ICYRMI: Six online classics of 21st century history

"ICYMI" generally refers to something written a day or a week ago.  In recent days, I've had recourse several times to Michael Hastings' deeply reported 2012 reconstruction of Bowe Bendahl's upbringing, inner life and military career -- as well as of the negotiations for his release. It would be a mistake to suggest that everything most of us are learning now about Bendahl is in that story, but my sense is that 80 percent of it is.

That set me thinking this morning about other articles, written years ago but still online, that made a strong impression on me and that still resonate. Here's a short "in case your really missed it" list.

America's Sicilian Expedition: in the runup to the 2003 U.S. invasion of Iraq, pundits and scholars analogized the impending war to every conflict in American history, with the possible exception of the War of 1812. Some went further afield. One that struck me as a bit outlandish at the time was historian Simon Schama's essay raising the specter of ancient Athens' disastrous exercise in imperial overreach:

Is there a hole in the heart of U.S. healthcare cost control?

It's a given that the sine qua non of providing universal access to quality healthcare is effective cost control. That's especially true in the United States, where healthcare costs 50% more per capita than in the next most expensive country, Switzerland, and more than twice the OECD average, notwithstanding the fact that the U.S. is the only wealthy country that does not insure all its citizens.

This high-cost starting point is the Affordable Care Act's pre-existing condition, the reality underlying bitter complaints about high premiums for the unsubsidized and narrow networks in exchange plans.  As Yogi Berra might say: if you want to make healthcare affordable to all, healthcare has to be affordable. To be successful, the ACA has to bend the cost curve -- or at least, maintain the windfall spending growth slowdown that seems to have taken hold over the last ten years -- at the same time it's expanding access.

The ACA's main efforts to control costs fall broadly into two categories. First, in Medicare payments, a series of pilot programs seek to move healthcare providers away from fee-for-service, via per-patient and per-episode payments and incentives to reduce costs and meet quality benchmarks. Second, in the exchanges, competition and price pressure induce insurers to reduce costs by a) putting a good deal of the cost burden on patients, via high deductibles and co-insurance payments, and b) offering narrow networks -- that is, limiting covered doctors and hospitals to those who meet the insurer's price (and, theoretically, quality) demands. In the broad category of putting price pressure on payers of all kinds also belongs the ACA's excise tax on the most expensive employer-sponsored plans, which is driving employers too toward both narrow networks and more cost-shifting to employees.

Cost control without cost controls?

Atul Gawande has expressed the hope that by seeding myriad experiments, the ACA will grow a few cost-saving sequoias  -- as an analogous outpouring of experiments and demonstration projects spurred by the U.S. Department of Agriculture revolutionized food production and drove down food prices in the early 20th Century.

I hope Gawande is right. He may be. But it might also be argued that all this experimentation is "designing around" the one cost control element that works in every other wealthy and is lacking in the U.S.: uniform pricing per procedure, imposed or at least overseen by government. (It's "overseen" in Switzerland, where hospital rates in each canton are negotiated by hospitals and insurers acting collectively, subject to approval by the cantonal government. Physicians are paid on a national fee-for-service scale.) Without that core shift in leverage away from healthcare providers, reforms are balkanized and incentives may fly in various directions.

Picking at the healthcare Gordian knot

It's no secret that there's a grotesque hierarchy in U.S. healthcare pricing. Medicaid pays the lowest prices, followed by Medicare, then by private insurers.. and then, at the bottom of the totem pole, by uninsured individuals, who, as Steven Brill documented in grotesque detail, may pay three or ten or fifteen times what Medicare pays for a given procedure.

This system is not only grossly unfair, it's the chief reason Americans pay more than twice the OECD average per capita for healthcare than people in other developed countries. Notwithstanding a wide variety of payment systems, countries with universal health insurance -- that is, every other wealthy country in the world -- almost universally empower government to impose uniform pricing. In Japan, for example, where most people get health insurance through private, nonprofit plans provided by their employers (generally with a 30% patient co-pay), the government publishes a uniform price schedule. T.R. Reid, in The Healing of America, describes it:

[the medical price schedule is] published in a thick book--about the size of the Tokyo telephone directory--that anybody can buy. This hefty volume, the Shinryo Tensu Hyakumihyo ("Quick Reference Guide to Medical Treatment Points"), sets forth exactly what a doctor, therapist or hospital will be paid for any treatment or medication. There are tens of thousands of different treatments in the book: "throat swab,", "application of plaster cast, ankle," "sutures, outer arm," "X-ray, simple, neck region, rear," etc., etc. For almost all of these, the price is extremely low...(p. 91).

David Goldhill, consider our dental dystopia

David Goldhill, long an advocate of shunting all but catastrophic health care costs onto consumers (pairing super-catastrophic insurance with mandatory HSAs) offers, I must admit, a compellingly negative view of what's likely to become of cost controls embedded in the ACA or favored by the health care experts I like to read. It's a kind of mirror image of Atul Gawande's thousand flowers vision:

Through private insurance, Medicare and Medicaid, our health system relies on centralized cost control and clever adjustments to payment formulas to try to tame the beast. Traditional health experts may repackage their ideas, but they are never discouraged by past failure. So the new Accountable Care Organizations are a reinvention of H.M.O.’s. The Independent Payment Advisory Board is the new Medicare Payment Advisory Commission, or MedPAC. Bundled payments are the new Prospective Payment System.

We often see some early benefit from the introduction of new ideas, but over time such initiatives are always subjugated by our system’s nefarious economic incentives. Implement cost control reforms and watch providers circumvent new rules and guidelines. Reduce reimbursement rates for procedures, and witness providers expand the definition of required services. Convert fee-for-service reimbursements into bundled payments, and soon more severe diagnoses are given. Attempt to use government buying power, and see providers turn to lobbyists to keep prices up. We are approaching a half-century of fighting this losing battle.

It's true that power industries and interest groups are very successful at gaming new regulations. It's also true that today's reforms bear some resemblance to prior efforts.

Promise and peril for the Affordable Care Act

In December 2009, Atul Gawande expressed hope that a "hodgepodge" of cost control measures stuffed into the Senate healthcare reform bill, most of which later made it into the Affordable Care Act, might have a transformative effective over time:

Where we crave sweeping transformation, however, all the current bill offers is those pilot programs, a battery of small-scale experiments. The strategy seems hopelessly inadequate to solve a problem of this magnitude. And yet—here’s the interesting thing—history suggests otherwise.

