Priceless: Chapter 5


by Austin Frakt and Aaron Carroll

Source: The Incidental Economist

Chapter 5 of John Goodman’s book Priceless is about why we spend so much on health care in the US. In comparison, it feels as if John was only toying with readers in prior chapters, which I found a bit light on evidence. (Our reviews of them are under the Priceless tag.) In Chapter 5 he lowers the boom, citing 66 references in about 27 pages.

I’m going to review the chapter backwards. It concludes with a sketch of John’s vision:

Let patients pay for all routine primary care and all diagnostic screening tests from a Health Savings Account that they own and control.

Create special HSA accounts for the chronically ill and encourage providers of integrated, coordinated care to compete in an unrestricted market for their patronage.

Let all elective inpatient care be subject to a type of value-based insurance involving domestic medical tourism—with the third party paying only what the care would cost at low-cost, high-quality facilities and with the patients paying all the additional costs if they choose to seek care from other facilities.

A full analysis of this vision would include all the virtues and all the potential limitations and concerns that a skeptic might voice, of which there must be some. Anyone serious about such a reform would respectfully consider the limitations and concerns and attempt to build in countermeasures and safeguards to address them. I look forward to seeing whether and, if so, how John handles this task.

Earlier in the chapter, John makes an interesting claim.

The conventional wisdom in health policy is that the United States spends far more than any other country and enjoys mediocre health outcomes. [...]

Indeed, the reverse may be true. We may be spending less and getting more.

On the spending side, John says a lot of things, but winds up telling us something that is well known. The US spends a lot more than other wealthy nations but doesn’t use more resources. What does that mean? Well, it’s the prices, stupid, which every health policy wonk knows. On the outcomes side. John says the evidence is mixed. That’s perhaps slightly more optimistic than many. But, did you notice that John leaned on survival rates as evidence of better outcomes? Survival rates! (I’ll say no more here. Follow the link.) Putting together what he’s written about spending and outcomes, and knowing what we know about survival rates, I fail to see how John has shown that the conventional wisdom is wrong. Prices are high and outcomes are, at best, mediocre. How is that spending less and getting more?

The chapter includes a section on Medicare’s administrative costs. He claims that their accounting “ignores the cost of collecting taxes.” Nope. The chapter contains a section on whether Medicare’s costs (spending, really) are growing more slowly than those of the private health sector. He makes an argument the limitations of which I’ve addressed. (For more on public vs. private cost control, see the FAQ.)

This is all part of John’s attempt to dismantle any shred of respect the reader might have for anything the government has done or is contemplating doing in the realm of health care. Though, in parts, John condemns private insurer’s too, he cites many studies purporting to show government experiments in cost control have failed. But what about those copied by private insurers? (I’ll get back to that.) I cannot possibly check up on all his studies and read all the other relevant ones. However, there are a few things I can easily react to.

1. John says ACOs have been rejected by the nation’s leading health plans. I guess this hinges on what “leading health plans” means. But there are private plans pursuing ACOs. Condemning ACOs isn’t just an anti-government or even anti-ACA stance.

2. John says that there is no reason to be hopeful about ACOs. Perhaps he should check the latest issue of Health Affairs. No, I’m not saying every ACO has or will deliver stunning results. But some have saved money and others may. Shouldn’t we be hopeful about that? Surely we cannot expect every experiment to succeed everywhere.

3. John says the “health policy community is dead set against discussing fundamental incentives.” I see nothing but talk about changing provider incentives. Just Google ‘provider incentives healthcare’ and you’ll see what I mean. Heck, there’s a lot about patient incentives too. Go on, Google it.

4. Here’s what John wrote about a Medicare demonstration relating to heart bypass surgeries:

Value-based payment demonstrations consisted of four programs in which Medicare made bundled payments to hospitals and physicians to cover all services connected with heart bypass surgeries. With respect to these, the CBO finds that “only one of the four . . . yielded significant savings for the Medicare program” and in that one, Medicare spending only “declined by about 10 percent.”21

Reference 21 is a CBO blog post, which actually says,

Only one of the four demonstrations of value-based payment has yielded significant savings for the Medicare program. In that demonstration, Medicare made bundled payments to hospitals and physicians to cover all services connected with heart bypass surgeries, and Medicare spending for those services declined by about 10 percent.

See what John did there? There were not four demos pertaining to heart bypass surgeries, only one of which succeeded. There were four demos of value-based payments. The only heart bypass one yielded substantial savings. John could have still have used what CBO really said to support an argument that few demos have saved money. What’s wrong with the truth? Does it hold out too much promise that at least in the area of heart bypass surgeries, we have evidence of a government demo success?

5. John lauds outpatient surgery centers as successful, private entrepreneurial innovations. However, outpatient and ambulatory surgical care is the single largest driver of excess health spending.

To all this, I’ll add one more thing. Chapin White has connected the gradual slowdown in Medicare’s spending growth to the program’s payment reforms. To a large extent, these reforms have been copied by private insurers. Nobody forced them to do so. Is the private sector the locus of innovation or not? (Truth is, sometimes yes, sometimes no.)

Let me be clear about what I’ve done in this post. I have not shown that Medicare or the status quo health system is ideal. I have not argued that the ACA cannot be improved. I have not claimed that John’s vision is flawed. I have, however, illustrated that John’s reading and reporting of the evidence is incomplete. I’m not sure how that furthers his aim. In my view, one need not eviscerate government or the status quo to argue something else would be better. John would get little argument that our health system needs reforms. He’d get little argument that the ACA should not be the final one. To me, that’s enough. I look forward to reading more about John’s vision, and I hope to read less one-sided presentations of the evidence.

In two posts between now and Monday, I will cover Chapters 6-9.

Priceless: Chapter 5, ctd.

By: Aaron Carroll

For reasons that will become clear next week, I’m totally swamped. Therefore, I will not be able to keep up with Austin’s relentless pace through Priceless. I feel compelled to comment on one thing in chapter 5, however.

It’s a common trick to cherry pick one study, one year, one country, or one statistic where we shine and declare that we have the best health care system in the world. Or, to declare that because you fond a way to make the US look good, it’s “up for debate”.

With the amount we spend, it’s crazy that we can even have a discussion. We should unequivocally be number one. We’re not. The way we get to say we are is by picking one country (Canada!) where “wait times” are an issue. Or, more commonly, we pick on survival rates.

I’ve written about this over, and over, and over again. And still, people ignore what I’ve written and cite survival rates. They also do it in the same cancers (breast, prostate, colon), where they know we over-screen, and they know we focus.

That’s cherry picking.

We do not have the outcomes we want. There are any number of reasons for that, more than I have time for today.

If you want to have a debate, fine. I’ve heard you. I’ve read what you’ve written. You have cited survival rates in certain cancers. I have written my replies to these citations and explained why we are cherry picking. I’ve shown what I think are better metrics. I have not talked past you, but engaged you and your arguments. I’ve thoughtfully considered them, and responded to them in detailed point by point analysis.

Your turn.