U.S. Health System Characteristics
The health system is a collection of provider organizations that provide health services and products to the population. Those providers are supported by training institutions, product suppliers, financing organizations, and research infrastructure. The way this “system” is organized, and governed is different in every country. In some systems the Government provides care and pays for everything through the tax base of the country (eg England). In some instances the Government provides all the financing (via taxes) but the service delivery is done by private hospitals and private practitioners (eg Canada). In most other countries the role of Government in the system is to finance some, but not all of the care, and to provide some but not all the of the services. In most countries the Government sets policy so that everyone is someway assured of financing for the health services they need. America’s health system is, as we might expect, somewhat unique.
Structure of Our Health System
Unlike other countries, our huge health system has developed organically, without design, or by explicit direction. The structure of the health system of educators, suppliers, providers and insurers and arrangements between them is purely a product of free choice and market competition and not the result of any plan or design. It is a product of free choices people have made about (1) careers (where to get educated, where to locate their practice), (2) about setting up and growing health care businesses, (3) about which kinds of health benefits (if any) to offer employees, and (4) about household free choices about when, where and from whom to seek care. This organic health system (some would call it a private, or market system) has nobody in charge! It is like the market for mobile phones or for breakfast cereals, or pizza shops. Free choice of investors, workers, employers, and consumers determine the winners and losers, with government influence more or less just a token presence.
The government activities, or functions, in the operations of our health care system are quite limited. The primary federal government functions are to (1) provide financing (eg insurance) for selected underserved populations (poor, elderly), (2) to provide free services for some groups (military, veterans, native Americans), and (3) to approve for sale new drugs and medical procedures based on proven safety and efficacy. The state (or local) governments also licenses most health professionals. Local government licenses health caregiver organizations. But, generally, our Governments don’t set prices, or regulate profits, or guarantee insurance coverage, or in any other way regulate the performance of the health care sector. The limited function of government in health care (and in most other economic sectors) is a legacy of our Founders, and our culture— Americans have always feared of growth of large, oppressive governments.
This “attitude” about treasuring free choice and small government is tied to why we can’t seem to muster enough public support to fix some of the problems in our health system. There are two related issues. On one hand, we value small government, and don’t want government to grow by creating new programs for the poor, and taxing the rest of us to pay for those programs. Secondly, we think that individuals who have been successful in earning a living should be “entitled” to use their money to buy whatever they want from whoever they want as long as they can afford it: eg. the American way.
The U.S. scientific and academic support systems are unequaled. We lead the world in medical R&D, new drug development, and train the world’s best clinicians. Health professionals often want to come to the U.S. for post doc research experiences and to work in our health care delivery system at some point in their career. This is one area of the health system where the government has had a very active role: actively promoting more investment in health care R&D than would otherwise occur. This is done to speed the pace of adoption of new medical innovation (new drugs and new devices and new procedures).
The government speeds progress by guaranteeing high investment returns for new innovations (drugs, procedures) by (1) granting patents (monopoly pricing power) to new innovations, (2) by granting tax subsidies for spending on R&D by drug companies and others, (3) by directly funding (with tax dollars) about 1/3 of all medical R&D in this country through federal research laboratories and grant programs(NIH, CDC, NSF, others), and (4) by forcing Medicare to pay the R&D companies undiscounted list prices for Part D drugs, and forbidding Medicare to negotiate lower prices (as is commonly done by health plan organizations in America and by purchasers from other countries). These policies, and some others, have been long advocated by big pharma and others to promote firm success, but the Congress and White House have also been influenced by strong voter support for using tax dollars for promoting the search for new “miracle” medical interventions .
The Performance of the U.S. Health System
The health system in USA is rated as very mediocre (37th in the world by the W.H.O.) due to (1) not very good population health outcomes relative to what is seen in many countries in the world. Outcomes are things like life expectancy, maternal mortality, infant mortality, and many other measures. (2) longstanding unresolved disparities in health and access to care across segments of our population (poor,uninsured and rural population segments), (3) excessive spending, and (4) lack of suitable policy responses about these problems.
Excessive and Misallocated Spending
The U.S. System of health care consumes about 18% of the U.S. economy and we spend 50% more on healthcare per person than our nearest country competitor. We spend almost exactly twice as much on health care per person as the average of the world’s other wealthy countries.
Excessive health sector spending in our country stems mainly from four things: (1) out of control (and unregulated) medical care prices, (2) our proactive policy of encouragement of fast paced adoption of new medical technologies, (3) excessive administrative costs (mainly stemming from so many separate insurers faced by each provider).and (4) vast amounts of unnecessary services stemming from strong insurance incentives (low prices at the point of service) and the way providers are paid (Fee for Service— providers are paid more if they do more). About one third of services provided are deemed unnecessary.
