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Curing the Health Care Crisis By: Bill Steigerwald
FrontPageMagazine.com | Wednesday, February 20, 2008

Money magazine has dubbed Regina Herzlinger the “Godmother” of consumer-driven health care, and it’s not just because has written books with titles like Consumer-Driven Health Care: Implications for Providers, Payers and Policymakers. The first woman to be “tenured and chaired” at Harvard Business School, Professor Herzlinger is widely known for her innovative research into health care and has written extensively for publications like the Wall Street Journal and health care industry journals. Her latest book is last year’s Who Killed Health Care?: America's $2 Trillion Medical Problem -- and the Consumer-Driven Cure. It outlines her plan for creating a consumer-driven system that would deliver affordable, high-quality care to everyone by putting insurance money in the hands of patients, removing the third-party middleman in the doctor-patient relationship and giving employers cost relief. I talked to Herzlinger Feb. 13 by phone from her office in Cambridge, Massachusetts.

Q: What is your shorthand description of the health-care system we have now in the United States?
A: Too costly and too erratic in quality, but still a system that preserves people’s choice.

Q: What do you mean by “still preserves people’s choice”?
A: You’re not forced to go with a single-payer system where you have no independent voice about what you’ll pay for what kinds of benefits.

Q: Is our health-care system as bad as our politicians and the media tell us it is?
A: Well, not all the politicians think it’s that bad, but certainly the media trumpets that -- and it is a hugely unfair kind of trumpeting. One of the issues is that the World Health Organization ranks us as very low in quality of care. Of course, one of its criteria for quality of care is whether everybody is insured or not. That seems like not a good criterion to use. Most of the important research in medicine, which is so promising to finally make medicine into a real science, is done in the U.S. And certainly, if you compare the U.S. to a country like Japan or Germany or the Scandinavian countries, it’s a ridiculous comparison because if you go to Japan or Germany you won’t see the diversity we have in the United States. And certain ancestries are much more prone to certain kinds of illnesses than others. For example, African-Americans are much more prone to cardiovascular disease and diabetes than Caucasians. So this kind of willy-nilly quality measure that doesn’t adjust for the differences within the population seems to me ridiculous.

Q: Who are the bad guys who are wrecking or ruining or distorting our health-care system?
A: Well, essentially the problem is that you and I have taken part of our salaries and given them to our employers to use in buying health insurance on our behalf. There is no way they could buy our clothes or our homes or anything else as well as we can -- and they don’t do a very good job of buying health insurance, either.

The only reason we’ve done that is because they can use our salaries pre-tax to buy health insurance, whereas if I were cashed out by Harvard and it gave me back the $15,000 I use on health care, I would have to pay taxes on those $15,000; I could only use after-tax money. So as inept as employers are in buying health insurance for their employees -- and they are inept not because they are stupid but because how can they possibly know what you want versus what I want; we only do it because of the tax status, and that’s a big problem.

The same problem -- i.e., a third party buying on our behalf -- also holds for Medicare, where the purchasing is done by the U.S. government, and for Medicaid, where the purchasing is done by state and local governments. So the biggest problem with our health-care system is that the agents we have appointed to take care of health insurance and health care -- which are the government and businesses -- are not very good at it.

Q: If we had a consumer-driven system of health care, what would it look like?
A: Everybody would be required to buy health insurance. If you were poor, you wouldn’t be stuffed into Medicaid, which is not a great program because lots of doctors refuse to see Medicaid patients because they get paid so badly for them. Instead, you would be given money to go out and shop for health insurance just like everybody else. Eventually, people on Medicare would be cast out and they could buy what they wanted. That’s what a consumer-driven system would look like -- in other words, you and I would be buying the health insurance.

The second crucial attribute of this system is in order to make sure that we weren’t buying stupid, we would need a lot of information, not only about the quality of our health insurers but also about the quality of the health-care providers that they provide access to. I need open-heart surgery? How good is this doctor in that hospital versus another doctor in some other kind of hospital? That’s what we need.

