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What to do before spending more on health care

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Monday, February 1, 2010

By now, it ought to be obvious why President Obama has wanted his health-care overhaul passed quickly. It would be (and now will be) inconvenient to promote expanded government health spending while simultaneously pledging to rein in future budget deficits -- when unrestrained health spending is a major cause. It's like promising to go on a diet but first treating yourself to one last binge.

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The Congressional Budget Office confirms the dire fiscal outlook. From 2011 to 2020, the CBO projects cumulative deficits of $6 trillion. By 2020, the debt-to-economy (GDP) ratio increases to 67 percent, up from 40 percent in 2008. Unfortunately, these projections incorporate assumptions, required by law, that are optimistic. Many tax cuts, backed by both parties, are assumed to expire. Adjusting for this and other dubious assumptions could increase deficits by another $6 trillion or more over the decade. By 2020, the debt-to-GDP ratio could approach 100 percent, near its peak in 1946.

No one knows the side effects. After the war, the debt burden declined because military spending dropped and the economy grew strongly. Now, the debt burden is increasing because the economy has slowed and spending is rising relentlessly. Could big deficits one day trigger much higher interest rates or a run on the dollar? How to reconcile today's need for deficits -- to promote economic recovery -- with the long-term dangers? Good questions without easy answers.

But we do know that health spending drives budget prospects. Already, health care represents one-quarter of federal outlays. In 2008, Medicare and Medicaid, the two biggest programs, cost $657 billion, or 22 percent of the budget. By 2020, the CBO puts their spending at $1.5 trillion, about 28 percent. And these estimates don't include the costs of Obama's proposals.

Before spending more, we need to spend better. If we don't, all possible outcomes are bad: high deficits or higher taxes; stunted take-home pay (squeezed by insurance premiums and taxes); lower spending on other programs; or meat-cleaver cuts in health spending. The vast medical-industrial complex -- doctors, hospitals, drug companies and more -- should be forced to change, just as other industries (autos, media, airlines) have had to adjust. The changes need not involve the mass layoffs of other industries, but they must alter how medical care is financed and delivered.

Doubters should read "Chaos and Organization in Health Care" by James Mongan and Thomas Lee, both doctors. Mongan is the recently retired head of Partners HealthCare System in Boston, and Lee is a senior manager. Partners is a network of two Harvard-affiliated teaching hospitals, six community hospitals and 6,000 doctors. From personal experience and studies, Mongan and Lee describe an increasingly fragmented system that often raises costs and lowers quality.

A typical primary-care doctor has 2,500 patients and works 50 to 60 hours a week. By some surveys, doctors have increased the time they spend with individual patients; but it often feels like less because there is "so much more to do than a generation ago," Mongan and Lee write. Paradoxically, medical "progress" -- better diagnostics, drugs and treatments -- fosters "chaos" by increasing specialization. Information-sharing becomes harder, and patients find the system more impersonal. A typical Medicare recipient sees seven doctors in a year. In 1986, almost half of internists performed treadmill tests in their offices; by 2004, only 29 percent did. Tests had shifted to cardiologists.

Hospitals and outside doctors often don't coordinate. One study found that two-thirds of patients leave the hospital without proper "discharge summaries" detailing tests and drug treatments. In early 2008, fewer than 20 percent of doctors used "electronic medical records" in their offices. High start-up costs were a major obstacle.

To counter all this disarray, Mongan and Lee would restructure the health-care sector. Hospitals, doctors and clinics would consolidate into networks that embrace electronic recordkeeping, information-sharing and the search for "best practices." Getting from here to there would not be easy. Mongan and Lee say networks would need at least 100,000 patients to make consolidation worthwhile.

Their improved health-care system would require a shift from fee-for-service reimbursement, which sustains fragmentation by covering most services that doctors and hospitals order. But moving toward "capitation" -- fixed annual payments per patient, adjusted for medical risk -- would trigger opposition. Doctors would feel their independence threatened by dictates from the network. Patients would correctly fear that their "choice" was being restricted. Payment limits would raise the specter of important care being denied.

Only leadership that convinced people that the prospective benefits outweighed the risks would make the health-care system's transformation possible. Obama hasn't provided it. He would mainly perpetuate the status quo and increase the number of insured. It's a missed opportunity that is a big reason the nation's budget outlook is so dismal.



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