What Matters: Three keys to curbing costs

22 April 2010

Social enterprise: It takes a network

By Raj Kumar

In Social Entrepreneurs

22 April 2010

Teaching the world to change

By Dan Viederman

In Social Entrepreneurs

22 April 2010

Innovating at scale in the social sector

By Jonathan Bays and Marla Capozzi

In Social Entrepreneurs

13 April 2010

The economics of social progress

By Iqbal Z. Quadir

In Social Entrepreneurs

Previous: Way too much for way too little

Next: The cure for US health care is right in front of us; let’s seize it now

Three keys to curbing costs

By Paul Mango and Nicolaus Henke

26 February 2009

Is it possible to provide adequate care to all? The short answer to this question is an emphatic yes, from both an economic and an ethical perspective. Yet we must understand that achieving these goals poses radically different challenges depending on local conditions, extends far beyond the traditional boundaries of the health care system alone, and requires reciprocal obligations between the government and the individual. These three caveats deserve closer analysis.

There are fundamentally different challenges, country by country, depending on the degree of economic development.

Developing and developed countries face different challenges when it comes to providing adequate health care for all. In developing countries, diseases, and therefore medical risks, are still largely a function of larger public-health issues: basic sanitation, the cleanliness of the water system, education, access to electricity, the prevalence of vaccinations, and access to basic medical care. The most serious challenge in these regions is the eradication of contagious, water-borne, blood-borne, and insect-borne diseases—malaria, typhus, tuberculosis, HIV/AIDS, and cholera, to name just a few. The potential for progress is dramatic. Some countries that have focused on such priorities, like Egypt, have achieved an increase of average life expectancy of 22 years over the last four decades. In countries that are still facing severe economic struggles, the fundamental challenge is to create the stable political environment, public-utility infrastructure, basic civic institutions, education system, and primary-care network that can help extend basic medical knowledge and technology.

In more developed nations, by contrast, the problem is not access to health care but rather its cost. The increase in the cost of health care in wealthy nations has outpaced GDP growth for the past 50 years by about 2 percent per year. If costs were to continue to soar at this pace—which, of course, is impossible—by 2100, health care would consume 70 to 90 percent of the GDP of the wealthy nations forming the Organisation for Economic Cooperation and Development (OECD).

Four factors are provoking runaway health care costs: wealth, technology, lifestyles, and aging. Lifestyle factors—such as lack of exercise, overconsumption of calories, smoking, excessive alcohol consumption, and the like—are the ones most important to alter. Fundamentally, it is an issue of behavior modification aimed at reducing chronic disease, and thereby dramatically improving the overall affordability of health care. Most health systems around the world spend between 1 and 2 percent of their budgets on the prevention of lifestyle-related disease or its progression. Nonetheless many of these initiatives are some of the highest-return initiatives in all health care, such as smoking cessation. Creating a delivery infrastructure with effective marketing to achieve behavior modification should be a key priority for health care policymakers.

This is not simply a health-system performance issue.

The challenge of providing adequate health care extends well beyond the direct authority of a nation’s health care system, since outcomes are driven fundamentally by social factors rather than just the health care system. The linkages to the workplace and to local economic and environmental infrastructure are important.

Consider that just within the region of Glasgow, Scotland—where there are few local differences among health systems—there is a local variance in life expectancy at birth of 22 years, within a driving distance of only eight miles. That variance is similar to the difference between life expectancies in Scotland and Sudan.

In developed countries, the issue is affordability—and the chief culprit is the treatment of lifestyle-induced chronic disease, which can now extend for decades. The key to success here will be altering several key behaviors: increasing exercise, moderating the intake of calories, reducing the incidence of unprotected sex, and reducing the abuse of narcotics, alcohol, and tobacco. Also crucial: improving primary and secondary education systems, imposing constraints on the food-processing industries, and developing a deeper understanding of the biases that shape what are seemingly irrational personal behaviors.

Obligations are reciprocal, involving commitments by both individuals and institutions.

