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It is incredible to me that, amid public concern over the leading healthcare proposals, congressional leadership continues to stonewall any discussion of legal overhaul. They have effectively left the field open to Republicans, who now have seized the center with proposals for special health courts and other ideas that enjoy broad support from almost all healthcare constituents, including consumer groups and patient safety advocates. See here, here and here. I know the trial lawyers give Democrats a lot of money, but can this possibly be smart politics?
The only substantive retort to solving the problems of tort, at least that I've heard, is that the CBO found last year that it couldn't find consistent evidence that fixing malpractice laws would save money. there's also no hard evidence that overhauling fee-for-service reimbursement will save money either--but almost everyone associated with healthcare understands that cost-containment requires a fundamental change in the culture of health care delivery, starting with getting rid of the incentives (both positive and negative) to always do more.
Today's New York Times op-ed by Jon R. Gabel addresses the fallacy of looking for hard data with fundamental change. "The budget office has particular difficulty estimating savings when it considers more than one change at once.... [I]f both malpractice reform and comparative effectiveness studies were instituted simultaneously, they might work together to yield substantial savings."
Creating a reliable malpractice system with special health courts will not solve all the problems of healthcare, but it will solve some. Reliable law is also a necessary foundation for other changes in the culture of healthcare delivery. Persuading doctors to use email with patients not only requires a new reimbursement system (Britain now pays doctors more for using email) but also requires a system of justice that reliably supports doctors who use this imperfect but highly productive form of communication.
Congress should listen to doctors and patients. They see these problems with modern healthcare. The fact that it's hard to "score" the precise savings doesn't mean that the changes are unimportant. I recall the statement attributed to Einstein: "Not everything that is important can be measured, and not everything that can be measured is important."
(Photo: Flickr User aflcio2008)
For the past few weeks, I've been talking with healthcare experts with a variety of perspectives, trying to discover coherent principles for overhauling American healthcare. This requires, in my view, testing every idea against its likely effect on the real people who provide healthcare services and on the real people who need those services. What's ultimately required is to change the culture of healthcare delivery.
Congress doesn't seem to be tethered to the realities of healthcare delivery, and its proposed bills seem to have been tossed in a storm of special interests. The refusal of the Democratic leadership to consider pilot projects for more reliable systems of justice--see my recent op-eds in the Wall Street Journal and Washington Post--is just one example of special interests trumping the needs of the common good.
It's hard to put pressure on Congress without a coherent point of view of what a new system should look like. In the first part of this post, I describe the aspects of current healthcare that drive up costs and must be addressed by a new framework. In the second part, I describe a framework for reform which would provide universal coverage with incentives to contain costs.
Part One: An Inventory of Cost-Containment
The healthcare debates have focused on ways to expand coverage--by mandates, by a public option, and by various forms of subsidy. But the underlying problem remains one of affordability, and, specifically, how to bring efficiency to a healthcare system notorious for its inefficiency.
Few concrete solutions have emerged because the healthcare industry itself is not sure what to do--its economic model is the product of the bureaucratic reimbursement and regulatory framework that drives providers towards always doing more. Moreover, the Congressional Budget Office cannot "score" most proposed solutions because it is impossible to quantify with any precision the main drivers of inefficiency--for example, the fee-for-service delivery model, or the amount of defensive medicine--or to quantify the potential savings of changing the legal and reimbursement framework.
Cost-containment can be viewed through many perspectives, which often overlap--for example, ineffective chronic care can be viewed in part as a problem of fee-for-service reimbursement. But categories of waste and inefficiency can nonetheless be identified, which any reform package should attempt to address. Here they are:
1. Chronic care. Care for chronic illness--mainly diabetes and heart disease--accounts for roughly 75 percent of all healthcare costs. About half of this is attributable to obesity, smoking, and other bad habits. There are several potential ways of cutting these costs:
--First, create incentives and other programs for healthier lifestyles. Safeway offers its employees reductions in premiums for losing weight and quitting smoking.
--Second, change the model of care delivery, from fee-for-service to a capitated "medical home" (or "accountable care organization"), in which providers are paid so much per patient per year, with incentives to push patients towards healthier lifestyles and with pay-for-performance adjustments to reward providers who succeed. There was a discussion among leading experts at NewTalk.org. Much of this work requires the work of social workers, not expensive healthcare professionals. Most experts agree on the need to shift to a medical home model; there is less agreement on how to get there.
