Academic Integrity

People in our culture think they can never admit they are wrong. This is especially true of so-called experts in any discipline. I’m not sure if it’s a pride thing, a worry that it will undermine their credibility/reliability as a source of good information, or (maybe more likely) a mix of both.

Politicians have the added consideration that people would be hesitant to vote for someone who admits they were wrong and then changes their position on an issue–it begs the question of what else they are going to change their mind about. Entire parties seem to get locked into this defending-previous-opinions cage even if that previous position doesn’t make sense anymore.

The more intelligent someone is, the better they are at justifying or spinning their position to make it seem like they weren’t wrong.

And I’m tired of it.

The benefit of having the academic integrity, humility, and bravery necessary to admit you were wrong more than compensates in the long run for any possible short-term downsides. Admitting fault acts as a signal to others that even experts are fallible humans, too, and that they, too, are still learning and improving. It shows we are not close-minded and dogmatic. And most importantly, it shows we are seeking truth rather than selfish aims.

Our learning and growth and progress will be stunted if we are ever-defending our errors. So let’s stop.

This is my reminder to do that myself, and it’s my encouragement for everyone involved in politics and policy to do the same. I am committed to being transparent about my areas of ignorance and my wrong assertions and also my biases. And as I work at completing and perfecting my knowledge, I will continue to try to be a reliable source of information by suspending judgment on an issue until I feel like I have understood all aspects of it thoroughly enough to make a sound assessment of it.

NEJM’s Fundamentals of U.S. Health Policy, Part 3: Do We Spend Too Much?

Photo by Scott R on Pexels.com

This next part in The New England Journal of Medicine’s fundamentals of health policy series is written by my favorite health policy writing duo–Drs. Baicker and Chandra. They both do amazing research independently, but when they work together to write an article, it seems to be extra insightful and interesting.

Their task with this article is to help people think deeper than the simplistic sentiment, “The U.S. spends way more than every other country on healthcare; we need to cut back, and any increase in spending is wasteful!”

Key insight: Only looking at the aggregate number obscures many important facts about our healthcare spending; digging a little deeper totally changes the conversation.

Here are my favorite examples of this from their article:

  • As nations grow richer, they spend more on healthcare. So, based on that alone, the U.S. would be expected to spend more than nearly every other country. Of course, this doesn’t explain all the difference between our spending compared to other countries, but it explains a lot of it, and it’s not a bad thing. A related side point they make about this is that it “highlights the challenge of putting all Americans, with very disparate incomes, into a single insurance plan.”
  • Studies that conclude our higher spending is purely due to higher prices (rather than higher quantity) aren’t able to account for all the inter-country differences in quality or intensity of care. This one was news to me, and you’ll see in my prior writings that I didn’t know this. You see, I thought that if a study shows that we generally have the same number of hospitalizations, doctor visits, prescriptions, imaging studies, etc., they would have controlled for differences in what kind of doctor visits (primary care vs. specialist) and scans (a 0.5-Tesla MRI vs. a 3-Tesla MRI) and such were being delivered. But that’s wrong–researchers don’t always have the data they would need to be able to do that. This means we need to look closer at exactly what we’re getting when we are paying a higher price than other nations, which will help us distinguish if it’s just plain overpriced in the U.S. or if it’s a substantially better service.
  • If we look at specific health outcome domains, we find out that we overspend on some of them and actually underspend on others. This means that sometimes increasing spending is actually a good thing, like for vaccines or other preventive care. When we look at spending this way, we can start to evaluate whether reforms’ spending impacts are effective not based on whether they increase or decrease aggregate spending, but instead we can base our assessments on how well they do at reducing overspending on the low-value care and increasing spending on the high-value care.

I hope that helps you think a little differently about (i.e., be a little more critical of) aggregate health spending references like it did for me.

And, to close, here’s a thought-provoking statement they drop in the middle of their article: “The debate about whether health care is a right sidesteps the more difficult and important question of how much health care is a right that should be ensured through public programs.”

Who Can Fix Irrational Healthcare Spending?

