Category Archives: Medical Quality
Part 2: The Emergence of Consumer Value
Despite its deep flaws, the new health reform law, ACA, has three aspects that make me optimistic about medical entrepreneurs being able to surmount the law’s barriers to create a consumer-dominated, market-based medical care system that will deliver high-quality, affordable medical care to everyone:
1. The creation of consumer value
2. The rise of high-value local health plans
3. Effective disease prevention
This second of five installments discusses consumer value.
Medical Consumer Value
The word “value” appears more than 200 times in ACA. The law’s architects clearly liked it and felt that the bill should strive to achieve it. Too bad they never bothered to clearly define it. If they had, they could have created a much more direct approach to fixing our dysfunctional medical care system, and without all the counter-functional, top-down bureaucracies that will actually impede it and force medical costs higher than they need to be.
Part 1: Even a Blind Pig Finds an Occasional Truffle
I’ve made no secret of my disdain for the Patient Protection and Affordable Care Act (ACA), the new health reform law. It is a bad bill that focuses the wrong “solutions” on the wrong problems and promises to visit unnecessary economic distress and destruction on America’s providers, consumers, taxpayers, and insurers. Even the IRS is protesting.
Yet, rather than continue to bash it, I’ve taken my summer hiatus from writing this blog to focus on a more constructive approach. The law is a fact we have to deal with, and despite a lot of talk about a subsequent Congress overturning it, I’ve concluded such an action to be both unlikely and unwise. The opposition has nothing better on the table and the ACA situation is actually far from hopeless. The focus needs to be on repairing, not revoking it.
I buy collision and comprehensive insurance on my car, but after talking to my State Farm agent, it might as well be called collision and incomprehensible. With seven layers of coverage, most of it is as clear to me as the details of health insurance are to many others. But it has two aspects I do understand. First, it doesn’t cover gasoline, oil changes, or worn-out tires. Those are predictable, normally affordable consumer purchases. Even if I could buy such coverage, I wouldn’t. It’s not worth the added insurer overhead and profit—not to mention the cost inflation on gas and tires once sellers discover their customers no longer care about price. I’m better off shopping around for reliable service, low price, and credit card convenience.
The other part I understand is the deductible. If my car gets accident damage, I pay the first $2,000 to fix it. Insurance pays the rest. I could get a $100-deductible option, but that costs an extra $183 per year. I’d rather save the money and drive more carefully—even if the two gents who’ve run into me during the past 40 years didn’t. I’m still way ahead.
Death is an unavoidable theme this time of year. Having just celebrated a great religious martyr, we move on to witness last January’s swaddled babe transformed into an ancient, arthritic geezer doomed to die at Thursday’s midnight toll. We ponder the lives of those who’ve passed this past twelvemonth—whether near, dear, or merely famous. And stories like the New York Times’ “Hard Choice for a Comfortable Death: Sedation” challenge us to ponder the process of dying itself. Such is the end of the year and a troubled decade.
Hence comes to mind “Life-Line,” the great Robert A. Heinlein’s first published science-fiction story (1939). In it, the ingenious Professor Pinero invented an apparatus that accurately predicted the exact moment of any person’s death. Although many of Heinlein’s speculative musings later came to pass (waterbeds, rail guns, travel to the moon), this one, thankfully, did not. Such a device (doubtless following a hideously expensive and lengthy FDA-approval process) would cause no end of mischief, including cutting billions from medical costs by simply denying care to people about to die.
THE PROPER ROLE OF GOVERNMENT IN HEALTH CARE REFORM – PART 3: HOW REGULATED CONSUMER MARKETS WILL SUCCEED
In Part 1, I describe the market failure that has caused all the major problems in our dysfunctional health care system. Part 2 recommends straightforward government regulatory reforms that will correct this failure. Now, Part 3 describes how these market reforms will allow all Americans—finally and sustainably—to get their necessary health insurance and high-quality medical care at less than half of today’s cost. This is not deregulation of health care, but enlightened re-regulation to correct a fundamental market failure that the government and economists have ignored for decades.