2. End-of-life care. Nearly one-third of Medicare's yearly expenditures are on patients in the last year of their lives. There is a wide disparity in care for terminal illness, especially for the elderly. Palliative care in a home or hospice setting is often the most humane solution, but many doctors feel compelled to try to "cure" old age with dramatic and expensive interventions. Sometimes these are driven by an insistent child, sometimes by fear of lawsuits, sometimes by medical self-interest. Professor Marshall Kapp and Dr. Diane Meier review some of these problems.
The solution to inappropriate interventions at the end of life is not to put government in the position of making life and death decisions. But there must be a reliable legal framework in which doctors feel comfortable offering ethical leadership in end-of-life situations. Third Way provides an excellent summary of the situation and its solutions. Committee for Economic Development (CED) fostered a discussion on its sponsored 2007 proposal, beginning on p. 38.
3. Over-treatment. The pioneering work at Dartmouth by Dr. John Wennberg and colleagues exposed the inconvenient fact that healthcare is often driven by supply of doctors and machines, not by need for care. Costs in Florida are almost double that in Minnesota, with no better outcomes. The recent report in the New Yorker by Dr. Atul Gawande revealed that costs in McAllen, Texas are almost double that in El Paso, with no better results. The cost driver appeared to be that doctors in McAllen had become entrepreneurs, setting up their own clinics, buying expensive diagnostic equipment and then giving their patients the works--paid for by the clunky fee-for-service reimbursement schedules.
The solutions for over-treatment include:
--Change the reimbursement model for primary care and chronic care, migrating from fee-for-service to a capitation model with pay-for-performance adjustments. To avoid under-treatment, there needs to be end-of-year audits to review effectiveness. The CED report sited above provides descriptions of successful models, starting on p. 41. Making this transition is unavoidably complex. The best approach, which is embodied in various proposals but not in a simplified form, is to provide a voucher redeemable at a "health exchange," offering annual coverage at a fixed price. This has the enormous potential advantage of driving insurers and providers to a capitation-based model of delivery for the simple reason that fee-for-service providers will become uncompetitive. I discuss this in the second part of this post.
--Eliminate incentives for "defensive medicine." Fear of unreliable justice, and apprehension at the prospect of years of gut-wrenching litigation whenever there is a malpractice claim, have corroded the culture of healthcare delivery, such that many doctors seem to focus on self-protection as much as the needs of the patient. The solution is a reliable system of justice that renders consistent rulings based on standards of care, not a jury-by-jury system that encourages inconsistency and thrives on emotion. A broad coalition has come together behind the idea of special health courts, developed jointly by Common Good (which I chair) and the Harvard School of Public health, with funding by the Robert Wood Johnson Foundation.
--Some believe that patients must have more "skin in the game," with substantial co-pays for expensive diagnostic tests and optional surgery. This is part of the logic of health savings accounts. Substantial co-pays would need to be means-tested, so that those without resources would not be disadvantaged. One defect of health savings accounts is that they encourage saving the first dollar, when most experts, including Professor Tim Jost, believe there should be more spent on primary care, in order to avoid expensive care later on. A better option is to provide care for everyone on a fixed annual fee, but create a list of optional interventions that require significant co-payments by the patient or the employer--in effect, defining a baseline of care.
4. Bureaucracy and Overhead. Administrative costs have been estimated to account for about 11.5 percent for private insurers, 3.8 percent for Medicare and Medicaid, and some larger number for diversion of time by providers for reimbursement and legal compliance. (The CED report elaborates on this idea on p. 29, as does Uwe E. Reinhardt). The fee-for-service model is notoriously inefficient: reimbursement paperwork for each aspirin and syringe administered and a costly gatekeeper function for each intervention. Private health plans are criticized for adding overhead, especially compared with Medicare and public plans, but some of that difference is offset by the losses to fraud and abuse in public plans and by disease management services provided by insurers. More could be saved if insurers agreed upon common forms and protocols.
The transition from fee-for-service to capitated payments will reduce much of this overhead. Creating accountability mechanisms that rely on audits at the end of the year to evaluate the appropriateness of services already rendered, not a gatekeeper function for each and every intervention, should also reduce overhead costs. Probably the best way to enforce guidelines on "comparative effectiveness" (for example, avoiding costly and unnecessary CT scans for a headache) is through penalties and bonuses following year-end audits, not arguments over each and every medical decision.
