How the Search for Perfect Markets has Damaged Health Policy

Sometimes ideas in healthcare are so powerful that they haunt us for generations even though their link to the real world we all live in is tenuous. The idea of “moral hazard” is one of these ideas. In 1963, future Nobel Laureate economist Kenneth Arrow wrote an influential essay about the applicability of market principles to medicine entitled “Uncertainty and the Welfare Economics of Medical Care”.    

One problem Arrow mentioned in this essay was “moral hazard”- the enhancement of demand for something people use to buy for themselves that is financed through third party insurance. Arrow described two varieties of moral hazard: the patient version, where insurance lowers the final cost and inhibitions, raising the demand for a product, and the physician version–what happens when insurance pays for something the physician controls by virtue of a steep asymmetry of knowledge between them and the patient and more care is provided than actually needed. The physician-patient relationship is “ground zero” in the health system.

Moral hazard was only one of several factors Arrow felt would made it difficult to apply rational economic principles to medicine. The highly variable and uniquely threatening character of illness was a more important factor, as was the limited scope of market forces, because government provision of care for large numbers of poor folk was required.  

One key to the durability of Arrow’s thesis was timing: it was published just two years before the enactment of Medicare and Medicaid in 1965, which dramatically expanded the government’s role in financing healthcare for the elderly and the categorically needy. In 1960, US health spending was just 5% of GDP, and a remarkable 48% of health spending was out of pocket by individual patients. 

After 1966, when the laws were enacted, health spending took off like the proverbial scalded dog. For the next seven years, Medicare spending rose nearly 29% per year and explosive growth in health spending rose to the top of the federal policy stack. By 2003, health spending had reached 15% of GDP! Arrow’s  moral hazard thesis quickly morphed into a “blame the patient” narrative that became a central tenet of an emerging field of health economics, as well as in the conservative critique of the US health cost problem.  

Fuel was added to the fire by Joseph Newhouse’s RAND Health Insurance Experiment in the 1980s,  which found that patients that bore a significant portion of the cost of care used less care and were apparently no sicker at the end of the eight-year study period. An important and widely ignored coda to the RAND study was that patients with higher cost shares were incapable of distinguishing between useful and useless medical care, and thus stinted on life-saving medications that diminished their longer term health prospects. A substantial body of consumer research has since demonstrated that patients are in fact terrible at making “rational” economic choices regarding their health benefits. 

The RAND study provided justification for ending so-called first dollar health  coverage and, later, high-deductible health plans. Today more than half of all Americans have high deductible health coverage. Not surprisingly, half of all Americans also report foregoing care because they do not have the money to pay their share of the cost!   

However, a different moral hazard narrative took hold in liberal/progressive circles, which blamed the physician, rather than the patient, for the health cost crisis.  

The Somers (Anne and Herman) argued that physicians had target incomes, and would exploit their power over patients to increase clinical volume regardless of actual patient needs to meet their target income. John Wennberg and colleagues at Dartmouth later indicted  excessive supply of specialty physicians for high health costs. Wennberg’s classic analysis of New Haven vs. Boston’s healthcare use was later shredded by Buz Cooper for ignoring the role of poverty in Boston’s much higher use rates.

The durable “blame the physician” moral hazard thesis has led American health policy on a  futile five-decade long quest for the perfect payment framework that would damp down health cost growth–first capitation and HMOs, then, during the Obama years, “value-based care”–a muddy term for incentives to providers that will eliminate waste and unnecessary care. Value-based care advocates assume that  physicians are helpless pawns of whatever schedule of financial rewards is offered them, like rats in a Skinner box. If policymakers can just get the “operant condition schedule” right, waste will come tumbling out of the system. 

The end result of this narrative: thanks in no small part to the festival of technocratic enthusiasm that accompanied ObamaCare, (HiTECH, MACRA, etc), physicians and nurses now spend as much time typing and fiddling with their electronic health records to justify their decisions as they do caring for us. Controlling physician moral hazard thru AI driven claims management algorithms has become a multi-billion business. The biggest “moral hazard mitigation” company, UnitedHealth Group, has a $500 billion market cap.

Thus the poisonous legacy of Arrow’s “moral hazard” thesis has been two warring policy narratives that blame one side or the other of the doctor-patient relationship for rising health costs. It has given us a policy conversation steeped in mistrust and cynicism. You can tell if someone is a progressive or conservative merely by asking who they blame for rising health costs! 

There were credible alternative explanations for the post-Medicare cost explosion. Recall that the point of expanding health coverage in the first place was that better access to care DOES in fact improve health.  Medicare lifted tens of millions of seniors out of poverty, improving both their nutrition and living conditions. Medicaid dramatically broadened access to care for tens of millions in poverty. This expansion of coverage, and the added costs, deserve much credit for the almost nine year improvement in Americans’ life expectancy from 1965 to 2015. 

It is also worth recalling that the two most explosive periods of inflation in the post-WWII US economy were the late 1960’s, the so-called Guns and Butter economy that financed the Vietnam War, and the mid 1970’s to 1981, fueled by the Arab oil embargo. These periods of hyperinflation coincided with the coverage expansion, amplifying their cost impact.

And of course, the 1980’s also saw a flood of optimistic, high energy baby boomer physicians, the result of a dramatic federally funded expansion of physician supply begun by Congress during the 1970’s. The reason for this surge: we did not have enough physicians to meet the demands of the newly enfranchised Medicare and Medicaid populations. 

This surge in aggressive young physicians coincided with dramatic expansion in the capabilities of our care system. Non-invasive imaging technologies such as MR, CT and ultrasound, ambulatory surgery dramatically lowered both the risks and costs of surgical care. The advent of effective cancer treatments, cut the cancer death rate by one-third from its 1991 peak. The advent of statins, and less invasive heart treatment has reduced mortality from heart disease by 4% per year since 1990, despite the rise in obesity!

Medicine today is of an different order of magnitude of clinical effectiveness, technical complexity and, yes, cost, than that on offer in 1965. No one would trade that health system for the one we have today.    

However, the biggest problem with the moral hazard theses–both of them–was the assumption that the physician and the patient are primarily motivated by “maximizing their utility” in the healthcare transaction. Arrow knew better. He emphasized the role that fear and existential risk played in their interaction, given that illness, particularly serious illness, is, as he put it, “an assault on personal integrity”. Given the level of personal risk, it is easy to understand why both patients and physicians will not be obsessing about the risk/benefit relationship of every single medical decision.

By reducing the physician-patient interaction to a morally fraught mutual quest of the proverbial free lunch, economists have not only insulted both parties, but grossly oversimplified this complex interaction. Is a sick person really “consuming” medical care, like an ice cream bar or a movie? Is the physician really “selling” solutions regardless of their effectiveness, unconstrained by pesky professional ethics, or rather groping through fraught uncertainty to apply their knowledge to helping their patient recover? 

In contrast to virtually every other Western country, American health policy has been obsessed for nearly sixty years with fighting moral hazard and, in the process, saddling almost 100 million Americans with $195 billion in medical debts (the vast majority of which are uncollectible). Isn’t it ironic that those other wealthy countries that provide their citizens care free at the point of service spend between 30-50% less per capita on healthcare than we do?  And that both physician visits and hospitalization rates are far lower in the US than most of these countries.   

