Stop the Pilot Programs

The federal government has been spending billions of dollars on health care pilot programs and demonstration projects. President Obama has explained their purpose: “We need to find out what works and then go do it.” In other words, the exercises are supposed to discover how to lower costs and raise quality so that everyone else can copy them.

There are five problems. First, three Congressional Budget Office reports (see here, here and here) have found that these programs are not working. Second, even where there is evidence of success, the gains are usually too small to warrant much hope for meaningful change. Third, no matter how successful a project, it is not of much value if it cannot be replicated — which appears to be generally the case. Fourth, even in the rare instance where a pilot program is remarkably successful and there is every reason to think the results are replicable, Washington will ignore the project if it does not fit into the bureaucratic vision of how health care should be delivered. (I produce a stunning example below.)

Fifth, and this is the real killer, we don’t need pilot programs and demonstration projects in the first place. Why? Because we have hundreds of natural experiments where costs have been lowered and quality raised without any cost to the taxpayer at all. This is because of:

Goodman’s law of medical innovation: For whatever we are trying to do in medicine, there is someone, somewhere, who has found a way to do it 50% better.

For almost any kind of surgery — mastectomies, knee or hip replacements, spinal fusion, etc. — there is someone in the United States who has discovered how to cut the patient recovery time in half. Partly for that reason, there is someone who has discovered how to cut the cost in half. For infection rates, readmissions and other indicators of quality care, there is some institution, somewhere, that is chalking up rates that are half that of what the country as a whole is experiencing.

If you think we can copy excellence, don’t run a demonstration project. Just go copy what’s already working and working well.

We got to stop and
Think it over.

Of course, in a normal market, if someone discovered how to lower costs by half for a given level of quality or to increase quality by 50% for a given level of cost, that person would have a huge advantage over his competitors. The rivals would have to quickly discover how to emulate the innovator, lest they be priced out of the market. Only in health care, where normal market processes have been systematically suppressed for decades, can widely different levels of efficiency coexist, side by side, for year after year.

How do I know that Goodman’s law is true? Because I meet people every day who appear to affirm it. Many of them have been profiled at this blog. We have posted before about American Physician Housecalls, which appears to cut the cost of care in half for chronically ill Medicare patients. To my knowledge, Health and Human Services has made no effort whatsoever to even investigate this successful venture. (They’re not ACO? Forget it!) And then there is Jeffery Brenner, the “hotspots” doctor who is saving millions of dollars for Medicare and Medicaid, and getting nothing in return. The problem: Brenner is changing patient behavior mainly through “social work” and Medicare doesn’t pay for social work. (Besides, he’s not an ACO either!)

Here’s another fascinating example (sent to me by Dr. Brenner). Health Quality Partners, in Doylestown, PA, participated in a 10-year Medicare chronic care demonstration project, with a 1,700 patient randomized control trial run by Mathematica. They used a nurse outreach model to visit the homes of frail, elderly Medicare patients. As explained by Dr. Brenner:

The project showed a 25% sustained reduction in death rates, reduced cost, and reduced hospitalization (33%). It’s really groundbreaking [with] stunning results. There are no pills or treatments that come close to these kinds of results. For the frailest patients the death rate dropped 50% and the results were sustained. They essentially discovered the fountain of youth.

So what is the federal government doing with this information? CMS is about to end the demonstration project with no plans to replicate the results.

So, back to the title of this post. There are really three questions to be asked:

  1. Are there techniques that will substantially reduce cost and/or improve quality?
  2. Will entrepreneurs discover them and implement them, given market incentives?
  3. Can a centralized planner manipulate doctor behavior in this regard, with small penalties and rewards?

The answer to the first question is clearly “yes.” The answer to the second is also “yes,” but let’s be clear about what that means. If an entrepreneur saves a million dollars for the system, he is going to want to bank, say, $500K for himself. No one is going to take big risks for a normal rate of return. Right now, no one is out there trying to copy what Dr. Brenner is doing in Camden, New Jersey, or what American Physician Housecalls is doing in Dallas, Texas, because they can’t capture a significant part of the huge value such activities create for the system.