Gawande goes on to review the history of Federal government intervention in the agriculture sector in the early 20th century gradually but radically transofrmed farming methods andled to massive increases in productivity.  For healthcare too, he argues, there is no master switch. Trial and error, orchestrated by carrot and stick, is the model:

Productivity revolutions can hurt

Program update: thanks to Hurricane Irene, I am held over in Ireland -- a very nice place to be stuck, I must admit.  Continuing squibs based on current reading....

In December 2009, Atul Gawande drew an extended analogy between the agricultural revolution of the early 20th century, sparked by an array of creative government programs that promulgated improved farming techniques, and the welter of cost control measures packed in the Affordable Care Act, which collectively may have the potential to radically lower healthcare costs while improving quality. Here's Gawande's overview of what happened in agriculture, circa 1900-1920:

The United States did not seek a grand solution. Private farms remained, along with the considerable advantages of individual initiative. Still, government was enlisted to help millions of farmers change the way they worked. The approach succeeded almost shockingly well. The resulting abundance of goods in our grocery stores and the leaps in our standard of living became the greatest argument for America around the world. And, as the agricultural historian Roy V. Scott recounted, four decades ago, in his remarkable study “The Reluctant Farmer,” it all started with a pilot program....

What seemed like a hodgepodge eventually cohered into a whole. The government never took over agriculture, but the government didn’t leave it alone, either. It shaped a feedback loop of experiment and learning and encouragement for farmers across the country. The results were beyond what anyone could have imagined. Productivity went way up, outpacing that of other Western countries. Prices fell by half. By 1930, food absorbed just twenty-four per cent of family spending and twenty per cent of the workforce. Today, food accounts for just eight per cent of household income and two per cent of the labor force. It is produced on no more land than was devoted to it a century ago, and with far greater variety and abundance than ever before in history.

What I'm learning from David M. Kennedy's Freedom from Fear: The American People in Depression and War, 1929-1945  is that however good this 'revolution' proved to be for consumers, it was absolutely wrenching for farmers. According to Kennedy, American farmers (who still made up 30% of the U.S. population in 1930) had been suffering a Depression of their own since the end of World War I, when prices collapsed. The problem was essentially massive oversupply, triggered by those wonderful productivity gains. The early New Deal remedy was the set of subsidies -- paying farmers not to grow certain crops -- that plague us to this day. Then as now, too, those subsidies disproportionately benefited large holders -- particularly southern landlords, who responded to incentives not to grow by depriving their sharecroppers of their less-than-bare-subsistence livelihood.

Are doctors more "defensive" than studies show?

Aaron Carroll takes a whack at the alleged myth that medical tort reform has the potential to significantly reduce healthcare costs. Citing two studies published in the September 2010 issue of Health Affairs, he reports findings from the first that our medical liability system accounts for only an estimated 2.4% of total U.S. healthcare costs (a nontrivial $55.6 billion), and from the second that tort reform would reduce costs by a mere one tenth of one percent.

Carroll originally published this post as a guest blogger for Ezra Klein, who has often cited similar findings -- as did Obama, in the bipartisan healthcare summit he called in February 2010.  Personally, I am deeply suspicious of the Republican passion for tort reform, medical and otherwise, which is part and parcel of their aversion to holding any industry accountable for any damages it causes.  Nonetheless, claims that the medical liability system has only a modest effect of doctors' behavior always arouses my skepticism.  This skepticism comes in large part from listening to my wife, a nurse-midwife at an inner city hospital, who is forever frustrated by the obstetricians' hair-trigger for Caesarian sections. Her colleagues are plainly strung taut by the constant threat of lawsuits; whenever anything goes wrong everyone anticipates a suit. I strongly suspect that the threat of liability affects caregivers' behavior in ways that do not show up in the research.  And I have questions about both of the studies Carroll cites, and about Carroll's presentation of them.

First, the two studies are to a certain extent at cross-purposes.  Carroll as noted above, reports that the first study [purchase required], led by Michelle M. Mello in a team including Atul Gawande, pegs the cost of our "medical liability system" at 2.4% of total healthcare costs and finds that the vast majority of that cost comes from the practice of defensive medicine.  Carrol then notes that the second study, led by J. William Thomas, pegs the potential savings from tort reform at just .1% of total costs.  But in the Mello study, defensive medicine costs and tort reform savings are presented as one and the same thing. The authors estimate of total, system-wide costs is based entirely on a series of studies by Kessler and McClellan conducted from 1984--1994. All the results, and the Mello authors' extrapolations from them, use those two terms interchangeably (my emphasis):

Kessler and McClellan examined the effect of tort reforms that directly reduce expected malpractice awards—such as caps on noneconomic damages—on Medicare hospital spending for acute myocardial infarction and ischemic heart disease from 1984 to 1990.⁷ The reforms lowered hospital spending by 5.3 percent for myocardial infarction and 9.0 percent for heart disease....

Rudolph Penner points a steep path toward budget salvation: tax reform and health care reform

As Ezra Klein points out, the long-range budget options laid out in a detailed analysis of the nation's fiscal future under the leadership of the Urban Institute's Rudolph Penner, who was director of the CBO under Reagan, are sobering.  The report, Choosing Our Nation's Fiscal Future, was prepared by a committee organized by the National Research Council and the National Academy of Public Administration.

The report lays out four menu options designed to cap the national debt at 60% of GDP by 2020, ranging from freezing taxation at current levels and cutting spending accordingly, to maintaining benefits at current levels and raising taxes accordingly. The consequences of freezing tax rates at current levels are scary. That would require a Paul Ryan-like budget converting Medicare and Medicaid to a system of vouchers of rapidly diminishing value. Maintaining benefits at current levels in its turn generates daunting tax requirements: top marginal tax rates of 50%, a VAT rising to 8%, payroll tax of 15% with a surtax on top.  Imagine Democrats trying to impose those hikes over the decades.

The report suggests that the challenge would be more manageable, however, if structural tax reform is coupled with effective health care cost control. Tax reform would entail elimination of myriad deductions and exemptions to which we've grown addicted. Here's how Penner presented this kind of tax reform to the Atlantic's Derek Thompson:

The other approach was to radically reform the tax system, getting rid of all tax expenditures [such as tax exclusions for employer health care and pension contributions ... see more here] like capping the employer health exclusion. It's really, really remarkable how much money you get back from tax expenditures, especially from capping the health exclusion. We could actually lower rates over time with that solution to the situation, while keeping the overall tax burden the same.