There is no question that healthcare in the US today is very expensive. But health costs have been dead flat as a percentage of US GDP for the past thirteen years. The explosive growth in health costs is over. Increasingly, attention is turning to the real culprit–socially determined causes of illness, and the inadequacy of our policies toward nutrition, shelter, mental health, gun violence and investment in public health. It’s time for the economists to eat some humble pie, and acknowledge that medicine will probably never fit in their cartoon universe of “Pareto optimality in perfect markets”.

Jeff Goldsmith is a veteran health care futurist, President of Health Futures Inc and regular THCB Contributor. This comes from his personal substack

BY NIRBAN SINGH AND AMY HELBURN

Introduction

Medicare Advantage (Advantage), originally conceived in 1997 during the Clinton Administration as ‘Medicare + Choice’, has progressively grown and become an established health insurance option for those 65 and older. According to data collected and aggregated by the Kaiser Family Foundation, Advantage has more than doubled in total enrollment between 2010 and 2021. In 2021 alone, 26 million people were enrolled in Medicare Advantage, which is over 40% of the total Medicare beneficiary population. In 2021, 85% of Medicare Advantage growth was concentrated among for-profit health plans, with UnitedHealthCare, Centene, and Humana leading the way.

Overall, the Medicare Advantage market is dominated by UnitedHealthCare, Humana, and CVS Health/Aetna, with this trio responsible for over half of all Advantage beneficiaries.As of October 2020, about 80% of Advantage enrollees directly purchased individual policies, while employer-sponsored Advantage enrollment has been steadily growing, comprising 18.1% of the Advantage market overall in 2020. Analysis from The Chartis Group indicates that half of all Medicare beneficiaries will be enrolled in Advantage plans by 2025, so the trio of existing leaders in providing Advantage plans may continue to innovate and profit immensely while new market entrants may grow their footprint rapidly, in response to growing demand.

Understanding the Policy Context

Originally enacted under the G.W. Bush administration in 2003, the Medicare Modernization Act (MMA) renamed Medicare + Choice as Medicare Advantage. This act also offered pharmaceutical drug benefits to Medicare beneficiaries for the first time through Medicare Part D via private, approved health insurers. The legislation cemented the notion that markets can, and should, regulate themselves and the federal government, i.e. CMS, would not be allowed to negotiate drug prices with pharmaceutical companies. As a resulting consequence, senior citizens were thrust into a newly organized Medicare market with private insurers offering HMO plans and managed care arrangements, within various budgetary limitations.

The Bush Administration emphasized that a ‘modernized Medicare’ would spark competitive forces among health insurers, ultimately delivering better forms of care at a lower price point than traditional Medicare. While the bill introduced new coverage options, it also limited members to switching plans only once annually. This condition effectively has dissuaded individuals from being proactive mid-year and discouraging activity outside of open enrollment periods. In 2018, 7 of 10 of Medicare beneficiaries did not compare Medicare plans, and that figure rises about 10-20% among minority, older, and low-income populations. Further, the MMA raised reimbursement rates to private insurers up to traditional Medicare enrollee spending. According to Public Citizen, in 2003, the pharmaceutical industry spent a record $109 million on federal lobbying and hired a record 824 lobbyists. PhRMA, a leading lobbying organization representing numerous brand-name pharmaceutical companies contributed greater than $16 million lobbying for the bill while HMOs and managed care plans themselves spent over $32 million in lobbying in 2003. Individually, the Blue Cross Blue Shield Association spent $8.1 million, while trade associations representing the health insurance industry spent an equivalent amount.

The rapid privatization of Medicare has been frequently attributed to a need for greater efficiency and better care options for senior citizens. However, the rise of Medicare Advantage has created an excess of health insurance options and resulted in economic outcomes that contradict the original rationale for the Bush Administration’s passing of the MMA. The Medicare Modernization Act is a clear-cut example of neoliberalism, a political ideology that favors free-market capitalism that is often espoused and enacted by political conservatives to deregulate industries. G.W. Bush touted the promise of affordability of prescription drugs and the federal government’s commitment to providing older adults with high quality healthcare experiences, all with the underlying intent of privatizing the administration of Medicare, by shifting spending from traditional Medicare to Advantage.

The pharmaceutical industry retained their freedom from pricing restrictions as the MMA restricted any negotiations between Medicare and drug makers. The federal government provided temporary prescription discount cards and offered an additional Medicare Part D plan with annual premiums and deductibles of hundreds of dollars for beneficiaries.If the federal government prioritized reducing patient spending, and could muster the political will, instead of succumbing to industry influence, prescription drug pricing would be capped at the source, and Medicare members would have lower out-of-pocket costs. Subsidizing the cost of prescriptions served as a superficial, short-term response that has subsequently allowed pharmaceutical companies to increase the price of drugs, thus mitigating the intent of federal assistance.

An analysis of Medicare data from 2019 found that Medicare spent $321 more per Advantage enrollee as compared to traditional Medicare, which contributed to an overall increase of about $7 billion in additional spending by the end of that year.Over time, CMS has increased benchmarks for how much capital is necessary to cover Part A and Part B for members, and Advantage plans are receiving higher payments for patients with a higher risk score while these same plans are garnering rebates when they spend less than the established benchmarks. When the Bush Administration conceived the reimbursement structure for Advantage plans, there was a deliberate push towards including provisions that would ensure profitability for the health insurance industry. According to an analysis conducted by the Kaiser Family Foundation, “results indicate that beneficiaries who choose Medicare Advantage have lower Medicare spending – before they enroll in Advantage plans – than similar beneficiaries who remain in traditional Medicare, suggesting that basing payments to plans on the spending of those in traditional Medicare may systematically overestimate expected costs of Medicare Advantage enrollees.”

Neoliberalist practices in various industries hone in on short-term economic practices that may deliver goals temporarily, but eventually falter and cost the public taxpayer and government more than private corporations. With the Medicare Modernization Act, a “conservative” policy dedicated to minimizing the federal budget has cost the Medicare program significantly more than expected, as private health insurance corporations reap growing profits from Advantage members and the government, in the form of CMS reimbursements and rebates.

Health Disparities Created by Advantage

Although Medicare Advantage offers more than traditional Medicare and the individual plans are rated and shared in the form of a quality measurement system, Advantage beneficiaries are suffering from greater health disparities while struggling to understand the true value of additional costs. CMS has constructed and utilized a 5-star rating scale to evaluate health plans on performance, and to provide prospective members with the ability to compare plans with one another. The 5-star scale constructed to asses Advantage plans is comprised of the following  categories: 

1. Access to preventive services
2. Coordination of chronic care and utilization of chronic care services
3. Member satisfaction with the health plan
4. Number of member complaints and difficulties using health services along with member attrition 
5. Quality of call center customer services, ranging from inclusivity to rapid processing.

Advantage plans that receive 4 or 5 stars, generate a significant bonus payment from the federal government, and these payments have been increasing steadily from $3 billion in 2015 and subsequently, nearly quadrupled to $11.6 billion in 2021. Many plans perform exceedingly well, but the impact of the star ratings on root causes of poor health outcomes, such as racial and socioeconomic disparities, have been widely ignored and excluded from payer priorities. 