When it comes to the most critical factors in health care—safeguarding public health, mobilizing multiple institutions, imposing regulations to control negative externalities, and building awareness of health dangers—the State is often a necessary and effective intermediary. Indeed, some of the greatest advancements in the overall health status of the world’s population have come from government-sponsored efforts to reduce the incidence of tobacco consumption, to prevent the transmission of HIV/AIDS, and to cleanse the water system. In addition, collaboration among such institutions as the global pharmaceutical companies, prominent academic medical centers, and the National Institutes for Health has led to marvelous discoveries and to greater practical applications of scientific advances. Thus there is a legitimate, and perhaps essential, role for government, nongovernmental organizations (NGOs), and commercial institutions in ensuring that adequate health care is available to all.

The result is a paradox: while the world’s population may be entitled to access to good basic health care services, it is not necessarily entitled to good health. On the contrary: good health in today’s society requires a reciprocal obligation. The State and other institutions are required to provide the education, the infrastructure, and the access necessary for good health. In return, individuals and families are required to engage in healthy behaviors (or at least to avoid fundamentally destructive ones); to commit to recommended vaccinations and screenings; and, when illness occurs, to adhere to agreed-upon and prescribed courses of therapy. These obligations are destined to intensify, as medical technology will increasingly move from curing disease to improving the functioning of the body (for example, through memory enhancement or cosmetic surgery). In a world where behaviors are increasingly the primary determinants of health status and medical risks—and, therefore, of medical-resource consumption—the individual must behave in ways that promote health, reduce risk, and conserve scarce resources.

Ensuring adequate health care for all will require bold decisions. Society must reach a consensus on the extent of health insurance coverage that will be available to all on a tax-funded basis (recognizing that even the market-focused United States provides 61 percent of health care spending from taxes); a consensus on how to foster the social determinants of health, in particular economic development; and a consensus on an ethos of reciprocal obligation. The government and its institutions must meet their obligations; at the same time, the individual and families must live up to theirs.

Comment [30]

Agree? Disagree? Let us know what you think. Please include your full name with your comment. Comments may be edited.

Discussions about chronic disease and its treatment/prevention are much more complex than “stop people from smoking.” First, chronic diseases only started to consume a vast proportion of the healthcare dollar as acute diseases were conquered, at least in developed countries like the US and as people started living long enough to have a chronic disease—or several.

Another key driver was the development of the computer, which led to the ability of vast epidemiological studies of associations. And associations, often mistakenly, became substitutes for cause and effect. A good example is the decades-long use of hormone replacement therapy to reduce heart disease after menopause because it was observed that once women’s estrogen levels declined, their rates of heart disease rose to equal those of men. So the claim was then made that replacing declining hormones would decrease heart disease. And billions of dollars were made by pharma based on this claim. Then came the clinical trials—much better measures of “cause and effect”—that proved just the opposite.

Reduction in cholesterol levels to reduce heart disease is largely based on associations. Plenty of people without elevated cholesterol die of heart disease and plenty of people with elevated levels do not. Doctors—and patients—face multiple challenges of knowing which guidelines are legitimate. Diagnostic criteria often differ between countries, eg, the “invention” of “prehypertension” in the US—a category recognized by no other country—including plenty where people live longer and heart disease rates are lower.

The government often provides health recommendations for everybody that actually only apply to a few, eg, only 15% of the population’s blood pressure is affected by sodium intake but everyone is told to lower salt consumption.

And pharma makes billions of dollars on drugs focused on chronic diseases—such as lipid lowering drugs that are eventually shown to have no effect on heart disease rates.

The point is, chronic disease is a big cost center, but it is also a big money maker, often based on unproven claims. Any conversation about it has to take that into account.

Posted 12 March 2009, 10:25 by Joan McClusky
It is interesting to read the comments above especially the subtext regarding ‘adequate’ health care. This appears to me to be a euphemism for cheap. Yet American and European health care systems are driven by technology and innovation especially in the pharmaceutical and diagnostic sectors. Hospitals, doctors, nurses, and allied professionals are a declining overhead relative to technological innovation. Yet the drive to keep people alive for longer in the first world creates huge demand for health services for the future. Is this sustainable since after 65 in many countries they are on pension?

