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How the “Fixes” to our healthcare system are actually destroying it
Keywords: healthcare reform, Obamacare, PQRS, healthcare quality, affordable healthcare
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Ben Agar
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Abstract:

There is an intense debate about reforming our "dysfunctional" healthcare so that it again becomes affordable and retain it's "high quality". After several decades of meddling by policy-makers and powerful lobbyists for middlemen (drug companies, insurance companies, hospital associations etc), healthcare has become increasingly dysfunctional and progressively more un-affordable. It is so bad that now even the upper middle class finds it difficult to afford healthcare. The horrible track record of policy interventions by the "well-meaning" politicians and economists and the powerful middlemen has not dissuaded another round of "policy interventions" to "save" our healthcare system. The politicians and economists are not in the habit of assessing the results of their policy prescriptions and therefore will not own up to their role in why our healthcare is so dysfunctional and un-affordable. The middlemen who have usurped all the power in healthcare marketplace are now about to kill the goose that lays golden eggs. And the patients and physicians have no say in this and are forced to be onlookers from the sidelines.

'Our healthcare system is broken' has become a buzz-phrase nowadays. And everyone is trying to fix the system including policy makers, economists and business leaders. Economists with 'special interest' in healthcare and some leaders of large and successful business corporations are applying the principles that 'succeeded' in business to healthcare in an effort to deliver similarly improved quality, productivity and efficiency. While I don't (and no one honestly can) disagree that the healthcare system is dysfunctional, I am amused by the prescriptions from economists and business strategists for fixing the problems in healthcare. In my interactions with economists, several of whom are considered experts in healthcare, I was surprised and then dismayed with how little they really know about healthcare and individual incentives of players in healthcare. Interestingly, when these healthcare 'experts' are emphasizing 'evidence based medicine' in an effort to improve healthcare, there is unfortunately 'no evidence' to support their “prescriptions' for improving healthcare.

Healthcare economy is an ecosystem and thereby follows rules, principles and laws of ecosystems. Like all ecosystems, it is complex, robust, and can absorb and withstand a lot of "Healthcare economy is an ecosystem and thereby follows rules, principles and laws of ecosystems. Like all ecosystems, it is complex, robust, and can absorb and withstand a lot of changes. However, the response to any single change is usually not predictable."changes. However, the response to any single change is usually not predictable (even if the 'experts' might have the illusion that it is) and the response is definitely not proportional to the severity of the change or to the number of changes. Sometimes a minor insult can produce dramatic system-wide damage, which cannot be anticipated by any prediction model until it actually happens. On the other hand, several big changes may not produce any apparent damage to the ecosystem, till one day it collapses suddenly.

I don't think there is any disagreement that healthcare should be affordable, be of high quality and easily accessible to all. The only disagreements are about how to achieve that goal. The debates exist only because the effects of any intervention (s) are slow and difficult to measure objectively and certain short term 'fixes' can have just the opposite long term effects and consequences. Before going further, and to put things in perspective, let us look at a big picture of the outcome of various well-meaning government interventions in the healthcare marketplace over the last 50 years. Government intervention largely started with the institution of Medicaid and Medicare programs in 1965 for the sole purpose of making it affordable to the poor and the elderly who had already given their contributed their share to the society. At that time, the American healthcare system led the world and no one used the word 'dysfunctional' to describe it. However, in the ensuing 50 years, healthcare in US has become progressively less affordable so that even the upper-middle class has trouble affording it. "Most present-day economists would agree that the most efficient way to utilize finite resources in a society is by a free market mechanism. Markets can efficiently match providers and patients based on their needs and skills (including skill levels). "In addition, patients have been increasingly disempowered in their care process and their options to choose their physicians based on quality and personality preferences are becoming limited every day; they are finding it difficult and cumbersome to get the tests/surgeries prescribed to them and they routinely have to put up with harassment dealing with the insurance companies, hospitals and even physician's offices when in need of medical care. Our healthcare system is now widely referred to as being dysfunctional, with ballooning costs. It is also widely recognized that the meaningful parameters of health in US are nowhere near the top of the list of other economically advanced countries, though our cost per capita exceeds the cost in all others countries by several fold. Compare this with other fields where free markets exist without significant government intervention. Take, for example, cars, which have dramatically increased in quality since 1965 and yet have become much more affordable. The same has happened within healthcare where free market has had a chance to exist as in the case of LASIK surgery for cataract for which the patients pay out of pocket and is not covered by the insurance. The price of LASIK surgery has progressively declined over last several years while the outcomes have improved. I think that this big picture should serve as a reality check, a reason for 'time out' and for re-calibration of ongoing and future efforts to 'improve' healthcare.

