Tuesday, December 15, 2009

We Need a "Team B" for Healthcare Costs

Two tough articles on spending in Monday's Washington Post require some thought--more thought than they are currently receiving. And that thought should include new approaches, because as we shall see, the old approaches, and the old solutions, aren't getting us anywhere.

First, the Post's Robert Samuelson wrote "A savings mirage on health care,"a tough critique of Obama administration pledges to control healthcare spending.

Samuelson notes, with skepticism, claims from leading administration figures that there is so much waste and redundancy in the current system that spending restraint can be accomplished relatively easily:

The administration insists that it can insure most of the uninsured and tackle runaway health spending simultaneously. There's so much waste in today's health-care system that both goals can be pursued together, Peter Orszag, head of the Office of Management and Budget, has said.

But all this optimism is likely ill-founded, Samuelson concludes:

The relentless advances reflect an open-ended insurance and delivery system that gives neither patients nor providers any reason to restrain spending. To attack costs first would be politically challenging. It would require admitting that all good things are not possible simultaneously and that the uninsured already receive much medical care. It would require genuine bipartisanship, not just a scramble for a few Republican votes. And it would require stronger measures to dismantle a fee-for-service delivery system that now rewards more, not better, care. That's a demanding and realistic approach; Obama's is wishful thinking.

Second, the Post's editorial page weighed in with an alarmist piece headlined, "The coming debt panic." Citing the work of the Peterson-Pew Commission on Budget Reform, the edit begins, "It is time to stop worrying about the deficit--and start panicking about the debt." Continuing in that vein, the edit continues:

In the space of a single fiscal year, 2009, the debt soared from 41 percent of the gross domestic product to 53 percent. By way of comparison, the average for the past half-century has been 37 percent. This sum, which does not include what the government has borrowed from its own trust funds, is on track to rise to a crushing 85 percent of the economy by 2018. Getting the debt back down to a reasonable level will require extraordinary, almost unimaginable, fiscal discipline and political cooperation. Failing to do so will lower the national standard of living and ultimately threaten America's economic stability.

And so the Post endorses:

Warnings about fiscal danger may sound familiar, but one reflection of the current circumstances comes in the composition of the group that signed on to this report and agreed that both tax increases and spending cuts would be required. They range from a liberal former chair of the House Budget Committee, William H. Gray III of Pennsylvania, to a conservative former chair, Jim Nussle of Iowa. The recommendations envision annual benchmarks, enforceable by a debt trigger that would impose spending cuts and a surtax if the specified reductions were not achieved. Once the debt is stabilized in 2018, the goal would be to set it on a glide path to further reduction, closer to the historical average of below 40 percent.

And the Post also lauds a bipartisan duo of Senators for their suggestions on budget restraint: "Last week Sens. Kent Conrad (D-N.D.) and Judd Gregg (R-N.H.) introduced a new version of their proposal to create a 'fiscal task force' to recommend a package of tax and spending changes."

Marrying the notion of enforceable debt levels to a commission that could come up with ways to achieve these goals would be an interesting, and potentially productive, union. Both concepts are premised on the notion, sadly correct, that the fiscal picture is too daunting and too politically sensitive to be addressed under the regular order. As the Peterson-Pew report grimly underscores, time is running out to come to grips with that unpleasant fact.

This is all well and good. Here at Serious Medicine Strategy, we won't quibble with a single fact adduced by Samuelson. Nor will we argue with the data assembled by the Pew-Peterson folks. Indeed, we realize that healthcare costs--most notably, Medicare, are the biggest single driver of federal budget increases.

But it's the Pew-Peterson recommendations, seconded by the Post, that trip us up. Some, of course, will point to the virtually built-in tax increases built into the Conrad-Gregg proposal. Americans for Tax Reform, among other conservative/libertarian groups, has already condemned the Conrad-Gregg proposal, and would similarly denounce the Pew-Peterson recommendations. It is, indeed, hard to justify tax increases at a time such as this. And in any case, it will probably be suicidal, politically, for many of the lawmakers who might vote for such a proposal.

As as we have noted in the past, there's a right way and a wrong way to go about cutting healthcare--or more precisely, an effective way and an ineffective way. What's ineffective is to try to make cuts in healthcare, for example, by simply cutting back on healthcare. Such cuts inevitably mean real pain to real people, and history shows that such cutting is not popular--profoundly unpopular, in fact. The elites in DC and New York can provide all the arguments and justifications one could want, but the voters never seem to agree.