Researchers at Brown University attempted to elevate this issue by analyzing over 1 million Advantage beneficiaries and re-calculating the star ratings, adjusted for socioeconomic status and race/ethnicity. This study found that top-rated plans had the greatest disparities in health outcomes between low and high socioeconomic status, Black and White members, and Hispanic and White members. Research assessing hospital readmission rates among Medicare enrollees quantifies the stark differences among those with Advantage plans. Black patients with traditional Medicare were 33% more likely to be readmitted within 30 days as compared to their White counterparts, whereas Black patients with Medicare Advantage were 64% more likely to be readmitted as compared to White patients.

Not only has quality of care been an area of concern for Medicare Advantage plans, but cost, one of the most debilitating barriers to healthcare, has surfaced as a challenge for individuals of color. When analyzing the entire sample pool, and by each individual racial category,  more Medicare Advantage beneficiaries report cost-related problems, as compared to traditional Medicare. The Kaiser Family Foundation reported that 15% of traditional Medicare beneficiaries faced cost-related challenges as compared to 19% Advantage enrollees. Segmenting the data into racial categories found that 32% of Black Advantage beneficiaries reported a cost-related problem as compared to 19% of their White counterparts. People of color already suffer tremendously as a result of biases deeply entrenched in the healthcare system, in terms of poor health outcomes and cost barriers. Medicare Advantage has been shown to heighten disparities by facilitating inequitable care models that do not deliver the same value to each person, regardless of race or socioeconomic status.

Concluding Commentary

Medicare Advantage has incredible potential to contain healthcare costs and drive seniors towards greater utilization of preventive health services, but currently poses one of the greatest challenges to cost-effectiveness and equity in the U.S. healthcare system. Medicare, a program once ideated to create equity among all adults over the age of 65 is well on the path to privatization, as well as preferential treatment. When enacting the Medicare Modernization Act, President George W. Bush espoused the benefits of providing senior citizens with more private health insurance plan options and driving down Medicare spending, but the opposite has occurred. 

The proliferation of Medicare Advantage plan options has led to confusion, as vulnerable populations such as the elderly may have lower levels of health literacy and encounter greater difficulties in navigating these options. Unfortunately, we, the authors of this article, have experienced this first-hand with our own elderly relatives, fielding their questions on the benefits of Medicare Advantage versus traditional Medicare and witnessing their difficulty in understanding complex insurance billing. With the limited familiarity of rapidly evolving technology and a range of health conditions, navigating the health insurance market is simply draining and frustrating for many of our nation’s senior citizens.

Champions of Medicare Advantage tout greater health outcomes overall, but that ideology is flawed because the wealthiest seniors, a population that can afford high premiums and deductibles associated with Medicare Advantage, maintain a higher level of health. Advantage affords greater access and quality of care for those privileged by social class and racial category. It is truly an ‘advantage’ for some, to the exclusion of those with little to no socio-political capital to advocate for themselves.

A core concern lies with the star rating system, which is intended to reflect the quality of Advantage health insurance plans and associated healthcare quality, along with beneficiary satisfaction. Star ratings are currently awarded without a deliberate focus on the core drivers of poor healthcare outcomes and experiences, ultimately perpetuating long-term care gaps that may never be reconciled. CMS should incentivize health insurers to promote Advantage plans more equitably among eligible individuals – to address disparities in health outcomes among Advantage beneficiaries and mitigate persistent disparities in health care access and quality, likely to further disenfranchise vulnerable populations and drive higher tertiary care costs. To contain costs and promote the wellbeing of Advantage and traditional Medicare beneficiaries alike, healthcare stakeholders need to advocate for, and funnel future investments into population health improvement measures. Such measures can complement the 5-star quality ratings, to provide broader contextual insights and a more substantive feedback loop for beneficiaries, providers, researchers and policy-makers. 

Nirban Singh is an MPH student at Northeastern University with a passion for investigating the role of health policy in creating equitable outcomes.

Professor Amy Helburn, PhD, MPH of Northeastern University conducts applied health policy research for federal and philanthropic clients.

For my health care tidbits this week, I was reminded on Twitter that many Americans really don’t understand health insurance. A spine surgeon no less in this thread (no jokes about arrogance please) was telling me that he was paying ~$8,000 a year ($4,000 in insurance and $4,000 in deductible) before he got to “use” his insurance–which, as his medical costs were low, he never did. Others were complaining that the cost of employee premiums were over $20K. They all said they should keep the money and (presumably) pay cash when they do use the system. It’s true that most people don’t use their insurance. That’s the whole point. When you buy house insurance, you don’t expect your house to burn down. You are paying into a pool for the people whose house does burn down.

In the US we are on average spending $12k per person on health care each year. But spending on most people is way under that and for a few it’s way, way over. If you take the rough rule that 50% of the spending is on 10% of the people then 35 million people account for $2 trillion in spending–that’s ballpark $60,000 each. They are the ones with cancer, heart disease, complex trauma, etc, etc. The rest of us are “paying” our $4,000, $8,000 whatever, into the pool to cover that $60,000.

There are only two ways to lower that cost for the healthy who aren’t “using” their insurance. One is to exclude unhealthy people from that insurance pool, which makes the costs for everyone else much less. We did that for years with medical underwriting and it was nuts because it screws over the unhealthy. Fixing the pre-existing condition exclusions was the only bit of Obamacare everyone agrees on–even Trump. But now we are ten plus years into this new reality, some people have forgotten how bad it was before.

The other way is to reduce the costs in the system and lower that $4 trillion overall. How to do that is a much longer question. But it isn’t much connected to the concept of insurance.

By CASEY QUINLAN, HELEN HASKELL, BILL ADAMS, JOHN JAMES, ROBERT R. SCULLY, and POPPY ARFORD

Last year, the Patient Council of the Right Care Alliance conducted a survey in which over 1,000 Americans answered questions about what worried them most about their healthcare. We asked questions about access to care, concerns about misdiagnosis, and risks of treatment, which we reported on in our last THCB piece about the What Worries You Most survey.

We also asked people to rank their concerns about the costs of their care, in five questions that covered cost of care, cost of prescription drugs, cost and availability of insurance, and surprise billing. In the time since we ran the survey, everything has changed in American healthcare. The COVID19 pandemic is filling emergency rooms wherever the epidemic arrives. Bills are likely to be high, for both patients and insurers, and it is still far from clear how they will be paid. Americans are likely to continue to worry deeply about healthcare costs, with good reason, since it’s only in America that someone can go bankrupt due to seeking medical care.

