Why Not More Innovation in Health Care?

I have often wondered why innovation is not more common in American health care. This wonderment goes back to my 2007 book Innovation-Driven Health Care (Jones and Bartlett).

There are many reasons:

1) American health care is the most heavily regulated industry on the planet, and it is hard to move off the dime without being second-guessed or having your idea handcuffed or canceled because it gores someone’s ox.

2) American health care is dominated by third parties who have a vested interest in maintaining the status quo.

3) American health care has been on an unprecedented and successful run on the bank, growing to 17% of GDP, so why change?

But we must change. We can no longer sustain the cost growth, and state government, national government, and employers can’t pay for it anymore. Add to that American health consumers who are mad as hell at the costs, fear medical bankruptcies, and are worried they will not longer have access to doctors or hospital care, and you have a crisis calling for reform.

One way out of the crisis is government intervention. Another is innovation that lowers cost while raising quality while abandoning old ways of doing things. This is not something government does well, if at all. The government never abandons anything, for it always has “constituents” it must please. These constituents make it almost impossible to think “outside the box.”

Take the case of Medicare, which has 47 million constituents. The new law sets up a Medicare "innovation" center that will oversee a series of demonstration projects – bundled billing between hospitals and doctors, accountable care organizations, medical home, pay-for-performance, comparative research, managed care, electronic health records, coordinated care.

All of these projects are, regrettably, “inside”the Medicare box. All will require federal agencies to credential, standardize, regulate, and endless paperwork to account for every dollar expended.

Each participant in these projects, these show trials, will have to qualify for Medicare reimbursement. They will, in other words, have to be overseen by Medicare accountants, auditors, regulators, and politicians. This is not bad. It is the nature of the Medicare beast – and of government.

True health care innovation, on the other hand, almost always occurs outside of government, often among patients themselves, and often outside of health care itself.

In two recent blogs, John Goodman, the father of health savings accounts, gives these examples.

• “There are more than 1,000 walk-in clinics spread across the country today — posting transparent prices and delivering high-quality, low-cost services;

• Whole businesses have been created to provide people with telephone and e-mail consultations because third-party payers wouldn’t pay for them;

• Mail-order pharmaceuticals are a huge and growing market — one which emerged to offer price competition to consumers who buy their drugs out-of-pocket;

• Wal-Mart didn’t introduce the $4-a-month package price for generic drugs in order to do a favor for Blue Cross. It is catering to customers who pay their own way;

• Concierge doctors are also providing patients with innovative services — services that health insurers don’t cover.”

Goodman’s point, which he has made many times, is this: free patients, doctors, entrepreneurs, and businesses, large and small, from shackles of third party regulation and reimbursements, and they will lower costs and increase quality.

If we want more health care innovation in the United States, we must encourage and set free new arrangements, outside of government and existing private health plan arrangement, like health savings accounts and direct payment between doctors and patients, that give patients more control over their health care dollars.