Government vs. Market Reform - Overcoming Cultural and Political Barriers to Innovations and High-Performance Care

The following appeared on February 5, 2007 in Healthleadersmedia.com and is reprinted with permission

The Mayo Clinic in May 2006 and the Commonwealth Fund in August 2006 recommended similar frameworks for improving health care in the U.S.

Mayo Clinic, National Reform Symposium Recommendations

1. Build public and business mandate for national change
2. Define essential care for all Americans
3. Encourage formation of integrated systems
4. Transparency among systems and physician practices
5. Results-based reimbursement with patient component for incentives
6. Reward consumers for choosing high quality health plans and providers

Commonwealth Fund, High Performance Health System Recommendations

1. Expand universal coverage
2. Implement major quality and safety improvements
3. Work towards a more organized delivery system that emphasizes primary and preventive care that is patient-centered
4. Increase transparency and reporting on quality and costs
5. Reward performance for quality and efficiency
6. Expand the use of interoperable Information technology
7. Encourage collaboration among stakeholders

Narrowing the Reform Gap

What’s striking about these reports--one from a conservative physician organization and the other from a liberal think tank--is their similar goals: coverage for all, patient-centered care, pay-for-performance rewards, market transparency, stakeholder collaboration, integrated systems, and a universal IT infrastructure to make it all happen.

These similarities indicate a narrowing ideological reform gap between conservatives and liberals. Neither report calls for universal coverage financed by the federal government. Both reports recognize the American system is unique. Americans historically embrace a heterogeneous private-public system based on competitive capitalism.

Blending of Private and Public Models

The U.S. health system now blends three models--private insurance with doctors and hospitals, public contracting by Medicare and Medicaid with private and public providers, and public integrated systems like the VA and public safety-net hospitals.

Both reports say a future system will combine and require market and public policy upgrades. The market and the government each have their place.

The market can innovate, respond to consumers, educate them and create efficiencies. Public policies can address information, risk, and access deficits by promoting health, social good, transparency and accountability. Government can set rules, ensure universality and invest in research to improve care, but it cannot deliver care across the board.
Neither markets nor government alone can do what needs to be done.

The Importance of American Cultural Factors

Unfortunately, American culture may impede combined market and government innovation.

For 230 years, American culture has shared these features:
• Distrust of centralized government
• Faith in voluntary individual initiatives, rather than big organization or big government mandates
• Resistance to sweeping obligatory policy changes
• Reluctance to heavily tax the healthy and wealthy to aid the sick and the poor
• Belief in equal opportunities but not necessarily in equal outcomes
• Freedom of doctors to practice in whatever setting they choose, large or small, independent or as employees
• Freedom of hospitals, doctors and patients to engage in voluntary free market, fee-for-service transactions without government oversight
• Belief in the powers of medical technology
• Insistence on immediate access to latest medical technologies
• Willingness to engage in partisan politics to achieve either conservative, liberal or local political goals.

Partisan Politics

Today, partisan politics poses barriers to a high performing system. Everybody knows money and politics are the mother’s milk of systematic health care improvement, but it is considered politically incorrect to say this publicly.

Others have not been so shy about distinguishing between political goals--left and right.

Daniel Patrick Moynihan, the late senator from New York and a liberal lion, explained the political problem this way, “The central conservative truth is that it is culture, not politics that determines the success of a society. The central liberal truth is that politics can change a culture and save it from itself.”

Milton Friedman, the conservative economist, in making the case for competitive capitalism, argues, “The preservation of freedom is the protective reason for limiting and decentralizing government. The great advances of civilization have never come from centralized government but from individual genius, strongly held minority views, and a social climate permitting variety and diversity. By imposing uniform standards, central government could undoubtedly improve the level of performance, but in the process government would replace progress by stagnation and substitute uniform mediocrity.”

And so, the national ideological battle is joined.

Local and Regional Cultural Clashes--the RHIO Rodeo

What politicians seldom mention is intense rivalries among health care stakeholders at regional and local levels. We are, after all, a competitive society. The best recent example of this is difficulties in forming Regional Health Information Organizations (RHIOs).

RHIOs are a grand concept. In theory, they would share data among various regional or local entities, avoid duplication, make patient care safer and more effective, achieve practice efficiencies and render more transparent aggregate costs of the entire cost episode for consumers who now pay a larger portion for their care.

Unfortunately, RHIO stakeholders are “competitors.” As such, they reluctantly share data, lest their rivals learn their costs, strengths, weaknesses and strategies.

Six Forces Driving--and Killing—Health Care Innovations

As Regina Herzlinger has outlined in “Why Innovation in Health Care is So Hard,” Harvard Business Review, May 2006, six forces, all political in one way or another, can drive or kill innovation.

