Thursday, May 28, 2009

Goverment vs. market reform, use and misuse - Collectivism, Individualism, and Data-Driven Cost Control

It is not possible to draw a hard-and-fast line between individualism and collectivism. You cannot draw it either in theory or in practice. That is where the Socialist makes a mistake. Let us not imitate that mistake. No man can be a collectivist alone or an individualist alone. He must be both an individualist and a collectivist. Collectively we light our streets and supply ourselves with water. But we do not make love collectively and the ladies do not marry us collectively.

Winston Churchill, 1906

Much of the health reform debate swirls on collectivism versus individualism. To hear partisans on both sides tell their stories, there is no middle ground between socialism on the left and laissez-faire capitalism on the right. The truth is, of course, that the United States has, and will always have, a pluralistic health system featuring both public and private plans.

What the debate is about is a balance between the two. That’s what the folderol is about between the collectivists’ proposal to have a public plan, with a huge built-in constituency and the federal treasury as a financial fallback competing with private plans, against the private sectors pleas to award patient responsibility and physician entrepreneurship.

Both sides naturally talk about “freedom” and “choice,” the hallmarks of individualism. That’s why the conservative stoutly maintain that effectiveness research will result in bureaucrats, not doctors, deciding what care you will get. That’s why President Obama uses this language.” If we want to cover all Americans, we can’t make the mistake of trying to fix what isn’t broken. So if you have insurance you like, you’ll be able to keep that insurance. If you have a doctor you like, you can keep that doctor. You’ll just pay less for the care that you receive.”

Under any federal plan, you will pay less, in the short run.. That’s because Medicare pays doctors and hospitals 20% to 40% less, $89 billion less each year, than the private sector pays. That’s because Medicare has $34 trillion in unfunded benefits for Medicare beneficiaries that will come due in the future. And that doesn’t include Medicaid. Add Medicaid in, and the unfunded benefit cost goes up to $52 trillion.

Reducing Public and Private Practice Variation

One way backers of more government intervention propose to control costs is to reduce practice variation among Medicare recipients and then for the under 65 crowd, lowering practice variation among health plan members. The root idea is to equilibrate payments in “high spending regions” to payments in “low spending regions.” And on the private side, to bring the “most expensive physicians” in line with “least expensive physicians,“ assuming of course they have the same outcomes. The result, according to the Dartmouth Group, is that we can reduce overall spending by 30%, and use the money “saved” to cover the uninsured.

This lovely idea is “data-driven.” It is claimed (no pun intended) you can use claims data, to prove the variations are “unwarranted” and driven by overuse of resources by hospitals and doctors. Data is compelling because data is “neutral” and because it can be effectively used to show that inexplicable variations exist and can be deployed to induce expensive providers to lower their charges and to do what is right and rational for the collective good. If, in the process, it embarrasses the over-chargers or makes them swing to the lower branches of cost, that’s good too because abusers deserve to be exposed.

If you would like to read a beautifully written explanation and justification of the 30% solution, I invite you to read Dr. Atul Gawander’s report in the June 1, 2009 New Yorker, “Annals of Medicine, the Cost Conundrum, Expensive Care Can be Harmful, What a Texas Town Can Teach Us about Health Care”

Dr. Gowanda compares the expensive and practices of doctors in McAllen, Texas, against those of the Mayo Clinic, and says, sadly, “In the war over the culture of medicine – the war over whether our country’s anchor model will be Mayo or McAllen – the Mayo model is losing. In the sharpest economic downturn that our health system has faced in half a century, many people in medicine don’t see what they should to the hard work of organizing themselves in ways that reduce waste and improve quality if it means sacrificing revenue.”

In other words, in Dr. Gawander’s opinion, physician individualism is winning out over the collective societal good.

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