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Monday, October 26, 2009

The Need for Real Health Care Reform

A few weeks ago on the PoliProf Blog I cited a study by the McKinsey Global Institute (MGI) which found that the U.S. spends about 31% more per year on health care than would be expected based or our wealth, cost of living, and health. In a $2.5 trillion health care economy that translates into $775 billion in excess spending. Why do we over spend? We have higher administrative costs owing to the fragmentation in our system, but mostly the problem is the manner in which we pay for services. Since every patient and procedure is a source of revenue providers over-provide. Because our insurance frequently has no limit on the utilization of services, we over-consume. My argument then was that only system-wide reform could realize the substantial savings implied by the study.

The findings from the MGI study have just been confirmed by a new study conducted by Thomson Reuters. That study found that the American health care system wastes an estimated $700 billion a year, roughly one-third of the nation's healthcare bill. Among the key findings:
  • Unnecessary care such as the overuse of antibiotics and lab tests to protect against malpractice exposure makes up 37 percent of healthcare waste or $200 to $300 billion a year.
  • Fraud makes up 22 percent of healthcare waste, or up to $200 billion a year in fraudulent Medicare claims, kickbacks for referrals for unnecessary services and other scams.
  • Administrative inefficiency and redundant paperwork account for 18 percent of healthcare waste.
According to a Reuters news account of the study "All this could help explain why Americans spend more per capita and the highest percentage of GDP on healthcare than any other OECD country, yet has an unhealthier population with more diabetes, obesity and heart disease and higher rates of neonatal deaths than other developed nations."

The Reuters story concludes with this "Democratic Senator Charles Schumer said on Sunday that Senate Democratic leaders are close to securing enough votes to pass legislation to start reform of the country's $2.5 trillion healthcare system."

The implication from that final line about Schumer and Democratic leaders being close to a deal on reform is that the reform may actually address the problems highlighted in the Thomson Reuters study - unfortunately, that is simply not the case. The current reform proposals being considered in the House and the Senate will not solve the systemic problems in the American health care system - in fact they will likely make the problems worse. The current reform proposals maintain our fragmented system and will even add to the fragmentation. The expansion of Medicaid and the creation of a public insurance option will only add to the plethora of insurance providers with which doctors and hospitals must contend. The reforms will do nothing to address the care-linkage deficiencies that result in the poor management of patients with chronic conditions (asthma, diabetes, heart disease) who consume 70% of our health care dollars. The reforms will not change the fact that our fee for service system makes every patient and every procedure a source of revenue - and therefore encourages overuse. The reforms will not alter our malpractice policies and the defensive medicine that results. Rather the proposed reforms will extend coverage to about 30 million Americans (a good thing), but it will accomplish this by dropping them into an inefficient, expensive, and broken system - the simple result will be even greater costs (a very bad thing).

In his recent book The Healing of America, T.R. Reid writes "Any proposal for reform that continues to rely on our fragmented structure of overlapping and often conflicting payment systems... will not reduce the cost or the complexity of American health care. Any proposal that sticks with our current dependence on for profit health insurers... will not be sustainable." Unfortunately our elected leaders have spent the past few months hammering out deals that will do those very things. While our press and our politics have been obsessed with whether or not reform would have a public health insurance option the real question should have been "will these reforms actually improve the American health care system?" Perhaps no one wanted to ask the question because the answer is so clearly "No."

President Obama has said repeatedly that he would like to be the last president to take on the challenge of health care reform... if he signs into law any reforms similar to the legislation being debated in the House and Senate he will fall well short of that goal.