Below are the questions we asked, and some commentary on how survey sentiment might be impacted by the COVID19 pandemic:

1. I can’t afford my care if I become ill or injured. Sixty-six percent of our survey respondents said they were very or somewhat worried about affording care if they got sick, or were hurt. Even if you have “good insurance,” usually an employer sponsored plan through work, you may have a high deductible or a narrow network of providers, leading to those pesky surprise bills. If you have insurance through the Affordable Care Act insurance exchanges, your situation is likely to be worse: your networks may be extremely limited and your  total out-of-pocket payments can be as much as $14,000 per year for a family plan. Now, COVID19 marches across the globe, with economies shuddering under the weight of business closures and layoffs due to social distancing requirements. We’re beginning to see the impact on employer sponsored insurance coverage, with people furloughed or laid off due to the pandemic. If furloughed, they might still have insurance; if laid off, they’ll have to apply for COBRA coverage, but only if their employer had 20 or more employees. And there were still 27 million Americans without health insurance before the COVID19 pandemic hit, so there’s a deep well of worry about how to pay for healthcare – COVID-related, or not – that continues to deepen. For one uninsured patient in Boston, the price tag for her COVID19 treatment, which didn’t include hospitalization, was almost $40,000.

2. High cost of drugs. Eighty percent of responses to our survey indicated they were very or somewhat worried about prescription drug prices. Insulin, a drug that has been available for over 100 years, and which is critical to the lives of those who take it, is now priced at up to $300 per vial. Now, in the COVID19 crisis, diabetics  are worrying about availability as  well. Recent headlines have trumpeted the promise against COVID19 first of antimalarial drugs chloroquine and hydroxychloroquine, and now of remdesivir, an antiviral drug developed in the fight against Ebola. Enthusiasm for hydroxychloroquine has waned following early studies showing potential harm and lack of effectiveness, but at the height of the craze retail prices for the anti-malarials ran between $100 and $350 per prescription. Concerns over quality also arose as the FDA pressed previously sanctioned manufacturers into service. Remdesivir, still an experimental drug, has yet to be priced by Gilead Pharmaceuticals, but drug pricing insiders are predicting a per-treatment cost of over $4,000.

3. High cost of health insurance premiums. Eighty-three percent  of our survey respondents said they were very or somewhat worried about health insurance premium costs; averaging over $15,000 per year for a family with employer sponsored insurance (employee’s portion averages $5,000) the U.S. regularly wins the prize for “most expensive national health coverage.” During the COVID19 pandemic, early signals indicate that U.S. health insurers are benefiting from the downturn in elective healthcare, with Anthem beating 2020 Q1 profit estimates, Humana also beating estimates, and UnitedHealth, the biggest American health insurer, beating Q1 profit estimates, too.

4. I will lose my health insurance. Fifty-four percent  of survey respondents said they were very or somewhat worried about losing their health insurance. Given that 49% of Americans are covered by their employers, the huge shift in unemployment numbers as COVID19 hit the American economy – almost 15% unemployed as of the end of April, 2020 – means that many of those who were worried  have likely had their worries validated by now, and those who weren’t worried might have shifted to “very worried.” The Healthcare.gov marketplace has instituted a Special Enrollment Period for people who have lost their jobs, and their employer sponsored coverage, due to COVID19. However, if your employer didn’t offer health coverage, and you didn’t have ACA coverage on your own, you won’t qualify for that Special Enrollment Period.

5. I will get surprise, unexpected medical bills. Seventy-three percent of those who responded to the survey were very, or somewhat, worried about surprise medical bills. The responses to question #1 (affordability) are echoed in the responses to this question, since even with insurance, an emergency health crisis may become a financial crisis if the care you get is out of network for your insurance coverage. With private equity taking a bigger position in healthcare via buying up doctor groups and medical practices, the risk of surprise billing has grown rapidly in recent years, and made national headlines in 2019, when Congress started gearing up to work on legislation to end it. Lobbying efforts from the industry side, including an ad blitz, stopped it cold.  This may be changing with COVID. To the surprise of many, HHS conditions for the provider relief payments authorized by Congress declared, “HHS broadly views every patient as a possible case of COVID-19” and stipulated that “for all care for a possible or actual case of COVID-19,” the provider could not charge rates higher than those of the patient’s own insurance company. While it is still unclear, this is interpreted by some as a ban on all surprise billing for the duration of the epidemic. The federal laws are only one part of a patchwork of measures being rushed into place to help provide treatment for both insured and uninsured coronavirus patients. But as the maze of relief measures meets the maze of U.S. healthcare coverage, many loopholes and questions about coronavirus billing remain. The big question remains what permanent changes this crisis might incite, in a system that has previously left too many people out in the cold.

“Wallet biopsy” has been a feature of U.S. healthcare for a long time, with a patient’s financial and insurance status being the key to getting anything from trauma care to an organ transplant. In that climate, consumer worries about their personal financial risk when they seek medical care are totally rational. There are no price lists on the walls of hospital emergency departments, or even in family practice medical offices. Given that the current COVID19 pandemic is forcing many people into hospital ERs, the ultimate price tag for care – for individuals, and as a nation – is still being tallied. Worrying about the costs of care is baked into the American consumer’s psyche at this point. The challenge for us, as a nation, is to use this as a pivot point to create a more rational, less arbitrary, system of payment for healthcare, one that does not allow corporate lobby power to thumb the scale on building that rational, national system.

The authors are the Leadership Team of the Lown Institute’s Right Care Alliance Patient Council: John James, Patient Safety America, Robert R. Scully; Casey Quinlan @MightyCasey, Bill Adams @Poorcountryboy2, Helen Haskell @hhask, and Poppy Arford.

By MATTHEW HOLT

Sometimes you wonder where the line is in health care. And perhaps more importantly, whether anyone in the system cares.

The last few months have been dominated by the issue of costs in health care, particularly the costs paid by consumers who thought they had coverage. It turns out that “surprise billing” isn’t that much of a surprise. Over the past few years several large medical groups, notably Team Health owned by Blackstone, have been aggressively opting out of insurers networks. They’ve figured out, probably by reading Elizabeth Rosenthal’s great story about the 2013 $117,000 assistant surgery bill that Aetna actually paid, that if they stay out of network and bill away, the chances are they’ll make more money.

On the surface this doesn’t make a lot of sense. Wouldn’t it be in the interests of the insurers to clamp down on this stuff and never pay up? Well not really. Veteran health insurance observer Robert Laszewski recently wrote that profits in health insurance and hospitals have never been better. Instead, the insurer, which is usually just handling the claims on behalf of the actual buyer, makes more money over time as the cost goes up.

The data is clear. Health care costs overall are going up because the speed at which providers, pharma et al. are increasing prices exceeds the reduction in volume that’s being seen in the use of most health services. Lots more on that is available from HCCI or any random tweet you read about the price of insulin. But the overall message is that as 90% of American health care is still a fee-for-service game, as the CEO of BCBS Arizona said at last year’s HLTH conference, the point of the game is generating as much revenue as possible. My old boss Ian Morrison used to joke about every hospital being in the race for the $1m hysterectomy, but in a world of falling volumes, it isn’t such a joke any more.

But it’s not as if this is a new issue. Back in 2009 I was writing about Ingenix’s (now called Optum/UHG) problems with trying to figure out what usual customary and reasonable (UCR) prices to pay for medical procedures. Essentially UCR prices (the ones baked into but not defined by Medicare) were made up, and the whole American health system’s cost structure follows along.

