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On the cost side, the basic challenges of health care are fivefold:
1: Each one of us wants as much care as is technologically possible.
2: What is technologically possible keeps expanding, and the new medical options are almost always more expensive than the older options. (This is why health care is so much more of a problem now than it was in 1960; the system was broken then, too, but there were fewer ways to squander money.)
3: For any particular medical treatment, someone else usually pays the bill, whether it is the government (Medicare and Medicaid) or an insurance company. The patient has little incentive to mind the costs or even to ask how much something will cost. Of course, we all end up sharing those health care bills in the long run. The effect is like going out to dinner with a large group and splitting the bill. Each one of us orders the steak and lobster and then wonders why the bill was so high.
4: Some expensive medical treatments are remarkably effective. Others have little impact on health. The current system does a remarkably poor job of separating one from the other. In fact, some procedures, such as screening healthy people for rare diseases, may actually do more harm than good because they are likely to generate false positives that lead to expensive and unnecessary follow-up procedures.
5: Medical treatments are prescribed by doctors, who have an incentive to act aggressively, both because they earn more money by doing more procedures, but also because doing everything that is medically possible helps to protect them from getting sued.
Add it all up. Your doctor, or more likely, multiple doctors, have an incentive to practice lots of medicine, whether the costs are justified by the outcomes or not. You, the consumer, are willing to undergo just about anything that is medically possible, no matter how much it costs, because you won't see the bulk of the bill. And even if you were to pay the bill, you would likely to listen to your doctor (who earns more by doing more) because he or she knows a lot more about medicine than you do.
This is not a recipe for responsible spending.
So here is my straightforward treatment. Congress should create a semi-autonomous Health Care Review Board, kind of like the Federal Reserve Board in terms of its independence, that gathers data on the cost and effectiveness of different medical procedures. The board would be made up of doctors, public health experts, economists and so on.
The British government already does this. It has an organization called NICE -- National Institute for Clinical Excellence -- that is "responsible for providing national guidance on promoting good health and preventing and treating ill health." That's a fancy way of saying that NICE determines what things the British health care system will pay for and what it won't.
But before I get a bunch of screaming e-mails about "death panels," let me make one thing clear -- the Health Care Review Board that I am proposing would have no authority to make anyone do anything or not do anything. Nada.
So what's the point? The Health Care Review Board would use its information and expertise to define every medical procedure in one of the following ways:
Effective: Based on existing data, this medical test or procedure is likely to have some positive impact on your health, though that effect could be quite small.
Cost effective: Not only has this test or procedure been proven clinically effective, but the benefits of the treatment are likely to exceed its costs. The distinction between effective and cost effective is crucial to the health care discussion. A drug for pancreatic cancer that costs $400,000 and prolongs life by an average of two weeks is effective, since it does improve outcomes, but it's not cost effective.
To get your mind around the concept of "cost effective," think about the following exercise. Suppose I offered you a choice today -- while you are presumably healthy -- between $400,000 and an extra two weeks of life at some point. Most people would take the $400,000. We don't have unlimited resources. The best way to get excellent health outcomes at an affordable long term cost is to channel our resources to the kinds of medical care that have the most pronounced impact on health.
Ineffective: These are things that we should not be doing, such as screening healthy 22-year-olds for prostate cancer, even if your doctor says so.
Why bother with all of this, if the Health Care Review Board has no authority to do anything other than put medical procedures in different categories?
Because once that information is credible and available, the market will take over. Using the information described above, the Health Care Review Board can define three different kinds of private health plans, regardless of what company is offering them.
Plan A: The Cadillac. If you subscribe to this plan (and pay the hefty premiums), you will get any health care your doctor may recommend, whether it is cost effective or not. In fact, it doesn't even have to have any proven medical benefits. Do you want to be screened for prostate cancer at age 23? Go for it. If your doctor says it's a good idea, this insurance plan will cover it. By the way, what I've just described is not only "Plan A," it is also a reasonable description of the current U.S. health care system, which is why we spend so much and get mixed results.
Plan B: The Toyota Camry. This plan covers any medical procedure deemed effective by the best available empirical evidence. If the data support a treatment, this insurance plan must cover it, which guarantees that you will get care that works. Insurance companies can't deny coverage for things that are expensive but well worth the cost, such as organ transplants, life-saving drugs and so on. On the other hand, this plan will say "no," or at least "not as much." No expensive treatments without proven benefits. Fewer diagnostics and tests for healthy people. No end-of-life care that is not justified by its cost. For example, you won't get a hip replacement at age 93.
Other: Any insurance company can offer any other plan that they want, at any price. In fact, no company is obligated to offer either Plan A or Plan B, though once these standard options are clearly defined by an objective outside body, I suspect there will be strong market pressure to do so.