How providers get paid has become a major matter of payor policy to improve efficiency of care, and more recently, to improve quality or the value of care. Hospital providers were long paid their incurred costs for services provided— calculated based on a methodology for allocating all costs incurred by the provider to the various payors (Medicare, Medicaid, BCBS, etc.). Professional providers (doctors, therapists, etc.) are still paid by fee for service. Both of these approaches to payment encourage doing more for patients, which simultaneously increases the provider revenues. Medicare was first . Starting in the late 1970s Medicare was experiencing double digit annual growth rates in Hospital spending, and began pilot programs in conjunction with a dozen or so states to pilot test different approaches to paying hospitals. In 1983 a policy change was made by Medicare to begin paying hospitals a fixed rate per the entire hospital episode for each of 383 types of patients (DRGs). These “prospective rates” encouraged hospitals to be efficient, and to ‘underserve’ patients or shorten their length of stay. The new system of payment cause the rate of increases in hospital spending to be reduced, the economic failure of small hospitals, and precipitated new thinking by all payors (even globally) that the way providers are paid will predictably change their patient care behavior—ushering in a 40 year period when health policy has been dominated by provider payment interventions across all payors and across all types of providers.
One payment method has been featured in all proposed (and failed) health sector insurance reform efforts in the U.S. This is a system where a provider organization enrolls a group of beneficiaries, and agrees to provide “all medically necessary health care” in exchange for an annual premium payment per person. This approach to paying provider is fundamentally different in terms of the incentives it creates for providers. Namely, the provider is at risk for how well the patient is: if they are sickly, the provider may bear large hospitalization and specialty care expenses. If the patient is quite healthy, on the other hand, the provider will not incur much in the way of expense. So, the provider will have incentives to do whatever they can to keep the insured pool of patients as healthy as possible (and out of hospitals). Enrollees using capitated providers being paid this way use far more ambulatory care services, and far less hospitalizations (30% less).
Insurance and Incentives
Insurance is a way for providing access to needed care in the form of portable financing (eg a credit card) for health services—strongly supported by organized medicine as a way of guaranteeing free choice of providers. Theoretically, a patient could change providers at any point, and find another—and the financing via insurance would enable it. We have private insurance in this country, and government insurance like Medicare and Medicaid (eg Social Insurance).
There are two systemic concerns about health insurance. “Moral Hazard” refers to the influence of insurance on the behavior of the insured person. Studies have shown that people with fire insurance are less careful about fire hazards in their home, and that persons with auto insurance drive faster and have more accidents. Health insurance, where we pay only a small copayment at the point of service, tend to cause people to use more services (because the price is so low). Indeed, persons with good insurance use 40% more health care (in terms of spending) than do persons without health insurance. And, the data show that there is no difference in level of health between the two groups. The second issue with insurance in America is the proliferation of private plans. We have hundreds of private health insurors. Some countries have only a single payor (usually a government plan) and some have a handful of private insurance organizations. The number of plans affects administrative costs of health insurance. Larger plans (plans with more enrollees) have economies of scale and are far less costly to operate (as a % of premium dollars). And fewer plans requires providers to have far more streamlined billing departments, and incur lower administrative costs.
3. Poor Health Outcomes
The U.S. system ranks 34th in the world on life expectancy at birth. For all the spending we do, we don’t do very well in producing health. The chart below shows the trends in spending per capita and life expectancy for a number of countries, including the U.S. (the flatish line with the years marked). Here we see that relative to the other countries, we have been spending a lot more but achieving very little increase in life expectancy as a result. In the U.S. we get less bang for the buck as we spend more money. Indeed, many of the other countries exceed our level of health outcomes.
There are several main reasons for our “inefficiency” of the health system: (1) while our system may excel in human provider skills and modern technologies of care, these are not easily (or ever) accessibly to many of our people (the poor, the uninsured, the residents of rural areas). (2) about a third of what we spend is due to totally unnecessary (eg. unproductive) services. (3) Almost all of our spending is for treating disease (eg. curative care), and little attention and little money is spent on preventing disease, (4) much of our spending is higher because of the prices we pay for services and drugs are much higher than in other countries, and (5) mainly, health is less a product of health professionals, but is a product of lifestle, eating habits, andf the decisions we make in households. Sure, when we get sick we rush to somebody who has a proper diagnostic tools and a “cure”. but studies dwmonstrate that the main driver of “health” is not the health care system as we encounter it. Americans do not live health lifestyles vis persons in many countries of the world. Spending more monety wont solve this problem (much to the chagrin of the AHA and AMA—who try hzrd to drive public policy in a direction that worl make it appear othertwise.
