Lawmakers and officials now seem serious about ballooning health care costs, but they're still not addressing the root issues. They are unaware (or choose to ignore) that the major problem is of overpriced care, not excessive or even wasteful care.
This is actually good news per my previous post, as the fixes for price distortions are relatively straightforward and painless. That is, except for special industry interests who have bought and wielded a lot of influence. But they may finally be trumped by public angst, and by other players that benefit from reforms and can compensate lawmakers to do the right thing (more on that in a subsequent post).
So what exactly should be done? Here's the recipe, in two parts. The first and major part lowers prices by correcting the scarcities as well as the lack of competition and innovation that have caused US health care to be over twice as expensive as in Europe. The second part is common sense steps to reduce waste and foolish splurging of resources for minimal benefit.
Here's the road map to lowering prices while increasing availability of resources to expand coverage:
Here's the second part, the ways to reduce inefficiencies and wasteful practices that receive more media coverage and commentary by pundits:
Conversely, an expanded provider supply through actions as in the first part above can make private insurance more viable, as in the Netherlands or a parallel system as in Germany. Such a system could be allowed to co-exist in the US with a basic public plan, with choices of more lavish private plans. Those opting for them can be helped with payments through risk category based government vouchers or credits that equal offsetting average savings in public funds.
Overall, steps of both types should be pursued in tandem but those enhancing provider supply and lowering prices at part one above offer easier and bigger savings as well as service improvements. For quick results turning to international trade in health services is essential, as I'll elaborate in a later post.
Moreover, this supply side approach that enhances competition should be more acceptable (in theory at least) to Republicans who control the House and vigorously oppose the single payer route. Given political will, these changes in health care are administratively quite easy to implement, and help solve the budgetary crisis far better than other more widely bandied options.
This is actually good news per my previous post, as the fixes for price distortions are relatively straightforward and painless. That is, except for special industry interests who have bought and wielded a lot of influence. But they may finally be trumped by public angst, and by other players that benefit from reforms and can compensate lawmakers to do the right thing (more on that in a subsequent post).
So what exactly should be done? Here's the recipe, in two parts. The first and major part lowers prices by correcting the scarcities as well as the lack of competition and innovation that have caused US health care to be over twice as expensive as in Europe. The second part is common sense steps to reduce waste and foolish splurging of resources for minimal benefit.
Here's the road map to lowering prices while increasing availability of resources to expand coverage:
- Increase the supply of doctors as I detailed in my Sept. 11, 2010 post. This involves expanding medical schools and setting up new ones, both of which allow entry directly from high school with applicants meeting core requirements through AP classes. Increase the number and support for residencies, while eliminating those caps imposed by doctor dominated bodies like the ACGME and the RRCs whose members benefit from scarcities. There are over 40% more doctors in Europe on average than in the US. A change in policy will start increasing domestic supply of doctors after about 10 years, so it is important to import doctors in the mean time, per my June 27, 2010 post. This should ideally be orchestrated at the federal level, but failing that the states can make changes in licensing requirements on their own.
- Leverage telemedicine, especially with qualified foreign doctors who can be allowed to treat US patients, as described in my April 30, 2010 post. This will add to patients' convenience while removing the need for a significant chunk of US doctor office visits and costly readings by US diagnostic radiologists. Apart from direct savings from payments to foreign providers that are a fraction of US rates, this will expand the availability of US physicians and lower prices here as well.
- Allow and encourage more hospitals to be set up, particularly those managed by reputed foreign chains, per my June 8, 2010 post. Cost effective innovations and practices from abroad can really help, in addition to the necessity of competition. US hospitals should never have been allowed by anti-trust authorities to consolidate as they did since the early 1990's. That has allowed them to jack up prices as there are few alternatives for payers and patients, and 90% of even metropolitan areas in the US now face low or no competition among hospitals.
- Encourage and allow medical travel abroad as described in my May 13, 2010 post. The facilities and support infrastructures for this are largely in place so the benefits kick in much faster than through other measures. Apart from direct cost savings that can be up to 90% for a destination country like India, this again diverts some demand for US hospitals and doctors. That reduces some of the market power and scarcity premium in pricing in the US, and allows for lower rates here. If HHS / CMS takes the lead on medical travel for major, "standard" surgeries this will enable private insurers to follow suit while considerably reducing their own legal exposure. That's because if they strictly follow or exceed the same protocols as the government, juries are far less likely to find against them when there are adverse outcomes. (These are inevitable when large numbers of patients are involved, even if the complication and mortality rates in world class foreign hospitals are lower than in the US.)
Here's the second part, the ways to reduce inefficiencies and wasteful practices that receive more media coverage and commentary by pundits:
- Allow drug importation and for Medicare to directly negotiate prices of drugs that it pays for. There's no valid reason to protect a system where US prices are twice as high as anywhere else.
- Use comparative effectiveness research to guide treatment, particularly when paid for with public funds. Factor in cost effectiveness as is explicitly done by the NHS in UK. Substitute fee-for-service with capitation or global payment. Counter Palin type "death panels" misinformation and encourage sensible end of life planning. Some sensible cuts by states like New York and by Washington should be adopted by others.
- Enact tort reforms, limit debilitating lawsuits by having more efficient forms of legal redress, impose malpractice caps and lighten needless regulatory or work rules burden on providers. (About the last, some onerous work rules may for example stem from union agreements that only lightly benefit health workers but severely throttle hospital operations.) The actual impact of legal exposure is likely less than what Republicans and providers claim, but Democrats conceding on this may enable broader bipartisan agreement.
- Electronic health records. Wellness and preventive programs. Smoking cessation. Obesity control and healthy living. Atul Gawande's Checklist Manifesto. Other innovations in practice of medicine. Yes, yes, yes. And motherhood and apple pie. By all means do all this, as supplemental to - not instead of - other necessary measures.
Conversely, an expanded provider supply through actions as in the first part above can make private insurance more viable, as in the Netherlands or a parallel system as in Germany. Such a system could be allowed to co-exist in the US with a basic public plan, with choices of more lavish private plans. Those opting for them can be helped with payments through risk category based government vouchers or credits that equal offsetting average savings in public funds.
Overall, steps of both types should be pursued in tandem but those enhancing provider supply and lowering prices at part one above offer easier and bigger savings as well as service improvements. For quick results turning to international trade in health services is essential, as I'll elaborate in a later post.
Moreover, this supply side approach that enhances competition should be more acceptable (in theory at least) to Republicans who control the House and vigorously oppose the single payer route. Given political will, these changes in health care are administratively quite easy to implement, and help solve the budgetary crisis far better than other more widely bandied options.