5. Barriers to Productivity. Healthcare is delivered in a legal jungle, thousands upon thousands of rules that require compliance. The body of unknowable law also contributes to a mindset of inertia. When in doubt, do it like it was done yesterday. Most doctors don't use email because it leaves a written record that might be used against you in a lawsuit, and might unintentionally violate requirements of privacy. Email communications are also not reimbursed. Innovation is not on anyone's top list of priorities, and, in any event, will usually be squelched by the risk managers, who basically have the job of saying no to anything new.
Better productivity requires incentives to innovate, which the shift from fee-for service to a capitated model with pay-for-performance incentives should provide. Better productivity also requires legal trust and legal clarity: providers must feel free to focus on better care, not self-protection or unnecessary bureaucratic compliance. Special health courts will allow providers to rely on sound medical judgment. A medical Federal Reserve can offer oversight and draw lines on what's needed. Legal uncertainty is the enemy of innovation, and of productive activity generally; I have a few suggestions to remedy the issue.
(Photo Credit: http://www.flickr.com/photos/orcoo/345583754)
08/06/09 12:41 PM
Fixing Healthcare, Part Two: The Path to a New Healthcare System
Conceptually, the most obvious way to achieve universal care without eliminating existing employer policies is through a voucher--plus an exchange where the voucher can be traded in. Employers would be free to top up the voucher and provide a more generous plan if they wanted to.
Most of the proposals on the table can be described as providing some sort of voucher. Massachusetts in effect gives vouchers to the needy. Wyden-Bennett also provides subsidies that can be reframed as voucher. But most of the proposals lack the clarity of a straightforward voucher framework. Vouchers provide a simple analytical framework for expanding care, for defining public assistance, and for deciding how much we want to spend. Moreover, by defining the amount of care we can afford, vouchers provide incentives for providers to improve efficiency in order to provide care within those limits, and provide a clear framework for evaluating cost and funding of universal healthcare. Vouchers do not require a "public option." Vouchers need not be universal, although some sort of offset for employer plans would be required if we want employers to maintain the incentive to provide their own plans.
A voucher system, combined with an overhaul of the regulatory and liability system, would dramatically shift the incentives towards a more effective system of healthcare delivery. Thus:
1. Transition into a voucher system. The most effective way of driving providers towards a new model of delivery is to transition all public assistance (starting with Medicaid) into the voucher program. This will put enormous pressure on insurers and providers to shift to a capitated system. Set up a federal authority to evaluate providers annually and help define baseline care. If we're going to have socialized healthcare for any significant part of the population (government already pays for half of all healthcare), there is no way to avoid government oversight. The challenge is to create authority structures that are transparent and accountable.
2. Overhaul regulatory and liability structures so that providers can focus on care, not compliance and defensive medicine. Congress should require special health courts with the goal of reliability. (Wyden-Bennett provides bonuses to states that implement liability reform.) Congress should establish a medical version of a base-closing commission to propose a rationalization of federal and state regulation, including easing antitrust restrictions so that, for example, providers can share expensive diagnostic equipment.
Insurers and providers must be required to reorganize themselves to provide care for an annual fixed fee, adjusted for performance. But they must be given the freedom to figure out how to innovate towards this end--subject always to oversight and accountability for good results. Top-down dictates can never work. A voucher system will put enormous pressure on them to become efficient. A reliable legal and regulatory system will give them room to innovate. And a new regulatory authority will make sure they provide competent care.
Healthcare reform ultimately requires a proposal that everyone understands. It's too easy now to blow smoke over any proposal. Universal care can be accomplished through vouchers. Cleaning out the legal jungle will create room for innovation and productivity. People can understand these principles for change. That gives them a chance of actually happening.
The debate gearing up around the nomination of Judge Sonia Sotomayor has little to do with her qualifications (undeniably impressive) and everything to do with a partisan referendum on the role of judges in a free society. You can practically already hear the senators' speeches, rewound from the last hearings. Conservatives will say she is "activist" and "result oriented," while liberals will praise her "empathy" and commitment to the "rights" of the downtrodden.
The tired vocabulary from the 1960s, however, is not just boring--it also reveals a profound misunderstanding about the role of judges. Both sides basically have it backwards, and have conspired unwittingly to foster a kind of legal free-for-all. Judges sit on their hands, letting litigants argue almost anything (thereby avoiding "activism") while permitting any disgruntled person to challenge decisions by people in authority (thereby showing "empathy" and honoring "individual rights").