But, ignoring the spending excesses, why is the health level so inadequate in the U.S.? Research provides us with some ideas, but no proof. Three possible reasons: (1) We know that underserved and underinsured racial and ethnic groups, especially in rural and inner city areas experience very low life expectancies and poorer birth outcomes than do white and insured populations. (2) we know from research that health in populations is driven mainly by household behavior (risky behavior, nutrition, concern about health), and less so by quality of medical providers, genetics, or environmental factors. Both of these plausible factors are supported by research on the Determinants of Health, as illustrated here from on such study.
As we see here (in one of dozens of similar attempts to determine the drivers of population health) the choices households make (the black segment) are the biggest driver of population health, followed by social circumstance, with professional health care (where we spend all the money) fallowing as the least significant driver of population health. It may be that Americans (or a significant fraction of them) are not as engaged in healthy behaviors (for whatever reasons) as they are in other countries. Keeping people well is usually a matter of engaging them in the process making better household choices.
Another factor we might suspect might matter in the relatively poor levels of health we see in the data for the U.S. is a related concern that providers of care in America may not be sufficiently concerned about keeping patients healthy as may be done in other countries (who use fixed budgets as a way of encouraging providers to keep their populations as healthy as possible).
The final possibilities for the poor health performance of the U.S. may stem from the virtual autonomy of physicians in what they do for patients, and how they do it. Medical guidelines to attempt to “manage” the way care is delivered are notoriously unwelcome in the much of the medical culture. In America we have tried several times to start agencies of government to study “what works best” and publish “guidelines of care” to try to standardize diagnoistoc and treament decisionmaking. These attempts have failed, largely because the physicians don’t want to lose theior autonomy to do what they want. They are special, you know, and need to have flexibility to “tailor the care to the peculiar circumstances of patients” in all decisionmaking. Why do you think they began to write prescriptions in Latin here in America? Because it was an attempt of organized medicine to create an aura of mystique and vast intelligence about physicians that would create a bubble surrounding physicians in our culture that would maker them permanently autonomous, and immune from any control.
The most burdensome health problem in America is mental health issues. It exceeds health disease and cancer in terms of the social burden of disease (premature death and years of disability). (see other posts on Mental Health System)
Scientific Basis for Care and Quality (adherence to best practice)
While we spend a lot (about 4.4% of health spending) on research and development activities the science backbone of medicine is VERY INADEQUATE to guide the practice of clinicians. Studies find that only about 1/2 of medical decisions about adult care made by clinicians in our country are supported by science! This means that decisions about what to test for — are, in half the cases cannot be made based on science— but can only be based on some thing else—experience, guesswork, or other bases— decisions are about things like; what the diagnosis is, if to hospitalize, whether to do surgery, what drug to prescribe. This is NOT a poor provider quality-of-care problem — this is about science not being available to provide guidance for providers as to best practice.
The popular belief is that medicine is “bazsed on science”. But, why do physicians all want the freedom to want to follow their own instincts and experience and treat each patient as somehow unique——- and why they must have freedom to prescribe whatever brand named drugs they are being psid to prescribe?
There have been large national studies of what doctors decide for paptients, and how that compares to what science shows about what should be done (Rand). Of the adult care decisions that are supported by science, clinicians only follow thescientific evidence about half the time (48%). (eg this is a quality problem).
What about the fact that many of the decisions made by caregivers doesnt have any science anyway? The lack of comprehensive science background for medicine stems largely from the limited science for prescribing medications and othert therapies. But, dont the drug companies always have to clinical trials before the FDA allows them to sell drugs? Yes, but the FDA allows drug companies to “test” drugs in the quickest and cheapest what the drug companies prefer— allowing smaller and cheaper studies to be done.
To illustrate: when testing a new drug for safety (will it do harm) and efficacy (does it work), companies must propose sample designs for their clinical trial–how big is the sample—which types of patients are represented in the sample . For a new hypertension drug, for example, they might propose a sample of 500 white men of age 50-60 who have no comorbidities other than a history of hypertension. They test, they get the drug approved, they go to market. The problems with this—doctors cannot tell from the research whether the drug actually works for women, or for men under 50, or for men who have diabetes, or other common chronic problems. This is largely why science coverage for medical decisionmaking is so low. Could the studies be designed differently. Sure, we can increase sample sizes to test all the things we’d like to know. But this would add expense for drug companies, and add complexity to the studies (add time, which delays going to market for the new drug). We also know that part of the problem with science coverage stems from discrimination— women are much less represented in clinical trials than men, and minorities are also significantly underrepresented. This means that the scientific basis for medical decisionmaking for women and minorities is smaller than 50% coverage, and smaller than for white males. Why does the FDA approve these study designs?