It wasn’t supposed to be this way, or at least not by now. The theory, taught to brave young health policy types like me decades ago, was that intelligent buyers would give integrated plan and delivery systems a fixed amount of money per head, and that those organizations (basically Kaiser & Geisinger) would be so much more cost effective that they’d force every other hospital system to become like them. Two decades of M&A later and it’s clear that the alphabet soup of HPO, IDN, ACO et al. has meant little. In practice, local monopoly or oligopoly provider systems have bought up the referring physicians and worked hard to feed the beast—the expensive inpatient procedural services where they make their money. And of course because of their oligopoly status they have been price setters not price takers. The recent $575m settlement for overcharging by Sutter Health is exhibit A of typical health system behavior. But it was presaged two decades ago by similar settlements by Tenet and HCA. The reward for that bad behavior? You get to be Governor/Senator of the great state of Florida!

The casual observer might notice that while the odd case of outright fraud by the little guys gets trumpeted by the DOJ there are no real punishments for the HCA/Sutter level of pricing extortion. No one goes to jail and the cost of the fine is never enough to put the miscreants out of business.

Which gets us back to the present debacle around surprise billing. While everyone can pretend to be appalled, the insurer doesn’t pay directly—the patient or their employer does. Meanwhile the providers are able to stop any real action in Congress. The provider defenders, like Anish Koka writing on THCB last year, say they want a baseball-style arbitration system, and that anyway the problem isn’t as bad as the extreme cases bandied about in the press. They may be right, but they’re just fighting their corner, and they don’t seem to be on opposite sides from insurers in the long run.

But we now have a real doozy. As reported by the folks at consulting company AVYM, one of the BUCAs, in this case Cigna, is being accused of playing both sides off against the middle in an out-of-network billing case.

 The lawsuit alleges that CIGNA accepts the out-of-network provider’s claims at the full billed charges and requests the same amount from the self-insured health plan. However, instead of paying the medical provider or member, CIGNA hires a Repricing Company to try and negotiate a reduction. If the provider refuses to negotiate, CIGNA pays the claim at an exorbitantly low level but appears to keep the difference between what was removed from the self-insured health plan and what was paid to the medical providers. In an attempt to conceal this from the patient and self-insured health plan, CIGNA issued Electronic Remittance Advice or paper Explanation of Benefits forms (collectively, the “EOB”) misrepresent the balance as “Discount” to the members, certifying the member is not responsible for the balance, while simultaneously representing the balance to the Plaintiffs as member liability or “Amount Not Covered”. Astonishingly, the complaint alleges that CIGNA, after being advised of these anomalies, not only refused to correct the issues but instructed the medical provider plaintiffs to sue to rectify the situation! 

This (allegation) is pretty brazen. Cigna gets the huge bill. It then takes that money from its employer client’s account. But instead of giving it to the provider, it keeps it, covers that up, and tells the provider to sue the employer for the difference that it has already taken.

Any similarity to the scene in It’s a Wonderful Life where old man Potter keeps the money Uncle Billy accidentally gave him and tries to later bankrupt the Building & Loan seems to be completely intentional.

You have to ask, who here is working in the patient or end buyer’s interest? And the answer seems to be, no one. The lesson of previous decades has been that health care companies can push the line as far as they like, even to beyond what looks like outright fraud, and nothing much will change.

What’s amazing is that the people paying the tab—the employers, the government and the patients themselves—seem to have no understanding that this is going on, and have few weapons to deal with it. Dave Chase and his Health Rosetta movement continue to point out a few cases where employers have figured out the game, but those best practices remain rare exceptions.

One might assume that a rational nation would look at this and agree on a single or multi-payer fee schedule, as exists in most other fee-for-service based systems like France, Canada, Germany & Japan. Or it’s time to put in a real version of global budgets either by government fiat or managed competition as I was taught years ago. But given the state of American politics, even though the Medicare For All cries are getting louder, no one seems to seriously believe that any rational policy is going to happen.

Instead the logical outcome is that in the pursuit of profit, every participant in the system will keep pushing up to and over that imaginary line. Perhaps there is no line. But unless the buyers completely revolt, not much will change

Matthew Holt is the publisher of THCB.

By KEN TERRY

Back in 2015, 20 major health systems and payers pledged to convert 75% of their business to value-based arrangements by 2020. Today, more than two-thirds of payments from U.S. commercial health insurers are tied to some kind of value-based model. By 2021, the health plans expect three-quarters of their payments will be value-based.

However, a recent analysis of Change Healthcare data by Modern Healthcare found that the percentage of value-based revenue tied up in upside/downside risk contracts was in the single digits. Among the types of two-sided risk contracts that provider organizations had were capitation or global payment (7.3%), pay for performance (6.5%), prospective bundled payment (5%), population-based payment (5.8%), and retrospective bundled payment (4.1%).

An AMGA survey picked up signs of a recession in risk contracting in 2016. A year earlier, survey respondents—mostly large groups–had predicted their organizations would get 9 percent of revenue from capitated products. In 2016, the actual figure was 5 percent, according to a Health Affairs post by the AMGA’s Chet Speed and the late Donald Fisher.

The authors cited a number of obstacles to the spread of risk contracting, including “limited commercial value-based or risk-based products in their local markets; the inability to access administrative claims data from all payers; the massive administrative burden of submitting data in different formats to different payers; lack of access to investment capital; and inadequate infrastructure.”

Fast forward a few years, and most of the same ingredients for risk-contract aversion remain. In researching my new book in progress, for example, I discovered that ACOs were having a hard time getting claims data from commercial payers. That made it more difficult for them to manage population health and to measure physician performance, which is critical to improvement and to the selection of high-value specialists. The insurers apparently did not want to reveal what they were paying providers, despite the value of ACOs to their bottom line.

Even if plans are willing to meet providers halfway, they still find a high resistance to risk. Hospitals don’t want to empty their beds, and they employ physicians, at least in part, to keep them filled. While they talk a good game about value-based care, they’re not necessarily committed to reducing costs if it hurts their bottom line.

Not surprisingly, a study found last year that “the growth of population-based payments has not been associated with a decrease in market-level cost growth.” The population-based arrangements that the study authors looked at included shared savings, two-sided risk, and global budgets. Their conclusion: providers were still not taking enough risk to make a dent in spending growth.

“The current level of population-based VBP penetration may be insufficient to move the needle on health care spending. Increased participation in VBP models that include downside risk may be needed for these models to lead to reductions in overall health care spending,” they wrote.

Because of the low volume of patients in these models, they also noted, many providers have continued to focus on maximizing fee for service revenues. “Without significantly more volume of payments flowing through APMs [alternative payment models], providers cannot make the business case to abandon fee for service.”

So what does this all add up to? In short, little progress has been made in the past five years to move U.S. healthcare from pay for volume to pay for value. As a consequence, not many providers have yet made the crucial switch to a model in which they can be financially rewarded for saving money and improving outcomes.

Until that begins to happen, costs will continue to rise at current or higher rates, and U.S. healthcare will remain dysfunctional and will fail to serve the needs of all patients. It is past time for physicians to wake up and realize they can make money by reducing waste, and for hospitals to get out of the way.

Ken Terry is a veteran healthcare journalist and the author of Rx for Health Care Reform (Vanderbilt University Press, 2007). This article is adapted from a forthcoming book.

Healthcare costs far too much. We can do it better for half the cost. But if we did cut the cost in half, we would cut the jobs in half, wipe out 9% of the economy and plunge the country into a depression.