To solve our problems with entrepreneurship, we have to free the market and let entrepreneurship bloom.

That brings us to the third question, which I think is the real reason why so much money is being spent on pilot programs when we could learn so much more without spending any money at all.

It turns out that the answer to that question is apparently “no.” Big bureaucracies cannot manipulate doctor behavior with small penalties and rewards.

Darn. The world would be so much simpler if only socialism worked.

Comments (28)

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  1. Ken says:

    Great post.

  2. Desai says:

    “If you think we can copy excellence, don’t run a demonstration project. Just go copy what’s already working and working well,” this should be the quote of the day, forget the lengthy process of just sitting down and debating and never finding any actual solutions.

  3. Cornelius Sutton says:

    “Goodman’s law of medical innovation: For whatever we are trying to do in medicine, there is someone, somewhere, who has found a way to do it 50% better.”

    In most industries, the organization doing it 50 percent better will be leading the industry. Not in health care!

  4. DoctorSH says:

    The object of Obamacare is to spend money and bankrupt the system. The president agrees with you that pilot projects funded by taxpayers do not work. But when the objective is to bankrupt the system you need proof you were trying, in this case, trying to fail.

    The ultimate objectives of Obamacare:
    1) control physicians
    2) bring insurers totally under govt dictate
    3) create dependence
    4) get hospitals and healthcare corporations to go along by promising them favors or money.
    5) help the present system fail to put a totally govt run system in its place.
    6) then blame all the players other than govt for the failure.

    This administration plays this same game with every industry and opponent.
    It’s getting pretty old!!

  5. Patel says:

    There will never be a free market if the insurance industries and the government keeps distorting it. It seems we are stifling innovation by cluttering the market with too many regulations.

  6. Kyle says:

    If you want how efficient government run healthcare pilot programs are, go take a look at the VA.

    Goodman’s law definitely applies. Anything they develop will be subject to FOIA like VistA, so the private sector literally will just take it and do it better.

  7. Jordan says:

    FLITE’s failure cost taxpayers 200 million, DOD VA VistA integration failure cost taxpayers billions, and the VBMS “pilot program” has still yet to complete a disability claim from end to end after a few years in development.

  8. Ramesh Chandra says:

    John, Is there any republican congress person or candidates reading ur blogs? Whty don’t we hear them taking up ur crusade? Is our political system so deceased that reason that’s come to frontline discussion?

  9. Roger Hall says:

    “If an entrepreneur saves a million dollars for the system, he is going to want to bank, say, $500K for himself. No one is going to take big risks for a normal rate of return.”

    How can you be so certain that no one would take such a risk for at leaset a smaller rate of return than a 50% rate of return? It’s fine to innovate and benefit from one’s innovation but personal greed is a big problem. One person may have a great idea and lead well but they will never be able to implement it without the help of others, which leads me to think it’s a little much to expect at least a 50% rate of return. Like it or not, personal greed has caused lots of issues, just look at the recent housing market crisis. This is as much of a cultural problem as it is a political/economic one.

  10. Anthony Sombers says:

    “Only in health care, where normal market processes have been systematically suppressed for decades, can widely different levels of efficiency coexist, side by side, for year after year.”

    I think this is a very important statement that helps us understand how dysfunctional our health care system has become over the decades.

  11. Gabriel Odom says:

    Roger, if you believe that greed is the only problem, then we might as well give up. Greed is a cornerstone of human nature. You can’t remove it. You can’t legislate it away. You can’t fix it.

    It is a Law of Nature, much like gravity or thermodynamics. The best way to “beat” it is to harness this natural force. That’s what taxes do. Allow greed to motivate people to earn money, then take a portion of it. The trouble is, you can’t take too much, else people will throw off your tax.

  12. Doctorsh says:

    Actually greed is hard at work in healthcare.
    But it is govt and insurers that are greedy by continually asking for more and more money while providing less and less service.

    I see greed as more dangerous in political hands.
    Political greed morphs to political power. Then there goes freedom out the window.

