Investing and Healthcare — The Quality and Learning Link

A couple of years ago, my colleague Jim Porto at UNC Chapel Hill asked me to teach a two-day seminar on performance psychology, and I loved it. My students, on the other hand, initially evidenced a normal distribution, with agnosticism as the mean. In other words, a small number loved it, a small number hated it, and most figured it was a necessary block to check before moving on to more productive things. As I continued to teach it and my skills presenting the materials became better, the response improved, and, because the materials were taken from research rather than the self-help section at Borders, the impact has been rewarding (and the student evaluations would make my mother proud).

Well, I no longer teach the seminar (having handed it to others who are every bit as capable), but I’ve retained interest in the topic. Over the winter holidays, I read Malcolm Gladwell’s Outliers and Geoff Colvin’s Talent is Overrated. While both are interesting (Colvin’s is better, despite Gladwell’s higher standing on the New York Times Best Seller list), I decided to apply Jacobi and invert – looking at the causes of failure.

Healthcare Camouflage

Open the New York Times last weekend and there were two articles concerning healthcare quality in the United States.  The first recounts the efforts by New York State government to close or consolidate hospitals with high patient-harm rates.  The first indication that such closures are exceedingly difficult is the necessity of creating a special, independent commission.  When elected representatives lack the spine or the consensus to do that for which they were elected, an independent commission is often the solution of choice.

Simone de Beauvoir’s “Other” and the Healthcare Practitioner

In Woman: Myth and Reality, Simone de Beauvoir (January 9, 1908 – April 14, 1986), the existentialist philosopher, feminist, and mate of John Paul Sartre, argues that women are accorded a mythological aura of indecipherable strangeness by the male of the species, which she calls the “other.” This status, in her view, sustained a paternalism in society, in which women were relegated to secondary status in comparison to men. The “other” is not, however, unique to women, according to Beauvoir, but, rather, serves as a mechanism to maintain secondary status for others in society – such as, the day laborer in comparison to the intellectual elite or foreigners of nearly every stripe.

 

At the time of its writing, others maintained that, for some women, this stereotype excused mercurial and illogical behavior that might serve her purpose at that moment but sustained the myth that so tarnished the totality of women during that era. I imagine the perfection of this was Bette Davis’ greeting of her suiter in The Cabin in the Cotton (1932) , when Madge says to Marvin, “I’d love to kiss you, but I just washed my hair…” Indeed, the publication of Woman: Myth and Reality did not stop the practice, which we see sustained in the female characters of Tennessee Williams.

 

Increasingly, I wonder if society has accorded “other” status to dyspeptic practitioners – who are revered and tolerated, simultaneously. The irascible doctor (often a surgeon) is a legendary stereotype, whose indefensible behaviors have been excused by the expression “Well, what do you expect? He is a surgeon.” Pleasantly, this negative stereotype rarely applies to female physicians, but , as short-sighted and reprehensible as they may be, stereotypes are not entirely the product of the observer’s delusional nature.

 

As with Beauvoir’s “other,” the sustaining of this persona serves the immediate purpose of the individual practitioner, in much the same way as the fighter jock stereotype benefited the Great Santini (Pat Conroy). Ultimately, however, it is the practitioner who suffers the greatest harm, which the original Santini (Donald Conroy) never recognized.

 

Is Healthcare a Free Market? Lessons From Seattle.

In 2000, the state of Washington deregulated the healthcare insurance industry. Individual patients were finding it difficult to secure coverage in an environment of “overregulation.” In 2007, following deregulation and the robust return of the industry to Washington State, a proposed bill designed to return regulatory oversight to the state was defeated when the industry declared that no significant rate hikes were anticipated. The Legislature adjourned, and increases of between 20% and 40% were imposed by many in the industry — using a loophole that increased rates as those covered moved from one age bracket to the next.

 

Yesterday, the Washington State Senate responded, passing a bill that would return regulatory oversight to the insurance commission. The House of Representatives is expected to easily pass similar legislation, prior to approval by the Governor.

 

The insurance industry, in response, claims that health care expenses are rising significantly, as the added burden of treating Boomer-generation patients increases industry costs, and in the absence of any effort to address the underlying sources of health care inflation. http://seattlepi.nwsource.com/local/349344_insurance31.html .

 

All this underscores a question that I raised at a televised debate sometime back. What, precisely, is health care in the United States? Worldwide, as best I can tell, healthcare falls into one of three models.

 

In the United States, for the majority of our history, health care has been perceived as a free-market economy. Currently, the United States is more of a socialized medicine country (by a small fraction) if simply comparing private-pay and health care insurance, combined, to that proportion of patient treatments paid through government. We are more prominently a free-market health-care system once the pharmaceutical industry, the medical device manufacturing industry, the medical supplies industry, and the other sporting industries are taken into account, within this $1.7+ trillion amalgam of providers, payers, and adjacent industries.

