Original Link: http://www.opendemocracy.net/article/iraq-afpak-beyond-the-global-cost-of-war
By Paul Rogers
A major landmark in the in the United States's military presence in Iraq arrives on 30 June 2009, when the army is scheduled to withdraw its combat-troops from the country's cities. The terms of the "status-of-forces agreement" with the Iraqi government will see most of these (currently 133,000) soldiers relocated to a number of major bases in rural areas, though some will join the 30,000 troops that have left Iraq since the peak of the "surge" in mid-2008.
The process is taking place against the background of continuing violence in Iraq, notwithstanding reports of an overall increase in security. Indeed, Iraq's foreign minister Hoshyar Zebari is warning that al-Qaida and Ba'athist militant clusters will seek to escalate the level of violence in advance of the 30 June deadline, in order to take credit for forcing the Americans into a humiliating retreat (see Patrick Cockburn, "US troops ask Syria to thwart al-Qa'ida offensive", Independent, 17 June 2009).
This major event in Iraq is thus surrounded by uncertainties. But it will also reverberate as far as Afghanistan. For the withdrawal of further US contingents means that there is scope for an increase in deployments there, in order to meet the commitment of 17,000 more soldiers made by President Barack Obama in February 2009; by the end of 2009, American troops should make up around two-thirds of the near-100,000 coalition forces in Afghanistan (see Barack Obama and Afghanistan: a closer look", 8 April 2009).
Many of the fresh US forces will be sent units to Helmand and its neighbouring provinces in the south of the country, where the Taliban and other militias are most active. These parts of Afghanistan traditionally see a lull in the fighting in the late spring as the opium-poppy harvest is brought in, to be followed by a summer period of greater violence. This makes the current evolution of these militias even more interesting.
Have PKM, will travel
For at this very moment, there are signs that a number of the paramilitary groups have added considerably to their operating capacities in ways that are surprising the American and British forces. In some recent conflicts with paramilitary units in Zabul province, United States troops have been struck by the sophistication of their opponents (see Sean D Naylor, "A Stronger Enemy?", Defense News, 8 June 2009).
These troops are experienced in facing irregular Taliban or other groups who fight with vigour and who have intimate knowledge of the local area in which they operate, but whose equipment is fairly rudimentary. One US unit, however, found itself in combat with paramilitaries that acted more like regular forces. They were equipped with body-armour and Kevlar protective helmets, used smoke-grenades for cover and had a high level of marksmanship - including an ability to use PKM heavy machine-guns to provide accurate firepower over a range of 800 metres.
The report in Defense News says:
"The insurgents' modern gear and the relative sophistication of their tactics and marksmanship indicated that these were not local guerrillas. The use of body armour, helmets and smoke grenades is ‘fairly rare' anywhere in Afghanistan, and ‘most likely indicates a skilled group [of]... foreign fighters with funding and previous experience [and] training', an Army source in Afghanistan said."
The intercepted of communications between the insurgents revealed that some were speaking Farsi; itself no proof of any Iranian involvement in this trend (and US army sources claimed none), since the language extends across the region and is not confined to Iran. But there is a range of evidence to show that the conflicts in Afghanistan and Pakistan are becoming more transnational as they evolve; this includes a spreading of "expertise" whereby militants with experience in fighting (for example) the Russians in Chechnya and the United States and its coalition partners in Iraq are able to share their knowledge in new environments.
The axis of expertise
The insurgents are not alone. The United States is investing many of its far vaster resources into re-equipping its army and marine corps for wars which are radically different from those envisaged in the cold-war era - and even from those anticipated in the early stages of the Afghanistan and Iraq invasions. Many of the new requirements derive from what are termed "operational needs statements" (ONS) - that is, calls from military commanders in the field for new weapons to counter the insurgents.
A recent ONS, for example, requested fast-tracking for "a precision-guided mortar program to help light infantry units..." (see Kris Osborn & Barbara Opall-Rome, "U.S. Speeds Precision Mortar Capability for Afghanistan", Defense News, 8 June 2009). One candidate for the provision of this system is the result of a partnership between Israeli Military Industries (IMI) and the US company, Raytheon. IMI had begun to develop the project after the war in Lebanon in July-August 2006 war; the US army's engagement in Afghanistan led the company to accelerate it by working with Raytheon. The transfer of Israel's expertise in trying to counter well-trained and well-armed Hizbollah paramilitaries could, it is thought, be very valuable in the US combat with the Taliban (and especially in limiting casualties on its own side).
The link has deeper strategic dimensions too. The US -Israel military relationship has developed over many years, but has become much more salient since 9/11 and the subsequent wars in Afghanistan and Iraq (see Between Fallujah and Palestine", 22 April 2004). The "trans nationalism" of one side is thus echoed on the other.