  13. Arne Poutala says:

    Great post, John. Very timely too from my perspective. I just read this morning a discription of what Oregon is doing with their Medicaid population. Here is the link to the Portland Business Journal article: http://www.bizjournals.com/portland/news/2013/03/18/six-things-you-need-to-know-about.html?ana=e_ptl_rdup&s=newsletter&ed=2013-03-19&u=rUeD+PWuJuTItncV3I3snX68Le&page=all

    Oregon is using the “hot-spotting” effort to save Medicaid dollars.

    Our governor, John Kitzhaber, a former emergency room physician, has negotiated with President Obama a boatload of money for support of the program. As I understand it, the agreement offers a lot of flexibility to the state to make Medicaid more affordable. If the project does not succeed, Oregon citizens will be financially responsible for the failure.

    What do you know about the project, John? Some of Kitzhaber’s healthcare ideas have hot worked before but I give this one a chance based on your blog post today

    Arnie

  14. jmitch says:

    Dr. Goodman: I like the quote “If you think we can copy excellence, don’t run a demonstration project. Just go copy what’s already working and working well.”
    Such is the case for single-payer healthcare financing: countries that have this provide more care for less cost, without a significant decline in quality.

  15. Linda Gorman says:

    @jmitch–

    If single payer works so well why are the countries that have single payer trying to move away from it and imitate the more successful US private system?

  16. Al Baun says:

    With respect to the implication made in this post–that the government is wasting money by creating pilot programs and demonstration projects and not recreating productive practices–I beg to differ.
    Though credits and grants are available to organizations to implement innovative ideas which may produce long-term benefits in the health care industry (of which immediate ROI is difficult to ascertain by the CBO), The Patient-Centered Outcomes Research Institute (PCORI) originated under Obamacare and is aggressively researching comparative clinical effectiveness in some 500 various medical facilities. http://www.pcori.org/funding-opportunities/pfa-awards/

    Next, Jmitch is correct in his observation that single-payer systems are the result of numerous countries plowing through the schools of hard knocks to find what works the best and to implement what works best for their nations as a whole … not just providers … not just insurers … not just patients … and not just government.

    Finally, regarding DoctorSH’s comment “The object of Obamacare is to spend money and bankrupt the system,” with this cynical view of things, we don’t need to be too creative to guess what the S and H stand for.

  17. Al Baun says:

    test

  18. Frank Timmins says:

    @ Al Baun

    “Jmitch is correct in his observation that single-payer systems are the result of numerous countries plowing through the schools of hard knocks to find what works the best and to implement what works best for their nations as a whole..”

    Mr. Baun, you are ignoring the fact that these countries have almost unanimously failed in their healthcare goals. The ones that haven’t simply have not yet reached the moment of truth when it becomes obvious. Evidence is overwhelming when the statistics that count are considered.

    But in reality we don’t really have to delve into a myriad of mind numbing statistics any more than we have to calculate the physics of speed, velocity and acceleration before deciding it’s not a good idea to jump out of 10 story building window.

    It is amazing that some of us fail to understand (even after decades of unquestionable failure) that “top down” price controls cannot work in a civilized and competitive society (assuming the goal is to provide the best quality of product or service to the most people at the least expensive cost). It is not even an arguable issue. Amazing.

  19. Al Baun says:

    Mr. Timmins, I love to discuss things because there are normally hard facts on both sides of an argument that need to be exposed.

    With respect to you statement, [Obamacare won't work]“assuming the goal is to provide the best quality of product or service to the most people at the least expensive cost”, I must question your rationale with respect to historic ‘statistics that count’ from the World Health Organization.

    You must be aware that the U.S. has not been rated ‘best’ in any health care catogories for a long time; more people in the U.S. do not have access to ‘best quality product[s] or services’ than most other industrialied contries; and the U.S. is ‘the’ most expensive place in the world to receive care. Therefore I do not understand your rhetoric.

