Harvard Business School Professor Regina Herzlinger has written a must-read book, "Who Killed Health Care?". It is written in the style of a murder mystery. The puzzle to be solved: Who killed Jack Morgan, (a patient who dies while awaiting a kidney transplant)? Like Murder on the Orient Express, there is not one killer here but many: health insurance companies, hospitals, employers, the federal government and even academics.
Jack Morgan is a composite figure, based on the experience of 112 people who needlessly died while waiting for a kidney transplant. They were all insured by California-based Kaiser Permante. Of those who died while waiting, 25 had a perfect match.
So the mystery begins, appropriately enough, by asking; what's wrong with Kaiser? "The original idea behind Kaiser was not all bad," writes Herzlinger. The company was formed by caring doctors who wanted to practice high quality medicine. Things went wrong when managed care became commercialized and insurers started telling doctors what to do so they could save a buck.
Herzlinger is not against managed care in principle, but she argues health insurers are the last people who should be doing it. Geico may be a great auto insurance company, but who would go to Geico for auto repairs? The same principle applies to health care.
Hospitals come next on the list of suspects and the bill of indictment is lengthy. These are stodgy, bureaucratic institutions that provide fragmented care rather than integrated team care and do so with highly uneven quality. Patients almost never learn what the cost is going to be prior to their surgery, and at the time of their release uninsured patients are charged the highest prices of all!
It doesn't have to be that way, she says. In India you can get a package price in advance for all major forms of surgery. That price, by the way, will be as little as one-fifth of what you would be billed in this country; and the surgery is performed by US-board certified physicians with comparable standards of care. In a real market, patients would find it easy to get price and quality data – just like they can for automobiles. To help that along, Herzlinger calls for an SEC-type body that would ensure patients get accurate data.
Employers come next. Good as they are at many things, they are lousy at choosing health care plans. So why should they – rather than the employees themselves – make these choices? It's all due to an accidental quirk in the tax law, says Herzlinger. To remedy the problems, individuals should be given the same tax break when they buy their own insurance, with higher subsidies for lower-income families.
Then there is government. Virtually everything wrong with our health care system stems from bad government policies. Herzlinger goes to great length to show how the federal government has botched kidney care, but I wish she had done more. Indeed, if there is a fault in this book it is the failure to more fully explore all the many ways in which government has undermined normal market forces in health care.
Finally there are Herzlinger's colleagues – in the academic and think tank world. She pulls no punches – and that's unusual. (Academics tend to be kind to one another; after all, we're all in the same game, so to speak.) Their sins? Over the years they have apologized for and defended managed care, bureaucratic care, perversely regulated care – indeed almost any kind of care other than the low-cost, high-quality care you would expect free markets to produce.
Herzlinger calls her ideal approach "consumer-driven health care." But the real issue is much deeper than putting patients in the driver's seat. We are suffering today because we systematically suppressed the market in every aspect of medical care for more than 100 years. The solution is long overdue: bring the market back to life.
Link to (the Manhattan Institute book) "Who Killed Health Care" McGraw-Hill, 2007.