The U.S. health care system is neither fair nor efficient. And, it is also well established that it doesn’t produce high levels of wellness or even longevity. We certainly spend a lot, but we don’t seem to achieve as much as other countries do. There are several dozen countries of the world that achieve higher levels of health for their people than we do. There are no countries that are even close to us in how much we spend on professional health care services and products. What’s our problem?
There are several ways to approach this important question. At the surface, we can look at how we organize our “system”, and the incentives that are created for households, for providers, for insurers, etc. From this surface appraisal of our system it is easy to conclude that a system composed of insurance, coupled with private provision of care (and a fee for service arrangement between the two) can lead to excessive utilization and spending. We can, and should also look more deeply at government policies, and how they sometimes create or perpetuate problems, or fail to exploit opportunities for achieving more for what we spend. These are both important approaches for understanding more about why the health system sometimes “runs off the rails” in terms of performance.
But if we pursue the tool of “root cause analysis” and continue to ask WHY we will be led to deeper and deeper “root causes” of why our system doesn’t achieve more “bang” or “more bang for the buck”?
1. why is the system underperforming? — we might say that it is because it relies mainly on private insurance, private care providers , and fee for service arrangements between them.
2. well, this begs the question of “Why does this happen? Why did we set it up that way? Why doesn’t the health policy fix this problem? — we might conclude that it has from time to time tried to insert more prepaid care into the system, which foists the financial risks of poor health onto the providers–who would then have incentives to keep people healthy–and replace the FFS incentive to keep them unhealthy enough to keep them coming back, and back again as patients?
3. So, why haven’t these efforts to change our system been successful? Why haven’t we moved to new policies that create better incentives for providers and patients? At the top level, we could quickly conclude “because our elected representatives cant agree on better policy”. Potentially better policy has been introduced (unsuccessfully) many times to the Congress by the executive branch since WWII (Truman, Nixon, Clinton, Obama are the main ones) .Only the Obama reforms were passed (but much of them were nullified within the first year of the following administration). Why can’t government act to improve the system’s performance?
4. We could answer “politics”, but that begs the real root question– why do our elected representatives choose to ignor the fact that the system is “underperforming” in producing more health for the people, and is vastly overspending to achieve so little? — are they stupid or tone deaf or just incompetent?
5. If so, we need to ask WHY do the people keep reelecting them? — we could conclude that the people just don’t care much about their health, or don’t care much about giving nearly 20% of their family income to hospitals, doctors and drug companies. Or maybe the people are collectively ignorant about how far off the charts the U.S. health care system is in terms of comparative performance? Or maybe U.S. voters are more concerned about electing representatives who vote for things they care about more than the health of their children or their parents (abortion, global warming, immigration, world peace, etc?
So, however this sequence of “root causes” as to WHY?, can go even further? Why don’t the voters know? Why do they care more about one issue than another? These may be worth exploring further. But, as we ask these question it is going to become obvious that the answers are going to being to relate to the values that Americans have, and how they play out in terms of the kind of health care system we have here.
I want to review with you some of those things we deeply value as Americans, and suggest how they have played out in the way our health care system is organized, and how they have guided our country as we monitor and evaluate the performance of our health system over the years. The concepts i want to discuss with you are:
a. entitlement
b. technological progress and innovation
c. economic freedom and limited role of government
these values are deeply seated and longstanding. they largely came on the boats in the hopes of our ancestors, and they are largely institutionalized in our founding documents, and laws, as well as beliefs.
Value: Entitlement
Founding fathers left England and other Monarchies in Europe to seek both religious freedom (in some cases) and to have economic freedom—eg. to not put artificial intergenerational boundaries on career opportunities as existed in the rigid societies in europe. At the root of all this was anger, largely directed at the Monarchies and socioeconomic rigidities of the culture. Elite classes were “entitled” to the privileges of wealth, and commoners restricted to lives of modest desperation. The concept of “entitlement” became different here. Instead, “entitlement” accrued to persons who earned it based on merit, rather than based on birthright. And, when capable people are successful, they are “entitled” to spend their wealth on whatever they want–after all, they earned it based on merit.