The elimination of "tax expenditures," as described by Penner in his Senate testimony, would be coupled with just a two-tier income tax - 10% starting at an income of $22,475, and 25% starting at $44,950. Fiscal Future claims that  "[t]he economic waste ("deadweight loss") to economic performance...is directly related to marginal tax rates. As marginal rates rise, these efficiency losses rise more than proportionally, roughly as the square of marginal tax rates."  The paper also asserts that various targeted tax incentives (tax expenditures) such as retirement savings or mortgage interest deductions distort economic behavior and so allocate resources less efficiently.

Tax expenditures have long been beloved by both parties -- by Republicans, because they are by definition tax cuts, and by Democrats, because in our right-leaning polity they're often the most politically palatable way to provide breaks to lower and middle class voters; Republicans find them difficult to oppose. Hence the number of targeted tax breaks for individuals has more than doubled since 1974.

I imagine that many economists would dispute the claim that all targeted tax breaks create non-beneficial incentives and economic waste.  A reasonable takeaway from this paper, however, would seem to be that eliminating or limiting some major deductions would yield major revenue and greatly reduce the extent of needed across-the-board tax hikes such as a VAT or increased payroll tax. (There seems to be near consensus, for example, that the current form of the mortgage exemption skews incentives.)  Fiscal Future presents along with each of its four future tax scenarios an equivalent alternative under a radically simplified tax structure that eliminates all "tax expenditures" except the child tax credit and the earned income tax credit. The paper acknowledges, though, that "[t]he current tax structure...and the simplified tax structure discussed here represent two 'bookends,' with many possibilities in between."  One can imagine the mammoth political battles that may come regarding which tax carve-outs to eliminate or radically reduce.

The Senate health bill's excise tax on expensive plans provides a foretaste of such battles. Penner's perspective on the health care tax exemption highlights why Obama is hell-bent on preserving the excise tax in the Senate bill, in the face of furious opposition from unions and House Democrats. The excise tax indirectly caps the health insurance deduction for employers. Proponents expect it both to provide significant revenue and to restrain health care cost growth.  It's a modest step toward eliminating the health care tax exemption for employers, as the Wyden-Bennett alternative HCR bill -- which at present remains a Utopian bipartisan dream -- would do.

Obama's healthcare priorities

Ezra Klein brings into sharp focus an aspect of Obama's approach to healthcare reform that he has repeatedly noted in its component parts:

This is one thing that the Obama administration doesn't get enough praise or criticism for. The only ideas they've introduced into the debate, and the only ideas they've really stood and fought for against serious opposition, are cost-control ideas. Namely, the excise tax, the Medicare Commission, the insistence on deficit neutrality and the $900 billion price tag, none of which have a natural majority on the Hill, and all of which the Obama administration has kept in the game through direct advocacy.

I see this focus as an instance of Obama's propensity for "the long game."  The Administration probably calculates that Congress will inevitably expand coverage and subsidies as the inadequacies of the initial allotments become obvious -- whereas the architecture for beginning to bend the cost curve has to be in place from the start or the whole package will swiftly become unaffordable. Atul Gawande's vision -- of a potpourri of cost control measures, pilots and demonstration projects out of which at least a few will have a dramatic impact -- is also Obama's.  Here is how Obama described the process to Fred Hiatt, focusing on one potential meta-enabler of such methods, the MedPAC commission:

At this point, I am confident that both the House and the Senate bills will contain what we've been calling MedPAC on steroids, the idea that you continually present new ideas to change incentives, change the delivery system, understanding that because this is such a complex system we're not always going to get it exactly right the first time, and that there have to be a series of modifications over the course of a series of years, and we have to take that out of politics and make sure that an independent board of medical experts and health economists are providing packages that are continually improving the system. So I think there's general consensus that that is one of two very powerful levers to bend the cost curve.

I can see two strong objections either to Obama's strategy or my understanding of it.

The crown jewels of health care cost-cutting

Ron Brownstein has an important post that details the substantial cost-control measures in the Baucus bill that led CBO to score it as a deficit reducer over the long term. The measures, Brownstein notes, center on two themes: "shifting the reimbursement model away from volume to value, and encouraging physicians to work more closely in teams to manage the overall health of patients, particularly those with expensive chronic conditions."

The Baucus bill would also create an empowered oversight commission, the "MedPAC on steroids" that Obama has emphasized as the chief mechanism for sifting, improving and expanding the cost control measures seeded in the bill. Brownstein:

The bill creates a second new institution that could be even more important: an independent Medicare Commission, as Obama has proposed. The commission would be required to offer proposals for cost-savings whenever Medicare spending rises too fast and Congress would be required to give their proposals fast-track consideration. The commission would likely become a vehicle to move into law the most promising payment and coordinated care reforms that emerge from the tests and pilot programs that the bill's other provisions set in motion. "If it develops into a respected independent body it could be one of the most significant parts of this legislation," said the senior administration officials. "I think that's the most auspicious path forward for promoting fundamental reform."

Compare Obama, speaking to Washington Post editor Fred Hiatt in July:

At this point, I am confident that both the House and the Senate bills will contain what we've been calling MedPAC on steroids, the idea that you continually present new ideas to change incentives, change the delivery system, understanding that because this is such a complex system we're not always going to get it exactly right the first time, and that there have to be a series of modifications over the course of a series of years, and we have to take that out of politics and make sure that an independent board of medical experts and health economists are providing packages that are continually improving the system. So I think there's general consensus that that is one of two very powerful levers to bend the cost curve.

Note the gradualism. That's not pusillanimity; it's recognition that our current payment system is a huge battleship that can only be turned by degrees. Compare Atul Gawande, who did so much to spotlight payment incentives as a core driver of health care inflation:

McAllen and other cities like it have to be weaned away from their untenably fragmented, quantity-driven systems of health care, step by step. And that will mean rewarding doctors and hospitals if they band together to form Grand Junction-like accountable-care organizations, in which doctors collaborate to increase prevention and the quality of care, while discouraging overtreatment, undertreatment, and sheer profiteering. Under one approach, insurers—whether public or private—would allow clinicians who formed such organizations and met quality goals to keep half the savings they generate. Government could also shift regulatory burdens, and even malpractice liability, from the doctors to the organization. Other, sterner, approaches would penalize those who don’t form these organizations.