Conservatives practically snarl when using the phrase "activist judge," thinking of judges in the heyday of the rights revolution who took it upon themselves to take over prisons and school districts. But their concern for judges acting like legislatures (a fair point) has mutated into a philosophical antipathy to judges making any value judgments. Conservative dogma, to quote Chief Justice Roberts in his confirmation hearing, is that judges are "like umpires," who don't "make" law but just "apply" law. This is a myth, of course--no animal sacrifices or burning of incense will reveal the one true legal ruling. A judge must make a value judgment. There's no other way to distinguish between, say, a valid lawsuit and one that, in a free society, ought to be dismissed.
Words matter, however, and the epithet of "activism" is now lodged in the collective judicial brain--it is hard to talk with any judge about judicial responsibility without hearing immediate protestations about how judges must avoid being "activist." But if judges don't assert values of reasonableness, then society loses the protection of the rule of law. That's what happened in modern society, with the effects all around us. Hardly any interaction in a free society is safe of legal peril--in the workplace, in the classroom, in government, on the playground. Teachers won't put an arm around a crying child. Doctors squander billions on defensive medicine. Diving boards disappear.
Liberals, on the other hand, see justice as the protection for the little guy, and look to Judge Sotomayor "to stand up for the rights" of the underprivileged. The rhetoric of rights is overpowering. Judges practically wilt at the thought of being insensitive to "individual rights."
But what about the rights of the community? Looking at every lawsuit as a matter of individual rights implies a lowest common denominator approach to justice that is the antithesis of the rule of law. Every accident, every job setback, has an injured person, for whom we can all feel empathetic. But letting the person maintain a claim creates a different set of victims (those who pay) and, more importantly, can discourage socially beneficial activities. If any swimming accident can result in a lawsuit, pretty soon lakes will close and there will be no diving boards.
Just as concerns about "activism" sprung from judicial overreaching, the liberal preoccupation with rights arose from a long history of judicial neglect. But the idea of rights then expanded to encompass what legal historian Lawrence Friedman calls "total justice"--in which courts were available to remedy almost any daily disappointment.
Pressing law onto daily choices is not freedom, however, but a form of coercion. Freedom is supposed to be an open field of human possibilities, not a legal minefield. Law supports freedom not by interceding in daily choices, but by defining the outer boundaries of legal intervention--"frontiers, not artificially drawn," quoting philosopher Isaiah
America needs a new judicial philosophy. Instead of focusing on enforcing "rights" and avoiding "activism," judges should look to the effects of lawsuits on the functioning of society, and see their job as drawing "boundaries" and achieving a "balance" between competing interests of freedom and individual grievances. Judicial rulings that keep claims and defenses reasonable should be encouraged, not avoided. To quote former Justice Benjamin Cardozo, the judge must act "as the interpreter for the community of its sense of law and order." Only by judges continually asserting reasonable community values can citizens enjoy the protection of the rule of law. As Justice Felix Frankfurter observed, "A timid judge, like a biased judge, is intrinsically a lawless judge."
There is plenty for liberals and conservatives to argue about, but first we need to restore the authority of judges to bring order to the free-for-all. What people can sue for establishes the limits of everyone else's freedom. That's why judges must be activist in taking back control of the courtroom. That's why judges must look to the effects of claims on the broader society, not just empathy to the particular claimant.
The Supreme Court's Ricci decision --holding that New Haven engaged in unlawful "reverse discrimination" by discarding test results for fire department promotions --exposes an unavoidable conflict at the heart of Title VII of the Civil Rights Law. It's basically impossible to encourage affirmative action (to avoid "disparate impact") without discriminating against other workers.
Ricci will probably prompt more litigation, as white males challenge perceived efforts at affirmative action. Rather than descend further into a downward spiral of accusations of discrimination and reverse discrimination, perhaps it's time for a fundamental rethinking of how to enforce anti-discrimination laws.
There's a flaw in the premise of these cases: law can't enforce fairness in daily relations. Law can guard against overt patterns of discrimination, but intervening in specific employment decisions creates a hopeless morass. There's no objective test, no proof in a court, that can sort out what's fair and what's not. The goal of the civil rights laws was to avoid racism and other forms of systematic unfairness --not to try to achieve a utopia in which every employment decision is extruded through the judicial system to prove some ultimate fairness. Fair to whom? Employment decisions always involve a winner and a loser.
The difficulty of proving fairness is evidenced by the majority and dissenting opinions in Ricci (see here).