And so what's a politician to do? Is it too cynical to say that if the average politician were confronted with a choice--a) let spending continue and see the government go bankrupt, or b) vote to cut such spending and lose your seat--that the average pol would go with a)? That might be too harsh, or it might be a statement of risk-averse/welfare-maximizing people would do in an environment where somebody would be telling them that a) isn't really so bad.

So what's needed is a new kind of thinking, perhaps along the lines of Team B, an analytical group set up by then-CIA director George H.W. Bush in1976 to provide another line of thinking about the Soviet threat. Team B was and is controversial, but at a minimum, in times of crisis, it is a useful exercise to encourage speculative thinking and analysis, because one never knows for sure where it will lead.

And with fiscal crisis looming dead ahead, what's desperately needed right now is speculative thinking and analysis. If the goal is to cut healthcare spending, is there any way to do it without inflicting pain on patients? Without causing all incumbents who vote for spending restraint to lose their seats, to be replaced by new officeholders with a mandate for fiscal non-restraint??

And the answer: Sure there is. We could use our brains to come up with better answers, just as we have a hundred times in the past. If we really wanted to save money on healthcare, we could figure out how to keep people from getting sick, and/or we could figure out how to cure them. In the past, it was cheaper to prevent polio through the polio vaccine than it was to treat them after they were crippled by polio.

Today, if the Pap Test reduces the incidence of cervical cancer, that's a savings. If statins prevent heart attacks, that's a savings. If exercise prevents heart attacks, that's a savings, too. The list of preventive strategies, and cure strategies, is long indeed. So why aren't they fully incorporated into our thinking about healthcare spending?

And there's an additional element, too: If cures are developed, they can be sold, not only to Americans, but to the world. If a fully effective treatment for Alzheimer's were developed--a treatment that staved off the onset of the dreaded disease--it's safe to say that a lot of people would happily buy that drug for decades. Decades in which they could be, if they wished, economically productive. Not just in America, but around the world. And that's a revenue stream--for individuals, for corporations, for cash-strapped governments.

If the situation is urgent, and it is urgent, then we need every possible option in front of us. We need a Team B for healthcare spending, to consider out-of-the-box approaches to saving money. Yes, such thinking is difficult. But if there's no good alternative, then, we can say, there is no alternative.

Because otherwise, Pew-Peterson-type efforts are doomed, even with the Post on their side.


  1. Your Team B approach is similar to another argument I presented while I was working for a pharmaceutical client in the late 1990s/early 2000s. I said they needed to take a "Star Wars" approach to healthcare, recalling President Reagan's success in changing the paradigm around nuclear arms with the Strategic Defense Initiative.

    They needed to present a vision of a future in which life-saving, cost-reducing drugs and procedures addressed the problems of cost and access. Today I would add market-based reforms and use of IT to make people more informed consumers and introduce an element of competition.

    I still don't understand why the insurance and pharma companies don't catch on to this.

    I met with Donn Davis, Steve Case's #2, when they were launching Revolution Health. He said that real healthcare reform would have nothing to do with the government but would arise from efforts to use IT to make healthcare more efficient and competitive. Good luck with that if Obamacare passes.

  2. Health care is presented in a complex regulatory framework. Traditionally, medicaid was considered an insurer of last instance. I think that this should continue to be the bedrock principle, along with relieving the stress on Medicare. If ultimately the President and Congress seek some form of single payor system, how would this impact patients involved in work place accidents, motor vehicle incidents, and other tort claims? Does the government take responsibility for these risks, or will there be some form of subrogation. Will we see more aggressive government bureaucracies and subcontractors seeking reimbursement for care through lawsuits and liens?

  3. How to lower Healthcare cost AND create millions of good decent, permanent jobs:
    1. Expand Meals On Wheels to all rural communities
    2. Increase SNAP food credit for low income Americans on Doctor ordered restricted diets and food allergies
    3. Provide shelf stable low glycemic/low sodium food to VA healthcare clinics, Salvation army senior centers, as well as other healthcare clinics that serve low income clients. These items would also be sold at Goodwill, for a minimum fee to cover shipping and handling.
    4. Every state would allow a taxbreak for Healthclub membership
    MILLIONS of decent, permanent jobs would be created, nationwide! Best of all, healthcare costs would drop,because of better nutrition and exercise- therefore; this makes my 4 step program better than anything Congress has come up with. Will this ever happen? NO. Because the almighty gods we elected think they know what's best for us.