    I 2008, the American people chose someone who would finally do something about the run-away costs and failures of the health care system. It is currently under construction and people nit-picking aspects of the PPACA, without better and new alternatives, is not constructive.

  20. Al says:

    Al Baum, you are using aggregated statistics that include many things other than how well a health care system functions. Look at how the WHO statistically rates the US with regard to infant mortality. What they are really rating is socio economic differences, genetic differences, the differences in collection data and a whole host of other things. One example, some of our European friends let infants of low birth weight or short stature die on the table. In that fashion they keep their infant mortality statistics lower than what they would otherwise be. Are you advocating that we let those infants of low stature die on the table?

    By the way, the major cause of infant mortality is low birth weight. Statistically our health care system is the best in the world at managing that group. Thus one should recognize that the aggregate numbers that you are using do not reflect what you think those numbers mean.

  21. Al Baun says:

    Seems like it’s just you and me.

    So, if WHO stats are (in you opinion)politically skewed, what Global research entity would you suggest we use … to show that we are not the best, inclusive or reasonably priced?

    WRT your comment, “Are you advocating that we let those infants of low stature die on the table?”, the fact exists that ‘WE’ have no say in the matter. If this practice is in fact as prevalent as you suggest in European countries, it is a protected decision made by those parents in those nations.

    Also, can you explain your rationale on how a full term child dying on the operating table ‘decreases’ infant mortality rates?

    If your question is ‘should we taxpayers spend billions on extraordinary medical life-saving in an attempt to save all distressed babies, even against the wishes of the parents?’ then I would say the public costs and violation of personal rights would be unreasonable.

  22. Al says:

    Al Baum:”So, if WHO stats are (in you opinion) politically skewed, what Global research entity would you suggest we use”

    Perhaps when using aggregated data one should know what that data is actually measuring instead of simply using numbers to errantly prove a point. Perhaps one should start looking at the raw data and stop with aggregates that many times are political. To continue with my example of low birth weight infants consider the fact that survival in the lower weight group is a good metric of how a health care system is functioning.

    Since lower birth weights require more skill to prevent death why not rank infant mortality by birthweight? That has already been done and since the US does the best in the lowest birth weights that clearly indicates that the US has the most skills in this area. Higher up on the weight scale we see more countries joining the US.

    From that alone one has to assume that US health care is among the best with regard to infant mortality. To delve further into the problem you might want to look at the differences in the lowest weight group. I believe that is how they found out that the comparison was apples to oranges and that some countries had no deaths in that weight class. That means there is significant reporting differences.

    Next one can look at the different factors race, personal wealth, drugs, prenatal care etc. We can see how different races compare when born in different countries. We can note the number of low weight infants born in the US because the mothers are drug addicted. Many will die, but at least we will learn to target our resources in a more appropriate way. I think there are reports that intensive prenatal care hasn’t had the effect we thought it would have. Could that be due to drug problems? If so perhaps instead of universal intense prenatal care we have to shift those resources to drug addiction prevention and down the line to those at risk for low birthweight infants.

  23. Al says:

    @Al Baum:

    Apparently in response to my question “Are you advocating that we let those infants of low stature die on the table?” you asked another question.

    You wrote “can you explain your rationale on how a full term child dying on the operating table ‘decreases’ infant mortality rates?

    I suppose you are asking why full term children die on the operating table? Many reasons, but are you inferring that we have more of these deaths than other countries? If so please provide a citation or explain the nature of your question. There is a big difference between letting an infant die because he will eat up resources and a child dying from other causes.

    “If your question is ‘should we taxpayers spend billions on extraordinary medical life-saving in an attempt to save all distressed babies, even against the wishes of the parents?’ then I would say the public costs and violation of personal rights would be unreasonable.”

    That is a reasonable point for discussion, but has little to do with the America you portray in your WHO data as having high infant mortality and low quality health care.

  24. Al Baun says:

    To reiterate, in response to your assertion that “One example, some of our European friends let infants of low birth weight or short stature die on the table. In that fashion they keep their infant mortality statistics lower than what they would otherwise be.” my question was, “can you explain your rationale on how a full term child dying on the operating table ‘decreases’ infant mortality rates? Meaning, that if ‘our European friends’ let them die, it would increase their mortality rate, not decrease it.