The majority opinion (by Justice Kennedy) emphasized the fairness of a level playing field. What stuck in the craw was that
The dissent (by Justice Ginsberg) emphasized the overwhelming patterns of nondiversity, reaching back generations. Justice Ginsberg questioned the whole idea of using a written test as the threshold for promotion --leadership skills are hardly revealed in test scores.
Both sides are right. Of course it's unfair to go to great efforts to design a neutral test, and then throw out the results. But Justice Ginsberg is also correct that no test can accurately evaluate intangible qualities like leadership, or the potential benefits of a minority supervisor. If
Almost forgotten in the spat over fairness is the main goal of employment decisions in the first place --to do what's best for the organization. That always involves the exercise of judgment by the person with responsibility. The hard question, in a free society with a bad history of discrimination, is how to restore the freedom to use judgment without opening the door to past bad behavior.
Discrimination law has certainly come a long way since the heady days when it knocked down historic barriers of racial and gender segregation. Now almost any disgruntled employee can claim discrimination --even before Ricci, an estimated 70% of workers were in some "protected category." Federal courts are clogged with employment lawsuits--about 10% of the federal civil docket. Most are without merit, but the claimants don't have the objectivity to discern their own shortcomings, and certainly not to discern the needs of the organization or the skills of others. The overhang of possible claims has chilled open interaction in the workplace, and acts as a barrier to minority employment.
The Ricci decision now closes the circle of discrimination jurisprudence, achieving a kind of mobius strip of forbidden acts. You can't discriminate; you can't reverse discriminate, you must strive towards choices that are pure and neutral. If Aldous Huxley were here, he would require HR officials to take an extra dose of soma to achieve a state of complete indifference. You can already see the elaborate protocols set up to avoid "subjective" criteria--effectively making human judgment illegal. Courts will take out their magnifying glass to enforce a lowest common denominator approach to employment disputes, scrutinizing supervisors to make sure they can't favor anyone.
Is this really how we want courts to spend their time? Is this really how we want supervisors to make decisions? Does this enhance the workplace culture, or corrode it?
Justice Scalia in his concurring opinion suggests that there is an unavoidable conflict between the Equal Protection Clause of the Constitution (the idea of the level playing field) and Title VII's suggestion that employers can be liable for "disparate impact" (when minorities don't have the highest test scores). Professor Richard Epstein goes further and calls for repeal of Title VII altogether
--pointing out the paradox that it prohibits affirmative action (see here).
I have a different proposal --pull back Title VII to its original goal. Keep the basic prohibition against intentional discrimination ("disparate treatment"), but limit the protection to groups that traditionally suffered discrimination in that workplace, and, with limited exceptions, require group-wide claims. Federal courts should not be called upon to adjudicate individual workplace disputes. That's a quagmire, hip-deep in emotion without any lifeline to dispositive facts. Ask any federal judge.
In my formulation, there would be no legal need to promote firefighters using written tests, and no prohibition on promoting minority firefighters. The statute is there not to create a happy world of fairness-for-everyone, but to avoid slipping back into the unhappy world of racial discrimination. There's a difference. The law isn't there to protect white guys. Nor is the law intended to compel affirmative action --what it prohibits is intentional discrimination. Now, there would still be pressure for employers, like the New Haven Fire Department, which have an extremely non-diverse workforce. The city might feel a little nervous about how it proves absence of discriminatory intent. That's not a bad thing, in my view. Leaning over backwards for diversity is a productive instinct. Feeling forced to make choices is not.
Pressing law down onto daily choices is a formula not for fairness, but for bitterness. What the competing opinions in Ricci demonstrate is how discrimination law has evolved into a perfect formula for simmering resentment. Why did he get the promotion and not me? It must be racism. Or...He must be playing the race card.... The only solution I can see is for law to get out of the business of trying to adjudicate fairness in individual choices, and to go back to guarding against patterns of intentional discrimination.
By the way, I don't think Ricci has anything to do with Judge Sotomayor's fitness as a nominee. As the Supreme Court's opinions make clear, the law in this area is internally contradictory. Judge Sotomayor's ruling is certainly not "activist" --the decision deferred to the choices of officials who are accountable politically. She and her fellow judges can be criticized, I suppose, for not writing an opinion explaining their decision to affirm the trial court. But what were they supposed to say? The Supreme Court has now given legal priority to the need to avoid "reverse discrimination," but that conclusion was hardly compelled by prior jurisprudence. There's a lesson to be learned from the Ricci controversy, however. Law has limits and can't meddle in daily choices without making everyone unhappy.
