Ringing in the healthcare-reform debate

(UPDATED: See below.) Ever since the Clinton health plan went down in flames 13 years ago, discussion of significant reforms to the U.S. healthcare system has been largely academic. Until now.

Suddenly, serious talk about the ills of U.S. healthcare — and what to do about them — seems to be everywhere. Democratic presidential candidates are falling over themselves to propose their own reform plans (see the Clinton plan, the Edwards plan, and the Obama plan at the links). A slew of recent books on the subject have hit the shelves over the past year, and of course Michael Moore’s new documentary Sicko is on its way. Perhaps most significantly, the mainstream media is starting to dig into the subject with increasingly tough stories on the underlying structural problems of the healthcare system and their consequences.

The big problems, of course, are easy to tick off. Healthcare costs continue to rise unchecked at a rate of more than 10 percent a year, more than four times the inflation rate. Higher costs are perhaps the single biggest reason the number of uninsured Americans — 44.8 million, or 15 percent of the population — continues to rise. Worse, rising costs are also eroding the system of employer-provided health insurance. Not only are businesses finding it increasingly expensive to provide insurance to their employees, but workers with health problems — who can face serious obstacles to obtaining individual insurance — appear to be more likely to take jobs at employers with generous health plans, which drives up costs at those businesses even faster. The natural response: Employers either force employees to pay a larger portion of their premiums or cut back healthcare benefits — or both. (For a good summary of these issues from a reformist perspective, click here.)

One reason costs are high, obviously, is that advances in medical technology and procedures allow doctors to do more and to do it better, but at a price. That’s one major reason that venture investment in biotechnology and medical devices is at an all-time high. On the other hand, there’s plenty of evidence that we’re not getting the biggest bang for our buck with all this spending. For one thing, the fragmentation of the U.S. healthcare system into competitive fiefdoms of insurers, hospital chains and medical practices — that is, doctors — is stunningly inefficient. For another, a number of medical-outcomes studies suggest that many of the most expensive procedures often do very little to improve patients’ health or quality of life, meaning that a lot of this spending is effectively wasted. Overall, in fact, the U.S. spends close to twice as much on healthcare as a share of GDP compared to other industrialized nations, yet produces worse health outcomes by (admittedly rough) measures such as infant mortality and life expectancy. (See this 2006 OECD data — it’s a PDF file — for details.)

So, what do we do about all that? Some reformists favor a much larger role for government in healthcare, as is the case in most, if not all, other OECD countries. Whether the government takes over the system completely or simply extends a program like Medicare to the entire population, such a change would heavily restrict the role of private healthcare insurance and would likely impose serious cost controls. Another group of free-marketers argue for a concept called “consumer-driven healthcare,” in which consumers shoulder responsibility for a greater chunk of their own healthcare spending, theoretically driving down costs by being more parsimonious and by shopping for the best deals. (Universal coverage is possible under either plan, although how acceptable it will be and whether anyone can afford it are separate questions.)

Although I’ll do my best to be fair to both sides — and to any others that might emerge as I dig deeper — I should say up front that my own sympathies tend toward a government intervention of one sort or another. The evidence of the last 40 years — there’s a very helpful summary in Maggie Mahar’s excellent book, Money Driven Medicine, which I wrote about briefly in an item here — suggests that market forces not only don’t work, but may actually be counterproductive, in much of healthcare. Sick patients are generally in a terrible position to bargain with doctors and insurers over procedures and fees — often enough, they’re confused, ill or injured, and in need of relatively immediate treatment, all of which gets in the way of comparison shopping. What’s more, as Mahar notes, many medical decisions tend to be supply-driven. When new medical technologies are available, doctors and patients tend to use them, regardless of their cost and frequently even without firm evidence as to how well they work. It’s hard to imagine how “empowering patients” will do much to change that, although it’s one of the issues I hope to explore. (It’s also worth noting this recent WSJ article, also cited below, on what may be an emerging backlash against consumer-driven plans.)

Why go into all this here? Two reasons, basically. First, the political momentum for major changes is clearly building — you don’t have to look farther than the universal-coverage plans in Massachusetts and California to see that. Biotechs and medical-device companies could be some of the first hit if reforms include any sort of overt cost-control measures, as I suspect they ultimately will. In fact, about three weeks ago Amedica, a medical-device company in Utah, listed “healthcare reform” among the risk factors to its business when it filed for an IPO — the first time I’ve ever seen that. (I wrote about it here.)

Second, outcomes research and life-science ventures might well be part of the solution. I may be a skeptic about consumer-driven healthcare, but many VCs believe in it fervently and have funded businesses to drive it forward. Medical IT businesses can contribute to the digitization of medical records, which could do a lot to prevent medical errors and encourage specialist cooperation. Similarly, it’s possible that medical breakthroughs such as personalized medicine or new treatments that actually cure chronic diseases like diabetes or arthritis could bring costs down. I’ll believe it when I see it, but let me dream.