If precision-guided mortars represent one outcome of the drive to develop new generations of counterinsurgency weapons, the experimental 25mm air-burst projectile is another. In technical terms, this is somewhere between a standard rifle-bullet (a direct fire weapon) and a traditional 40mm grenade (indirect and therefore more liable to be indiscriminate in its effects). What is now being developed is a direct-fire exploding projectile that is accurate over a range of 700 metres and delivers high-velocity shrapnel fragments directly over insurgents that are otherwise under cover.
These are but two of many examples of new weapons under development. But they are overshadowed by the biggest development of them all - the rapid development of what is termed "the autonomous future" of pilotless drones possessed of heavy firepower, long range and endurance (with flights lasting scores of hours). The Afghan war has done much to stimulate massive investment in these systems.; while the spillover of this war into western Pakistan has been followed by their greater deployment across the border in operations that have also inflicted many civilian casualties. The effect of the ensuing protest and controversy has reached the highest military levels; but the larger point in this context is that the military development of drones is still in its very early stages (see "Drone wars", 16 April 2009).
In the longer-term, companies are seeking to build solar-powered drones that combine large glider-like wings coated with photovoltaic cells and lightweight batteries to provide the capability of these drones staying aloft almost indefinitely (see Graham Warwick, "Autonomous Futures", Aviation Week, 8 June 2009).
The military spree
The concentrated investment in these new instruments of combat - in response to wars in Afghanistan and Iraq where a few thousand insurgents have been able to tie down over 200,000 western troops - are part of the more general trends in world military spending over the (almost) eight years of the2war on terror" (see Jorn Madslien, Military spending sets new record, BBC News, 8 June 2009).
The latest armaments and disarmament yearbook of the respected Stockholm International Peace Research Institute (SIPRI) - Armaments, Disarmament and International Security (June 2009) - highlights a 4% real-term increase in world military spending in 2007 -08, and a 45% real-term increase in the 1998-2008 period. The US's own expenditure increased by 58% over this decade, in great part due to spending on the wars it has been engaged in since 11 September 2001 (see America‘s politics of defence" , 12 March 2009).
Indeed, it is striking that defence industries are being largely shielded from the global financial crisis that is affecting almost everyone else. Frida Berrigan, an arms and security expert at the New America Foundation, comments: "The only winners from increases in global military spending are [US-based] weapons manufacturers like Lockheed Martin, Raytheon and Northrop Grumman". Almost every other sector of the economy is affected by the recession, but "thanks to the fact that nations around the world are putting more and more of their precious (and ever more scarce) resources into the coffers of their militaries, the weapons industry continues to report regular profit" (see Thalif Deen, U.N. Big Powers World's Top Military Spenders, IPS/Terra Viva, 9 June 2009).
The "war on terror" has had huge impacts on a small number of key countries, and reverberating effects in many more: the destruction of lives, mass displacements, spreading insecurity and polarisation, and the corruption of states by their involvement in torture (see Jan Egeland & Mariano Aguirre, "Torture: America's policy, Europe's shame", 17 June 2009). The toxic phrase itself may have been dropped from the United States's political-military lexicon, but the commitment to ever-increasing international military spending that it has fuelled remains rampant. This would be notable at any time, but the context of a severe economic downturn makes it look even more like a massive diversion of resources away from the world's poorest people at the very time they most need support.
Saturday, June 20, 2009
Iraq war's cost: Loss of U.S. power, prestige, influence
Original Link: http://www.mcclatchydc.com/homepage/story/30413.html
By Warren P. Strobel
It was a decision that only President Bush had the power to make: At about 9 a.m. on March 19, 2003, in the Situation Room in the basement of the West Wing of the White House, he gave the "execute order" to begin Operation Iraqi Freedom, the U.S.-led invasion of Iraq.
Now, five years later, the consequences of that act will soon be beyond Bush's grasp. In 10 months, they'll land on the desk of his successor.
Thanks in part to the Iraq war, the next U.S. president — Republican or Democrat, black or white, man or woman — will take office with America's power, prestige and popularity in decline, according to bipartisan reports, polls and foreign observers.
"The winner of the 2008 elections will command U.S. forces still at war in Iraq, Afghanistan and against elusive terrorists with a deadly reach. The U.S. economy will remain burdened. ... America's moral leadership and decision-making competence will continue to be questioned," begins a study of foreign-policy choices for the next president, which a Georgetown University task force released last month.
"Restored respect will come only with fresh demonstrations of competence," the study said.
The numbers don't inspire confidence: Oil prices are at an all-time high, the dollar at new lows against the euro. Surveys find the United States' popularity and respect slipping in every part of the globe except Africa. A poll of 3,400 active and retired U.S. military officers by Foreign Policy magazine found that 88 percent agreed with the statement that "The war in Iraq has stretched the U.S. military dangerously thin."
Not all of the challenges facing Bush's successor can be blamed on the invasion and the failure of civilian leadership to plan for what would happen next in Iraq.
