We spend $8,400 per American on health care, which is 18% of our country’s economic output. For those that are interested in a current balance sheet, Kaiser Family Foundation has put out a Primer on Health Care Costs, found here. The report includes all of the requisite graphs and charts all done in multiple colors and looked at six different ways. The conclusions—technology is expensive, old people have a lot of diseases, people with chronic illness cost a lot of money,  Americans are not smart health care consumers, and physicians are not necessarily effective (or even always honest) purchasers of health care—were the same conclusions reached in my health policy class in 1983 when we were spending $1,200 per American and less that 10% of our economic output. Kaiser concludes the report with this statement:

Successfully improving the efficiency and quality with which care is delivered is an enormous challenge, one that will require substantial investment in research, new information systems, performance incentives, and education, with the hope of transforming how health care is delivered by thousands and thousands of providers dispersed across our largely disaggregated health care system. Coming to terms with the potential of medical technology and its long-run influence on costs is a different type of challenge, but one that is also important.

When I was learning about health policy in 1983, there was general agreement that we as a country were spending enough on health care, but we were spending some of it on the wrong things. When I was learning about entrepreneurial health care delivery (same program, different class) we were taught how to manipulate physicians and patients into committing more of their health care choices to our facility, regardless of need. The tension between actual, perceived and created need is pervasive throughout many aspects of American consumer culture. If as a shoe salesman you talk people into purchasing extra shoes, however, the worse that happens is the customer needs a bigger closet. If you talk them into purchasing additional health care, a little waste is the best that might happen. Worst case, to quote the Verizon CEO:

  • 280,000 people will get the wrong advice today in a doctor’s office
  • 2,800 people will be harmed today by a medication error
  • Equivalent of 390 fully-loaded 747’s will die this year in the hospital from a preventable medical mistake – >1 747/day
  • Many of these will be our employees

People tend to make poor health care choices when left to their own devices, rendering the traditional “market” ineffective. Consequently the “give them cash and let the invisible hand decide” strategy is not an option. So, how do we fix this problem? Per Kaiser, the answer lies in the following:

  • improving the efficacy of care delivery (making sure that only correct care is given and only when needed)
  • de-medicalize some aspects of life and encourage patients to demand less instead of more
  • work within the provisions of the Affordable Care Act to improve care
  • demand that the government (the major purchaser of health care) demand better from its suppliers (physicians, hospitals, etc)
  • focus on keeping people from getting sick instead of paying for illness care.

The good news is that in many areas of the country, transformation along these lines is occurring. I will chronicle some of these activities in the coming weeks.

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