Just a few months ago, members of Congress took turns wagging their fingers at CEOs of the automakers for not making tough choices--not shedding "legacy costs," not making products consumers wanted, not cutting bloated bureaucracies. Detroit had become self-referential, unable to compete because it was unwilling to deal with its internal constituents.
Now Washington faces a series of domestic crises that will shape the health of our society for decades--unaffordable healthcare, balkanized financial regulation, and a mind-boggling deficit, to name three. But Washington will likely fail--indeed, may even make the problems worse--unless it deals with its own "legacy costs" and bloated bureaucracies, which currently make it impossible to achieve new focus and efficiencies.
Detroit is Google compared to Washington. Year after year, Congress makes laws but almost never repeals them. Washington is like a huge monument to legacy costs. Laws from the Depression will send tens of billions in unnecessary subsidies this year to farmers, organized labor and other groups thought to be in need--80 years ago. Bloat is also notorious--it's nearly impossible to fire anyone under civil service laws, so layers of middle management have grown exponentially. Professor Paul Light found 32 levels in some agencies (compared to 5 levels in most well-run enterprises).
All this accumulated law--about 300,000 pages of federal statutes and regulations--operates as a form of central planning. It bogs people down in bureaucracy. In healthcare, the labyrinthian requirements of Medicare, Medicaid, HIPAA, plus the equally dense, and often conflicting requirements of 50 states, plus the insurance company red tape, make it impossible for people to deliver care efficiently. Add to that bureaucratic nightmare the ever-present fear of being hauled into court whenever a sick person gets sicker, and you have a system that looks like it was designed for frustration and waste. (See here for principles needed to climb out of this rut.)
The inertial forces that make it hard to achieve change in Washington, in the best of circumstances, become a kind of invincible fortress when reinforced by thousands upon thousands of pages of binding law. Each of those provisions is zealously guarded by special interest groups, and changing any word of a statute requires the votes of 218 members of the House and (generally) 60 senators.
Faced with legions of special interests, Congress is trying to fix healthcare by piling new requirements on top of the old ones. But this won't address the underlying problems of efficiency, any more than it could in Detroit. To restore focus and efficiency, Congress must first clean out what's there--not to eliminate the goals of existing regulation but to put them in a coherent framework that real people can understand and internalize.
Dealing with the sclerosis of accumulated regulation, however, is not something our leaders have any experience with. Most of the historic legal reforms of the past century were written on a new slate. The Progressives at the turn of the 19th century imposed worker safety and food safety laws to fill the regulatory void of laissez-faire. Roosevelt's New Deal provided social safety nets where there were none, and job programs in agencies that didn't exist before. The civil rights movement led to laws against discrimination where there were none.
We don't have the luxury of a clean slate--healthcare, schools, and the financial sector are all mired in a bureaucratic jungle. Al Gore had the right idea with his Reinventing Government initiative, but he was trying to simplify what was there. The imperative now is much more radical, and urgent--to solve society-wide crises of affordability in healthcare, accountability in the financial markets, and disarray in schools.
Making sense of the current problems requires not just new laws--but a willingness to undo old laws in order to build coherent new structures. The litmus test is not whether some expert can draw a complicated chart showing how law requires this or that, but whether real people (including doctors, teachers, and financial regulators officials) feel liberated to focus on doing their jobs properly. The closest analog in history are recodifications that occur periodically--almost always releasing enormous improvements in productivity. In ancient Rome, the emperor Justinian is best known for taking "the vast mass of juristic writings which served only to obscure the law," and rewriting them into a coherent code. Napoleon considered his "Napoleonic Code" to be his finest achievement, and the simplified set of principles that his experts created is still the legal foundation for most European countries. America's Uniform Commercial Code, developed in the 1950s and adopted by all states, brought consistency and efficiency to a tangled web of state laws that impeded free flow of commerce.
The current debate is missing its most important element of effective reform--the need to phase out many existing laws and regulations so that our leaders can build structures from the ground up that focus on human responsibility and accountability. This is what observers such as Ezekiel Emanuel have called for in healthcare (see here), and what Richard Posner seems to be suggesting for financial reform (see here). Two areas I have worked on--healthcare justice and authority of teachers--both require abandoning existing legal conventions in order to meet our public goals. To restore trust needed in healthcare interactions, patients and doctors need health courts that are reliable to sort out good care from bad care. To restore a school culture of order and respect, teachers need to be released from bureaucracy and the threat of a legal proceeding for ordinary daily disciplinary decisions.