The unregulated, healthcare ecosystem will be (and was) defined by market forces and incentives. Most present-day economists would agree that the most efficient way to utilize finite resources in a society is by a free market mechanism. Markets can efficiently match providers and patients based on their needs and skills (including skill levels). No central planning or prescriptions from economists or strategists are needed for optimal functioning of a healthcare ecosystem if it is left entirely to the market forces.

In functional and free markets, the two most important and influential players are the customers and the providers. In our healthcare marketplace, the patients (customers) and physicians (providers) have been completely marginalized, and the power and influence has shifted to the middlemen (insurance companies, drug companies, the hospitals and now even the government (read politicians)). It is a stark illustration of how the market forces have been completely distorted in our healthcare marketplace. Several of us wonder whether it is even appropriate to call it a 'market' and whose interests are being 'really served' in the present healthcare marketplace.

"Most problems in healthcare can be traced to misaligned incentives resulting from 'rules and regulations' that distort the free market incentives in healthcare."Most problems in healthcare can be traced to misaligned incentives resulting from 'rules and regulations' that distort the free market incentives in healthcare. That these regulations were designed with noble and good intentions is beyond debate. However, in complex systems such as economy, the outcome of “changes made with good and noble intentions" is not always good. One glaring example of it is the communist system. Back at the time of conception, communism was an experiment in noble thought and behavior in which every individual was unselfish, was not going to own anything and would work for a larger cause than his/her own personal benefit. This idea does work in small and controlled situation since “teams of unselfish sports players" usually win more games/tournaments and unselfish 'teamwork' is valued even in corporate settings. Unfortunately, this great sounding idea which works in small and controlled settings when applied on a larger scale and over a longer duration produced the most inefficient and corrupt economy in the world. We should therefore evaluate the impact of all the changes (big or small) that we make to the healthcare system, howsoever well-meaning they are and even if they have previously worked well in small groups and controlled experiments.

As the economists keep reminding us, people follow incentives and not prescriptions. If we really want to change the behavior of people in a durable fashion, we need to understand their incentives and change them accordingly, to produce the behavior we want. Without changing the incentives, no 'prescriptions' will meaningfully change behavior. Furthermore, it is not enough to change the incentives to modulate the behavior of the individuals in an ecosystem. It is equally critical to study, the overall changes that take place in the ecosystem as a result. It is possible (and often quite likely) that overall change in ecosystem is far less desirable or even totally undesirable. In ecosystems, reversing the damage from change(s) is not as simple as just reverting back to previous individual incentives (there are no 'Undo' buttons). Thoughtful leadership in well managed companies such as Toyota, has a practice of asking “Why" five times, before even starting to put together the solution to a problem. Unfortunately, people who are prescribing fixes to healthcare don't have the means to understand more than one or maybe two “why's" of the problems in healthcare. In other words, the patient (the healthcare system in this case) is being prescribed strong and potent 'treatment' without carefully and diligently diagnosing the real problem(s).

One wonders when there is so much dysfunction in healthcare, why don't the physicians speak up to define the problems. This is to a large extent because of the professional work environment and restrictions that physicians operate under. All insurance company contracts with physicians have gag clause(s) that prohibits physicians from saying anything publically that will put the insurance company in bad light. It can become grounds for the insurance company to drop the physician from its physician panel. The hospitals also can and do target physicians who speak up and say anything that the hospital administration can deem to be casting any aspersions on the institution. Such physicians are targeted with 'sham peer review' and the physician is then declared to be a 'disruptive physician'. This is reported to the National Practitioner Data Bank (NPDB) and it will preclude the physician from being able to practice medicine thereafter, even in another hospital. The voices of physicians have effectively been gagged. This is a shame, as physicians who can shed the most light about the ground reality that is leading to ongoing and worsening dysfunction in healthcare, are unable to communicate freely. As a result, the policy makers have to make guesses about what the problems actually are and make policy prescriptions based on those guesses. As in most other aspects of life, truth is stranger than fiction and is often beyond what can be imagined or guessed. No wonder most prescriptions to 'cure' healthcare are so widely off the mark and have only confounded the problems rather than solving them.

"The large number of policy pre-scriptions for fixing healthcare, some of them very radical, are looking like a patient’s long list of medications."

"Ironically, the long list of policy prescriptions to fix healthcare simultaneously being applied without adequate study also carry a real risk of causing an 'iatrogenic death' or long-term injury to healthcare."
Fools rush in where angels tread. This is as true when dealing with ecosystems as it is in other aspects of life. The large number of policy prescriptions for fixing healthcare, some of them very radical, are looking like a patient's long list of medications. Though proven beneficial in experiments and small controlled studies, when these medicines are used indiscriminately and along with several other medicines, they can have fatal consequences due to unrecognized interactions (iatrogenic deaths). Such 'medical accidents' are also a target of improvements in healthcare. Ironically, the long list of policy prescriptions to fix healthcare simultaneously being applied without adequate study also carry a real risk of causing an 'iatrogenic death' or long-term injury to healthcare.

