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Winning the Future
Health Reform
from Newt's five Challenges
Today, health costs are the largest sector of the economy and it will get bigger as new and expensive breakthroughs in medicine come on-line and the numbers of aging baby boomers explode. Some studies show health care growing from almost 14 percent of our economy today to 21 percent (or one out of every five dollars) in a few decades. Without dramatic change, the current system will gradually crowd out more and more spending on other items. Already governors are seeing their Medicaid and state employee health costs eat into education, highways, law enforcement, and other budget priorities. Many businesses now rank health care as their fastest-growing expense and believe that it is a serious burden in competing internationally.
If our country takes the right approach, baby boomers will live longer and better, cost their children less, and create an economic boom for America.
Yet there is also the possibility that we will take the wrong approach. Indeed, the approach favored by much of the news media, many politicians, and liberal government and corporate bureaucracies is the wrong approach.
Virtually every political story about health focuses on "reforms" for our problems: the rising cost of health care, the challenge of the uninsured, the state and federal budget crises, the high cost of drugs, litigation, nursing shortages, doctor unhappiness. The list goes on and on. The truth is that the current health system cannot be reformed because its approach is profoundly wrong in three specific areas. First, it emphasizes acute care rather than wellness, early detection, and prevention. Second, it focuses on third-party payments, an area in which the individual has little responsibility, little knowledge, and no control. And third, it relies on paper (i.e. paper medical records and paper prescriptions) rather than information technology. This has contributed to as many as 98,000 deaths in hospitals due to preventable medical errors.
We need to transform our health care system based on an entirely new set of principles. Our new 21st Century Intelligent Health System will be built around three big changes:
If these three big changes occur, we will live longer, healthier lives and spend less on health care than we do now.
Productivity has continued to explode in many of America's industries. But health care has been wrongly insulated from the competition that brings about higher productivity and lower cost. The issue is not that health care is different. In fact, when there is a commercial market in health care, prices behave much as they do in any industry. Everyone has watched the cost of laser eye surgery decline as it has grown more common, more convenient, and safer. Studies have shown that the cost of cosmetic surgery, where people research quality and price, and pay out of their own pockets, has risen slower than the cost of living and in some cases has even decreased. When people are involved and quality and price information are available, people do in fact behave rationally in health care just as they do in purchasing other products and services.
The lesson of nearly four hundred years of entrepreneurial, technology and science-based free market capitalism is very clear. You should expect to get more choices of higher quality at falling prices. This is the opposite of the rationing mentality of some left-wing politicians and the scarcity mentality of too many bureaucrats.
We need to bring these concepts into health and health care. We must insist that doctors, hospitals, medical technologies, and drugs have both quality and cost information available on-line so people can make informed decisions. We can then shift the purchasing decision to the patient and his family so they can make their own cost and quality trade-off decisions.
There should also be an on-line drug purchasing system where patients, doctors, and pharmacists can choose the best product at the best prices, and it should be an after-pay system. Financial incentives could potentially bring down drug prices by 30 to 50 percent from the current marketplace. We should insist that every hospital have computerized order-entry for medication; bar-coding for drugs, technologies, and supplies; and automated medication dispensing.
Indeed, the health system must become paperless. Health information should be made available on-line and in real-time to both providers and patients so they can easily, conveniently, and inexpensively understand their options and their costs. This "right to know" about cost, quality, and outcome should be established in every state. And we should set a standard that doctors who become paperless get electronic funds transferred every night so they no longer lose money waiting to be paid.
If we insist on modernizing the health system and turning it into an entrepreneurial system with honest reporting of costs and quality, we will rapidly see dramatic changes. Hospitals will start billing based on real costs rather than on stunningly complex cross-subsidies no one understands.
We will also have to develop new models of compensation. A fee-for-transaction model is a bad model because it encourages the doctor to do just enough to bring you back for another transaction to earn another fee. Today we pay for visits and we get billed for visits. With new information systems, we can measure outcomes. When we pay for better outcomes, we will start getting more providers focused on wellness rather than acute care.
The wide-scale availability of information on the best practices and outcomes creates an opportunity to develop a new system of health justice. Malpractice insurance is driving doctors out of their practices. If we do not do something decisive to replace the predatory, personal injury lawyer-enrichment system with a more responsible system of health justice, we will end up as a country with richer and richer lawyers while the rest of us get poorer and poorer health care.