Really? It’s that simple? Half the cost equals half the jobs? So we’re doomed either way?

Actually, no. It’s not that simple. We cannot of course forecast with any precision the economic consequences of doing healthcare for less. But a close examination of exactly how we get to a leaner, more effective healthcare system reveals a far more intricate and interrelated economic landscape.

In a leaner healthcare, some types of tasks will disappear, diminish, or become less profitable. That’s what “leaner” means. But other tasks will have to expand. Those most likely to wane or go “poof” are different from those that will grow. At the same time, a sizable percentage of the money that we waste in healthcare is not money that funds healthcare jobs, it is simply profit being sucked into the Schwab accounts and ski boats of high income individuals and the shareholders of profitable corporations.

Let’s take a moment to walk through this: how we get to half, what disappears, what grows and what that might mean for jobs in healthcare.

Getting to half

How would this leaner Next Healthcare be different from today’s?

Waste disappears: Studies agree that some one third of all healthcare is simple waste. We do these unnecessary procedures and tests largely because in a fee-for-service system we can get paid to do them. If we pay for healthcare differently, this waste will tend to disappear.

Prices rationalize: As healthcare becomes something more like an actual market with real buyers and real prices, prices will rationalize close to today’s 25th percentile. The lowest prices in any given market are likely to rise somewhat, while the high-side outliers will drop like iron kites.

Internal costs drop: Under these pressures, healthcare providers will engage in serious, continual cost accounting and “lean manufacturing” protocols to get their internal costs down.

The gold mine in chronic: There is a gold mine at the center of healthcare in the prevention and control of chronic disease, getting acute costs down through close, trusted relationships between patients, caregivers, and clinicians.

Tech: Using “big data” internally to drive performance and cost control; externally to segment the market and target “super users;” as well as using widgets, dongles, and apps to maintain that key trusted relationship between the clinician and the patient/consumer/caregiver.

Consolidation: Real competition on price and quality, plus the difficulty of managing hybrid risk/fee-for-service systems, means that we will see wide variations in the market success of providers. Many will stumble or fail. This will drive continued consolidation in the industry, creating large regional and national networks of healthcare providers capable of driving cost efficiency and risk efficiency through the whole organization.

What’s the frequency?

So what’s the background against which this has to take place? What’s going to affect healthcare from the outside? Mainly three broad trends:

The economics of yawns: We can expect more of the same, with continued inequality, most economic gains going to the top 1%, and continued deprecation of the middle and working classes. This will express itself in an ever mounting need and demand to bring people greater access to healthcare, which includes bringing the actual costs to the consumer/patient/voter down.

Boomers again: Boomers will continue bulking up the Medicare demographic. The current trends will become even more stark: costs per beneficiary down, overall costs up. Just pre-retirement Boomers were the group hit hardest by the great sucking sound of 2008 which magically disappeared massive amounts of equity in home values, IRAs and 401Ks. The effects span generations: Not only are the Boomers struggling themselves, they have far fewer resources available to give help when their children and grandchildren sink into a health crisis.

Political momentum: The relative success of the ACA in getting people covered  gives the political momentum to expanding coverage further, such as through expansion of Medicaid in states that have not accepted it. It will especially add oomph to any political or market attempt to lower the actual cost of healthcare for the patient/consumer/voter.

Political momentum: The relative success of the ACA in getting people covered  gives the political momentum to expanding coverage further, such as through expansion of Medicaid in states that have not accepted it. It will especially add oomph to any political or market attempt to lower the actual cost of healthcare for the patient/consumer/voter.

What will grow anyway?

However successful we are or are not at making healthcare leaner, one thing the next few years will not be is business as usual. The current trend toward massive regulatory complexity will most likely continue. There are no forces or mechanisms emerging yet that would change that trend. At the same time, the economics of running a healthcare organization will get much more complex, which means so will strategic planning, capital planning, and every other top management task.

So we can expect growth in the regulatory compliance sector of healthcare employment. At the same time, healthcare planning, forecasting, financing, and strategy skills need to put on muscle, whether in-house or through consultants.

How will parts of healthcare get lean, trim down, atrophy?

Waste: Any payment system that gets around fee-for-service and puts the healthcare provider at some risk for good outcomes will push healthcare providers to compete to give the best possible outcome at the best available price. Any such competition will tend to drive wasteful, unnecessary, and unhelpful practices out of the market — you’re not going to do it if you can’t get paid for it. These include such common practices as complex back fusion surgery for simple back pain, computer analysis of mammograms, the use of anesthesiologists in routine colonoscopies, the routine use of colonoscopies for mass screening, some two thirds of all cesarean sections, over $1 billion worth of unnecessary cardiovascular stents done every year, and on and on. If your business model or your career depends on a technique that honestly doesn’t score all that well on a cost/benefit scale, this would be a good time to rethink your business model or career.

Prices: With growing price transparency and a growing willingness of buyers to go far afield if need be to find the right deal, it will become increasingly difficult for manufacturers of devices, implants, pharmaceuticals — indeed, any supplier to healthcare – to continue to insist on outsize profit-driven prices. It will be hard to charge $21,000 for a knee implant when the exact same device can be bought in Belgium for $7000. Similarly, with reference pricing and comparison shopping becoming more common, it will be very difficult for your hospital to get business if you insist on charging over $100,000 for a new knee.

Automation: Many job categories across healthcare, from messengers and janitors to neurosurgeons and oncologists will be supplemented or in some cases entirely replaced by robots and software.  We are already seeing widespread automation of  labs and pharmacies. HVAC systems are auto controlled and remotely monitored. Security is enhanced with surveillance cameras, robotic patrols, and position sensitive ID badges. But automation will move much higher up the skill scale, as DNA analysis and volumetric CT and MRI scans replace much of the work of many oncologists, and next-generation scan-driven high precision proton beams replace neurosurgeons at some of their most delicate tasks — even as new custom-built DNA-based personal pharmaceuticals may obviate any need for surgical removal of tumors at all.

Automation of various kinds will show up increasingly in every task category throughout healthcare, extending individual’s powers, raising productivity, and increasing the team’s capacity while eliminating jobs.

Cost Accounting And Lean: Under a fee-for-service system, in which you can charge for each item, inefficiency is a business model. If you’re getting paid a bundled price or a per-patient per-month stipend, suddenly inefficiency is a drain on the bottom line. You simply must recognize your true costs and use strong “lean manufacturing” protocols to get them down. In the organizations that get this right we can expect large increases in productivity, which will mean both increases in capacity and loss of some jobs, either in the organization that is succeeding or the organizations that it is competing against.

What will grow?

In a healthcare economy that is moving toward “leaner and better,” which categories would increase?

A leaner and better healthcare will have to do far more in preventing and managing chronic disease. We are losing rather than gaining the extra primary care physicians that we need to lead that charge. The most successful disease prevention and management programs are based on team care. The most efficient and effective way to influence behavior, especially of “super users,” is through trusted lines of communication with real clinicians — being efficient requires putting a crew on it, increasing rather than decreasing the people who have actual patient contact. So we can expect strong growth in any category that could add to that crew, such as:

“Complementary and alternative” practitioners: When you get paid to do medical stuff to people, why give any business to rival modes? But when you get paid to help people be healthier, why not throw into the mix modalities such as chiropratic, acupuncture, and others which can often show strong results at a fraction of the cost? Why not try them first?