A careful look at the previous track record of 'policy prescriptions' on improving economies or ecosystems is also warranted. Unlike healthcare, which most policy makers and economists don't really understand despite their delusions and claims to the contrary, the economists do have a good understanding of a nation's economy. The macro-economic policy prescriptions are largely based on rhetoric about why they should work and not any meaningful evidence that they actually work. Even more importantly, the economists, just like the politicians do not believe in doing a reality check of the outcomes of their prescriptions. Our own economy has been grossly mishandled by the economist think-tanks who advise the government so that our debt is 19 Trillion dollars and increasing, and the interest rates are stuck at below 1% making our economy prone to bubbles just like the housing bubble in 2008. The International Monetary Fund (IMF) and other similar organizations frequently push policy prescriptions for ailing economies in other countries, usually as a pre-condition for providing monetary assistance."To my naïve mind the policy prescriptions are more likely shots in the dark and the economists and the policy makers definitely don't bother to find out or care to see the damage they have inflicted on our" Joseph Stieglitz in his book 'Globalization and its discontents' points to the dismal tract record of IMF and similar agencies in helping ailing economies recover based on 'policy prescriptions'. If the 'policy prescriptions' in fields that the economists know and understand well don't work as hoped, we should carefully assess the potential benefit of such prescriptions in healthcare, which to most economists is like a black box. To my naïve mind they are more likely shots in the dark and the economists and the policy makers definitely don't bother to find out or care to see the damage they have inflicted on our healthcare system.

Physicians have been made the face of everything that is wrong with healthcare. A careful evaluation of incentives will point out the real problem. Physicians, besides being the public face of healthcare are also responsible and accountable for quality of care. Most people would agree that delivering higher quality of care requires more expense for the higher pay of high quality personnel, more time and superior quality equipment. Since the payment for the service both to the physicians and the hospitals is set irrespective of the quality of service, all expense on higher quality is a non-reimbursable expense and will hurt the bottom-line of the hospital. Since the hospital CEO is incentivized and rewarded for higher profits but has no accountability for the quality of healthcare, it sets them up in a conflict of interest with the physicians. The physicians are responsible and accountable for quality but do not have the requisite power over personnel or control of resources, and the CEO who is incented to maximize profits by minimizing non-remunerative expenditure on quality and is not accountable for quality. Guess, who wins and what happens to quality of healthcare delivery despite very vocal claims to the contrary.

The incentives of 'experts' who are trying to reform healthcare need examination too. The economists, business leaders and policy makers involved in fixing the healthcare can shrug and walk away if their efforts are unsuccessful even if their prescriptions and attempts result in lasting damage to the healthcare system."The payers in healthcare have legitimized this practice of 'low-balling' the patients with their fee structure." People who are completely vested in healthcare include physicians and nurses (providers) as well as their patients (consumers). The vast majority of physicians have no alternative but to continue practicing medicine no matter how dysfunctional it gets. They have to accept the lower payments for their services even though the payment to see a patient in clinic may be less than a plumber receives for his services lasting a similar time.

The worsening dysfunction in healthcare has lowered the earnings of most physicians and made the practice of medicine less satisfying, less rewarding and less enjoyable. Still, physicians are blamed for all the dysfunction in healthcare. I find this situation akin to the mortgage crisis a few years back when the 'homeowners' greed' was widely blamed for the crisis, even when the homeowners were the biggest losers while others (executives in the financial institutions) were the only gainers, having received huge bonuses that resulted from that bubble even when their own financial institutions collapsed from the crisis. Similarly, now physicians are being blamed for following their incentives even though those incentives are not set by them and the resultant physician behavior benefits others far more. Consider a physician who gets paid 50 dollars to see a patient for 30 mins in the clinic (less than a plumber or an electrician for the same amount of time) and who could make another 250-1000 dollars for equal amount of time performing a procedure or surgery on this patient. What do you think would be the most important consideration in the mind of this physician? Like any rational person, the physician would be strongly motivated to find a reason to operate on this patient."You cannot hope to improve the biologic ecosystem in a lake by throwing a large amount of pesticide in it (no matter how 'advanced or sophisticated' the pesticide is) and hoping that this will result in a better biologic ecosystem inside the lake." In fact this would be an example of the low-balling techniques used by several businesses including unscrupulous car dealers, where the customers are lured by an offer of a service at ridiculously low prices in the hope of generating higher paying business from the customer. The payers in healthcare have legitimized this practice of 'low-balling' with their fee structure. These same payers don't tire of pointing it out as an example of “physician's greed" even though the physicians are only following the incentives set for them by the system. What is however not mentioned is that performing procedures also generates several thousand dollars of revenue for the hospitals, medical device makers, drug companies and other financially and politically powerful players in healthcare, who can and do influence the quasi-political process of setting fees for physician services. Making a physician 'revenue neutral' by paying him a 'decent' fee for solving a patient's problem without having to perform the surgery, would save much more money for the system without decreasing the quality of care (actually it might go up without unnecessary or marginally needed surgeries). Physicians, like professionals in other fields, should be able to earn a decent living by doing what they judge best and were trained to do, i.e. solving a patient's medical problems. This is in the best interests of the society and also the physicians.

