Draft.

Atul Gawande has another fascinating piece in the New Yorker about the challenges facing the broken American health care system. He looks to McAllen, TX - one of the nation's most expensive health care markets, where Medicare spends almost twice the national average per enrollee (which also happens to be greater than the per capita GDP) - to find some answers.

Do patients in McAllen get better care for all that extra cost? No. Research shows, in fact, that per patient Medicare costs and quality of care are negatively correlated on a State-by-State basis.  The long and short of it is that there is an overwhelming tendency for doctors in McAllen to treat their patients as revenue sources, first; the quality of their care is a lower priority.

Are these folks assholes? Absolutely. But wherever you find shared behavioral patterns, no matter how noble or diabolical, you can bet that there are structural and institutional drivers. So what drives the behavior of those McAllen docs? Well, they get paid for it. They perform many more high cost diagnostic and surgical procedures per patient with no associated increase in patient health. The American health care system bases provider (re)compensation on volume rather than quality of care.

In this context, the "public vs. private" health care debate starts to take on a different shade. Gawande notes:

He contrasts the example of McAllen with some of the success stories: hospitals (or hospital systems) like the Mayo Clinics and Kaiser Permanente, and more loosely affiliated "accountable-care" organizations (read the article). The success of these arrangements - high quality of care and low per patient costs - seems to be driven by a few interrelated factors: a focus on patient care quality as the bottom line, enabling and empowering (or even requiring) collaboration among docs, paying salaries rather than procedure-dependent physician reimbursement, and non-profit health care organizations.

Shocker: to get quality health care, make sure your structural incentives are properly aligned.

Rather than focusing on patient care, most of the US health care system is instead driven by a perverse compensation system in which neither doctors nor hospitals are rewarded for keeping patients health. Yeah, they both make more when their patients are sick. What do you expect will happen?

To be clear: I don't lay blame at the doctors feet. My grandfather was a doctor, and my dad, sister, brother and sister-in-law are all docs today (two surgical oncologists, pulmonary intensive care specialist, anesthesiologist and OB-GYN, respectively). They are all deeply and truly good people, and they - like many and perhaps most others - do amazing work as physicians and human beings. That being said, do we want to put our trust in the nobility of a few individuals against the weight of the $2 trillion health care industry?

________________________________________________________


From my perspective, the main point of failure of American health care is the decoupling of health care providers, insurers, and the value of healthy people. Health care providers - both hospitals and physicians - should be paid to keep people healthy. Instead, they're reimbursed based on patient & procedure quantity. Shouldn't insurers have a vested interest in having health (low cost) customers? You'd think, but several factors undermine most hope for that: their ability to constantly re-arbitrage and refuse to insure high-risk individuals, high customer churn (cough terrible customer experience), and their demonstrated lack of ability to innovate and address the long term.

That's the heart of it - the greatest part of the value of health care is in keeping people healthy. The value in preventive care, though, is realized in the long term through dramatically reduced health care costs. No one has figured out how - or has had the balls to try - to capture this value yet.

Our health care mess feels a lot like the initial lending abstractions that contributed to the current financial crisis. Banks used to lend known families and individuals money to buy a home; because they held that risk themselves, the financial health of their customers and that relationship itself were of great importance. Once banks started selling their mortgages to Wall Street, they became brokers.

Doctors and hospitals should not be brokers of health care services, but that's what the US health care system has made them. Until we address the underlying incentive structure, we're largely fucked. As Gawande put it: