Tear Down The Health Care Fortress So We Can Explore The Frontier

Tear Down The Health Care Fortress So We Can Explore The Frontier

Medical care is about the same monolithic fortress it was 50 years ago, only more expensive and complicated. Innovation requires whole-system conversion.
Greg Scandlen
By

Sometimes, when a problem seems completely intractable, it is because we aren’t looking at it the right way. Robert Graboyes, PhD, of the Mercatus Center at George Mason University suggests in a new paper this is the case with health care.

For 50 years, we’ve been trying to expand insurance coverage while holding down health costs. We haven’t done a particularly good job with either, despite spending many trillions of dollars and whipsawing the entire system back and forth with new laws and regulations.

Coverage expansions have included creating Medicare, Medicaid, the State Children’s Health Insurance Program (SCHIP), state high-risk pools, state requirements to limit underwriting, state universal health programs, and federal continuation of coverage requirements under the Health Insurance Portability and Accountability Act and the health provisions of the Consolidated Omnibus Budget Reconciliation Act (COBRA). Sometimes large numbers of people have gained coverage, but often the people enrolled through the new programs are simply changing their source of coverage.

Through it all, roughly 15 percent of the population has remained uninsured while 85 percent have insurance coverage. Even Obamacare has shaved possibly three percentage points off the numbers of uninsured, and we can’t be sure that will last once all of the requirements finally kick in.

Then There Are The Price Controls

At least as much effort has gone into cost controls, starting with President Nixon’s price controls in the early 1970s, the federal encouragement of health management organizations, National Health Planning, Certificate of Need, state hospital rate-setting systems, the Resource Based Relative Value Scale and diagnosis-related group payments under Medicare, state small-group insurance reforms, and a host of pilot programs and demonstration projects on pay-for-performance, case management, second surgical opinions, and on and on.

All of the ‘reform’ efforts have involved trying to get these same actors to do things slightly differently, and slightly more efficiently.

Yet health-care costs continue to increase at roughly twice the level of general inflation.

Nothing ever seems to work very well. Graboyes suggests this is because, for all the tumult, nothing ever really changes in the health-care system. The landscape is exactly what it was 50 years ago: marked by large hospitals fed patients by scattered physician offices and clinics, that prescribe drugs and medical devices produced by other giant corporations, for all of which enormous insurance companies or government agencies acting in the role of insurance companies pay.

All of the “reform” efforts have involved trying to get these same actors to do things slightly differently, and slightly more efficiently. But every time there is a new regulation, it becomes harder for innovators to enter the market, so incumbent companies are protected against real change—the disruptive innovators that have transformed every other area of the economy.

The Fortress Versus the Frontier

Graboyes sees this as “a fortress,” a walled city where no one can get out and no one can get in. Everything stays pretty much the same. He contrasts this with “the frontier,” which is open to innovators and entrepreneurs. He draws many examples of startling innovation from the communications and computer industries, and notes that few of these groundbreaking developments came from established companies. Established companies are incapable of real change because it would threaten their current business model.

Established companies are incapable of real change because it would threaten their current business model.

He also finds examples of similar innovation in health care, including, “an unheralded doctor who pioneered stem-cell therapy in a small-town hospital, a carpenter and puppet-maker who invented functional prosthetic hands costing one-thousandth the price of professionally made devices (aided by an evolutionary biologist who started a worldwide consortium of amateur prosthetists), and college students who devised a low-cost treatment for clubfoot.”

But such efforts are largely doomed due to the tedious and expensive approval process of the Food and Drug Administration (FDA) and scores of other restrictions on real change. He writes,

The FDA’s central operating principle is the precautionary principle— the notion of pre-market clearance, meaning that a drug or medical device must be proven safe and effective before it can be allowed on the market. And yet the FDA’s traditional methodologies are inconsistent with personalized, molecular, precision medicine. Medicine designed (as at present) for an ‘average’ person will likely be less than optimal for any actual person. Personalized medicine offers the possibility of more efficient treatment of individuals’ illnesses.

Graboyes isn’t the first writer to tantalize us with the whiz-bang potential of new approaches to medical care. In 2006 Andy Kessler wrote “The End of Medicine,” which would have sent a tingle up Chris Matthews’ leg if he had read it. It was all about nanotechnology and molecular, customized medicine being developed by oddball geniuses around the country. Star-Trek medicine right around the corner! But it all seems to get stalled in the molasses of bureaucracy and nothing ever really changes.

How to Destroy the Fortress

What Graboyes does that is unique, however, is provide a strategy for tearing down the walls of the fortress—the vast mountain of laws and regulations that protect established players from disruptive innovation. He calls for adopting a strategy similar to the Pacific Theater in World War II—island hopping, systematically rolling back the regulations that get in the way of medical freedom.

The number of such islands is vast. Some examples:

  • The FDA approval process
  • State Certificate of Need laws
  • Archaic medical licensing laws
  • Scope-of-practice restriction on non-physician providers
  • Tort reform
  • Reform of medical education curricula
  • Medicare price controls
  • Mandatory benefits in insurance policies

Within these categories he cites several dozen specific targets, but even here he is barely scratching the surface.

The only problem with this approach is that repealing regulations is not very sexy. In fact, it is pretty boring, and it is impossible to identify the benefits other than freedom to innovate. Plus, mighty industries are invested in keeping the regulations just the way they are.

There is a reason people build fortresses: to keep out the riff-raff. They will defend their fortress to the death, if necessary, because their livelihoods depend on it.

Greg Scandlen is the founder of Consumers for Health Care Choices, as well as an accomplished writer, researcher, and public speaker. He is considered one of the nation's experts on health care financing, insurance regulation, and employee benefits. He blogs at http://gmscan.wordpress.com/

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