1: Each one of us wants as much care as is technologically possible.
2: What is technologically possible keeps expanding, and the new medical options are almost always more expensive than the older options. (This is why health care is so much more of a problem now than it was in 1960; the system was broken then, too, but there were fewer ways to squander money.)
3: For any particular medical treatment, someone else usually pays the bill, whether it is the government (Medicare and Medicaid) or an insurance company. The patient has little incentive to mind the costs or even to ask how much something will cost. Of course, we all end up sharing those health care bills in the long run. The effect is like going out to dinner with a large group and splitting the bill. Each one of us orders the steak and lobster and then wonders why the bill was so high.
4: Some expensive medical treatments are remarkably effective. Others have little impact on health. The current system does a remarkably poor job of separating one from the other. In fact, some procedures, such as screening healthy people for rare diseases, may actually do more harm than good because they are likely to generate false positives that lead to expensive and unnecessary follow-up procedures.
5: Medical treatments are prescribed by doctors, who have an incentive to act aggressively, both because they earn more money by doing more procedures, but also because doing everything that is medically possible helps to protect them from getting sued.
Add it all up. Your doctor, or more likely, multiple doctors, have an incentive to practice lots of medicine, whether the costs are justified by the outcomes or not. You, the consumer, are willing to undergo just about anything that is medically possible, no matter how much it costs, because you won't see the bulk of the bill. And even if you were to pay the bill, you would likely to listen to your doctor (who earns more by doing more) because he or she knows a lot more about medicine than you do.
This is not a recipe for responsible spending.
So here is my straightforward treatment. Congress should create a semi-autonomous Health Care Review Board, kind of like the Federal Reserve Board in terms of its independence, that gathers data on the cost and effectiveness of different medical procedures. The board would be made up of doctors, public health experts, economists and so on.
The British government already does this. It has an organization called NICE -- National Institute for Clinical Excellence -- that is "responsible for providing national guidance on promoting good health and preventing and treating ill health." That's a fancy way of saying that NICE determines what things the British health care system will pay for and what it won't.
But before I get a bunch of screaming e-mails about "death panels," let me make one thing clear -- the Health Care Review Board that I am proposing would have no authority to make anyone do anything or not do anything. Nada.
So what's the point? The Health Care Review Board would use its information and expertise to define every medical procedure in one of the following ways:
Effective: Based on existing data, this medical test or procedure is likely to have some positive impact on your health, though that effect could be quite small.
Cost effective: Not only has this test or procedure been proven clinically effective, but the benefits of the treatment are likely to exceed its costs. The distinction between effective and cost effective is crucial to the health care discussion. A drug for pancreatic cancer that costs $400,000 and prolongs life by an average of two weeks is effective, since it does improve outcomes, but it's not cost effective.
To get your mind around the concept of "cost effective," think about the following exercise. Suppose I offered you a choice today -- while you are presumably healthy -- between $400,000 and an extra two weeks of life at some point. Most people would take the $400,000. We don't have unlimited resources. The best way to get excellent health outcomes at an affordable long term cost is to channel our resources to the kinds of medical care that have the most pronounced impact on health.
Ineffective: These are things that we should not be doing, such as screening healthy 22-year-olds for prostate cancer, even if your doctor says so.
Why bother with all of this, if the Health Care Review Board has no authority to do anything other than put medical procedures in different categories?
Because once that information is credible and available, the market will take over. Using the information described above, the Health Care Review Board can define three different kinds of private health plans, regardless of what company is offering them.
Plan A: The Cadillac. If you subscribe to this plan (and pay the hefty premiums), you will get any health care your doctor may recommend, whether it is cost effective or not. In fact, it doesn't even have to have any proven medical benefits. Do you want to be screened for prostate cancer at age 23? Go for it. If your doctor says it's a good idea, this insurance plan will cover it. By the way, what I've just described is not only "Plan A," it is also a reasonable description of the current U.S. health care system, which is why we spend so much and get mixed results.
Plan B: The Toyota Camry. This plan covers any medical procedure deemed effective by the best available empirical evidence. If the data support a treatment, this insurance plan must cover it, which guarantees that you will get care that works. Insurance companies can't deny coverage for things that are expensive but well worth the cost, such as organ transplants, life-saving drugs and so on. On the other hand, this plan will say "no," or at least "not as much." No expensive treatments without proven benefits. Fewer diagnostics and tests for healthy people. No end-of-life care that is not justified by its cost. For example, you won't get a hip replacement at age 93.
Other: Any insurance company can offer any other plan that they want, at any price. In fact, no company is obligated to offer either Plan A or Plan B, though once these standard options are clearly defined by an objective outside body, I suspect there will be strong market pressure to do so.
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