Physical therapy: Remember those Boomers massed at the gates? Many of the aches and pains of aging are better served by cortisone, ibuprofen and yoga than by back fusion surgery and new hips. Physical therapists, like chiropractors and acupuncturists, can be a first line of defense against higher medical costs.

Home health: Vulnerable populations (such as pregnant women, newborns, people with multiple chronic conditions, and the frail elderly) can often be cared for in the home for far less cost than any acute care that can be avoided. New communication technologies can make home health care cheaper, more constant, more data-driven, and more effective.

Enhanced medical home: The Vermont Blueprint and other programs have shown the efficiency and effectiveness of expanding the “medical home” home concept into teams staffed by physician assistants, nurse practitioners, community health specialists, behavioral health specialists, indeed any category of helper that can strengthen and deepen the bond with the family caregiver or the patient.

Behavioral health and addiction: In a fee-for-service world, the behavioral practices have been given short shrift. Considering how much illness and accident is driven in one way or another by addictions and other behavioral problems, any healthcare system run by “value” rather than “volume” is going to hire a lot more psychologists and family counselors.

IT support: The Next Healthcare will be modulated not only through docs’ BYO devices, but through multiple types of cheap sensors, gadgets, dongles, and apps. In order for them to be medically useful, they must be integrated into the system’s IT and EMRs. The need for integration and support of the device swarm will grow rapidly.

Tech industry: We can expect that creating such devices and software, especially those connecting the patient and caregiver to the clinic and clinician, will be a big growth area in the tech industry.

What’s the trend?

The shift can’t be captured in one Big Trend That Devours Everything. But there is this: Most of the things we will doing less are the kinds of things that have made a lot of the “procedure guys” rich over the last few decades, unnecessary procedures and tests that use lots of big machines, expensive implants and other hardware. Most of the parts that will grow emphasize real patient contact, though often at a lower skill and expense level. “Fewer back surgeons and implants, more physical therapists and exercise classes” could stand as a metaphor for the shift.

So while “healthcare at half the cost” would definitely mean fewer jobs in healthcare, it would not mean half the jobs. It would mean more jobs in direct patient handling, especially in primary care, while allowing less profit for suppliers and providers and high-end procedure specialists doing unnecessary work as well as charging unsupportably high prices. And that, my friends, would be a success.

On the front page of last Tuesday’s Wall Street Journal was this headline:  “Taxpayers Foot Big Bills from Handful of Doctors.” It is a two-page story about a clinician whose practice drew attention from the WSJ research team that combed through the recently released Medicare Utilization and Payment database released in April. They wrote:

“Ronald S. Weaver isn’t a cardiologist. Yet 98% of the $2.3 million that the Los Angeles doctor’s practice received from Medicare in 2012 was for a cardiac procedure, according to recently released government data…The government data show that out of the thousands of cardiology providers who treated Medicare patients in 2012, just 239 billed for the procedure, and they used it on fewer than 5% of their patients. The 141 cardiologists at the Cleveland Clinic, renowned for its heart care, performed it on only 6 patients last year. Dr. Weaver’s clinic administered it to 99.5% of his Medicare patients…”

Lets face it: curiosity about what other people earn is a national pastime. Pro golfers qualify for their tournaments based on their publicly accessible official winnings. NFL agents bargain for their clients based on position-specific compensation comparables. We are frequently reminded that members of Congress “officially” earn $174,000 plus attractive perks, and of late, executive compensation for most of America’s public companies has become a major focus for Board Compensation Committee’s who are being pushed by shareholders to reign in their generous comp packages. So it’s understandable that physicians bristle at stories like this one. We would as well if in their shoes.

Here’s why the story is particularly challenging for the medical profession:

1-Physician income is high relative to what most American’s earn. Though wide-ranging across the various specialties in medical practice, the ratio of physician income to the median income in the U.S. ($51,324) is from a low of 3.6:1 for family practice to 13.9:1 for the highest earning clinicians in radiology, orthopedics and others (and that does not include their income from ownership in surgery centers, testing facilities and other services). Physicians think they deserve to be paid more than any other profession, reasoning theirs is a higher calling, their debt higher (averaging $170,000 for the 86% that borrow for medical school) and their training and expertise more valuable to society than others. Stories like this draw attention to how much physicians “might” earn and lend to suspicions that belly-aching by some in their ranks claiming they earn too little is more about greed than the greater good. Income potential is important to everyone: physicians want to earn as much as they can, and keep score against their peers and other high-earning professions. Many feel underpaid; some indeed are. But relative to what’s made in the vast majority of households, they are well paid.

2- Physicians practice in a high profile industry and the spotlight is getting brighter. It’s 17% of our GDP, 28% of the federal budget, 34% of a state’s budget, and 9% of household discretionary spending. It impacts every one every day—in the costs of what we buy, in the ways our wages are set and in the intense political debate about health reforms to keep Medicare solvent, increase access to affordable insurance and holding down costs. The release of the Medicare Utilization and Payment Database represents another layer of transparency about physician behavior that’s accelerating at warp speed. Aptly, the Wall Street Journal’s story about Dr. Weaver’s practice is part of its series “Secrets of the System” dating back 3 years. USA Today calls its current series “Medication Generation” and Elizabeth Rosenthal’s New York Times series “Healthcare’s Road to Ruin” are prominent in top tier coverage, not to mention the blogosphere and social media fascination with healthcare’s complexities, conflicts, deals and personalities. What physicians do and how much they earn is part of the new normal in healthcare wherein transparency is an end in itself.

3-Physicians and other stakeholders in the system have inadequately addressed the issue of medical necessity in the profession. Medical necessity is a tricky issue. It presumes a binary assessment about a possible treatment: either it works or not. But it’s not that simple: the signs, symptoms, risk factors and co-morbidities that factor into a diagnosis or treatment recommendation are complex. Evidence is scant for some treatments. And the data upon which the determination of “what works best and how much” is rarely accessible to a practicing physician for two reasons: 1-most physicians don’t have hard data about their practice patterns, outcomes and alignment with evidence-based practices due to the costs of these systems and 2-they believe outsiders—especially health insurers– have no legitimate standing in the important discussion of medical necessity. If adherence to evidence-based healthcare was the focal point for the profession, disclosures about each physician’s adherence to evidence-based practices, outcomes, and patient experiences would be readily accessible today. Disciplinary actions against physicians who abuse would be higher and hospital privileges yanked faster. And for sure, insurers would be quicker to drop them. But that’s not the case.  If unnecessary tests, surgery and medications represent 30% of unnecessary health spending in the U.S. per Dartmouth, attention to a remedy by the profession and by the rest of the stakeholders is not readily evident: for sure, it needs to involve liability reform, but much more. For many clinicians, fear of being sued is merely an excuse to practice medicine as they choose with limited accountability to their patients, payers and peers for medically necessary care. It’s an issue the profession must face head-on.

