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New America? Old Excuses

May
2
2007

Last week, I came to criticize Jonathan Cohn (for being too nice). Today, I come to defend him.

Phillip Longman who hails from the New America Foundation complains in the Washington Monthly that Cohn’s new book Sick is Misdiagnosed because Cohn concentrates on the financial consequences of living without health insurance and not on the overall problems with inefficient and ineffective care in the U.S. system.

He doesn’t exactly get off to a roaring start, taking Cohn to task and getting it totally wrong in the process. Longman says:

…Cohn opens his book with a story about a woman who dies of a heart attack purportedly because she did not receive a cardiac catheterization, a procedure in which a cardiologist inserts a balloon into a patient’s circulatory system and then expands it in order to open a partially blocked vessel…Yet a study in the Journal of the American Heart Association last year revealed that while the elective use of such procedures has been skyrocketing over the last ten to fifteen years, there has been no change in the rate of heart attacks. Since Cohn’s book went to press, a new blockbuster study …found that the specific use of angioplasties (the opening of a blocked blood vessel using a thin tube with a balloon or another device on the end) and stents (the tubes that prop open a blood vessel) is no better at preventing heart attacks than nonsurgical therapeutic treatments, such as taking aspirin or cholesterol-reducing drugs.

Now, it’s true that cardiac catheterizations and stents are way overused in this country as cures for coronary artery disease, and that the recent trails did indeed show that medication was an equally effective treatment for preventing heart attacks. Unfortunately for Longman that’s not the situation Cohn talks about at the beginning of his book. The woman who died in the example in Sick did not get access to emergency cardiac catheterization immediately after her heart attack. In the case of actual heart attacks – which Cohn’s patient had – catheterization is very effective. (Here’s the American Heart Association guidelines on it and here a New York Times story about it too).

So if you’re having a heart attack you really want to get to a hospital which has a catheterization lab. In Sick the woman having the heart attack was diverted away from the local hospital which did have that equipment to one that didn’t. So her chances of surviving were much lower. Why was the first hospital on “diversion”? In part because its emergency room was dealing with patients who had minor problems. If those patients had had they had insurance and therefore better access to regular primary care, they wouldn’t have been cluttering up the ER.

Longman also misunderstands the relationship between universal health insurance and the mess we have stemming from the overuse of care in the U.S. He says that uninsurance is a sysmptom of the current system and that “Treating symptoms often makes sense, and we should treat this one. But that doesn’t get us to a cure.”

But again he’s wrong. It’s a matter of simple economics. Ultimately responsibility for the cost of care in the U.S. falls on no single entity. The payer (the employer, the consumer or the government) can always choose not to pay – they can not provide or not buy insurance benefits. Of course most will, because the consequences of not doing so are greater than the cost of purchasing it. (Employers lose workers, consumers face huge risk, government can lose votes). The health care system knows this. So it maximizes its revenue by increasing prices and volume. Some people will drop out of the system and become uninsured as a result but they’re a small minority. The increased money paid into the system by the everybody else more than compensates for the revenue lost from those who drop out. Which is why health care costs as a share of gross domestic production go up while the percentage of uninsured Americans also goes up. As they have uniformly since 1965.

Now imagine a system in which everyone is required to buy insurance or is covered in other ways, and someone (e.g. the government or taxpayer) is responsible for the bottom line. If the health care system tries to maximize its revenue, there is no way for people to drop out or be dropped out at the margin by the end payer. Instead the entity purchasing insurance will have to find a way to cope with increases in those total costs and they won’t be able to reduce the number of people for whom they’re purchasing insurance. In that case it’s more than likely that whoever is responsible for that bottom line will instead look at what’s happening within the health care system and start demanding better value for the dollars being spent. This is how every other business works (see GE and Wal-Mart’s relationships with their suppliers!).

It’s also how the government agency and the private HMO that Longman does like (The Veterans Health Administration and Kaiser Permanente) more or less work. They have a fixed budget and have to deal with a fixed population. So they have an incentive to actually figure out how to spend those dollars better. The rest of the health care system–the one that’s more flexible about who gets insurance–just wants to figure out how to get more dollars into its various pockets.

So, until we get everyone in a universal care insurance/coverage system, then no one will be responsible for that overall bottom line–other than odd government agency run like the VA. All the inefficiency and ineffectiveness Longman – and for that matter Harvard Business Professor Michael Porter – think are the root cause of our problems are never going to be fixed while the health care system still has that the “safety valve” where people lose coverage at the margins and end up sitting in emergency rooms with minor complaints that cause major problems for others.

Until we get everyone into one social insurance pool and find a way that incents the rational allocation of limited medical resources within a overall health care system, smart people like Longman can foam at the mouth about the inefficiency of the delivery system all they like. It will stay that way because it’s more profitable for it to be like that.

Share  Posted by Matt Holt at 10:32 AM | Permalink

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