Getting anything done in Washington is notoriously difficult, and the instinct is always to do whatever can be agreed upon in the sausage factory, and then to collapse from exhaustion. But that's not good enough this time around. We can't get there from here. The failures of our public institutions are built into the current structures and can't be fixed without rebuilding those structures.
Future historians will look on this time as one that was critical to the growth of America in this century. Meeting the challenge requires building a new foundation of law and regulation that aspires to address our current goals, not to mollify interest groups clinging to past entitlements. Like Detroit, Washington has to face up to the need to clean out its clogged bureaucracies and start anew.
It's not at all certain that any of these reforms will be enacted. The politics of fiscal pain have eluded Congress in recent decades. The opposition will include those with self-interest in the status quo as well as conservatives who fear nationalized healthcare. Perhaps the best argument Republicans have to scuttle reform is that the reforms won't do the job, since none promise to change the delivery system sufficiently to make universal care affordable.
But the new willingness to confront the flaws in the framework of healthcare delivery could lead towards what's really needed--a complete overhaul of the reimbursement, regulatory and liability structures of healthcare. These structures, like legal concrete poured over daily decisions, have neither the virtues of market discipline (there's no incentive by patients or providers to be frugal) nor the focus of central planning (the single payer countries at least understand that primary care is where first dollars should go). Add to the mix a complete and justified paranoia about lawsuits, and voila, you have the world's most inefficient health delivery--doctors doing whatever they can be reimbursed for, mindful of always protecting themselves legally, with patients demanding miracle cures after neglecting basic responsibility to take care of themselves. This is a "system" (actually more of a bureaucratic junkyard) without focus or discipline. That's the main reason it costs almost twice as much as healthcare systems in other countries that deliver better outcomes.
Some of the worst aspects of this undisciplined system were cited by President Obama in his speech to the AMA--the fee-for-service reimbursement model that tolerates unnecessary care by entrepreneurial doctors, brought to life in Atul Gawande's recent essay in The New Yorker (see here). Obama even ventured out to where few Democrats have gone before--acknowledging that "defensive medicine" could not be solved until doctors were given a system of reliable justice, that can be trusted to distinguish between good care and bad care. (A seismic shift given the Democrats long-standing deference to trial lawyers and their political money.)
But American healthcare is unlikely to become affordable by layering one or two reforms on top of the current system. The idea of holding providers accountable for their "comparative effectiveness"--i.e., not squandering money on unnecessary treatments--is an excellent component of a payment reform, but, if applied by rigid formulas, could potentially become a bureaucratic nightmare (similar to the focus on test scores in the No Child Left Behind law, which has transformed educators into idiot savants concerned about scores, not education). A "public option" or "mandates" to acquire coverage may be useful to cover the uninsured, but is unlikely to do much to wring inefficiency from the current system (except, perhaps, by introducing competition in areas where providers and insurers enjoy an effective monopoly). But the cost problem will not be solved merely by more competition (all providers and health plans are stuck in the bureaucratic Rube Goldberg machine), nor by reliance on choice in the marketplace (see Professor Tim Jost's analysis in Health Care at Risk: A Critique of the Consumer-Driven Movement (Duke U. Press, 2007)), nor by reducing payments to providers already squeezed to the point of pain. Containing costs requires a fundamental overhaul to re-align incentives towards healthy lifestyles, preventive care and effective results.
Doctors, nurses, hospital administrators...even executives who run health insurance companies, are real people. They get up in the morning, and set out to do a good job caring for people. They are in many respects the best in the world--the best trained doctors in state of the art hospitals. But all these people operate within structures that have been imposed upon them--reimbursement systems mandated by Medicare and Medicaid; the differing regulations of 50 states, with literally thousands of rules; as well as mind-numbing bureaucracy and paperwork from the health plans. Without too much overstatement, it would be fair to say that the people who deliver health care services are crushed and demoralized by accumulated bureaucracy, legal fears and cynicism.
America can't solve this looming crisis by reforming from the top. We must put ourselves in the shoes of all those dedicated, frustrated caregivers, and create conditions under which they can make the judgments needed to deliver effective care. We must harness their energy and intelligence towards our common problem, not extrude them through even more bureaucratic machinery.