This will by necessity be an experiment. We will need to do in-depth research on what makes the best systems successful—the peer-review committees? recruiting more primary-care doctors and nurses? putting doctors on salary?—and disseminate what we learn. Congress has provided vital funding for research that compares the effectiveness of different treatments, and this should help reduce uncertainty about which treatments are best. But we also need to fund research that compares the effectiveness of different systems of care—to reduce our uncertainty about which systems work best for communities. These are empirical, not ideological, questions. And we would do well to form a national institute for health-care delivery, bringing together clinicians, hospitals, insurers, employers, and citizens to assess, regularly, the quality and the cost of our care, review the strategies that produce good results, and make clear recommendations for local systems.

Dramatic improvements and savings will take at least a decade...

Bending the health care cost curve is not the work of a day, or a single bill. There is a fair amount of consensus among Democrats about how to get the process started. Will the lobbyist-ridden legislative process gut the promising provisions drafted in Baucus's and other bills? Will Obama take a stand on these, as he didn't on the public option? Did he decide long ago that payment mechanisms were more important than insuring mechanisms?

On "catching" happiness

According to the research team Nicholas Christakis and James Fowler, pioneers in the study of "social contagion," happiness is a large social network. From Clive Thompson's long assessment of their research in the Times Magazine:

The subconscious nature of emotional mirroring might explain one of the more curious findings in their research: If you want to be happy, what’s most important is to have lots of friends. Historically, we have often thought that having a small cluster of tight, long-term friends is crucial to being happy. But Christakis and Fowler found that the happiest people in Framingham were those who had the most connections, even if the relationships weren’t necessarily deep ones.

The reason these people were the happiest, the duo theorize, is that happiness doesn’t come only from having deep, heart-to-heart talks. It also comes from having daily exposure to many small moments of contagious happiness. When you frequently see other people smile — at home, in the street, at your local bar — your spirits are repeatedly affected by your mirroring of their emotional state. Of course, the danger of being highly connected to lots of people is that you’re at risk of encountering many people when they are in bad moods. But Christakis and Fowler say their findings show that the gamble of increased sociability pays off, for a surprising reason: Happiness is more contagious than unhappiness. According to their statistical analysis, each additional happy friend boosts your good cheer by 9 percent, while each additional unhappy friend drags you down by only 7 percent. So by this logic, adding more links to your network should — mathematically — add to your store of happiness. “If you’re at the center of a network, you are going to be more susceptible to anything that spreads through it,” Fowler said. “And if happiness is spreading more reliably, then on average you’re going to be catching happy waves more often than you catch sad waves.”

This sweeping claim set off a series of free associations in me, an inveterate introvert. E.g.:

1) Walking to work in Manhattan, where I might pass 1,000 people on my mile-long route, I've noticed that people look a lot better when they're with someone else -- happier, more intelligent, more energetic.

2) As Atul Gawande documented ably some months ago, solitary confinement is torture. It has taken hold through what also might be a kind of social contagion in the U.S. over the past quarter century:

Prolonged isolation was used sparingly, if at all, by most American prisons for almost a century. Our first supermax—our first institution specifically designed for mass solitary confinement—was not established until 1983, in Marion, Illinois... In 1995, a federal court reviewing California’s first supermax admitted that the conditions “hover on the edge of what is humanly tolerable for those with normal resilience.” But it did not rule them to be unconstitutionally cruel or unusual...The ruling seemed to fit the public mood. By the end of the nineteen-nineties, some sixty supermax institutions had opened across the country. And new solitary-confinement units were established within nearly all of our ordinary maximum-security prisons.

The number of prisoners in these facilities has since risen to extraordinary levels. America now holds at least twenty-five thousand inmates in isolation in supermax prisons. An additional fifty to eighty thousand are kept in restrictive segregation units, many of them in isolation, too, although the government does not release these figures.

3) The former king of the Himalayan kingdom Bhutan, Jigme Singye Wangchuck, may have been onto something with his concept of Gross National Happiness as an aim of government policy. But perhaps instead of focusing on sustainable development, cultural values, environment conservation and good governance he should have focused on increasing social interaction.

4) I have often wondered whether people in countries that are poor but still organized around tight social networks, such as tribes, mightn't be happier on average than people in advanced industrial societies -- that is, if the country is not a failed state or ruled by a brute like Saddam, or by a regime that deeply intrudes upon and controls and distorts social and economic life, like Iran's.

5) On the other hand, the ancient pastoral ideal and classical dichotomy between the wholesome country life and the sordid, corrupt city is more or less a load of crap -- as are demagogues' paeans to the virtues of small town America. While cities can be places of both horrific isolation, human beings have at every opportunity voted with their feet -- and hearts, and minds - to place themselves in ever larger social hives.

6) Per items 4 and 5, I really have very little idea where human social life is most rewarding. I really should get out more. But it does seem that organizing ourselves in ways that maximize positive social interaction is the fundamental challenge of human collective effort. Perhaps Wangchuck's four pillars of "GNH" are at bottom means to that end.

The Times points another arrow at fee-for-service medicine

Fee-for-service, fee-for-service, fee-for-service. Gradually the healthcare debate is centering on this major driver of runaway healthcare inflation. Atul Gawande and David Leonhardt have helped shine the spotlight on doctors' incentives to provide unnecessary care; Peter Orzag and Barack Obama (see "p.s." at link) have seized on their examples and language.

Today, the New York Times is front-paging a new poster child for putting doctors on salary. Gardener Harris profiles Bassett Healthcare, "a modest hospital of 180 beds" in Cooperstown, NY, to demonstrate that you don't have to be the Mayo Clinic to improve outcomes by realigning incentives, a.k.a. putting doctors on salary:

Bassett — like the Cleveland Clinic and a small number of other health systems in this country — pays salaries to all of its doctors. No matter how many tests or procedures are performed, they take home the same amount of money. Medical costs at Bassett are lower than those at 90 percent of the hospitals in New York, while the quality of care ranks among the top 10 percent in the nation, surveys show.