This concept of entitlement, though not talked about often nor well understood as an underlying value in American culture, it is extremely important in understanding our health system. Our notions about “fairness” are guided by this value. Essentially, if someone can afford to buy it, they ought to be allowed to do so. It is their right. And, the fact that other people cannot afford to buy it, should not limit the consumption of others who can. And, if there are people who want some something but can’t afford to buy it— then they ought to get better jobs and work harder.
I call this value concept of economic freedom and entitlement the “american way”. This concept of “entitlement of those who earned it” is almost uniquely American. In other countries, particularly our European friends, the shared distaste for the “entitlement by birthright” created more social solidarity — where most of the people have developed a “shared concern” over the welfare of other people, not just their own. And the health systems of other countries reflects this “shared concern” or social solidarity. How ironic.
Back to America. The concept of economic justice and entitlement has had specific implications for health care. There was push-back against the notion of “rationing or managed care”, where population health for a group of enrollees might be better off if we managed the allocation of resources better by eliminating some high cost, low payoff services for some people and instead shifted the resources to provide high payoff services to other enrollees. This kind of reallocation creates more “bang for the buck” for the group. Such an idea will make providers and patients unhappy because it runs counter to the culture of economic entitlement. if they want a Porsche, they ought to be able to get if they can afford it. If the doctor said the costly procedure may help our 94 year old grandma live a little longer, then we should be entitled to get it done if we want it, and can afford it. Why should we care about the opportunity costs of using those resources somewhere else in the health system? For someone not as entitled as us!
Where did this thinking come from. It has blocked universal health care for over 200 years. And It continues to block it. I used to think “economic entitlement” was a reaction to “birthright entitlement” which prevailed in western europe at the time our ancestors came to the colonies–and was likely one of the reasons they came here. They could never “make it” in such countries through hard work, and whatever successes were available to them. So, they came here, and dumped “birthright entitlement” in favor of capitalism and “economic entitlement”. And it continues to cast a pall over our health system– making it too expensive, too ineffective in producing health, and too unfair.
This little piece i found offers a more informed perspective on where the “economic entitlement” came from.
https://academic.oup.com/annonc/article/26/10/2193/144592
Value: Technological progress and innovation
Americans have always thought they (as a society) are exceptional (distinct and better than non Americans); driven to work hard and produce more, deserving and wanting the best, discovering the best ways to do things, better at making things happen, and always unbridled by barriers like religion and stifling government that affect other cultures. This early insight about our culture mainly came from French scientist Alexis de Tocqueville who visited the U.S. about 190 years ago to try to understand and write about our new and emerging culture (Democracy in America: 1835, 1840). He wrote an extremely perceptive analysis, which still amazes many. see (Sasascus, The American, 2013). and http://straightstory.gmu.edu/alexis-de-tocqueville-a-19th-century-french-visitor-to-the-united-states-shed-light-on-why-todays-american-politics-are-so-dysfunctional/.
This self view of ‘exceptionalism’ has had a strong impact of our Health System in terms of our demand for innovation: we want to find new and better ways of getting things done. New test, new treatments, new science about ways to prevent disease, etc. Contrary to a taste for scientific discovery (as in Europe, De Tocqueville noted that Americans had a thirst for science that improved life, productivity, and wealth. We might say a peculiar taste for progress and innovation or “applied” science.
Not only do we love to encourage investing a lot in bio/pharma research, and “wars on cancer” and spending tax dollars on NIH, NSF and other scientific grant programs in health care, but Americans demand (way too much) heroic health care. Ask anyone who worries about end of life care. We like to reward miracles of science in our culture, and this aspect of hope, and positive or optimistic attitude of Americans has always been the sources of the bias. We are different than the Europeans we fled from…. their cultures were rigid, no real chance of intergenerational upward mobility. We fled. We want better ways of doing things, we need science to show us a better way in all aspects of our life, we dont want to be trapped in a rigid and hopeless way of life when it could be better. We want this. We look to our NIH and NCI grants as a source of miracles of a better life, even more so than we look to our faith as a source of those miracles. We are different.