What I'm proposing might be called the human approach to healthcare reform. The governing principles are these: Simplification, Accountability and Reliable Authority. Here is a sketch of how this approach might work.
--Reimbursement simplification. The fee-for-service model is hopelessly inefficient--inducing unnecessary care, with oceans of paperwork. Primary care and chronic care should be delivered on a "capitation" model (X dollars per patient annually), with end-of-year reviews to true up for unexpected developments and account for effectiveness. This reimbursement idea can work with any type of healthcare provider, private or public, healthcare system or single practitioner. Special medical events--surgery, specialists, hospital stays--require some version of fee-for-service, but need more discipline--perhaps bundled payments for a universe of patients, with true-ups at the end of the year.1. Simplification.
--Regulatory simplification. Providers need to understand what's expected of them. That requires not deregulation but coherent regulation. Healthcare has become a legal jungle. See Professor Jost's overview of the scope of law here. There has not been any serious effort to conform principles or consolidate regulatory goals. The detail makes central planning look efficient--some states have rules regulating the place settings that nursing homes must use to serve residents (see here). The federal government needs to rationalize its own laws and rules, and, as the funder of almost half healthcare costs, has ample leverage to compel states to do so as well. We can't expect healthcare providers to focus on delivering effective care if they're focused instead on bureaucratic compliance.
--Public clinics. Public clinics, accessible to whomever walks in, are not a substitute for universal coverage, but could provide a failsafe mechanism for coverage. Many people, for whatever reason, will not effectively access any coverage system. Many people find themselves out of town and ill. The government should expand its program of public clinics to all urban areas. This should take some of the load off hospital emergency rooms. Health clinics are a service readily understandable, and for some, will end up being their form of universal coverage.
--Effectiveness accountability. Instead of bureaucracy and arguments over each and every procedure, end-of-year reviews can evaluate whether providers have delivered effective care efficiently, with incentives and disincentives for good or bad performance. There will inevitably be disagreements, which puts a premium on creating a reliable authority mechanism to hear disagreements and resolve disputes efficiently. Millions of hours will be saved when doctors don't have to get approval for each and every procedure--they will be at risk, however, for penalties for overutilization at the end of the year.2. Accountability.
--Malpractice accountability. Doctors make mistakes, and injured patients should be compensated for their losses. The current ad hoc system is not reliable (studies show a 25% error rate (see this 2006 study from the Harvard School of Public Health)), staggeringly inefficient (an average of 5 years to settlement, with upwards of 60 cents on the malpractice dollar spent on lawyers fees and administrative costs (ibid.)), and transforms human error (we all make mistakes) into a moral ordeal. Universal distrust of this system infects every healthcare encounter with legal fear--as if doctors are constantly listening to a little lawyer on their shoulders. Defensiveness is now built into the culture of healthcare.
Restoring trust requires a system that will deliver consistent rulings based on accepted standards of practice. That's why a broad coalition of providers, patient safety experts and consumer groups has endorsed the goal of special health courts, developed by Common Good (which I Chair) and the Harvard School of Public Health. See here and here.
--Licensing accountability. Whether doctors are fit to practice is not effectively managed by the malpractice system. But state licensing boards are woefully underfunded and generally ineffective. There needs to be a new authority structure that can gather the data and peer reviews and make the important decisions on professional competence.
--Patient accountability. Patients should have a measure of responsibility for themselves. A few ideas for this include significant co-pays for elective procedures or medications (more broadly defined than now), and affirmative incentives for improved lifestyles and prudent use of specialists, such as those implemented by Safeway (see here).
It is impossible to make sense of the difficult choices required in healthcare without reliable authority mechanisms. That is why health courts are needed, and why ideas such as Ezekiel Emanuel's call for a Federal Reserve-type structure (see here) are essential. Decisions about standards of care and scope of coverage are too complex to be applied mechanically, and require people with the authority to draw these lines. Creating these authority structures is also essential to reducing the crushing bureaucracy--there's no need to regulate how meals are served in a nursing home if someone is authorized to evaluate the overall effectiveness of the facility.3. Reliable Authority.
No one would design American healthcare the way it works today. For the same reason, it can't be fixed by layering more reforms on top of it. It needs a new structure, built with the goal of helping humans do the best they can to meet our common goals. We could even give it a human name: SARA (Simplification, Accountability and Reliable Authority).
Philip K. Howard