As at the Mayo Clinic and other treatment centers that have eschewed fee-for-service, the payment structure goes hand-in-hand with coordinated, integrated patient care:

Michelle Griffiths, 41, of Edmeston found a lump on her breast six years ago. During cancer care at Bassett, Ms. Griffiths’s appointments to see her oncologist and primary care doctor are often scheduled on the same day. One doctor will sometimes accompany her during a procedure performed by another, and each has her complete medical history.

“The communication amongst all of my doctors is impressive,” said Ms. Griffiths, who works as a database administrator for the insurance company New York Central Mutual. “They always call each other or shoot each other e-mails.”

Such coordinated care is a hallmark of integrated health systems with salaried doctors, like Kaiser Permanente, the Mayo Clinic, the Veterans Administration and the Cleveland Clinic.

Harris also highlights the political conundrum: everyone seriously engaged in healthcare reform knows that fee-for-service is a major inflation culprit. But as in the Aesop's fable in which a group of mice agree that they should hang a bell around the cat that's been gobbling them up, no one knows how to "bell the cat":

“Everyone knows that the Bassett model is the right model,” said Senator Charles E. Schumer, a New York Democrat involved in negotiations over health care legislation. “The question is, How do you get from here to there?"

In response, I wonder why the unanamious recommendations of the Massachusetts Special Commission on the Health Care Payment System are not getting more attetention. The Commission's central proposal takes direct aim at fee-for-service, proposing a five-year transition to "global payment systems" that pay doctors and hospitals per patient, with performance incentives, and adjustments for region, income, clinical risk and other factors. The recommendations appear to have broad, if cautious and equivocal support. The Times' Kevin Sack reports:

Top state legislators said that they recognized the political challenge in enacting such a plan but that Massachusetts’ circumstances demanded it. Senator Richard T. Moore, co-chairman of a joint legislative committee on health care financing, said he expected to hold hearings on the recommendations this fall. The committee’s other leader, Representative Harriett L. Stanley, said, “It’s going to be a very long haul, but it’s a trip worth taking.” [snip]

Interest groups with heavy stakes embraced the proposal, but warily.

“Hospitals want to be part of this historic endeavor,” said Lynn B. Nicholas, president of the Massachusetts Hospital Association. But Ms. Nicholas added that “the success of moving to a global payment system is not a foregone conclusion” and expressed concerns about how risks would be adjusted and how start-up costs would be covered.

The president of the state medical society, Dr. Mario E. Motta, also urged caution. “A big transition like this has never been done on such a broad scale,” Dr. Motta said, “so it must be done very carefully, deliberately and
thoughtfully.”

In Massachusetts, turning the battleship toward global payment systems appears to be recognized as a necessity if the 2006 reform plan that's already achieved near-universal coverage is not to bankrupt the state, as it's beginning to do. (Of course, the state has only taken a baby step toward reforming the payment system.) Will federal legislation have to follow the same road - extend coverage first, deal with the resulting financial emergency as it takes hold?

Massachusetts Commission cuts the Gordian Knot on healthcare costs

I wanted to post notice of a key development on the healthcare cost containment front reported in the WSJ on Friday, but didn't get around to it (settling for a tweet) -- and now I see that Ezra Klein has beaten me to it. Here's the WSJ:

A Massachusetts panel proposed that the state scrap traditional payments to doctors and hospitals for each office visit or procedure, and instead adopt a system where they receive a monthly or annual fee per patient.

The proposal is an effort to control the state's health-care costs, which are among the highest in the nation.

Under the new system, doctors and hospitals would be organized into groups responsible for all of a patient's health-care needs. The groups would receive a "global payment" per patient, which could be adjusted with performance incentives based on the quality of care provided.

The proposed system -- a radical departure from the way patients and insurers now pay -- would require legislative action and waivers from Medicaid and Medicare rules.

The panel, created by state law, voted unanimously to adopt the recommendations. The commission included key state legislators, the state's leading doctor and hospital associations and insurers.

As Klein says:

That's a huge reform. Much bigger than anything we're considering nationally. It's a direct attempt to change the behavior of politically powerful providers to preserve the coverage that the reforms gave to individuals. It will be difficult. The doctors' lobby is already giving angry quotes to the press.

Atul Gawande, in his landmark article focusing the healthcare debate on the problem of health care providers' incentives (mainly payment per treatment), stressed the complexities of realigning those incentives:

Instead, McAllen and other cities like it have to be weaned away from their untenably fragmented, quantity-driven systems of health care, step by step. And that will mean rewarding doctors and hospitals if they band together to form Grand Junction-like accountable-care organizations, in which doctors collaborate to increase prevention and the quality of care, while discouraging overtreatment, undertreatment, and sheer profiteering. Under one approach, insurers—whether public or private—would allow clinicians who formed such organizations and met quality goals to keep half the savings they generate. Government could also shift regulatory burdens, and even malpractice liability, from the doctors to the organization. Other, sterner, approaches would penalize those who don’t form these organizations.

This will by necessity be an experiment. We will need to do in-depth research on what makes the best systems successful—the peer-review committees? recruiting more primary-care doctors and nurses? putting doctors on salary?—and disseminate what we learn. Congress has provided vital funding for research that compares the effectiveness of different treatments, and this should help reduce uncertainty about which treatments are best. But we also need to fund research that compares the effectiveness of different systems of care—to reduce our uncertainty about which systems work best for communities. These are empirical, not ideological, questions. And we would do well to form a national institute for health-care delivery, bringing together clinicians, hospitals, insurers, employers, and citizens to assess, regularly, the quality and the cost of our care, review the strategies that produce good results, and make clear recommendations for local systems.

Dramatic improvements and savings will take at least a decade.

Massachusetts' Special Commission on the Healthcare Payment System (full report here) is proposing to cut the Gordian knot - to end payment per treatment in one fell swoop. In fact, though, there is nothing simple about the proposal, other than recommending unequivocally that the core transition to "global payment" be mandated. The Commission proposes a phase-in period of five years., and makes it clear that developing the global payment system will be a complex undertaking -- "global payment rates will include adjustments for clinical risk, socio-economic status, geography (if appropriate), core access and quality incentive measures, and other factors." The Commission recommends all the reforms outlined by Gawande and then some - development of "accountable care organizations," development of uniform standards of outcome assessment, implementing pay for performance incentives, building consumer incentives for preventive care.