And our health policy reflects our unique culture. we have (1) a strong patent-oriented culture to protect high private investments in medical innovation. (2) the absence of policy attempts to reduce price we pay for new drugs and other technology, (3) no regulations that would elevate the bar for new technology to be introduced into the health system. (4) even simple solutions to increase price competition for new drugs such as reducing years of patent protection or providing more price transparency for generic drugs are not done. (Lieberman, S. M., & Ginsburg, P. B. (Brookings, 2017). Anything of these sorts would reduce private sector investment in R&D. Americans don’t want that. In one of the most egregious policy actions in recent years Congress and President G.W. Bush mandated that Medicare’s new drug benefit mandated that Medicare pay drug companies the full list price for ever prescribed drug used by a Medicare beneficiary (unlike all foreign governments, and all other insured populations in the U.S.). in order to preserve profits for the drug companies to protect their willingness to pursue research on new drugs.
The policy bias is also reflected in the way government “looks the other way”, rather than by overt policy action. We fight over issues like the Medicaid expansions, and the generosity of the rates we pay hospitals and doctors. But we do not fight over the price of drugs, the pace of technology change, or the way drugs are marketed in America, in part because of the powerful demand for innovation in this sector.
Value: Economic Freedom and a Limited role of Government
Another of the longstanding beefs of those fleeing to America was the heavy role of central government is society, which generally sought to protect the power and wealth of the the elites, and was seen as a limiting factor in the economic growth and wellbeing of the commoners. Americans were distrustful of strong central government. When the Constitution was written, this concern was a dominant influence. The framing of the federal government of the U.S. was set up subject to checks and balances from the Congress and the Judiciary branches, and the power of the executive deliberately limited in scope.
In health care, the powers over health of the people were deliberately delegated to the States (rather than the federal government). The idea of centralized government control over health delivery or financing is always a worry of many.
The Social Contract
We live in a society where individual have “natural rights” to live according to their own own “life, liberty and pursuit of happiness” . Of course, individuals have different needs, desires and abilities. How society accommodates to these differences, particularly as related to abilities to earn and accumulate wealth is always a stress point for societies. Generally, government gets involved in providing for people who cannot provide for themselves. To do this, the rights of freedom possessed by successful individuals are somewhat tempered (surrendered, or taxed) by individuals to the STATE, to create a sense of order and justice in the society as a whole. The “social contract” is defined as the unwritten arrangement between the state and the individual about the limits of the state to involve itself into private affairs.
Essentially, what this usually boils down to is that society, thru democracy or other means, must decide how to organize and provide for the less fortunate members of society. For example, for many generations our “Social contract in America” consisted of a shared belief that citizens should form self supporting family units, and pay some taxes so that persons unable to work (the disabled, the very young, and the very old) could share in the proceeds of the society. But the “sharing” was deliberately skimpy, so that strong incentives remained to “work and be self supportive. if at all possible”. Of course the ebbs and flows of politics occurred. sometimes broadening the scope of social contract and the role of government, and at other times narrowing it.
Underlying the social contract is the concept of social justice we see as our standard of social fairness. Who deserves support from society? What level of support is fair? These are hard questions. And, today we find the polarizing and disturbing divisiveness in our discourse is highlighting widening views about what is fair, and how far should society go to create fairness. The social contract is under reexamination.
In my view the impetus of these strong and disparate opinions about what is fair stem directly from the “pace of progress” we have experienced since WWII (computers, internet, wireless, genome, software, robotics, etc).) and the success of so many Americans (often the educated ones, and the ones with earnings from capital markets) and at the same time the Americans who have suffered from this “progress” by not being able to adapt quickly to it. The income distribution trends (the the blogs on Income Distribution, and the one on Progress). The higher income segments of the population have received larger and larger shares of the proceeds of our economy–while the lower paid segments have barely been able to stay ahead of price level increases.
The anger and polarization we have been living is about a blame game for the proceeds of the economic pie in America. Are the immigrants responsible for me not being able to earn more or be happier? Or is it the Chinese trading partners who have cut a better deal than they should have been allowed to do? Is it the educated “elites” living on the coasts who have been conspiring to shift the economic pie around and get a bigger piece for themselves? Some see the “welfare” programs and the “affirmative actions” that were the product of social justice policies– are now seen by many as an unfair use of tax dollars. The wounds of a broken consensus on what is fair in America are upon us. Why now? It is partly due to the striking disparities in income and wealth. I may also be mounting anger over the income distribution coupled with the election of the first black president (who may have been a convenient scapegoat to blame).