• Stakeholders--Political foes can kill innovation. Examples: “bad-mouthing” by hospitals and physicians of Health Stop, a chain of physician walk-in clinics; certificate-of-need laws blocking physician-owned ambulatory care centers or specialty hospitals; and medical establishment’s condescending criticism of “integrative” medicine.
• Funding--Health care funding may depend on FDA approval, Office of the Inspector General scrutiny, Medicare payment decisions, commercial insurers’ estimate of long-term cost benefits, and doctors’ and consumers’ receptiveness. These funding decisions rest on political lobbying, e.g, device manufacturers attempting to persuade Medicare of safety benefits of implanted heart pacemakers, or lobbying by cancer or physician organizations to compensate providers for colonoscopy screening.
• Policy--Innovation viability tends to be political. Policy-makers have erected a network of regulations to prevent human damage caused by incompetent or fraudulent behavior. Policy-makers are acutely aware almost anything they endorse automatically becomes a niche industry that has the potential of being exploited by health care entrepreneurs or aggressive consumers. These government-based programs generally live on in perpetuity, never to die, never to fade away.
• Technology--Here politics can be a nightmare for innovative entrepreneurs. Timing is everything. Move too early and infrastructure to support innovation may not be place. For example, electronic or personal health records will not take wing until Medicare and commercial insurers reward doctors for IT installations. Another example is the pay-for-performance movement. For P4P to take hold, doctors and hospitals must have electronic health records in place. Move too late and competitive advantage goes away.
• Consumers--Health care consumers are a force to be reckoned with. Consumers belong to AARP, disease associations, Internet “disease tribes,” gray panther organizations, and high deductible health plans. Six million now own health savings accounts. But innovations may hinge on patient privacy issues, doctors recognizing that prompt payment at the point of care speeds cash flow, and hospitals acknowledging that greater price transparency is the key to their futures.
• Accountability--To prove beyond reasonable doubt that innovations satisfy demanding consumers and cost-pressured payors can be a tricky proposition. Are these innovations safe and effective? Do they save money? Are they superior to existing products? For start-up companies, the answers to these questions, which may take years to answer, can be critical to success or failure, as start-ups “burn” through their cash and lose investors.
Overcoming Barriers Depends on Where One Sits

How can one overcome these barriers these political, policy and market barriers? The answers, of course, depend on to whom one talks.

In my 2005 book Voices of Health Reform, I interviewed 41 national health leaders.

Not surprisingly conservatives favored consumer-driven care, health savings accounts, high deductible plans, IT innovations, physician-based ownership initiatives, decentralization of care and a market-based, consumer-driven system. Conservatives maintain consumers are not to be pampered. They are perfectly capable of making the right choices--given enough information and enough transparency.

Progressives, again not surprisingly, favored greater Medicare and Medicaid funding. They regarded consumer-driven care as a temporary ideological “fix” that would not save money, blasted market forces as cost-inflators, and repeatedly said most consumers, particularly the old and the ill, are unable to differentiate care on basis of cost and quality. Progressives predicted the entire system would collapse within a few years after the Bush Administration ended.

Real and Virtual Integration

On both sides, experts are calling for a more organized approach to care through larger integrated systems--both real and virtual. Americans have a penchant for individualism and privacy. Since 60 percent of doctors remain in groups of four less and 75 percent in groups of 10 or less, I predict most larger provider organizations will be virtual. That is, they will be composed of independent physicians rather than salaried physicians working under one corporate roof.

Can We Have Universal Coverage?

Universal coverage is on everybody’s agenda, but can it be done? Some are betting on innovative state programs, such as the ones in California, Massachusetts, Maine, and Vermont. But will other states follow like lemmings over the universal cliff? There are signs Pennsylvania and Illinois are making their moves. Others say individual mandates, as in car insurance, may do the job. All believe universal participation by whatever means--employer, government or individual mandates--will be necessary.

Spurs to Innovation

Adding 47 million uninsured to the market might galvanize innovation. Removing Stark Laws, moratoria on physician-ownership of facilities, and certificate on need laws would also help innovation. Policy decisions, already in existence in Switzerland, a country that requires all citizens to buy insurance and emphasizes consumer-centered care, may provide another answer.

Market-Based Pricing

Basing pricing on performance, better outcomes, keeping patients healthy and transparency may help improve the system by aligning consumer, payor, and health plan interests. The Bush Administration has announced providers dealing with CMS must move towards price transparency. Already 42 states require that hospitals post prices. But moves to make pricing more transparent are going slowly, partly because keeping patients healthy doesn’t pay and partly because changing systems to inform and accommodate consumers, takes time, energy, money and political compromise.

Government Oversight

Whatever evolves, government oversight will be necessary. Herzlinger recommends a Security Exchange Commission for health care because of the uncertainties and abuses of price and quality in a rapidly changing system. Consumers need adequate information, and health care organizations and providers may need financial results verified by an independent auditor.

To sum up, a consensus is growing among various political constituencies that something needs to be done to improve health care. This improvement will require markets to innovate, government to change policies that restrict innovations, more incentives to reward consumers for choosing quality, more rewards for providers to give measurably superior care and larger organized, integrated and coordinated systems of care.