The lobbying machinery is cranking up to crush the panel's initiative. Can Massachusetts legislators, under cover of a unanimous blue-ribbon commission, withstand the pressure? Can Massachusetts, which led the way in extending near-universal coverage, now lead the way in containing costs? Or will this fundamental reform fade away. to be replaced by nibblings around the edges of health care cost control?

BTW, will Peter Orzag weigh in on this potential game-changer?

Leonhardt seconds Gawande: put doctors on salary

David Leonhardt has joined Atul Gawande in pointing toward what should be the central front in the war on health care costs:

put doctors on salary.

Leonhardt prices four ways of treating prostate cancer: watchful waiting ("a few thousand dollars"), prostate removal ($23,000), I.M.R.T. radiation ($50,000), and the latest, proton radiation (often over $100,000).

Which one works best? “No therapy has been shown superior to another,” an analysis by the RAND Corporation found. Which treatments are growing fastest? "Use of I.M.R.T. rose tenfold from 2002 to 2006, according to unpublished RAND data." Proton radiation is newer, but treatment centers, which require "a proton accelerator that can be as big as a football field," are springing up left and right.

Why do the most expensive treatments always gain traction, whether or not there's any evidence that they're effective, or more effective than cheaper treatments? Insurers -- all insurers, including Medicare -- pay per procedure. At the center of the skewed incentive system, as Gawande showed, are doctors -- who are not only paid by the procedure, but in too many cases own all or part of the treatment facilities such as medical imaging centers.

OMB Director Peter Orzag, in his drive to shape health care reform, has tried on a couple of mantras since taking office. The first was "healthcare reform is entitlement reform" -- because problems with the social security trust fund are miniscule compared with the problem of runaway health care costs. Another was "the Mayos, not the McAllens" -- framing Gawande's contrast of a county where the doctors have "gone entrepreneurial" with the Mayo Clinic, where doctors are on salary. And when ticking off the administration's proposed reforms, Orzag generally tucks in "changes in provider incentives."

The nub of incentive reform is pretty simple: put doctors on salary. Good salaries. High salaries. Sweeten the pill with tort reform, reducing the defensive medicine imperative. But remove the incentive for prescribing the most expensive care.

Orzag hones in on doctors' incentives

Peter Orzag has a new sound-byte (or stat-byte) to counter those who want to lump social security together with Medicare/Medicaid under the aegis of "entitlement reform."

For some time, Orzag's mantra has been "healthcare reform is entitlement reform." In today's FT, he distills why that is:

Our fiscal future is so dominated by healthcare that if the US can slow the rate of cost growth by just 15 basis points a year (0.15 percentage points), the savings for Medicare and Medicaid would equal the impact from eliminating Social Security’s entire 75-year shortfall.

Having framed the imperative to cut healthcare costs, Orzag continues in the FT piece to channel Atul Gawande, as he has at least three times on his blog. Whether or not Gawande has helped to focus Orzag's thinking, there's no question that his tale of two healthcare markets has helped Orzag focus his rhetoric on changing doctors' incentives to prescribe unnecessary care:

We must also address the forces making the healthcare system unaffordable and inefficient. The system creates incentives for doctors and hospitals to provide more care, not the best care. A lack of information on what works leads to huge variations in the quality of care and its cost. As Atul Gawande has described in the New Yorker, there are cities such as McAllen, Texas, that spend close to twice the national average on healthcare and do not get better results than lower cost, high-quality cities even in their own state or region.

The US must move towards a higher-quality, lower-cost system in which best practices are universal – rather than concentrated only in some parts of the country. The administration has therefore put forward initiatives such as health IT, research into what works, prevention and wellness, and changes in provider incentives (my emphasis).

The focus on eliminating unnecessary care is in turn helping Orzag -- and Obama -- to draw together two parts of their healthcare pitch: reduce costs, extend coverage. Two weeks ago, Jonathan Cohn noted that Obama seems to find it politically helpful to focus rhetoric on the cost-reduction side of the equation. As Orzag makes clear, however, it's runaway costs that have swelled the ranks of the insured and underinsured -- and runaway costs will make universal coverage impossible if they're not reined in.

What Gawande has handed Orzag is a demonstration that unnecessary procedures are a prime driver of healthcare inflation. That makes it possible for Orzag and Obama to suggest that costs can be effectively reduced without compromising quality of care -- thus defanging the bogey of "healthcare rationing."

As the administration trains its sights on removing financial incentives to prescribe unnecessary treatment, it's interesting that Obama has floated tort reform as a counterweight. Easing the constant threat of litigation hanging over doctors would be powerful compensation for reducing the financial incentives that bias some doctors toward prescribing operations, tests etc. that may not be necessary.

See also:
Did Obama read Atul Gawande? I, II, III.

Did Obama read Atul Gawande? - part 3

UPDATE: Orzag hones in on doctors' incentives

First Peter Orzag, then Obama, and now the New York Times editorial board are making a manifesto of Atul Gawande's powerful demonstration that a major driver of healthcare inflation is doctors' financial incentive to prescribe unnecessary procedures (and often invest in the providers, such as medical imaging centers).

Adopting Gawande's tale of two healthcare markets, Orzag wrote in his blog on June 8, We need to reform the health care system so that it rewards the right kind of innovation – the Mayos, not the McAllens. Yesterday the Times picked up the thread

A glaring example of profligate physician behavior was described by Atul Gawande in the June 1 issue of The New Yorker. (His article has become must reading at the White House.) Dr. Gawande, a Harvard-affiliated surgeon and author, traveled to McAllen, Texas, to find out why Medicare spends more per beneficiary there than in any other city except Miami.

None of the usual rationalizations put forth by doctors held up. The population, though poor, is not sicker than average; the quality of care people get is not superior. Malpractice suits have practically disappeared due to a tough state malpractice law, leaving no rationale for defensive medicine. The reason for McAllen’s soaring costs, some doctors finally admitted, is over-treatment. Doctors perform extra tests, surgeries and other procedures to increase their incomes.

and drew the conclusion:

There is disturbing evidence that many do a lot more than is medically useful — and often reap financial benefits from over-treating their patients. No doubt a vast majority of doctors strive to do the best for their patients. But many are influenced by fee-for-service financial incentives and some are unabashed profiteers.