Medical Errors
Unfortunately, medical errors are an important quality problem in health care. Indeed the third leading cause of death in the U.S. is medical error. Attempts to highlight and resolve these problems is very slowly getting traction. Medicine is learning much from aviation and other industries when similar “error” problems have been studied, and resolved, often by using tools like “checklists” and “pause points” in situations where errors often occur (like before the scalpel cuts the skin, or before we wheel the patient out of the OR).
Most medical error is the result of “systemic” issues, not human mistake. In commercial airplane accidents, for example, the errors are often due to “failure to communicate effectively in the cockpit.” (pilot doesn’t listen to subordinates, subordinates unwilling to speak up, etc.). In airline safety programs building teams and working on teamwork is a key focus. In healthcare, teamwork is a long- known key element in improving care and reducing errors in primary care and in acute care, but it is still not widely implemented
in practice.
Population Health Management
Patient care is universally focused on “what the patient needs” , not what kind of care would be best for the population, or everyone in the covered group. This is a consequence of not caring about the overall cost—the cost will end up being “whatever it will turn out to be”. So, we have situations like doing a heart/lung transplant costing $200,000 on 85 year old Mrs. Smith (which may be expected to give her another year or twp of life), yet not having money in the system for giving adequate preanatal care for 150 uninsured poor teen moms living down the street (which may cost the life of a couple of moms and a dozen infanst — and several thousands of lost life years).
Whenever providers are paid a fixed budget (for a hospital, or for a entire health plan). the issue arises—–for the fixed budget, how do we achieve the maximum impact on health? The common practice of “individual patient management” often creates a suboptimal situation for the group as a whole. Being totally focused on a patient, the provider may decide to do the “marginally necessary” CT scan even though the return for the money may be very low (but, just to be safe, let’s go ahead and do it anyway) . Contrasting with the “individual focus”, the “population focus” asks “is there another thing we could be doing with the money that would yield more health for the whole community. For example, in most countries of the world (Canada being one example) hospitals are paid a fixed budget per year. Many choose to limit hi tech spencialty services because they cost too much, and patients that need them have to go elsewhere (or be flown by helicopter to another facility). But, the point, someone is in charge of maximizing the health we get for the community. In the US nobody is in charge—– its a scrample of getting the most you can for every provider because there are no limits (as long as insurance covers whatever the doctors are prescribing.
Rationing is a term that often arises in the context of Population Health Managemtn and fixed budgets (when health plans get paid a fixed premium it is called “capitation”). It means “limiting” services available to individual patients in order to maximize the health for the entire population. Coverage limits of insurance, or medical guidelines can be used to set such limits.
In a “fee for service” system, which is largely what happens with the US system, providers assess “need” for a particular service based on an assessment of the individual benefits to the patient vis a vis the convenience, and the expected benefits. That is, they make decisions about maximizing the net benefits to the individual patient, and maybe even themselves. Overwhelmingly, providers today are of this view—that the patient deserves to get what their condition warrants, and it would be unethical to drag in other considerations.
But when provider organizations are capitated, they are “at risk” for the health (and cost) of their entire enrolled population. This means that they would be expected to behave as if they were trying to allocate resources so as to maximize total population health achievable with their fixed budget. To do this, there may be instances where such a provider might not want to do a marginally necessary (but expensive) CT scan — preferring to conserve money which might be better spent providing counseling to expectant teen moms— moving money around to make sure the plan is getting the biggest bang for the fixed amount of bucks they have to spend on this population.
When working for a capitated plan like Kaiser, or Fallon, of HCHP, it would be confusing and probably infeasible to ask individual clinicians to weigh the alternative uses of the resources as they decide what each individual patient “needs”. So, as a practical matter, the concept of “population focused” care would necessarily be implemented by adjusting coverage rules or by using medical guidelines to guide providers in using expensive proceedures. HMOs, for example, have been able to be successful in “guiding” their clinicians to avoid unnecessary admissions to hospitals (they use 30% less hospital care, with absolutely no deterioration in health.
Rationing is not an evil word, it is a way of getting more bang for the buck by limiting the use of high revenue producing specialized services in hospitals and some overutilized services that have small benefits to the covered population relative to other services that are currently underulized in the covered population.
professorgaumer 