So what are the views of social justice, of fairness in our economic system or in our health system? I think there are three basic views in play today about what is fair or just about health care.
1. doctrine of individual contribution to society— largely the view of justice attributed to the founding fathers, echoed now by libertarians. This view is a reaction to the European concept of Entitlement of the Monarchs, the birthright to get whatever they wanted from society because they were borne into the entitlement. Generalizing a bit, to America— this view of justice says that people are entitled to the yield of their contribution to society. If they have economic power, work hard, and accumulate wealth, then it is fair for them to keep it. If people, on the other hand, don’t think ahead, don’t work hard, etc, then they deserve a smaller yield from society. That is only fair, under this concept of social justice. Only the truly aged or disabled persons , through no fault of their own, deserve to be supported by others. This view of justice imagines a social contract with a very minimal role of government to reallocate resources of society to health services for variously underserved groups.
2. doctrine of Equal Opportunity for all— Many argue that all members of society are entitled to the share equally in the “opportunity to be successful”. Sure, some people will always outperform others, and there will always be unequal allocations of health care. But, this view of justice is that what is critical is whether everyone gets a fair shot at being a successful contributor to the economy. Things like a good education or good health care would be viewed as necessary for the “opportunity to be successful. So, for example, if poor rural farmers are not provided the same level of health resources, or education, then they have no opportunity to be as successful or as productive as others in society. So, Paul Farmer, for example, believes that poor countries deserve the same level of access to advance cancer treatment as we get here in the U.S. and anything less is unfair because some human lives are therefore being values less than others. This is the standard of fairness. Equal access to health care is critical if you believe that social justice requires equal opportunity to be successful.
3. doctrine of achieving maximum benefits to society (aka population health management) This view of justice is a collective one–and suggests that in a society, the available resources should be allocated in such a way to achieve maximum amount of benefit to society. In health care, for instance, the budget for health care should be allocated across interventions, across regions, across people — so as to produce the maximum benefits for the society. The Oregon Medicaid program sort of does this. The single payer Canadian health system sort of does this by setting a single coverage package, and limiting hospital budgets and doctor income, These kinds of systems of allocation set rules for who gets what under which circumstances, in order to produce the greatest good for the group, and provides no rights for individuals to achieve their maximum benefits. So, rather that pending $1m to do heroic organ transplants to attempt to extend the life of a 90 year old gravely ill person, the money would instead be used for something else (say a vaccination program for poor kids in a rural area) where the health payoff per the $1M would be much higher.
These views all affect our view of the health system, and what ought to be done about it. We see the views of Paul Farmer, a major player in helping fix broken health systems in Haiti and elsewhere. Why should any group (or person) suffer from inadequate care just because they are poor? Knowledge of what should be done is viewed as a “public good” once it is known, and according to him, should be available to anyone who needs it. Of course, knowledge may be a public good, but getting the resources mobilized to provide the care is another matter. Which is where the third doctrine raises its ugly message of reality. Should we provide a 300,000 course of stem cell treatment for Benito’s cancer because that is now the standard of care? Or should we spend 300,000 on a vaccination program for infants that would save 100 equally young lives? Choices, and the need to make them because of limited resources, imposes economic realities.
In my opinion, the concept of “social justice”(the role of government as contrasted with the role of individual ability) in allocating the product of our economic system is changing. Most people believe that able bodied persons should be expected to support themselves and work. The role of government is to help take care of persons who cannot be expected to work, and to otherwise provide support for public (free) education to give all an equal opportunity for contributing to society as an adult. We quibble about the particulars of this, but this view, more or less, has been the social contract for many generations. But, we read and watch what is happening to our society. Things are changing.
Technology (namely computers, internet, wireless) has been changing how people live and work. Amazon, for instance, has almost single handedly eliminated much of the “retailing” sector, making it far cheaper in both money and time, to shop on line and have goods delivered in a day or two to the buyer’s front door. This eliminated millions of jobs in the U.S. Economic growth around the world, and the growth in robotics, and the growth of free trade that resulted has made all countries less self-sufficient than they used to be, and has allowed every country to benefit from accessing cheaper products ( that are available because of cheaper resources available in other countries than would be available domestically). China has lots a very cheap labor, Kenya has a better climate for growing more flavorful coffee , etc. This trade has been a fabulous boon for our consumers, and our standard of living. But, all of the innovation and economic success is making it harder and harder for unskilled workers, and people with limited education to find work.