Numerous more such paradoxes exist in our healthcare system. Most of these paradoxes have resulted from well-intentioned changes made to the healthcare and some to accommodate the interests of powerful 'middlemen'. Before a radical make-over of the healthcare is implemented, I would think it would make more sense to get to the bottom of the problem and identify its drivers. Most ecosystems do not 'improve' with outside interference. Changes imposed on ecosystems from outside interference almost invariably damage them. You cannot hope to improve the biologic ecosystem in a lake by throwing a large amount of pesticide in it (no matter how 'advanced or sophisticated' the pesticide is) and hoping that this will result in a better biologic ecosystem inside the lake. Restoring a distressed ecosystem usually involves identifying the underlying problem that is causing the distress, and then rectifying it.

Correcting the misalignments in the incentives of the players in our healthcare system is likely to be more successful than punishing them for following their incentives, howsoever misaligned and faulty those incentives are. The ever growing volume of regulations and rules in healthcare is becoming reminiscent of the volume of rules and regulations in communist USSR to guide what will be produced in the factories and farms and how it will be distributed and priced. Despite all the regulation and resources allocated for its planning, the stores in communist USSR were usually empty. This is in contrast to the US where the 'free market economy' obviated the need for such elaborate rules and regulations and yet had sprawling and fully stocked supermarkets with affordable and high-quality products.

"In my mind, loss of this volume of clinical experience and expertise would surely rate as one of the biggest losses of intellectual capital to our society"Medicine is a field where knowledge is acquired/transferred over a very long period- about 10 years of medical school and subsequent training and usually another 4-5 years of guidance from senior mentors. Even after that, the physicians don't stop learning and become better at clinical problem solving in the latter half of their careers. Knowledge transfer to the next generation of physicians does not happen just with the books- it is more from working alongside senior experienced clinicians, participating in managing patients together and in case discussions. Physicians usually peak in their capabilities between 55 to 65 years of age. In the past few years, several accomplished and skilled physicians, especially those with highly specialized skills have decided to retire or have taken/forced to take roles where their core skills and experience is grossly under-utilized. In my mind, loss of this volume of clinical experience and expertise would surely rate as one of the biggest losses of intellectual capital to our society. The consequences of such a loss would be felt for a long time and make it difficult, if not impossible for our healthcare system to recover if and when there is general recognition of the consequences of 'fixing' the healthcare economy.

In conclusion, I think that it is about time we took stock of the effects of changes and policy prescriptions on the healthcare over the past 50 years. It is easy for the policy makers to get caught in the fallacy that they can fix a complex system like healthcare with policy prescriptions. Because of this fallacy, they keep trying harder and harder with similar but “improved" prescriptions to get the “desired results" even when their prescriptions have so far yielded the opposite results. Healthcare ecosystem relies on complex networks in its delivery. Several recent policy changes have completely disrupted these networks, which will likely produce lasting or at least long-term damage to our healthcare system. If our healthcare has become dysfunctional and unaffordable, it is important to understand the reasons behind it. Blaming physicians for being greedy and patients for having a 'sense of entitlement' only highlights the ignorance of the policy makers about the real problems underlying that type of behavior. I have highlighted a few contradictions and misalignments of interests/incentives in the preceding discussion. There are numerous more. A close evaluation of these conflicts would reveal that most of them result from much smaller number of "changes" imposed on our healthcare system. Careful mapping of these conflicts and incongruence of individual incentives in healthcare could help identify real solutions to the present dysfunction in healthcare, and correcting them might hopefully restore our healthcare system to its glory days.

 

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Anesth47378

I love this article. You are funny and spot on.

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Sanders98948

Interesting. But too long :-) I like the insecticide analogy. Looks like we are are screwed now. This healthcare fiasco will never get straightened.

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Debbie32818

Very insightful. Just tell me how complicated healthcare is.

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