    In response to your question: “Are you advocating that we let those infants of low stature die on the table?” my response was [assuming that in order to not let these light and short infants die, extraordinary medical measures must be taken]… “If your question is ‘should we taxpayers spend billions on extraordinary medical life-saving in an attempt to save all distressed babies, even against the wishes of the parents?’ then I would say the public costs and violation of personal rights would be unreasonable.” That means that the decision and financial costs must remain with the parents, not you or me.

    Lastly, if you can’t trust World Health Organization’s data on the relatively poor U.S. health care global standings, and since you cannot give an alternative authoritative source (other than personal research), we’ve reached a point of impasse on that topic.

  25. jmitch says:

    Linda Gorman: the key word in your question – “If single payer works so well why are the countries that have single payer trying to move away from it and imitate the more successful US private system?” – is the word “trying.” Name 5 countries that are anywhere close to succeeding in moving away from single-payer. In fact, name one. And please define how the phrase “successful US private system” applies to the uninsured and under-insured.

  26. Al Baun says:

    In the final analysis, where do we stand and where do we go. Do we work together or continue fighting. I wager our global health care standing improves greatly when Obamacare is finally fully implemented. Is there continued room for improvement … yes.

    To review where we stand, see:

    http://www.businessinsider.com/best-healthcare-systems-in-the-world-2012-6?op=1

  27. Al says:

    1)@ Al Baun: “Meaning, that if ‘our European friends’ let them die, it would increase their mortality rate, not decrease it.”

    You are absolutely correct except for the data selection differences. Any birth with a heart beat is counted by the US as a live birth and upon death it becomes an additional death in our infant mortality statistics. These other nations I mentioned do not count every birth with a heart beat and subsequent death as an infant mortality. Instead those with short stature or weight will be counted as miscarriages. I think that is shown as an asterisk in the infant mortality statistics of the OECD.

    2)Your second point was already answered.

    3)@Al Baun: “Lastly, if you can’t trust World Health Organization’s data on the relatively poor U.S. health care global standings…”

    You can trust the WHO data for what it is, but it doesn’t represent a true comparison of health care systems due to all the factors I mentioned previously. If you wish to quote WHO then the least you can do is know what the number represents. Alternatively you can look at the OECD raw data or any of the outcome studies. The impasse only exists as long as you refuse to look at the data and errantly rely solely upon aggregate numbers.

    You are right though, “we should work together” and should have done so when Obamacare was passed. It was forced through in an ugly fashion so I guess working together is only an afterthought, something made quite clear by the following statement: “We have to pass the bill so that you can find out what is in it”

    PS: I think you can find some of the numbers you are looking for in John Goodman’s book “Priceless”. It’s a good read and certainly worth the price. Since you are on this list you must at least believe he is an accepted authority on this subject.

  28. Al says:

    Al Baun Yesterday I referred you to the book “Priceless”, but in retrospect maybe I should have given you at least one direct citation comparing outcomes.

    See the CONCORD study @

    http://healthcare.procon.org/sourcefiles/CONCORDCancerSurvivalStudy.pdf

    Especially pages 11 and 18 for direct comparisons of some common cancers. Exclude Cuba because their results are not credible and take note how it is true that the US is not always first, but it is either first or second out of the remaining 29. If one scored the average results numerically The average for the other countries would be around ~15th place. (very quick calculation) The US would be at ~1.7th place and France the third best competitor is at ~3.7th place. If I remember correctly France is the country that lets newborns of short stature die on the table and then calls the death a miscarriage rather than an infant mortality. This study is a far better assessment of quality than the aggregates used by WHO that are near meaningless for these types of comparisons. (Note: This was published in Lancet, a British Journal. Also note that it appears that Australia would be at 3.5th place and Canada 4.8th place)

    I can’t find my copy of “Priceless” (I loaned it out), but I think John Goodman used this study as an example.