Photo by Karolina Grabowska on Pexels.com

A couple weeks ago, I wrote about an experience I had at work with a patient wanting to stay in the hospital for two extra days just so he could spend a few hours with his daughter from out of town before going to a skilled nursing facility where no visitors would be allowed. The cost of staying in the hospital those couple extra days was probably at least $4,000 total, but the patient and his family were (rationally) ignoring that cost because they weren’t going to have to pay for any of it directly themselves.

The solution I proposed to such system-level irrational spending was to have the person making the purchase decision bear at least part of the cost of that decision. That way, if they choose something more expensive, it will be done with a consideration for the additional cost that choice entails.

As context for my proposed solution to such a problem, remember three things: (1) every system is perfectly designed to get the results it gets, (2) the design of a system generates a set of incentives, and (3) incentives are what drive the results of every system. So does no one have an incentive to get the people making purchase decisions to bear at least part of the price differential?

This is how I look at it:

Anything that lowers the total cost of care (while at least holding quality constant) is desirable for whoever is bearing the burden of that total cost of care. And the parties who bear that burden are the insurer and the patient, to varying degrees.

But since the patient typically doesn’t have much of an idea about what their out-of-pocket cost will be or how those costs will be impacted by choosing a different procedure or a different provider, they are not in a position to do anything about it.

The insurer, on the other hand, has the capacity to know–or at least give a reasonable estimate of–the cost of something. Therefore, we need to look to insurers for the necessary changes.

But think about this proposal from an insurer’s perspective . . .

The young energetic intern pitches such a plan to the executives, “Hey, how about we offer a new and innovative insurance plan that gets rid of the typical deductible and instead makes enrollees pay a 50% coinsurance on each service they receive (subject to their out-of-pocket max, of course). We could set the total price of each service (and, therefore, their coinsurance portion) at our negotiated rates with each provider. And we’ll make an app that will allow them to compare prices beforehand.”

The room’s executives would immediately see all the problems with such a plan. “This is too complicated for people! They will hate it and never want to get an insurance plan from us again.” “We can’t divulge our negotiated rates, all the providers who find out they are getting paid less will be angry and demand more from us.” “What about things that are not shoppable?” “If a single bad publicity event comes out of this experiment, it will severely damage our reputation and we’ll lose market share as a result, so we stand to lose more than we could gain.” “We’re going to have to make premiums extra low for such a plan to be able to convince people to try it out, but there’s no way to easily communicate how this plan is different, so a lot of people will just choose it because it’s cheap and says it has a $0 deductible and then they won’t be prepared to pay all their coinsurance costs.” “What about out-of-network coinsurance rates?” “Nobody’s ever done something like this before, so it’s too crazy to try unless we are likely to make a killing on it, which we aren’t.”

I talked about these same issues in my Why Insurers Don’t Innovate post a year ago. And not all of them are immediately solveable. But if we could address at least a majority of those executives’ concerns, I believe we would start seeing some enterprising insurers try this out.

The big thing would be solving the novel complexities that such a plan would create and then finding a way to convey this information to potential enrollees, either in the health insurance marketplace or in employer benefits explanations. And we would have to hope that many people would be willing to use an app to check healthcare prices in compensation for paying a much lower premium.

There would be lots of challenges to solve, and apparently no insurer has yet determined that the potential benefits are worth the potential harms. But I have hope that this will happen and be successful sooner or later. Maybe if the first enterprising insurer to try it can identify some first-mover advantages and create some barriers to imitation, they would stand to gain a lot more.

Also, remember there’s the static-world benefits to patients making value-sensitive decisions (they get better deals on the care they buy), and then there’s the dynamic-world benefits (the market starts to evolve toward delivering higher value). This kind of insurance plan design change, as it starts and then spreads, will enact a big change in providers’ incentives. In other words, the system will be fundamentally changed, which will result in much higher value care being delivered as it evolves in response to that change.

NEJM’s Fundamentals of U.S. Health Policy, Part 2: How Broken the U.S. Healthcare System Is

Image credit: Karsten Schley

I only vaguely remember the great interest and surprise and bafflement I felt when first reading health policy articles that describe how broken the U.S. healthcare system is. But now, after having seen those sorts of summaries hundreds of times, I kind of just gloss over them. Having said that, I think Dr. Schneider does a great job covering the “our healthcare system is broken” lay of the land fairly succinctly in this article, which is the second in NEJM’s series on the fundamentals of U.S. health policy.