The EU Commission has stated that good health is a measurable economic driver and that it leads to growth yet it has a perverse outcome in keeping people alive for longer while the workplace excludes them just a the point where health care shows a benefit. Perhaps we need to abolish compulsory retirement at 65 as a necessary quid pro quo for improved health outcomes?

The comments above re: exercise and lifestyle address indirectly another point that of moral hazard. Comprehensive health care systems promote moral hazard as well as increasing health outcomes. Has anyone worked out the cost of this moral hazard yet. Perhaps hypothecation of taxes on sugar, dietary fat, alcohol, and tobacco would help address the issue. I am dubious of the power of education to alter lifestyles. In Ireland about ten years ago the Minister for the Environment placed a 15c tax on plastic bags (used for groceries and a source of litter) within weeks the use of such bags had declined to almost zero. Today, cheap thin, plastic bags are almost gone from shops. Behaviour modification cannot be achieved if you offer comprehensive health care guarantees. It can only be achieved with real, tangible, and severe negative outcomes for those who take risks.

Posted 12 March 2009, 05:52 by Joseph Richardson
I really enjoyed reading this article; it is very similar to the essay I wrote when applying to my graduate program. I agree with the perspective that there needs to be reciprocal responsibility to improve the health of the public and moderate the costs of providing care. Most healthcare reform efforts are targeted to reform the health care delivery system, as opposed to addressing the determinants of health status, because a personal responsibility for one’s health is difficult to enforce. Two aspects that differentiate health care service provision from consumer goods are time inconsistent preferences and assymetry of information. Time inconsistent preferences are the fundamental stumbling block to mandating individual responsibility; the preferences of decision-makers change over time, such that what is preferred at one point in time is inconsistent with what is preferred at another point in time. This dynamic shifting of preferences and values makes it difficult to hold individuals responsible for decisions not made rationally. The issue of health care reform from a purely market driven perspective because without perfect information on the relative quality of care provided, market efficiency cannot be achieved. Market efficiency can only be reached when the characteristics of the goods and services on the market can be accurately assessed. Cost is only one component to be considered when making healthcare decisions and a;hough relative prices of care can be easily understood by healthcare consumers, in the absence of evidence based information on the other elements (quality, safety) that are relevant to the selection of a provider, the individual will never be able to make decisions that reflect their true preferences.

This is why I am a big proponent of establishing a comprehensive, reliable quality measurement system to establish a resource that individuals can use to gather information on which to base their decisions. This is an enormous undertaking, requiring resources to achieve IT integration to facilitate measurement necessary to create and maintain an accurate resource for quality information.

To address the issue of time inconsistent preferences, the author of the article is correct: primary and secondary education needs to be improved and health needs to be legitimately incorporated into the curriculum (not just the class where you learn about sex). Teaching kids from an early age how to take care of their bodies and cook affordable nutritious food would instill these behaviors and make them habits from an early age, so that every day would not have to be such a struggle to break the habit of eating poorly and not taking care of your body. “Home ec” starting in 1st grade would be ideal; teach kids how to prepare and enjoy consuming healthy foods and it won’t be such an uphill battle later in life, after health problems have already developed.

Posted 11 March 2009, 22:57 by Amy
Absolutely, healthcare is available to all of us. Affordability is a different story. But it doesn’t have to be. Competition in the America healthcare system would restore affordability, efficiency, and better clinical outcomes. The current system is a zero-sum game of many players that extract value from the market, where under normal conditions would raise value and lower costs.

In our free market system the transaction for a product or service is between provider and buyer. This is not the case in healthcare. Competition is among payers, hospitals, and health networks. The physician and patient are shielded from the normal pressure of the free market. Why should healthcare, a commodity, be different than say, cellular phone plans? It’s no more complex. It is different, and broken, because it is without competition. When was the last time you knew the price of a general physical? Is it posted on the wall? Is it known by the staff? No. We don’t bother to ask because somebody else is paying the tab. When was the last time you didn’t bother to ask about the price of a computer? Furniture? An automobile? Would you take out an insurance policy on lawn maintenance? Pay your lawn guy a co-pay? Of course not. Why do the same for a physical?

