Regina Herzlinger Chroncles

Prelude: I owe a debt of gratitude to Regina Herzlinger, professor of business administration at Harvard Business School and editor and author of Consumer-Driven Health Care: Implications for Providers, Payers, and Policymakers, Jossey-Bass, 2004). On consumer-driven care, she has taught me, the What (consumers spending their own money), the Why (they spend it wisely), the When(now, more people have HSAs than HMOs), the How (HSAs/high deductibles), the Where(Switzerland), and the Who (patients, doctors, and entrepreneurs). She has also taught me government care stifles innovation, imprisons ambitious well educated people), and produces mediocre care lacks dignity for its givers and recipients). Finally, she has honored me by writing the foreword to my book, Innovation-Driven Health Care: 34 Key Concepts for Transformation(Jones and Bartlett, 2007).

August 22, 2009
Government Should Get Back to the Basics on Health Care
By Regina Herzlinger

Those who worry about a growing role for government in health care reform have reason for concern: the government already plays a surprisingly large role in our health care system. Like Thomas Jefferson, the father of the Democratic Party, they may feel that: 'Were we directed from Washington when to sow and when to reap, we shall soon want bread.'

Protecting Us

Normally, the government's role in the sectors that provide us with goods and services is to protect us - by enforcing anti-trust and consumer protection laws, guaranteeing transparency through agencies such as the SEC, and preventing fraud and abuse. It also enables income redistribution, so the poor and disabled can participate in society just like everybody else.

Powerful Role

But the government plays a much more powerful role in our current health system. Through the Medicare and Medicaid programs and state government regulations, it sets the prices paid to providers, determines who is covered for what in its insurance plans, and requires that certain benefits are included in insurance policies. The government of Massachusetts, for example, requires 52 benefits, including in vitro fertilization, a benefit that raises the price of every family's health insurance by $850 or so.

Liabilities – Debt, Degradation, Physician Turnoffs, and Cost-Shifting

It is difficult to conclude that the government has attained terrific results with these expanded powers. Despite the government's regulation of the prices, coverage, and benefits in Medicare, the program has incurred a $38 trillion liability - a sum equivalent to nearly three years of the nation's Gross Domestic Product. The Congress has chosen to underprice Medicare to current recipients (and voters) and to stick our children and grandchildren (who do not as yet vote) with the bill. As for Medicaid, although it is better than no insurance, it is a degrading program for its participants because as many as 40 percent of doctors refuse to see recipients due to its stringent provider payment rates. These physicians are not heartless; but because many are burdened with up to $500,000 in medical education expenses, they cannot afford to see patients like these. Increasingly, physicians refuse to see Medicare enrollees too, for similar reasons. To compensate for the government's shortfall in payments to providers, enrollees in private health insurance have been forced to pay about $90 billion more annually.

Practicing Medicine through Cookie-Cutter Recipes

Increasingly, the government even tells physicians how to practice medicine. The movement, disingenuously labeled "pay for performance," does not reward doctors and hospitals who achieve better outcomes. Instead, it rewards those who follow the government's cookie-cutter recipes for providing medical care. It should be labeled "pay for conformance."

Destroying Physician Autonomy

In my classes in Innovations in Health Care, I meet all too many students who are fully certified specialists in their chosen fields, men and women in their 30s. When I ask them, "What are you doing in this class? Although a business career is wonderful, you are fulfilling God's mission as a physician or nurse." I worry when some respond "I can no longer practice medicine. I have lost my professional autonomy by the intrusion of government into the relationship between me and my patient."

Switzerland, Not U.S. Government, Shows How

Despite these less than stellar results, the current health care reform bills would further enlarge government's functions by having it run "Uncle Sam's Health Insurance Market," in which the uninsured would be required to shop, and even creating a new government health insurance program to compete with private sector insurers. Although the authors of this legislation aver that this combination would control costs so that universal coverage could be attained without breaking the back of our economy, the country of Switzerland has achieved universal coverage and excellent health care outcomes at costs 40 percent lower than ours, as a percentage of GDP, without a public program or government-run market. Instead, ferocious competition among the country's 87 private insurers has driven their general and administrative expenses down to 5 percent, a percentage lower than Medicare's.
The key to Switzerland's success is that it is consumer-driven - people buy their own health insurance. No employers or degrading government programs are involved. Instead, the poor receive money from the government so they can buy the same insurance as the average Swiss. The sick among the Swiss are not discriminated against either - the private insurers reinsure each other so that sick enrollees pay the same prices as the average person.

Power to the People and Proper Role of Goverment

In this kind of consumer-driven health care system, the government ceases its artificial price-setting mechanisms and intrusions into the practice of medicine. Instead, the economic power rests with the people.

To enable it, the Congress should:

- Change the tax laws so that all Americans could buy health insurance with tax-free income, a right currently limited primarily to employers

- Help to create information about the quality and prices of medical care providers

- And transfer money to the poor so they can shop for health insurance like all other Americans.

The government should also vigorously prosecute anti-trust and fraud and abuse.
With these legislative changes, employees could either use the funds their employers now deduct from their income to buy health insurance -about $17,000 for a family - or remain under their employer's plan. The uninsured could also use tax-free income to buy their health insurance.

In this system, the government - senators, representatives, and bureaucrats - will stop practicing medicine and setting market prices. They will get out of the way and let the doctors do the doctoring and us do shopping.