 

There is, as well, in the United States an established recognition of public health as a government obligation. No private sector equivalent exists for the management of natural disasters and acts of terrorism – such as Katrina and the unrequited but prayed-for deluge of patients from the 9/11 attacks on the Twin Towers. Government coordination of a response to pandemic bird flu, just as the public health response to tuberculosis and polio in previous generations, would fall under this government role of public health, as well. Today, in fact, government is largely responsible for the public education initiatives related to the increasing number of Americans diagnosed with diabetes each year, and it was the states attorneys general that sued the tobacco industry for the cost and harm attributable to smoking and nicotine addiction (to say nothing of the original surgeon general’s declaration in the 1960s).

 

It may be argued that this is not a legitimate role for government – that, if compensated, the private sector might profitably undertake the exercise and do so with greater efficiency. The counterargument to such a model references the “domestic tranquility” clause in the Constitution as making this a compelling requirement of government. Philosophically, this goes back to Thomas Hobbes, who maintained that each individual enjoyed absolute freedom when no laws exist (including the freedom to steal, assault, and murder), and that we willingly give up a portion of those freedoms to avoid the resulting state of anarchy and pursue what Maslow later described as “personal actualization.”

Domestic tranquility and its promotion, therefore, is a basis on which government credibility is derived. The declared willingness of South Africa and Brazil, several years ago, to ignore international copyright laws and produce AIDS cocktails off patent (rather than suffer the debilitating expense and public health consequences of that epidemic), serve to support the legitimacy of this claim. The governments of neither Brazil nor South Africa could retain internal credibility if ignoring HIV AIDS or supporting patent protection for treatment medications over the public health of the population.

 

The third model is health care as a human right, which is, either, explicitly or tacitly declared by socialized medicine countries. In France, this declaration is explicit, while, in England, it is tacit. In the United States, it is tacit with respect to the impoverished and the elderly under Medicaid and Medicare, and it is extended to other selective classes of patients through smaller and targeted programs, such as healthcare provision for children, those suffering from black lung, et cetera.

 

It may be argued that this hybrid model in the US has served us well for at least 40 years, since the enactment of Medicare and Medicaid in 1965. The question going forward, however, is whether it can continue to do so and, in fact, whether it does so today.

 

Those arguing for the overhaul or reform of the healthcare system note that the cost of goods produced in the United States are less competitive in comparison to the rest of the world. A recent study indicated that $1600 in the cost of every car produced out of Detroit is attributable to healthcare, for example. An increasing number of employers are, in fact, no longer providing coverage (in whole or in part). When coupled with the high cost of care and the rate of healthcare inflation, the number of uninsured Americans has increased by roughly 15 percent to 47 million in roughly the last five years. This serves to further expand the cost of care as preventative services are avoided and inappropriate sources of care (such as the emergency room) substitute for family practice.

 

Beyond the competitive posture of the country, there is a long-standing realization that the Boomer generation will enter retirement starting in less than two years. This represents a significant burden on the US system and its finances, since greater than 70% of health-care costs are borne in the last five years of life. The Boomer generation is estimated to increase the senior population (those older than 65) by nearly double between now and the year 2030 – growing from 45 million, currently, to over 80 million. Couple this with the realization that Medicare is slated to go bankrupt, by its own estimate, in 2020, and the subject of intergenerational “warfare” seems a real possibility, if warfare is defined as a policy fight over limited resources. The Boomer generation, however, is clearly not to blame, since it contributed to the financing of Medicare costs for the previous generation AND largely funded the now-depleted Medicare Trust Fund – which was designed to cover the healthcare cost of Boomers in retirement.

 

It is certainly the case that the current model will require significant reform if the implosion of the US system is to be avoided. Recognizing the three current models in existence among first world countries may assist in identifying potential alternatives, but these three models should not be viewed as the only options available. Some different, uniquely creative and, as yet, unrecognized, alternative may exist, but this issue is far too important to represent a topic of interest and voter consternation only during presidential election cycles – simply to be forgotten in the intervening years.

 

In fact, I am nearly convinced that the problem has been ignored for so long that no viable solution exists. It was a moderate issue when Jimmy Carter ran for president, when Ronald Reagan defeated him, and when the first George Bush followed Reagan. Paul Erdmann lists it as a looming threat in his writings of that time, and Ross Perot made it a center piece of his first campaign for the presidency.

 

It was the leading issue for President-Elect Bill Clinton at his Little Rock Economic Conference the month before his inauguration, and a campaign focus when the current President Bush was elected his first term in office. It was such a significant issue in advance of Mr. Bush’s reelection that the new pharmaceutical benefit for seniors was enacted. We have, however, largely ignored the looming crisis of healthcare during the three-years-in-four when presidential politics are not at stake.

 

Given this, some reading the Seattle article may believe this to be the most important sentence, “Jeff Roe, president of Lifewise Health Plan of Washington, said increased rates are driven by the increased costs of providing health care for an aging population that relies on more and better medical technology.” (Emphasis added.)

 

For me, however, the more telling and important sentence is this one:

 

“Roe contends the bill would artificially suppress rates through a subjective rate authority but do nothing to address the underlying cause of rate increases.” (Emphasis added.)

 

Why?

 

No undertaking by government or industry has directly sought to address the “underlying cause(s)” of our health-care inflation problem. We have, instead, acted as though this were the rightful providence and role of the free market and its “invisible hand.” Health care, however, has not been an unmolested free market for more than 40 years.