Not only does he cover each of the three main categories of issues (quality, spending, and access), but he makes mention of other important aspects to that that are sometimes forgotten, such as the fact that part of our higher spending relative to other countries is simply attributable to our wealth, the impacts of healthcare overspending on U.S. competitiveness, and that a big unmeasured component of the inconvenience of our healthcare system is how much time is wasted by patients trying to figure out insurance or navigate this system in other ways.

I won’t rehash everything he talks about here, but I did find one small section in this article particularly interesting. He is talking about how private organizations and private markets affect the healthcare system, and then he says, “Functioning private markets can reduce costs and innovate in ways that broaden service availability. But private markets may not restrain costs in health care as they do in other sectors. Patients frequently rely on professionals to decide what services are needed, and costs may not be a consideration for either patients or professionals.”

Translation: Markets don’t work in healthcare. And a couple reasons they don’t work are (1) information asymmetries and (2) costs are not considered.

I remember reading things like this as well from the very beginning. And my question was always, “Why?” Or, if reasons were given, “How does that mean markets don’t work in healthcare?” And there never seemed to be a good answer that contained spelled out causal details. The unsatisfactory answer was always, “Healthcare is different.” And then they’d reference the same landmark article by Kenneth Arrow, Uncertainty and the Welfare Economics of Medical Care. So I read that article carefully, and it is a great and important article, but it never seemed to address the challenges for which people were referencing it.

This is, in big part, what spawned this blog. And thousands of hours of researching and thinking and writing later, I feel like I have answers to those questions. Not every answer to every question, mind you, but the main answers to the most important questions. I’ve found that it’s not that markets don’t work in healthcare–it’s that markets aren’t working in healthcare. And the reasons why are explained in my Healthcare Incentives Framework, which I probably reference in at least 50% of my posts because it’s the foundation of how I have come to understand healthcare markets and our healthcare system specifically.

So, if you do any degree of reading about health policy topics, you are sure to come across similar statements about how markets don’t work in healthcare. Or, just as commonly, that they could work in healthcare but relying on them would cause even worse disparities. Don’t believe either of them.

There is a whole article about markets at the end of this NEJM series, so we will see whether it has worthwhile things to say on the topic!

A Real Life Example of Irrational Healthcare Spending

Photo by Karolina Grabowska on Pexels.com

This week at work, I had a patient in the hospital who had been through a pretty challenging illness, and he was going to have to be discharged to a skilled nursing facility (SNF) to rehab for a few weeks. Sadly, SNFs in my area don’t currently allow any visitors due to the pandemic. The patient is very close with his daughter, who lives out of state, and she was flying in the next day to visit him and lend support in his challenging time.

Unfortunately, he was ready for discharge to the SNF now, and upon hearing my plans for discharge, the family requested we keep him in the hospital until he could see his daughter. Because she would be arriving late afternoon the next day, it would be too late to send him to the SNF that day, so he would be stuck in the hospital an extra two days just so he could see his daughter for a few hours.

It’s a perfectly reasonable request, right? But what am I to do when I get a request like that? What’s the socially responsible thing to do? If I assume that every day spent in my hospital costs at least $2,000, I am left judging whether $4,000 of society’s money is worth spending on this brief visit from the patient’s daughter.

As all these things were going through my mind, I gave them my response: “Sure.”

Maybe that’s an irrational use of society’s resources, but it’s a rational response to the situation. I, as a physician, am often asked the be the incidental steward of society’s resources.

And I face experiences like this every week at work. Actually, I would contend that there are thousands of these illogical spending decisions happening every single day across the healthcare system.

The issue at play here is this: The people making decisions about healthcare purchases are not the people directly paying for it.

But what if Medicare patients were required to pay even just a portion of the $2,000/day cost of staying in a hospital? Of course, not all patients could afford it, so there would have to be a policy to account for that, but let’s focus on the people who could afford it. Suddenly, the conversation with that family changes quite a bit.

“Can you keep him in the hospital two extra days so he can see his daughter for a few hours?”