In the old days, excellent careers were available to such persons in manufacturing, retail, sales, and other sectors. This opportunities have noticeably shrunk. Sure, careers in software engineering , and bio sciences, robotics engineering and finance are booming. But, these careers demand substantial education and experience. As the impact of progress continues to eliminate jobs for less educated workers, the pressure will mount to change the “social contract”. Some will say, no, don’t change the social contract— just try to get government to slow innovation and progress, to keep these jobs from disappearing. Of course, if we do this, the pace of economic growth will slow — a very high price to pay to protect American jobs. Other people will say that the solution is to let progress happen as fast as possible –and change the “social contract”— now about 2/3 of adults have more or less full time jobs. It is a declining trend. Say in ten years only 50% have full time jobs—- and in 100 years lets say that nobody has to work more than a day a week (everything is produced, sold, and distributed by robotics, internet transactions, and by telepathy). Would this be bad? If we didnt all have to work, or if we worked we didnt have to do much of it. No, it sounds like the Garden of Eden. But, as needs for worker labor falls, we would need to replace the the way incomes are produced.
How does everyone get the cash or the coupons that entitle them to have food to eat, a place to live, etc, etc.? Jobs do this now— jobs create income based on “level of ability to contribute”. Some get big incomes, others get far less. How might a different social contract –without using jobs to give us consumption coupons??
The Marxian notion of a social contract is the most extreme example —- “from each according to their ability, to each according to their need” Though this ” socialist” social contract and social justice is idealistic in many ways— it also provides poor economic incentives for economic growth. But wherever the future brings us with new technologies, innovations and ways of living— it does appear that basing our economic system and social justice concept on “jobs” is in clear jeopardy at this point. Maybe jobs will be made to include mandated social service work (peace core, military, infrastructure renewal work for government, etc) which all could be required to do to get fed and housed, etc. Maybe the tax rates on highly valued professional and managerial workers would need to skyrocket to pay for all the new public programs? Who knows.
Rationing
The “hot” word during the Obamacare policy debates (and earlier) is “Rationing”. It is often contrasted with “economic entitlement”. Rationing is also a term that conflicts with the medical priority we refer to : giving each patient what they need. Rationing is particularly hated in health care in America because it implies that patients will sometyimes not get what they need because the resources are limited, and a better result (more health for the society) would be achieved if applied to some other patient.(eg sending some of our doctors and nurses from Boston to the Mississippi delta to provide primary care there– would create a higher health level for the entire U.S. because of the reallocation of resources— a large increase in health in the Delta, and a small decrease in health here in Boston ). Economists say that by reallocating (rebalancing) resources the GROUP or the COVERED POPULATION, or the SOCIETY can often achieve a higher level of health though some INDIVIDUALS may suffer a bit.
This rationing juxtaposes the idea of “individual entitlement” with “rationing or limiting individual entitlement to allow for balancing the needs of everyone in the group in order to achieve the maximum health level for the GROUP.
This is viewed as evil and unamerican. HMO’s are long known to be able to achieve a more efficient result (more bang for the buck) than other kinds of health care financing, and practice a form of “rationing” of hospital care— by limiting (rationing) hospital usage the can use premium dollars to provide more of other types of services that can benefit the enrollee population and create a net payoff for the group. The research shows that, relative to a population using traditional insurance, HMO’s (health plans that are paid a fixed amount per year per person) can deliver care to an enrolled population for 20-25% less spending (and over 30% less hospital spending) with virtually no change in overall health of the group. Though there is a reduction in customer satisfaction. People often dont like being told no (and doctors too express dissatisfaction with being told no). The requirements for practice guidelines, and preauthorization requirements are not the American Way, and cause the loss of freedom and “entitlement” in favor of the better result for the GROUP. Health policy continues to struggle with this as one of several core issues—- to ration use of resources to get more for the money we spend on healthcare, versus the loss in individual freedom for those of us who are feeling victimized by rationing because of losing our entitlement. Other countries dont have this problem.
professorgaumer 