Andy Grove’s placebo pill for U.S. healthcare

Having survived prostate cancer and now facing a mild form of Parkinson’s disease, former Intel chairman Andy Grove has turned his analytical eye on the increasingly dysfunctional U.S. healthcare system.

Unfortunately, his recommendations are disappointingly small-scale and reflective of the inordinate faith that many high-tech aficionados place in technological “fixes” for complex social phenomena. I’ll explain why in a moment.

To Grove’s tremendous credit, he argues in a recent interview with Wired News that the most pressing issue facing the U.S. healthcare system is the growing number of uninsured Americans — 44.8 million, or nearly one-sixth of the population, according to the latest Census Bureau data — and the subsequent stress that treatment of the uninsured puts on the nation’s emergency rooms.

As he says:

As the population ages, people are being thrown out of the insurance boat at a faster and faster rate and it’s the forgotten part of medicine.

We have the Human Genome Project, personalized medicine, war on cancer, CyberKnife, stem cell research on one hand — no doctor to be found or to take care of your sore throat on the other. That’s a pretty ugly picture. It’s pretty ugly today but it’s going to be uglier five years from now.

Now Grove is one of the smartest people around, and it’s refreshing to see him diagnose the failure of U.S. healthcare so succinctly. It’s equally hard to argue with his preference for breaking this hairball of a problem into manageable chunks while favoring “doability as opposed to desirability.” And, of course, the Wired News interview may not have fully captured the depth of his thinking on the subject.

That said, Grove’s proposed solutions strike me as so much whistling past the graveyard. At best, his ideas might improve access to healthcare on the margins, but without really addressing the plight of the uninsured, the breakdown of employer-provided insurance or soaring healthcare costs. At worst, they might even aggravate some of the trends he deplores.

Starting from the top, Grove dismisses the notion of universal health care on the grounds that it would disenfranchise insurance companies and that no one knows exactly how to bring healthcare cost inflation under control. No one doubts that insurance companies would fight any plan that threatened their role in the system, although Grove doesn’t acknowledge that some universal-coverage plans envision a prominent — in some cases, even central — role for insurers. (Whether that’s a good idea or not is a subject for another day.)

As for his second point, there’s no shortage of ideas — good, bad or indifferent — for cost control, such as allowing Medicare to bargain down drug prices or limiting the use of costly, intrusive and frequently wasteful medical procedures on elderly patients near the end of their lives. What’s more, most other industrial nations have already implemented some form of cost control, which helps account for the fact that their per capita healthcare spending is so much lower than in the U.S.

Instead, Grove favors tinkering around the edges of the system. He suggests that “retail clinics” — essentially nurse-practitioner-staffed outlets in Wal-Marts or drugstore chains designed to handle everyday ailments quickly and without fuss — might be a “disruptive technology” that could solve the emergency-room crowding problem. For instance, Grove says:

There is an incredible need of medical help for the 70 (percent) or 80 percent of medical care that is routine … where the diagnosis is straightforward and treatment is basically codified. They are conveniently located to where people live or shop or show up for emergency care. And by concentrating on effective delivery of standard care, they can do it conveniently but also much less expensively than doing the standard production. That’s the complex manufacturing logic…. You wouldn’t think about building a toy on the same production line as putting up airplanes. The factories will be different and the cost structure will be different.

Well, retail clinics are certainly on their way, so we’ll presumably know soon enough if they can lower healthcare costs by treating large numbers of people cheaply and effectively. On the other hand, the major problems facing the uninsured have less to do with the inability to see a doctor when they have the sniffles than with the crippling hospital bills they can face after a severe accident or the onset of an unexpected health problem like heart trouble or diabetes.

What’s more, some experts already worry that the spread of these clinics might further erode the financial health of community hospitals by drawing off healthier — meaning “cheaper to treat” — patients. Hospitals tend to subsidize care for the uninsured by charging higher prices to insured patients. If healthier insured folks take off for retail clinics, that means less money to cover expensive conditions of the uninsured that no clinic can touch.

Furthermore, the bulk of U.S. healthcare spending covers the treatment of a minority of chronically ill and typically elderly patients who won’t be candidates for these clinics in the first place. Here, Grove has another solution: Advanced sensor and communications technology with which to wire up the homes of the elderly. This would allow them to stay home, with medical personnel monitoring them remotely and reminding them to take their meds, instead of moving to long-term care facilities. So far as it goes, that vision is laudable and humane — assuming, of course, that you’re willing to overlook exactly how long the tech industry has been promising us the sort of “ubiquitous computing” that would be necessary to make it work. According to Wired News, Grove estimates that shifting one-fourth of the nursing-home population back home could save $12 billion a year.

Let’s extend the benefit of the doubt and assume that those savings are net of the expense of building out this information infrastructure in the first place. They’re still a drop in the bucket compared to the $207 billion spent on U.S. long-term care in 2005, according to Georgetown University’s Long-Term Care Financing Project. (Of that, $130 billion went for nursing-home care, the rest for home care.) Unless there’s something very screwy in the numbers here, the overall cost impact of wiring up seniors’ homes seems likely to be negligible.

Grove’s final idea is another technological fix — standardized, Web-based electronic health records that any doctor could access once a patient “unlocks” them. Once again, assuming it satisfies relatively straightforward privacy and reliability concerns, there’s nothing at all wrong with this idea. Theoretically, at least, electronic health records could promote cooperation between medical specialists, reduce medical errors and improve the long-term health of patients via better preventive care.

At the moment, however, few players in the healthcare system have a financial incentive to implement such a system, which is one of the main reasons it doesn’t yet exist. Any insurer that invests in an electronic-record system — which, even with off-the-shelf technologies, will generally cost more and work less well than expected — is likely to bear the costs without reaping many of the benefits. That’s because many of its presumably healthier customers are likely to change jobs at some point and move on to competitor health plans, who will then garner any savings. Nor do the competitive insurance and hospital industries have much reason to adopt the universally compatible, Internet-based systems Grove favors, since that would just make it easier for their customers or patients to take their records — and their business — elsewhere. Grove doesn’t even seem to acknowledge these fundamental adoption issues, much less address them.

Since last November, Grove has apparently offered similar thoughts to a variety of audiences, including a Stanford lecture crowd and my former WSJ colleague Lee Gomes. Which is too bad, in a way, because it suggests to me that no one has seriously challenged his rather glib prescriptions in that time. The healthcare crisis is real and urgent, and we could all benefit from the best thinking of a sharp-witted “rational capitalist” of Grove’s stature. Unfortunately, I don’t think he’s really offered it to us yet.