To be fair, doctors are victims as well as perpatrators of our healthcare system dysfunction. They waste insane amounts of time and resources fighting with insurance companies to get paid. And they're driven by the constant hair-trigger threat of malpractice lawsuits (and malpractice insurance profiteering) to order unnecessary tests and procedures. You might say that defensive medicine, and the "entrepreneurial spirit" that Gawande found infecting some medical communities, are the yin and yang of wasteful healthcare spending in the U.S.

Gawande may be emerging as the Jacob Riis of 21st centure healthcare. And perhaps, when we're ready, of cruel and unusual punishment as well.

Did Obama read Atul Gawande? - cont.

Last week, I wondered whether Obama had read Atul Gawande's eureka-inducing article on why U.S. healthcare costs are so high, noting that Obama cited Gawande's chief example of a care center where costs are low and outcomes excellent, the Mayo Clinic, while highlighting before a Senate audience the imperative to reduce dramatic variations in costs among different communities.

Had I done my homework, I would have known that the answer was "yes" -- or more precisely, that Obama's brain on healthcare, Peter Orzag, not only read read Gawande, but went to town blogging on Gawande's conclusions and in particular on Gawande's spotlight on McAllen TX, the low income town with one of the highest per capita Medicare tabs in the country. On May 28, Orzag noted that Gawande's tale of two healthcare markets richly illustrated his own theme that some markets pay dramatically more for healthcare than counterparts, with no apparent benefits. Then, on June 4, he delved deeper into McAllen's high costs, comparing them with his own favorite poster child for low costs/good outcomes, Grand Junction, CO:

For example, at the end-of-life, nearly half of all McAllen Medicare patients see 10 or more physicians, significantly more than the national rate of 30 percent (and in Grand Junction, Colorado, it is just 11% – more than four times less than the rate in McAllen). Also, McAllen’s Medicare patients have 50 percent more cardiac surgery procedures as the national average (about 24 per 1000, versus about 16 per 1000), four times the ambulance spending during end-of-life, and eight times the home health care costs. Medicare spending per enrollee in the last two years of life also varies greatly among McAllen and other peer hospitals.

This week, Orzag was at it again, converting Gawande's core contrast into a policy mantra:

It’s certainly true that medical innovation is essential to improving treatment – and thus health outcomes – for us all. And it’s also true that we need to encourage doctors and researchers to explore and experiment in ways that lead to medical advances that save lives and improve their quality. But, today, the American health care system doesn’t always reward the best medical innovations – and one need look no further than McAllen, Texas to see that this is so.

Despite having a demographic profile similar to El Paso, Texas, and despite having had similar Medicare expenditures as El Paso as recently as 1992, McAllen’s spending grew about five times faster in the years since than in either El Paso or the United States as a whole. In return, McAllen got more medicine (more tests, more surgeries, more time in waiting rooms), but it didn’t get better health – McAllen scores lower than El Paso (and the U.S. average) in measures of health care quality. McAllen "innovated," and certain doctors and hospitals were financially rewarded, but I think we can all agree that this isn’t the kind of innovation we desire.

To get the most from innovation, we need to align incentives toward quality rather than intensity. The Mayo Clinic, synonymous the world over with cutting-edge medicine, has among the country’s lowest Medicare costs per beneficiary. Smaller medical markets, too, have managed to achieve such results: Grand Junction, Colorado is one of the lowest-cost and highest-quality places in the country to be treated. We need to reform the health care system so that it rewards the right kind of innovation – the Mayos, not the McAllens. And the Administration’s proposals aim to do precisely that through bundling of payments, incentives to reduce hospital readmission rates, and (as discussed below) a process through which MedPAC’s recommendations would enjoy fast-track protections in Congress (my emphasis).

Obama is singing from the same choir book. As in his June 2 address to senators, so in his June 2 letter to Senators Kennedy and Baucus, he highlighted the Mayo Clinic, replicating Gawande's thesis in the process:

We should ask why places like the Mayo Clinic in Minnesota, the Cleveland Clinic in Ohio, and other institutions can offer the highest quality care at costs well below the national norm. We need to learn from their success and replicate those best practices across the country (my emphasis).

Compare Gawande:

Most Americans would be delighted to have the quality of care found in places like Rochester, Minnesota, or Seattle, Washington, or Durham, North Carolina—all of which have world-class hospitals and costs that fall below the national average. If we brought the cost curve in the expensive places down to their level, Medicare’s problems (indeed, almost all the federal government’s budget problems for the next fifty years) would be solved. The difficulty is how to go about it. Physicians in places like McAllen behave differently from others. The $2.4-trillion question is why. Unless we figure it out, health reform will fail.

Among other cost-cutting measures, Obama also called for "'accountable care organizations'" to improve the quality of care for Medicare patients - apparently a bid to create the kind of outcomes-focused peer group Gawande highlighted in the Mayo Clinic.

Not to mix up cause and effect: Orzag has seized on Gawande's field research because it so precisely illustrates his own pet theses. But still it's remarkable to see that high quality piece of research and writing working its way so swiftly into the political process.

Updates:
Did Obama read Atul Gawande part 3
Orzag hones in on doctors' incentives

Did Obama read Atul Gawande?

It looks like Barack Obama read Atul Gawande last week.

Gawande's article in last week's New Yorker examining why healthcare is so expensive in the U.S. drew eurekas from hosts of readers. The main culprit, Gawande's exhaustive look at one of the country's most expensive healthcare markets suggests, is paying doctors by the procedure and thus creating financial incentives for prescribing expensive treatments. Gawande's Exhibit A is McAllen, Texas, where Medicare spends twice as much per capita as it does down the road apiece in El Paso. The reason seems to be that doctors in McAllen infected one another with an "entrepreneurial spirit":

One afternoon in McAllen, I rode down McColl Road with Lester Dyke, the cardiac surgeon, and we passed a series of office plazas that seemed to be nothing but home-health agencies, imaging centers, and medical-equipment stores.

“Medicine has become a pig trough here,” he muttered.

Dyke is among the few vocal critics of what’s happened in McAllen. “We took a wrong turn when doctors stopped being doctors and became businessmen,” he said.

Gawande's Exhibit B is the Mayo Clinic, where those incentives have been neutralized:

The core tenet of the Mayo Clinic is “The needs of the patient come first”—not the convenience of the doctors, not their revenues. The doctors and nurses, and even the janitors, sat in meetings almost weekly, working on ideas to make the service and the care better, not to get more money out of patients. I asked Cortese how the Mayo Clinic made this possible.