My third reason is more personal — it’s that I find the subject fascinating and critically important for millions of Americans. I’ve touched on the debate a few times already, although often somewhat obliquely, with earlier posts on evidence-based medicine, Andy Grove’s prescription for U.S. healthcare, and a roundup item on Health Evolution Partners, a private-equity fund ostensibly devoted to reducing healthcare costs. Watch this space for more.

Let me leave you with some recent examples of the attention healthcare-reform issues have drawn in the mainstream media. A recent NYT special section on “The Business of Healthcare,” for instance, featured several very good stories on subjects near and dear to my heart: Steve Lohr on the expense of electronic health records and the economic disincentives that face doctors who try to adopt them; Alex Berenson on how healthcare economists measure the value of medical treatments; Andrew Pollack on how biotech drugs are manufactured and how that plays into the biogenerics debate; and Matt Richtel on the flood of venture money headed into medical devices. The whole section is worth a read, although the NYT doesn’t seem to have “bundled” it together online the way it arrived in the print edition a few days ago.

Meanwhile, the SF Chronicle’s David Lazarus recently laid out the political strategy behind attempts to extend universal healthcare to Californians, while the WSJ explained recently how the Massachusetts universal-coverage plan came together (subscription required). The Boston Globe’s Liz Kowalczyk describes efforts at a variety of hospitals to encourage cooperation among otherwise competing medical specialists. Another WSJ article looks at the issue of medical errors and whether doctors themselves may be responsible for many of the problems associated with artery-unclogging stents.

Finally, two consumer-directed healthcare stories. The WSJ reports that the plans are increasingly unpopular with consumers who’ve enrolled in them, and that dissatisfaction may cause them to “stall out.” Meanwhile, the WaPo references a new study of consumer-directed plans that found they could double — or more — out-of-pocket costs for maternity care.

One glaring exception to this run of generally excellent stories is this Steven Pearlstein column in the Washington Post, which somehow manages to blithely conclude that:

[J]ust about every important interest group acknowledges that today’s health-care model is politically and financially unsustainable, that universal coverage is inevitable, and that everyone is going to have to accept major changes in how they do business and how things are priced and paid for.

Really? From my perspective, just about every special interest in the field — insurers, hospitals, doctors, pharma/biotech companies, and other associated hangers-on — still seems to be holding out for the best deal it can possibly cut for itself. If there’s an emerging consensus among these players on the inevitability of reform, they’ve been awfully quiet about it.

Let me also lay out some older links to Web-based commentary and debates that I compiled when I first thought about writing this item almost two months ago. (I put it off to better educate myself on the subject.) Sorry if these are a bit musty, but I figure it’s better to put them out later rather than never. As I get deeper into this, I’ll post some fresher stuff.

The New Republic, for instance, recently hosted a high-toned debate between TNR senior editor Jonathan Cohn — author of a new book on the human costs of the U.S. healthcare crisis — and Manhattan Institute fellow David Gratzer, who has previously published his own free-market take on healthcare reform. Cohn kicked things off with an article-length summary of his book’s American-healthcare critique; for the debate itself, it’s probably best to click here for the final installment and then use the top-of-page links to get to the earlier rounds (TNR’s new Web design, alas, doesn’t seem to be big on navigational aids).

Cohn also debated another consumer-driven healthcare advocate, Michael Cannon of the Cato Institute, at a forum provided by the Kaiser Faily Foundation. You can watch the video, download a podcast or just skim a transcript of it here.

Over at the Economist’s FreeExchange blog, one of the magazine’s anonymous correspondents has taken on a legion of commenters over several common — and, in his or her opinion, wrong-headed — reasons frequently offered in support of switching over to some form of government-run universal healthcare system. Among the Economist’s complaints: “me-too” drugs are nothing of the sort, pharma’s marketing costs are irrelevant to the broader healthcare debate, and medical innovation could easily suffer if reforms end up forcing down prices of medical products and services.

Elsewhere in the blogosphere, Merrill Goozer critiqued the fears that reform will crimp innovation at his blog GoozNews in this recent post. Other, somewhat older commentary, is offered by Matthew Holt (here, here and here), Ezra Klein, Uwe Reinhardt, and Robert Laszewski (hat tip to Jason Shafrin of the Healthcare Economist blog for several of these links).

If you’ve read this far, you clearly care a fair bit about this issue. Let us know what you think in comments.

UPDATED: I’ve written through the item to correct a number of awkward wordings and other minor errors I should have caught the first time around.