he was ready to return to work.

    CoverTN paid $4,000 for a “bad dog bite that put [Ms. Landry] in the emergency room with several follow-up visits.” For $375 my clinic repaired an uninsured man’s nasty chain saw wound that extended clear down to the bone, then cared for the wound for two weeks until we removed the sutures.

    The obvious question is – why does medical care cost over ten times more at these other medical facilities when compared with ours? Since my practice does not accept any form of insurance, could it be that the third party payment system for non-catastrophic medical care is largely responsible for these outrageous prices? And who pockets the difference? It doesn’t take a rocket scientist to figure out how Mr. Bredesen and other health insurance executives have made their fortunes. It sure wasn’t taking care of patients.

    The ill and injured we will always have with us. Government programs, like CoverTN, come and go according to the condition of the economy and the whims of public opinion. Given that the Tennessee government now faces an $800 million shortfall in tax revenues and is projecting $1 billion in cuts to TennCare next year, how will Mr. Bredesen continue funding Cover Tennessee?

    Perhaps it’s time he looked outside of his health insurance box to self-sustaining, direct-pay alternatives like mine that provide ten times more healthcare for the dollar and which do not depend on the fickle politics of public financing.

  11. Robert Blandford says:

    Absolutely right, Dr. Berry.

    My plan, http://www.bipartisanhealthplan.com/hlthplan.htm just puts some money in people’s HSAs and doctors can run their practice any way they want. The terrible situation we are in certainly has nothing to do with the docs.

    I suspect that a major reason that health care costs a lot in the US is that the US has the highest per capita income of any nation. Hence its docs and nurses will be the highest paid.

    If those in “consensus” have noticed this … I take it that they want docs and nurses to be paid below the national scale for people of their skill and education. That’s not the way to get good people in the profession. That’s a formula to destroy health care in the US. We need a market system.

  12. George Beauchamp says:

    Outstanding analysis, John,
    A market would be wonderful. A market absent competent and virtuous physicians, free to innovate rather than be enslaved by promise makers (“We’ll take care of you with quality, affordable, accessible health care” [QAACH!]), is not sustainable. Because, promises enforced at the point of a gun will only destroy a profession. Who will want to be a doctor? Where do we go from there?

  13. June O'Neill says:

    Thank you for a laugh in these otherwise gloomy times, including the weather.

  14. Jon Utley says:

    John–

    Did you ever see my Reason piece on runaway hospital costs?

    http://www.reason.com/news/show/127821.html

    Merry Christmas,
    Jon

  15. Ed Harper says:

    John This did occur to me too. Right on again!

  16. Ed Harper says:

    John

    You are right — Salad is easier to understand than health care.

  17. David R. Henderson says:

    John,

    Good one. Even better, watch “We The Jury.” Made for USA channel TV movie. Plus McGillis is prettier than (Henry) Fonda.

  18. Sven Berg says:

    I also recommend Dr. John Kitzhaber’s keynote address to the Institute for Healthcare Improvement last week. His slides can be found at:

    http://www.ihi.org/ihi/files/Forum/2008/Handouts/K3_UnfinishedBusiness_Kitzhaber.pdf

  19. Marcy Zwelling says:

    Thanks to Lisa Girion for understanding the pain our primary care physicians are facing as practices are closing all over the United States, in her article. The Physicians Foundation Survey (published at the end of November) estimated that as many as 150,000 physicians will be leaving clinical medicine within the next 3 years: doctors who desperately want to continue to care for their patients. The survey found that the overwhelming paper work and regulatory restrictions stood between doctors and the patients who needed their professional expertise. Low or no reimbursements were the final straw driving doctors to leave their patients in order to make a living. Our leaders in Washington are ready to "reform" healthcare and to provide coverage for all Americans. But, if there are no doctors to provide the care necessary, the reforms cannot be successful. The LA County Medical Association asks that all conversations about reform be centered around the patient/doctor relationship. Financing MUST follow care rather than care following financing.

  20. Chris Ewin, MD says:

    Consensus Point No. 4: Primary Care Docs are changing the business model of medicine in order to continue practicing medicine.

    He who laughs first, laughs last….Merry Xmas

  21. [...] ridiculous claims about monetary savings). They also have been endorsed by what I call the "new consensus" folks: left and right, business and academic, government and nongovernment, public and [...]

  22. Jim Johnston says:

    We hear all about getting everyone insured. If we can’t get control of the cost of what’s being insured you will never be able to afford the insurence. Once all the overhead costs of the salad are added into the end cost yoou end up with an overpriced product that’s still infierior.

    Drugs: The Wall Street Journal reported that 59 “B”illion was spent on marketing. We don’t advertise liquior or tabacco. Why not stop advertising drugs and reduce the prices. HHS should create a web site listing all drugs and the coditions they are used for. The Condition a drug is used for on the Rx label. Allow for the re-use of a Rx bottle for the same Rx.

    FDA: Reorganize the the Deprtment to review approvals and regulations. Ask any healthecare worked and ask them to make a list of all the things they are required to do that have nothing to do with care. Thier eyes roll back and say it would be very long list. FDA should become pro-active and find procedures in other countries that have been effictive for long periods, but not approved here (ie Morning after pill France).
    Hospials: Relief from unnecessary Reg’s. The waste of disposibles. When I was younger every DR’ office had an autoclave to sterilize instruments. Now you ask a younger healthcare worker what an autoclave is they don’t know.
    As J.C. Penny said “Watch the pennies and the Dollars will take care of themselves”.