“Sure, I’m happy to do that. Medicare requires patients to pay 50% of the cost of each hospital day though, which means it’s costing him $1,000/day to keep him here, so you need to decide if it’s worth paying $2,000 extra for him to see her for a few hours.”

Then the people making the purchase are directly bearing a portion of the cost of that purchase, and the utilization of resources becomes more rational.

In my Healthcare Incentives Framework, I focus so much on removing the barriers to people bearing at least part of the cost of their healthcare purchases for this very reason. And the way to get there starts with changing insurance plan designs and enabling patients to obtain price information up front.

NEJM’s Fundamentals of U.S. Health Policy, Part 1: What Is Health Policy?

The New England Journal of Medicine (NEJM) is one of the most prestigious medical journals in the world, and it has a new series of articles I find particularly interesting called Fundamentals of U.S. Health Policy. I’ll be reading through the articles of that series and giving some thoughts in response.

The first article in the series, written by Eric Schneider, Debra Malina, and Stephen Morrissey, introduces and defines the field of health policy, and then it defines the goal for the series: “To offer a foundation for a common understanding of where we stand and where we need to go.”

When I tell people I’m an internal medicine physician but that my real passion is health policy, they often respond by saying, “Oh, so you want to get into administration, eh?” And then I have the opportunity to introduce them to this amazing field of health policy.

Sometimes I’ll tell them my oversimplified analogy to NCAA basketball, with the clinicians being the players, the administrators being the coaches, and the policy makers being the NCAA. Sometimes I’ll tell them I want to set the rules for the system, to align incentives properly. Sometimes I’ll simply just say my goal is to fix the healthcare system (so far, everyone agrees–it needs fixing).

This is how Schneider et al. define it: “the choices made by the people who govern, manage, deliver, and pay for health care.” They also describe it as shaping (1) how clinicians deliver care and (2) how patients seek care, obtain care, pay for care, and adhere to care.

There are many other definitions you can find online with a quick “what is health policy?” search. But they all seem kind of vague and textbook-y and obscure the captivating challenge and monumental opportunity that health policy offers.

My working definition of health policy is different. I would say that health policy is the field of work that deals with making the rules for our healthcare system; it takes on the ultimate challenge of figuring out how to properly align all the industry participants’ incentives in a way that motivates them to maximize value for patients. And then I’d add some rhetoric about how healthcare is the most complex and high-stakes industry there is, that it’s like the ultimate puzzle, and I’d tell them about how success can mean solving many people’s greatest heartaches, solving the nation’s fiscal crisis, and saving the world.

I look forward to evaluating the rest of the articles in this series!

Sneaky Hospital Tactics to Force Higher Prices

Image credit: Rich Pedroncelli/Associated Press

There was a recent 60 Minutes episode with a segment that talked about why healthcare prices are so high, and I learned a couple new things.

The segment focused on Sutter Health, which is a large healthcare system in Northern California. Sutter Health was the bad guy in this episode, but the American Hospital Association dutifully provided a counter-argument to the story here.

For context, remember that the price negotiations between hospitals and insurers are not based on costs but rather bargaining power. The more bargaining power the hospital has over the insurer, the higher the prices they win.

Here is Sutter Health’s strategy to win more bargaining power, according to the 60 Minutes segment:

First, buy up other hospitals to become a monopoly in as many markets as possible. If you cannot be a complete monopoly somewhere, find a way to become a monopoly over a key service line, such as maternity care. Next, require two things in every contract you make with an insurer–a gag clause (so nobody can divulge the prices agreed upon) and an all-or-nothing clause (so the insurer has to have all the system’s hospitals and services in network or none of them).

The combination of all that leads to the hospital having much greater bargaining power.

How?

The insurers are kind of forced to have Sutter Health in their networks to avoid having important gaps in coverage (either a regional gap if the one hospital in that county isn’t in network, or a service-specific gap if Sutter Health is the only provider of that service in an area). They leverage that foot in the door with the all-or-nothing clause, so now basically every insurer is compelled to include every Sutter Health hospital, so Sutter Health can demand very high prices and get away with it. And, for Sutter Health’s protection against the bad PR they would get by charging such high prices, they have the gag clauses in place.