Instead of asking “who pays?”, ask ‘who provides the best value?” Payers have incentives to shift costs, while providers are not held accountable for outcomes. If your mechanic did not fix your transmission as warranted, you would return your car for a do-over, free of charge, in most cases. In healthcare your physician or hospital would bill your insurance company – again, who then hands you the bill.

Positive sum competition will drive down costs, increase efficiency, and require people to be conscientious of their health. Nobody spends your money better than you do.

Posted 11 March 2009, 21:19 by Daniel Ryan
Providing health care for all is feasible indeed, if one is talking about primary care including preventive care.
Providing the most sophisticated tertiary health care for all is a pipe dream. Look no further than medicare and its skewed cost levels by disease driven by technological improvements in the disease. Tertiary care burden would have to be shared by consumers increasingly and better choices as to who gets what on tertiary care must be made.

Posted 11 March 2009, 18:52 by GK Kannan
‘Is it possible to provide adequate care to all?’

I would rather ask: How do we provide adequate care to all?

Posted 11 March 2009, 16:58 by Sandra
This discussion is very interesting, and I think it’s noteworthy that programs that promote healthy lifestyle in exchange for a firm commitment from the patient to adhere to the program’s goals, do in fact exist in some modern countries (for example – Israel), and do generate success. Healthcare providers understand today that such measures, although costly, prevent future morbidity and mortality, which is the key driver of health related spending, as mentioned in the article. Patients do respond well to such initatives, and patients who do not adhere to the program’s milestones get dropped out.

Posted 9 March 2009, 06:54 by Yair Erez
Interesting idea that health care responsibility could be reciprocal. Conventional allopathic medicine has always been “move away from” rarely “move toward”. Move away from pain, move away from disease; only the non-conventional providers have been advocating moving toward health and fitness.

Promoting healthy living seems intuitive but why is it that the insurers actually don’t see an adequate ROI in funding preventive medicine? Smoking cessation funds come from tobacco sales primarily. I don’t want to suggest nefarious reasons, yet the insurers have the data. Does the smoker or obese individual die sooner in those costly last six months?

What would the authors suggest if the individuals do not act responsibly and continue to live an unhealthy lifestyle? What are the consequences and how is that different than now?

We all know that something has to change and the uninsured/untreated have to be brought into the system. Incentivizing the physician through pay-for-performance is rebuked because it brings in more regulations. In a recent Healthleaders’ Media survey of healthcare executives, physician leaders, and insurers, the biggest cost driver of healthcare was seen as government regulations.

I believe, as do my clients, that we have to get away from this cost-shifting nightmare we are involved in now and become inclusive, accountable, and patient-centered. We ask ourselves, what has to change to bring real value to the patients yet become inclusive? Other than momentum, why do we like the current system? And, who is the real healthcare customer – the physician or the patient?

Posted 4 March 2009, 14:56 by Michael Cylkowski
I agree with the opening essay and William Resnick’s comment.

We have an unprecedented opportunity to re-orient the healthcare system from “disease” to “wellness.” As this crisis in the current state escalates, the motivation and public will to witness transformational change increases. Hopefully, this will result in an appreciative perspective towards positive health for all (although disease mitigation and management will also need to be a part of that scenario), including accountability by the economics of the system and by every citizen.

Interesting discussion!

Posted 2 March 2009, 16:20 by Larry Hiner
I agree that providing healthcare for all is in fact feasible. I also agree with Paul and Nicolaus that there must be fundamental, actually radical shifts in accountability across the entire health care spectrum, including the insured. For example here are few ideas I believe would be a great starting point to accomplishing this lofty goal:

Promote and hold Americans accountable to live healthier lifestyles. Mass communicate the benefits and the negative effects of not living a healthy lifestyle at both the personal and financial level

Mandate accountability at the employer and insurance company level to include and track preventive care screenings and health education

Require members with disease states/health conditions to participate in targeted programs or face reduction in coverage

Hold health care providers accountable for quality outcomes and offer remuneration for educating and increasing participation and awareness (today doctors are paid to treat sick people not to keep them healthy) to promote and provide preventive care

I’m extremely passionate about health care reform and if I can be of any further assistance please let me know.

Posted 1 March 2009, 17:31 by William Resnick