The key action is to place America’s consumers firmly in charge with the money and the authority to make their own purchase decisions from insurers and medical providers that will be forced to actively compete with better value—higher quality, better customer service, and lower cost. This also makes consumers responsible for living healthy lives or else paying higher premiums if they don’t.
I wrote in Part 1 that medical care is an economic good. More specifically, it is a consumer good delivered directly to patients, primarily in the form of services. Experience has taught us that the most effective, efficient, and fair way to create and distribute consumer goods and services is through open consumer markets that allow each customer to determine a product’s value before deciding whether to purchase it with her limited available funds. Such value assessments require consumers to consider the answers to two fundamental questions:
- Which sellers’ are offering me products and services that will provide the best quality for my needs?
- Of those best sellers, which offers the lowest price?
In (slightly) technical terms, value equals quality divided by price, meaning that the higher the quality and/or the lower the price, the higher the resulting value. The challenge in getting higher quality, lower priced health care, therefore, lies in creating a consumer market for it. Actually, it means creating two markets, one for health insurance and one for medical services. But if we do the insurance market right, the second will naturally follow.
The raging health reform debate has completely obscured recent disclosures by some medical providers of shocking information that has long been held among their most closely guarded secrets: their prices. These innovators are responding to the rapid four-year growth of high-deductible health plans that incentivize consumers to demand cost-effective solutions for their medical problems. Stated simply, a lot more patients want to know the prices of medical services before they buy them.
I recently discovered one striking example of this trend that promises an entirely different and brighter future for American health care than the one currently fermenting its way through the legislative bowels of our nation’s capital. It is the website for The Surgery Center of Oklahoma in Oklahoma City. Click on the link and see something extraordinary: a leading-edge medical facility that actually tells you its prices up front—but only for patients who pay them in full and in advance. Otherwise, if you want the Center to bill your insurance company and fight through its bureaucratic layers for uncertain payment at some distant time, the price will be higher.
I recently posted a blog on why government rationing of health care is utterly unnecessary, not to mention immoral. I’ve also written about how the current House version of health reform, supported by the President and the AMA, will inevitably herd us into a government-run health care system that is more restrictive than even the British single-payer National Health Service.
Now comes Zane F. Pollard, MD, a doctor of many decades practice who has personally experienced the heavy hand of U.S. government rationing on a first-person basis. I checked out Dr. Pollard on HealthGrades and he’s the real deal. In his posting, he relates example after example of government intrusion into medical care that is both an indictment of it and a testament to the determination of American doctors to do the right thing despite it. And if you’re one of those people who tends to be suspicious of anecdotal accounts, check out the doctor comments accompanying his telling story. The clear message is that we simply cannot rely on current government programs, much less proposed ones, to get us out of the health care mess we’re in.
President Obama just missed a perfect chance to save America’s prescription drug consumers a cool five billion dollars per year. In a recent speech on health care reform, the President said, “If there’s a blue pill and a red pill, and the blue pill is half the price of the red pill and works just as well, why not pay half price for the thing that’s going to make you well?”
If only he had changed the “blue” to “salmon pink,” the “red” to “purple,” and the “half the price” to “an eighth the price,” he would have thrown a bright light on one of the great economic absurdities of modern American medicine: people (and their insurers) paying $170 per month for the prescription acid-reflux drug Nexium when the nearly identical Prilosec OTC costs about $22/month—and without a doctor’s prescription. That’s right. There’s nothing in Nexium that isn’t in Prilosec OTC which itself used to be a major prescription medication before its patent ran out several years back. Every doctor I’ve asked says one works as well as the other for almost everyone. Taking Nexium? Ask your doctor. And save.
I recently spent the better part of a Colorado summer Saturday reading the worst parts of something called The Affordable Health Choices Act of 2009. Purported to constitute health care reform, its thousand pages were introduced this past week by the chairmen of the three congressional House committees with jurisdiction over health policy. It is the single most egregious piece of health care legislation to cross my desk in four decades. Hillary Care (yes, I read that one too), nonsensical as it was, represented an order of magnitude more thought than this bill which is so blind to basic economics on so many levels that I marvel at the ability of the three chairmen, Speaker Pelosi, President Obama, and the AMA to praise it with straight faces.