regulation, part 2: health care

Peter Orszag had some very interesting thoughts on health care reform in recent issues of the New York Times. In his most recent piece, "To save money, save the health care act" published last week, Orszag freely admits that the plan has flaws, but also makes the legitimate point that fundamental reform of a health care system devoid of any form cost control (or for lack of better terminology, health care rationing) is going to be messy. I think the piece has some flaws, but I think this statement is an important one to note:

There are four ways to contain health care costs: by reducing payments to providers and suppliers; by rationing services; by having consumers pay a greater share; and by giving providers incentives to be more efficient.

So, lets consider each of those methods individually.
1) Reducing payments: Despite the shooting myself in the footishness of this, its certainly necessary. Part of the equation is that we are spending too much money on health care, but reducing costs means reducing compensation. So what should we paying for and what shouldn't we be paying for? Well, the fact of the matter is that we should be decreasing compensations for interventions that are not proven to improve overall prognosis (like: vertebroplasties, knee arthrocenteses, 4th line chemotherpeutic agents, renal replacement therapy in patients with hepatorenal syndrome). Conversely, we should be creating and/or increasing compensations for primary care interventions that reduce cost-ineffective, but necessary procedures (aka, effective smoking cessation counseling, vaccinations, obesity management).

2) Rationing services: Now, part and parcel of reducing payments is going to include reducing the number of health care services that should be provided. How do we decide what to ration? With QALYs, of course. See Peter Singer's NYT article "Why we must ration health care" for elaboration.

3) Having consumers pay: Certainly, increasing consumer contributions to the health care pot will help reduce the incurrence of health care debt. But high premiums seems to be at the core of people's discontent with the health care system. And while health care rationing will improve premiums, I don't think that people will be willing to offset those savings with increased payments. Rather, the answer probably involves insuring some of the 47 million Americans who are currently uninsured, perhaps with catastrophic and preventative insurance coverage that will reduce the significant amounts of debt they incur. This would be the same population in which reduction of health care interventions not shown to improve mortality would first be implemented.

4) Improve provider incentives: Finally, the issue of how providers are motivated. This issue has been broached by Atul Gawande, and is addressed by both Orszag and the health care bill, by tracking and ultimately attempting to reward and penalize providers based on the health of their patients rather than a fee-for-service model that rewards procedures rather than outcomes. There is a clear precedent for this: the No Child Left Behind Act, which provides a negative incentive for poor student performance. This seems alright, except for the fact that it may discriminate against school districts where students are more difficult to motivate. Similarly, infusing accountability into a compensation system for providers might penalize the providers who face the most daunting sets of patients (many comorbidities, poor compliance).

Certainly, one clear negative incentive that can be removed is the practice of "defensive medicine" in which doctors prescribe additional tests and/or interventions simply to avoid being sued for for being insufficiently aggressive. This practice, as delineated by JAMA, is widely pervasive, and seems to primarily take the form of unnecessary imaging to rule out highly unlikely pathology. Tort reform will doubtlessly reduce the practice of defensive medicine, though the extent of cost savings is difficult to estimate. And for those of you fuming over Obama and Orszag's socialist tendencies, let there be no mistake that both of them agree with tort reform.

Other (or even undiscovered) methods of cost reduction

One of the final aspects of the health care plan, one of the least mentioned, and probably my favorite, is the pool of money (the so-called Innovation Center) dedicated to supporting cost-effective initiatives. It's essentially a fund to say "If you have an idea to save money, we'll give you a little money to try it, and if it works, we'll give you more money. So go to town." Sounds like typical government waste? Well, as Atul Gawande noted, this was pretty much the model that led to agricultural reform. As he states, the answer involves engaging local providers to institute reform from the ground up:

At this point, we can’t afford any illusions: the system won’t fix itself, and there’s no piece of legislation that will have all the answers, either. The task will require dedicated and talented people in government agencies and in communities who recognize that the country’s future depends on their sidestepping the ideological battles, encouraging local change, and following the results. But if we’re willing to accept an arduous, messy, and continuous process we can come to grips with a problem even of this immensity. We’ve done it before.

Was it worth it?

I'll close with an extreeeemely interesting piece by William Saletan at Slate. In it, he vociferously defends the Pelosi-led congress, and refutes the idea that the resetting of congressional balance reflects a failure of governance by Pelosi. Rather, he states, she did what she ought to have done: used her Democratic majority to institute legislation that she felt supported the common good.

Politicians have tried and failed for decades to enact universal health care. This time, they succeeded. In 2008, Democrats won the presidency and both houses of Congress, and by the thinnest of margins, they rammed a bill through. They weren't going to get another opportunity for a very long time. It cost them their majority, and it was worth it. And that's not counting financial regulation, economic stimulus, college lending reform, and all the other bills that became law under Pelosi. So spare me the tears and gloating about her so-called failure. If John Boehner is speaker of the House for the next 20 years, he'll be lucky to match her achievements.

Awesome. Coming soon: GABA in stroke, chemokines in asthma!