If Reform Doesn't Make The Industry Angry, It Won't Work

If Obama and Congressional Democrats make a lot of people in the healthcare industry angry, their healthcare reforms might not pass. But if they don’t make a lot of those people angry, it won’t work. It’s really that simple.

As the letter that six industry groups sent the President yesterday makes abundantly clear, they’re not prepared to go beyond pious platitudes in carrying out their pledge to shave $2 trillion off of health care spending in the next 10 years. Representing physicians, hospitals, insurance companies, device makers, pharmaceutical companies and health workers, the groups proposed old standbys like health information technology, quality improvement, administrative simplification, better chronic disease care, and health promotion as their solutions to the cost crisis that grips health care and our nation.

To be fair, President Obama offered similar panaceas during his election campaign, and he has pretty much allowed Congress to carry the reform ball since he took office. His new campaign to promote reform is still pretty limp. In an online op-ed piece today, Christina Romer, chair of the President’s Council of Economic Advisors, cited a report by the council showing that health care is on unsustainable path (which we all knew). So what’s the solution? “The administration and health industry leaders have pledged to work toward a goal of reducing health care cost growth by 1.5 percentage points per year.” That’s great! Break out the champagne! But how are we going to get there?

The Democrats’ inability to answer that question has opened them to a Republican counterattack. “This report [by the Council of Economic Advisors] is nothing but smoke and mirrors,” said House Minority Leader John Boehner in a statement. “Everyone agrees that reducing the cost of health care would benefit our economy, but the Administration hasn’t offered a credible plan to do so without raising taxes or rationing care.”

Unfortunately, he’s right.

So let’s get real, Democrats. The industry’s representatives are only going to make nice with you in return for something that they want. And what they want is to maintain the status quo as long as possible. As health economist Uwe Reinhardt once told me, the people who say that U.S. healthcare is a non-system have got it all wrong. “It’s actually one of the most finely honed systems in the world. It’s like a Mercedes Benz. Its purpose is to maximize the amount of money that can be sucked out of the rest of society. And it does that with uncanny efficiency.”

Clearly, the industry is running scared. That’s why hospitals and doctors are suddenly pledging to cut costs and rein in overuse of services. That’s why the insurers are offering to cover everyone without considering their health status. That’s why drug manufacturers and device makers are willing to support comparative effectiveness research (albeit with strings attached). So, instead of compromising with them, now is the time to whip them into shape and, in the phrase of blogger and healthcare consultant Robert Laszewski, “sweat the 30 percent” of waste in the system out of the providers and insurers.

It’s not going to be easy. The attainment of that goal—or even the more modest one of reducing cost growth by 1.5 percentage points—requires a fundamental restructuring of the health care financing and delivery system. There are a number of proposals to do that, and they all require much greater government intervention than anything now on the table. That doesn’t necessarily mean switching to a single-payer system—which wouldn’t, by itself, address the key problems in healthcare delivery. But at a minimum, we need to organize providers into larger business units or networks, put primary-care physicians in charge, and give physicians financial responsibility for the care they order. If we do those three things, we will save enough to finance comprehensive, universal health care and slow health spending growth to a pace that we can afford.

Of course, this will make many people unhappy. But those aren’t the millions of people who are uninsured or who are insured but still can’t pay their medical bills. And they aren’t the millions of other people who are being put out of work as our economy buckles under the strain of unaffordable health care. Let’s get real now, before the situation gets any worse.

 

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