Pretty clever I’d say. Unfortunately for them, the government tends to notice when a hospital system becomes a monopoly in multiple ways, and they also notice when a hospital system is making a lot more money than others around it. So they get investigated, reporters dig up the juicy story, and the government slaps a few wrists with lawsuits and new regulations.

Is there a better, long-term solution to these tactics? I have a few thoughts on the matter. First, there’s nothing like monopoly rents to draw competition to a market, so allowing healthcare entrepreneurs to enter those monopolized markets/service lines would be a great start. And if Sutter Health’s competitor hospitals start doing some thorough cost accounting, they could know how much their different services cost and be able to start setting competitive “out-of-network prices.” When those competitors start winning market share, Sutter Health will have to respond with lower prices and more price transparency to become competitive again themselves.

So many market failures are solved by price transparency.

Back to Basics: What Is a Health Insurance Death Spiral?

Photo by Frank Cone on Pexels.com

This is one of those topics that comes up in healthcare reform discussions regularly, but we don’t often take the time to explain it. It’s not currently a trending topic, but it’s a perennial one, so it will come up again sooner or later.

Let’s start with an assumption: All people want health insurance.

But people’s willingness to pay for health insurance varies greatly. If it’s free, few would refuse. If it costs $200 per month, many more would refuse. If it costs $2,000 per month, most would refuse.

What determines whether someone thinks the premium is worth it?

A few things. The two biggest factors are (1) how much healthcare that person expects to need that year and (2) how much money they have. If a person expects to be hospitalized multiple times that year, a $2,000/month premium is probably going to be a lot less (even with the deductible and copays) than going without insurance. If a person is fairly wealthy and has the foresight to recognize that unpredictable healthcare expenses could be financially catastrophic, they would probably also be willing to pay the $2,000 deductible. But healthy people and poor people (and especially poor healthy people) are much less willing to spend much on premiums.

Ok, that was most of the background information, and here’s one more thing. If an insurance company is allowed to charge whatever they want for a premium, you know what they would do? They would collect a bunch of data on every insurance applicant and use some smart actuaries to calculate each applicant’s average expected annual healthcare spending, and then they would use that number (plus a percentage) for the person’s premium that year.

As you would expect, this would work fine for the young and healthy who will have low premiums. But for most others, it can be pretty expensive to the point that many would rather choose to forego insurance.

Now we can talk about how to cause a death spiral.

To solve that problem of premiums being too expensive for the people who probably need insurance the most and ending up uninsured, the government can make a simple policy that requires insurance companies to charge everyone the same premium. (For simplicity, I’m saying they will only have a single premium, although in reality they usually say something like, “You can only charge the sickest person 3x what you charge the healthiest person, and you can only use these few variables to decide who is sick and who is healthy.”)

What happens? The sick people get a great deal, and the healthy people end up subsidizing the sick people’s premiums.

This enables the sick people to get insurance, although now that the healthy people’s premiums are so expensive relative to what they’re getting out of it (many of them probably don’t even end up using their insurance most years), they say, “Forget that. Buying insurance isn’t worth it anymore.” And they drop out of the insurance pool in favor of going uninsured.

What happens then? All the healthiest people are no longer in the insurance pool, so the average expected healthcare spending per person will be much higher the next year. Therefore, the insurer is forced to raise premiums accordingly.

And, predictably, when those new higher premiums come out, again the healthiest in the insurance pool will say, “Last year it was just barely worth it for me, but this year with this crazy increased premium, it’s not worth it.” And they drop out of the insurance pool. This is about the time when the insurance companies get labeled as greedy, too.

The next year, premiums rise again, and more people forego insurance.

Do you see the pattern? That’s a death spiral. And, again, it’s caused by requiring insurance companies to restrict the degree to which they can charge different people different premiums.

There is a way to prevent this, though. If, at the same time as restricting premiums, the government also creates some sort of incentive for healthy people to stay in the insurance pool, it can prevent them from leaving.

That’s what the individual mandate was for. It was the government saying, “Hey, we need you healthy people to be in the insurance pool subsidizing the sicker people’s premiums, so we’re going to persuade you to do that by making you pay a fee (tax) if you don’t buy health insurance.”