The bottom line: The presumption that a physician might practice with unfettered autonomy and protected privacy is a legacy of a by-gone era. Modern medical professionals understand the profession’s changing. They acknowledge they practice in the spotlight and know their reputation is increasingly dependent on  “hard data” about their clinical practice patterns and outcomes preferred by health insurers, employers and individuals.

Schools of Medicine face a daunting task of implementing reforms that equip their grads to practice in the new normal. Teaching hospitals face incredible responsibility to immerse residents in clinical practice that’s consistent with technology-enabled, team-based care management. Medical groups and health systems face responsibility and risk to measure the performance of their affiliated physicians and weed out bad actors prone to unnecessary care.

Most physicians love the practice of medicine. They resent intrusion by outsiders of any stripe—media, insurers, administrators, and even their peers. Physicians are understandably frustrated by stories that paint the profession unfavorably. Like any profession, there are bad apples. But medicine, whether they like it or not, is in a uniquely sensitive spotlight that’s likely to grow brighter.

Rube Goldberg was an American cartoonist and inventor, perhaps best known for the extremely complicated contraptions he devised for performing the simplest tasks.  Each year, a national Rube Goldberg Machine Contest is held, challenging competitors to devise bizarre contrivances that can shine a shoe or zip a zipper.  One day while watching a group of children marvel at such a machine in a museum, a thought occurred to one of us: As healthcare becomes more complex, the interactions between patients, physicians, hospitals, payers, and communities increasingly resemble a Rube Goldberg machine.

Consider a recent case.  Ms. Jones was a 50-something year old African American woman with type I diabetes, high blood pressure and end-stage kidney disease requiring peritoneal dialysis, a form of dialysis performed nightly at home.  She was recently admitted to the hospital because of an apartment fire that destroyed everything she owned, including her home dialysis equipment and medications.  Once she was hospitalized, the medical team restarted her dialysis, restored her blood chemistries to normal, corrected her blood sugar, and began to make plans for her discharge.  There was just one problem.  They had no place to send her.

Ms. Jones could not return to her apartment, which had essentially burnt to the ground.  She did not qualify for admission to a nursing home.  And she couldn’t afford to rent a new apartment, at a cost of about $1,500 per month.  She had paid for insurance on the apartment for years, but had recently let the insurance lapse to help finance the purchase of an $8,000 living room suite.  The medical team had heard that social service agencies would provide one month’s rent, but it turned out that she could get only one-time distributions of $100 from the Red Cross and $200 from the Salvation Army – not nearly enough.

As the days rolled by, the medical team caring for Ms. Jones began feeling escalating pressure from hospital administration to discharge her.  Her medical problems had been taken care of, and there was no medical need for her to remain in a hospital bed at a cost of $1,500 per day.  The team arranged to get her dialysis supplies delivered to her sister’s house, hoping that she could stay there until she found a place of her own.  But it turned out that too many people were already living there.  Attempts to find temporary housing through friends and her church dead-ended.  Hotels she contacted were all too expensive.  Going to a homeless shelter was not a viable option; it would give her a place to sleep, but she couldn’t perform her dialysis there.  She volunteered that she could live out of her car, for which she reportedly used some of the $300 to buy gas, but it later turned out that she did not have one.

As pressure to discharge Ms. Jones mounted, team members became increasingly frustrated.  Each new hope was thwarted by an opposing reality.  The team had provided their patient with the best available medical care, marshaling the impressive resources of a major academic medical center to solve her acute medical problems as effectively and efficiently as possible.  But now they had run up against a barrier for which they lacked the necessary training and resources – not a medical problem so much as a social one.  Treating acute illness was doable, but looking out for their patient as a whole person with a real life outside the hospital was proving quite another matter.

Mrs. Jones frequently made decisions that, from the medical team’s point of view, simply didn’t make sense.  How could someone with chronic medical conditions requiring expensive treatments fail to be more prudent with her finances and ensure access to life-sustaining medications?  How could she let her insurance lapse to buy an $8,000 living room suite?  No one on the medical team would even think of letting their insurance lapse, and not one of them had anything in their home of similar value.  Such problems were all too frequent.  Patients whose drug habits had landed them in the hospital would complain that they did not have the money to buy their prescription medications.  It was difficult for team members to understand the life circumstances behind such choices.

The situation was no less difficult for the hospital administrators, who were running a high-tech, acute-care medical center that had been designed to rescue patients from serious illnesses.  Could such a huge, high-budget organization afford the few thousand dollars needed to keep Ms. Jones in her hospital bed a few more days?  Of course it could, but the hospital needed to develop and abide by policies that supported its mission and ensured that it remained on a sound financial footing.  This meant avoiding expenditures that did not promote these goals.

From the point of view of Mrs. Jones, the whole situation seemed unfair and unjust.  She knew that the medical center was a multi-billion dollar organization, boasting facilities, equipment, and personnel as fine as those available anywhere.  Its billboards and television ads proudly trumpeted its advanced, compassionate care.  How in the world, she wondered, could such a formidable organization lack the modest resources needed to find her a place to live?  Couldn’t they let her stay in the hospital just a few more days while she worked it out?  Couldn’t “the system” offer more?  The medical team asked many of the same questions, wondering how they could promote their patient’s health when the social safety net seemed so moth eaten.

So what happened to Ms. Jones?  Essentially, she was discharged from the hospital against her will and sent away in a taxi cab.  Everyone at the hospital had fulfilled their job descriptions, providing expert care at a financial loss.  The patient’s acute medical issues were all addressed.  Dialysis supplies had been delivered to a relative’s house, and the team had arranged financial assistance and provided prescriptions for the least expensive medications.

Yet everyone, and most of all Ms. Jones, was deeply frustrated by the whole experience.  How can each part of a system do its part, yet the overall outcome still feel to everyone like a failure?  It was as though, no matter how hard everyone tried, it was somehow rigged to fail.  It wasn’t just Catch-22.  It was catch 2,222.

And here lies one of the core frustrations of healthcare today.  The interfaces between healthcare and the people, organizations, and communities it touches aren’t just a Rube Goldberg machine.  They are a Rube Goldberg machine on steroids.  They are so complicated that virtually no one is capable of stepping back far enough even to see – let alone understand or control – the big picture.  Who is ultimately responsible?  The doctors?  The hospital administrators?  The patient?  The payers?  The politicians?  And who are they ultimately responsible to?  The patient?  The profession?  The system?  Who has the authority – economic, administrative, and professional – to ensure that patients’ needs are met?

Far from solving the problem, most current proposals, which tend to bolt on more layers of complexity, merely compound it.  The Rube Goldberg machine has become so byzantine that no one, including even the most knowledgeable and intelligent people in the system, can get their heads around it.  Simply lubricating it with compassion does not solve the problem.

What can be done?  It is hard to say, but one thing is certain: to turn things around, we need to stop attempting to solve the problems of complexity by adding more complexity.  Our current approach means that no one is responsible, enabling everyone to shift the blame to someone else.  The big question of our day is this: where should ultimate responsibility lie: with the federal government, the health system, the health professionals involved in the case, or with patients themselves?  In our view, the actors on the local scene have the best grasp of the situation, and as much authority and responsibility for resolving it should be entrusted to them.  As it is, the unwieldy contraption we call healthcare frequently adds up to much less than the sum of its parts.