The New York Times recently ran a story based on an interview with Dr. Donald M. Berwick who stepped down last week as Administrator for the Centers on Medicare and Medicaid Services. He had received a recess appointment to that position after his nomination ran into trouble over statements concerning rationing health care.
Perhaps without realizing it, Dr. Berwick makes several statements that highlight the difference in philosophy between the Administration and Republicans over health care. The first statement is Dr. Berwick’s conclusion that 20 to 30 percent of health spending is “waste” in that it yields no specific benefit to patients. This is a stunning admission from the head of agency charged with supervising these programs in a Democratic administration. Dr. Berwick lists five reasons for this waste: 1) overtreatment of patients; 2) failure to coordinate care; 3) administrative complexity of the health care system; 4) burdensome rules; and 5) fraud. Of these at least two are directly tied to government action and the other three are strongly influenced by it. All of them are long-standing issues. That they continue to cause so much waste despite (or perhaps because of) over 40 years of experience might lead one to question the role of government in health care.
The second statement is Dr. Berwick’s response to why Americans are still deeply divided over the new health care law: “It’s a complex, complicated law. To explain it takes a while. To understand it takes an investment that I’m not sure the man or woman in the street wants to make or ought to make.” Given the waste already in the system, Americans might naturally distrust a complex law that they do not understand, especially when complexity is already creating waste. Yet Dr. Berwick thinks they should support the reforms because of their ultimate destination: “We are a nation headed for justice, for fairness and justice in access to care….We are a nation headed for much more healing and much safer care. There is a moon shot here. But somehow we have not put together that story in a way that’s compelling.”
Third are Dr. Berwick’s observations on government in general: “Government is more complex than I had realized….Government decisions result from the interactions of many internal stakeholders — different agencies and parts of government that, in many cases, have their own world views.” He also contrasts his experience in the private sector: “I was used to moving very, very fast. We could decide on Monday to start a program and have it in existence on Wednesday” with that in government: “I wish they could go faster…[but]…I don’t think you want government to be impulsive.”
One seldom sees such clear examples of the disconnect between the defenders of recent health care reforms and their opponents. Note the implicit assumption that the law deserves support merely because of its goal, regardless of whether it is likely to succeed in that goal. Yet this is precisely where the disagreement lies. There is broad agreement about the goal of increasing access and quality of care. There is strong disagreement about whether the Administration’s policies will move us toward or away from that goal. Democrats tend to think that guaranteeing everyone health care and then delivering it through a centralized program in which the young and healthy subsidize the old and sick is the only solution. Republicans believe that, just as in other markets such as telecommunications and transportation, increasing competition and innovation will make health care more affordable by driving down prices. The two approaches have dramatically different implications for the role of government and support for last year’s reforms. Americans who oppose the law see the waste that Dr. Berwick’s points to as evidence for their view.
The two approaches have important implications for the affordability of health care. The news article points out that: “For political reasons, the administration did not want [Dr. Berwick] to defend past statements in which he had extolled the virtues of the British health care system and had suggested a need to cap total health spending and limit the supply of costly high-technology medical care in the United States.” One was a 2009 statement that: “The decision is not whether or not we will ration care — the decision is whether we will ration with our eyes open.” Dr. Berwick feels that Republicans are unfair to depict him as an advocate of rationing health care and he defends the statement: “My point is that someone, like your health insurance company, is going to limit what you can get. That’s the way it’s set up. The government, unlike many private health insurance plans, is working in the daylight. That’s a strength.”
Yet almost everything Dr. Berwick has said up to this point belies this last statement. His 2009 statement was correct, which is precisely why the Administration did not want him to try and defend it. Rationing is inevitable in a world of scarcity. The Administration prefers government rationing through careful studies about the costs and benefits of alternative treatments and improvements in the incentives that government policy gives to patients and providers. Yet its own official has just listed a number of reasons why this approach is unlikely to succeed: 1) it wastes a large amount of the money passing through its programs; 2) decisionmakers are too self-interested to act consistently in the public’s interest; 3) it moves too slow; 4) it is too complex. Given all of this, how probable is it that better government policy can deliver the improvements needed to make health care more affordable? Not very. Even under health care reform, government programs will suffer a debilitating handicap: their decisions will be political. And because they are political a wide variety of interests other than those of the patient or the general public will often move to the forefront. Every penny of the 20-30 percent of waste that Dr. Berwick pointed out is income to one provider or another. They will fight hard to keep it and past experience gives every indication that they will succeed regardless of what the last Congress intended.
There is another way. Markets also ration care in a much different way; through prices. Provided you pay the price, you can have as much as you want. Prices for a product usually start out high, but this attracts other suppliers who, through competition gradually bring prices down. New entrants continually introduce new products and technology into the market. Assuming they have enough purchasing power (a key concern that vouchers and other supplemental payments are designed to address) patients decide for themselves how much care to buy. There is evidence that patients are increasingly able to make intelligent decisions about their care; forming support groups, exchanging health information, and even organizing their own medical trials. Sensible government programs could help this process.
One could have hoped that Dr. Berwick’s experience with government would have made him more sympathetic to an alternative path.
Law, Economics, and Technology 