It didn’t work very well. Many people didn’t know about it, and those who did figured they’d rather pay a relatively small tax than a relatively large insurance premium. That’s why premiums in the private market rose so quickly after the Affordable Care Act was passed. Not enough healthy people joined the insurance pool, and more dropped out each year. It wasn’t exactly a precipitous death spiral, but that is the direction it was trending.

Socialism Leads to Totalitarianism?

Friedrich A. Hayek
Image credit: Mises Institute

If you haven’t noticed already, I have a strong interest in political philosophy. Isn’t thinking about the different ways government could be designed exciting? This is primarily a health policy blog, but political philosophy topics are closely enough related to what happens in healthcare that I write about them here as well.

I recently read (listened to) The Road to Serfdom by Friedrich Hayek. The interesting thing is that he seemed to be using my framework for categorizing governments. So I’d like to restate his main points in the context of my framework.

The book was written during WWII and published in 1944. At that time, he was living in the U.K., and he was seeing a movement there toward central planning, so he wrote this book to explain to the people involved in that movement how central planning starts a country down a road that leads to totalitarianism. He used Germany’s then-recent political history as the main case study to show how that process goes.

Let’s say the U.K.’s government looked something like this at that time:

And the “planners,” as Hayek calls them, wanted to do this:

There were different motivations for this. One was that, at the time, technology was seen as necessarily pushing industries toward monopolies, so they felt that government ownership would limit the tyrannies of monopolies. Another motivation that developed is a change in how freedom was conceptualized. “Before man could be truly free,” they said, “the despotism of physical want has to be broken.”

Notice that these are not totalitarian desires; they are desires for efficiency and an increase in freedom and opportunity for the poor. So how does Hayek say they lead to big leftward shifts on the other three spectra?

He doesn’t exactly provide a super explicit stepwise process, but here are some of his major checkpoints along that road:

  • Planning a society will involve areas with great agreement, but there will also be areas with great disagreement. In those areas of disagreement, people lose the freedom to conserve their preferences.
  • If a state owns half the economy, it necessarily controls most of the other half indirectly due to the interactions between industries, such as through shared inputs to those industries (like labor and resources). This means there is no part of society where people are completely free of government direction.
  • After a democracy votes in a planning government, they find that the democratic process is ill equipped to handle the plan’s requirement for rapid and unified-purpose decision making, so different parts are working at odds with the overall plan or are slow to change to fit better. For this reason, the laws they pass increasingly delegate decision-making power to unelected experts. Eventually, their legislative power becomes limited to making decisions about the plan’s overall goals, although in this area as well they find themselves inadequate because frequent shifts in goals (due to differences in factions’ priorities and politician turnover with each election cycle) undermine progress toward any ideal. Thus, they begin to concentrate the power to direct the overall goals (and coordinate the efforts of those many boards of experts) into a single individual who is not fettered by democratic and legislative processes.
  • This new powerful leader is occasionally confirmed via the democratic process, but the leader has the power to ensure, one way or another, that the votes go in his direction so he can continue working toward the ideal society.
  • A planned economy becomes the rule of man because so many of the decisions about people’s lives become arbitrary (whose interests to prioritize over whose). For example, do you increase wages of the working poor who are struggling to get by or do you decrease unemployment?
  • A planning government only sets out to control and improve the economic aspect of people’s lives, but by controlling the economic aspect they are indirectly controlling nearly every other aspect, such as where people live (you can’t move somewhere else if the government hasn’t decided there will be jobs available in that area) and what you do for fun (which luxury items and entertainment options are available and how they are priced).
  • People are dissatisfied when they are made to go along with another’s set of priorities and values, so the government creates indoctrination tools that will reduce the number of people resisting their goal for an ideal society.
  • The whole apparatus of information, including schools and print and audio and visual media, will be used not only in supporting the ends but also the means to achieve the ideal society, and speaking out against it becomes not just an opinion but treachery.
  • The leaders who tend to arise in such a system are those who are the strongest and most motivated to get things done, which means they are the most likely to be willing to ignore negative impacts on other people in pursuit of their singular focus (the means justify the ends).