Q: What or who is the chief obstacle to our developing a better system?
A: One is this tax preference, where only your employer can use pre-tax money to buy health insurance; that’s a huge barrier and it’s a big (undertaking) for employers. They don’t like buying insurance; they have a business to run. They have a paper to publish or something else to do and they are obligated to buy this very important item for us. So the tax preference is a huge item and Democrat or Republican, that will be corrected by the next president. The problem that is much more difficult to correct is the problem of transparency, and that is that providers do not want to be measured and they are hugely powerful. But unless we know whether we are buying a Toyota or an Edsel, we’re never going to get to a higher-quality, lower-cost health-care system. And the only way you and I can know that, because we are not doctors and we are not scientists, is if we had good data that was accessible to us.

Q: The same kind of data we have when we buy a car?
A: Or a computer. Nobody understands how they work. Nevertheless, computers have become cheaper and better and they have become consumer items because there’s terrific information. That’s why Dell, for example, flourished because people like me who don’t know a bit from a byte nevertheless knew Dell was a good purveyor. It no longer is, but when I first bought a computer it was a good purveyor.

Q: What do you think of Hillary Clinton's health-care plan?
A: Well, I like the universal coverage and she does have choice, so allegedly under her plan you could choose to either buy a private health insurance or a public insurance. That’s the rub. The public choice that she would offer is hugely subsidized. For instance, she would offer Medicare for people like us. Well, Medicare -- ha -- for every eight dollars spent, seven dollars are paid by somebody other than the recipient. So if we were offered Medicare, which is hugely subsidized, of course we would opt for it. But we would put a tremendous burden on our children and grandchildren, and we would enlarge the government’s stranglehold on the health-care system. Government is not good for health care. Government is political.

Government is bureaucratic. Government kills off innovation. Not a good idea. Her plans for controlling costs are equally bureaucratic. It is that the government would tell doctors how to practice medicine better. Already, physicians in their 50s and 60s can’t wait to leave the profession. They just can’t stand it. This would put the final nails in the physician coffins.

Q: Does any politician have a better plan than Mrs. Clinton?
I think McCain has a pretty good plan. He’s very high on transparency. None of the other candidates really push transparency because the special interests are so powerful and they don’t want it. McCain has the courage to say, "I’m going to make data available about how good your doctors and hospitals are," so in that way it’s better.

Both Mrs. Clinton and McCain advocate something else that’s very important, and that is they want to get away from “pricing by procedures,” where a doctor makes money only when he does something for you. That might seem like a good way to price, but what it stops doctors from doing is doing things that might make you a lot healthier, because if they make you a lot healthier, the doctor won’t be paid anymore. This is called “procedure-based pricing” and it’s very pernicious. It stops providers from making sure that they catch diseases early on, for example, or that they use less-costly interventions because although doctors are very good human beings, they are also financial human beings, so they get a financial benefit for doing more rather than a financial benefit for making us healthier so we don’t need them so much. Both Clinton and McCain understand this and have promised to change this form of pricing.

Q: Are we heading in the right or wrong direction on health care?
A: I think we’re headed toward universal coverage, which I think is a very good idea for the simple reason that if you’re sick, the 20 percent of the people who are sick spend 80 percent of the money on health care. If you are sick and uninsured, there’s no way you will be able to get health insurance because it is so expensive. So until we have the healthy subsidizing the sick, the sick in the United States who don’t have health insurance are going to be in the terrible situation of being both sick and uninsured.

McCain doesn’t like universal coverage. Neither does Obama. Only Mrs. Clinton is for it. However, Mrs. Clinton and Obama are both for a lot of government intervention. In health care, that’s a really bad thing. McCain is the only one who wants everything to be done through the private sector. For example, he would subsidize people so they could go out and buy health insurance rather than having the government dictate the insurance policy to them.

Q: Like food stamps?
A: Like food stamps. Correct.

Q: Are you optimistic or pessimistic that our political leaders have the wisdom to take their paws off health care and allow a free market or a semblance of one to develop?
No. If the Democrats get elected, absolutely not. And what I now see, they are all about more government -- more government funding, more government control. I teach at the Harvard Business School. In a class of 100 students, I have 20 fully trained doctors. I say, “What the heck are you doing here? Why aren’t you practicing medicine?” They say, “I cannot practice medicine any more.” That’s a tragedy and that tragedy will become much worse under a Democratic administration.

Bill Steigerwald is the Pittsburgh Tribune-Review's associate editor. Call him at (412) 320-7983. E-mail him at: bsteigerwald@tribweb.com.

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