“It’s not easy,” he said. But decades ago Mayo recognized that the first thing it needed to do was eliminate the financial barriers. It pooled all the money the doctors and the hospital system received and began paying everyone a salary, so that the doctors’ goal in patient care couldn’t be increasing their income. Mayo promoted leaders who focussed first on what was best for patients, and then on how to make this financially possible.

No one there actually intends to do fewer expensive scans and procedures than is done elsewhere in the country. The aim is to raise quality and to help doctors and other staff members work as a team. But, almost by happenstance, the result has been lower costs.

Now listen to Obama, addressing Senate Democrats working on healthcare reform (as excerpted by Jonathan Cohn):

I want to just make mention of something that I've talked to many of you privately about. I want to say this publicly. As we move forward on health care reform, it is not sufficient for us simply to add more people to Medicare or Medicaid to increase the rolls, to increase coverage in the absence of cost controls and reform. And let me repeat this principle: If we don't get control over costs, then it is going to be very difficult for us to expand coverage. These two things have to go hand in hand. Another way of putting it is we can't simply put more people into a broken system that doesn't work.

So we've got to reform the underlying system. And this means promoting best practices, not just the most expensive practices. And one of the things I'm going to be discussing with the health and the finance committees is how can we change incentive structures so that, for example, places like Mayo Clinic in Minnesota are able to provide some of the best health care services in the country at half or sometimes even less of the costs than some other areas where the quality is not as good. What we should be--and by the way, that's not just unique to Mayo. The Cleveland Clinic in Ohio, same thing: top-notch quality, lower costs.

Now, the Mayo Clinic's success is not exactly a secret, and Peter Orzag, Obama's budget director, is one of the country's foremost experts on healthcare costs. So maybe this exhortation didn't come straight out of Gawande. But it's hard to shake the impression that the article was in Obama's mind.

UPDATE: Peter Orzag, Obama's healthcare brain, has been all over the Gawande article.

"Why healthcare costs so much"

Andrew Sullivan has a series of blog posts, Why healthcare costs so much, in which various blind men describe their part of the elephant. Atul Gawande, writing in the current New Yorker, has the answer -- beyond a shadow of a doubt:

Providing health care is like building a house. The task requires experts, expensive equipment and materials, and a huge amount of coördination. Imagine that, instead of paying a contractor to pull a team together and keep them on track, you paid an electrician for every outlet he recommends, a plumber for every faucet, and a carpenter for every cabinet. Would you be surprised if you got a house with a thousand outlets, faucets, and cabinets, at three times the cost you expected, and the whole thing fell apart a couple of years later? Getting the country’s best electrician on the job (he trained at Harvard, somebody tells you) isn’t going to solve this problem. Nor will changing the person who writes him the check.

Gawande focuses on McAllen, Texas, a poor community that is one of the most expensive healthcare markets in the country. In McAllen, he learns, an "entreprenuerial spirit" has become the dominant culture among doctors:

One afternoon in McAllen, I rode down McColl Road with Lester Dyke, the cardiac surgeon, and we passed a series of office plazas that seemed to be nothing but home-health agencies, imaging centers, and medical-equipment stores.

“Medicine has become a pig trough here,” he muttered.

Dyke is among the few vocal critics of what’s happened in McAllen. “We took a wrong turn when doctors stopped being doctors and became businessmen,” he said.

The antidote, unfortunately, is not readily apparent. Creating the right incentives -- or unwinding the wrong ones -- is complicated. Some institutions have done so by creating systems in which doctors essentially oversee each other and the institution holds itself collectively responsible for outcomes. Some, like the Mayo clinic, produce excellent outcomes at low cost. But how to replicate their successful cultures is not yet clear:

McAllen and other cities like it have to be weaned away from their untenably fragmented, quantity-driven systems of health care, step by step. And that will mean rewarding doctors and hospitals if they band together to form Grand Junction-like accountable-care organizations, in which doctors collaborate to increase prevention and the quality of care, while discouraging overtreatment, undertreatment, and sheer profiteering....

This will by necessity be an experiment. We will need to do in-depth research on what makes the best systems successful—the peer-review committees? recruiting more primary-care doctors and nurses? putting doctors on salary?—and disseminate what we learn. Congress has provided vital funding for research that compares the effectiveness of different treatments, and this should help reduce uncertainty about which treatments are best. But we also need to fund research that compares the effectiveness of different systems of care—to reduce our uncertainty about which systems work best for communities.

Training in torture

Atul Gawande's long look at solitary confinement in U.S. prisons, Hellhole, asks, "is solitary confinement torture?" and provides overwhelming empirical evidence that the answer is yes. Solitary confinement brings on psychosis and hallucination; it makes the mind effectively disintegrate; it causes lasting psychological damage.

In addition to documenting this torture's effects, Gawande also chronicles its explosion in the U.S. prison system since the early eighties, the same period in which the prison population as a whole has exploded:

The number of prisoners in these facilities has since risen to extraordinary levels. America now holds at least twenty-five thousand inmates in isolation in supermax prisons. An additional fifty to eighty thousand are kept in restrictive segregation units, many of them in isolation, too, although the government does not release these figures. By 1999, the practice had grown to the point that Arizona, Colorado, Maine, Nebraska, Nevada, Rhode Island, and Virginia kept between five and eight per cent of their prison population in isolation, and, by 2003, New York had joined them as well. Mississippi alone held eighteen hundred prisoners in supermax—twelve per cent of its prisoners over all.

Reading this made me think that like most disasters, the Bush Administration's embrace of more physically abusive forms of torture in its treatment of hundreds if not thousands of detainees from Bagram to Guantanamo to Abu Ghraib had no single simple cause -- say, a rogue Vice President and Secretary of State -- but came at the end of a chain of systemic failures. In some sense that needs to be explored further, we have trained ourselves to accept brutal treatment of those we deem to have forfeited their rights. A politics and society that embraces ever more punitive measures against prisoners and illegal immigrants is part and parcel with one that removes regulatory restraint from elites, from Wall Street to the executive branch, that gleefuly redistributes wealth upwards, and that plots to privatize and eviscerate our common measures for sharing risk.

We have changed course. How successful, lasting and thoroughgoing will Obama's counterrevolution be? For better and worse, we're living in interesting times..