So this is where the U.K. could have ended up if the planners had gotten their way, and remember this would all come from the planners’ initial desires to have the government help out with inefficient industries and to reduce the despotism of poverty:

There are so many other points made in the book that flesh out these ideas more fully, but I will forbear. Suffice it to say that end point of the the road is not just totalitarianism, but serfdom, which is due to the increasingly impossible task of a government trying to control an entire economy and, in the process, distorting every single worker’s incentives away from efficiency and innovation and redirecting resources away from their most profitable uses.

Reading this was quite an interesting experience because, with every point Hayek made, I could visualize which spectrum he was talking about and interpret his explanations in terms of which direction (and how far) a country would slide along that spectrum.

And the question it left me with is this: If Democrats’ policies tend to push toward more wealth redistribution and more government control over industries (e.g., Medicare for All), does this mean electing Democrats puts us on the road to serfdom?

My thought is that it doesn’t. Pushing for Medicare for All is not the same as endorsing a planned economy. One could argue that it’s one step closer to getting us on that road, but we have seen “social democracies” in Scandinavia not progress toward totalitarianism, so maybe that slope isn’t as slippery as Hayek makes it out to be. Exactly which factors would also need to be at play for us to truly get onto the road to serfdom? I don’t know. Any thoughts or ideas are welcome.

Healthcare Experts Often Support Good Healthcare Reforms for the Wrong Reasons

This week’s post is a little later than usual, but next week will be back on track with a Tuesday post about Hayek’s book about socialism, The Road to Serfdom, and how it fits into my framework for categorizing governments.

Something I have noticed for many years now is that many good and important healthcare reforms are touted by experts for the wrong reasons. Supporting a good reform for the wrong reason may seem harmless, but without a clear understanding of the principles behind why the reform is important, the implementation may undermine much of the benefit of the reform, or it may not be evaluated based on the right expected impact (and, therefore, cause the reform to be incorrectly judged as a failure). Either one of these mistakes could ruin the reform.

Example 1 – Quality metrics reporting: This refers to making providers track and report a variety of quality metrics, which are then usually used to give quality-contingent bonuses. These quality metrics are also often reported publicly with hopes that it will add some accountability to providers and motivate the lower-quality ones to improve.

What many experts don’t realize is that quality-contingent bonuses are not going to make a big dent in our healthcare problems. They also don’t realize that the main purpose for quality metrics should be to help people make value-sensitive decisions, which means the tracked and reported metrics need to enable people to do this. Commonly used metrics these days, such as aggregate mortality numbers and overall patient satisfaction scores, aren’t super useful at achieving this goal.

Example 2 – High deductibles: Some experts say that if people have high deductibles, they’ve got some “skin in the game” and will therefore stop being such spendthrifts, which will decrease overutilization and total healthcare spending.

It’s true that a high deductible will reduce healthcare spending;, although, unfortunately, people tend to decrease unnecessary AND necessary care. That’s what the classic Rand Health Insurance Experiment demonstrated. But lowering spending is not the main purpose of high deductibles. The primary benefit of them is that they make people actually consider price when they are choosing where they will get care, which allows people to start preferentially choosing higher-value providers (i.e., make value-sensitive decisions). Of course, this only applies to services that cost less than the deductible.

Example 3 – Bundled payments: These are seen as a way to get providers to integrate more and, through that integration, “trim the fat” (what’s with all the flesh metaphors?). Usually the reduction in total episode costs comes from providers becoming less likely to discharge people to skilled nursing facilities.

Bundled payments do get providers to send fewer patients to nursing facilities and to find other superficial ways to decrease total episode costs, but the primary benefit is that they allow people to compare, apples to apples, the total cost of a care episode. Again, it’s all about removing barriers to value-sensitive decisions. This will lead to complete care process transformations as providers become motivated to improve value relative to competitors and are assured they will win greater profit as a result. So implementing bundled payments with a single provider in a region will likely result in only very modest benefits, which will come from those superficial low-hanging-fruit types of changes.

That’s enough examples for this week! Merry Christmas, and may everyone do good things for the right reasons.