There are other forces at work, foreign-policy specialists say, including an increasingly globalized economy with new centers of wealth and power, China's rise and the growth of Islamic extremism.
The federal government's inept response to Hurricane Katrina dealt another blow, causing some prominent U.S. allies to question not America's intentions or its wisdom, but its competence, a prominent Arab ruler once told a top U.S. diplomat.
But because of the invasion of Iraq, "America's strategic position in the world has worsened," said Josef Joffe, the editor and publisher of Die Zeit, a German weekly that's sympathetic to United States. "From a coldly realist perspective, Iraq was the wrong war against the wrong foe at the wrong time."
The removal of Saddam Hussein strengthened Iran and "by entangling itself in an interminable civil war, the U.S. has lost power to spare," Joffe said.
Bush has never wavered in defending the most fateful choice of his presidency.
"The decision to remove Saddam Hussein was the right decision early in my presidency, it is the right decision at this point in my presidency and it will forever be the right decision," he told religious broadcasters earlier this month.
With improvements in security in much of Iraq over the last year, it still seems possible that the country could someday experience stability and even prosperity, thanks to its vast oil deposits.
"The prognosis in Iraq is potentially a lot more promising than it's been in a long time," said Stephen Biddle of the Council on Foreign Relations, who was in Iraq in March and April 2007 as part of commander Gen. David Petraeus' staff.
But even under the best of circumstances, tens of thousands or more U.S. troops may be needed to stabilize Iraq throughout the next president's first term — and beyond.
That could limit the next president's options, even as he or she deals with more basic questions about how to restore the United States' standing in the world.
U.S. credibility also has been undermined, at home and abroad, by the administration's false claims about Saddam Hussein's weapons of mass destruction and ties to al Qaida prior to the Iraq war.
Several recent blue-ribbon panels recommended that the next president make major changes in how the United States deals with the world.
He or she, they said, should rely more on "soft" or "smart " power, such as diplomacy, promoting U.S. values and rebuilding alliances; use persuasion rather than coercion to achieve goals when possible; and invest more in non-military tools such as public diplomacy and foreign aid.
More provocatively, they advocate replacing the "war on terrorism" — which has colored virtually every aspect of Bush's foreign policy — as the focus of American security strategy. Instead, they say, the United States should be the leader in advancing peace, liberty and prosperity worldwide.
"Since 9/11, the United States has been exporting fear and anger rather than the more traditional values of hope and optimism. Suspicions of American power have run deep," Richard Armitage, deputy secretary of state under Bush, and Joseph Nye, a Pentagon official under President Clinton, wrote in a December report published by the Center for Strategic and International Studies.
"At the core of the problem is that America has made the war on terrorism the central component of its global engagement," they wrote.
That doesn't mean going soft on terrorists, said Chester Crocker, the co-chairman of the separate Georgetown University report, which also called for a new guiding principle for U.S. foreign policy.
But Crocker, an assistant secretary of state for Africa under President Reagan, said the war on terrorism has inflamed suspicions of U.S. motives, forced Washington to look the other way when its counterterrorism allies engage in bad behavior themselves, and led to an over-focus on the Middle East.
"Obviously, we can't ignore these hotspots," he said. But "if all we really care about is what's going on in the struggle within the Islamic world, we're not a world power anymore."
Many specialists also advise a more subtle, patient and less hectoring approach when it comes to advancing global democracy, which was one of the justifications Bush gave for invading Iraq.
Instead, the invasion "set it back in multiple senses," said Larry Diamond, a Stanford University expert on democracy promotion and author of the new book, "The Spirit of Democracy."
"Number one, it didn't go well," he said. U.S. efforts to spread democracy "were equated with insecurity, violence, refugees." Arab autocrats then used the specter of instability to argue against political liberalization.
"We have to approach the whole thing on fresh terms," Diamond said, with a strategy that "is incremental, that is more gradual, that doesn't over-reach."
Crafting a new foreign policy may not be easy, even for a new president making a fresh start.
"Europeans may delude themselves in thinking that their problem was with Bush, the president, and not with America, the superpower," said Joffe, the German publisher and academic. But the next president "will still be at the helm of the mightiest nation on earth, one that faces more threats and has more means to combat them than anybody else."
Said Crocker: "We are substantially leveraged or mortgaged by legacies" such as Iraq. "The next president has to figure out a way to dig out of this hole."
By Warren P. Strobel
It was a decision that only President Bush had the power to make: At about 9 a.m. on March 19, 2003, in the Situation Room in the basement of the West Wing of the White House, he gave the "execute order" to begin Operation Iraqi Freedom, the U.S.-led invasion of Iraq.
Now, five years later, the consequences of that act will soon be beyond Bush's grasp. In 10 months, they'll land on the desk of his successor.
Thanks in part to the Iraq war, the next U.S. president — Republican or Democrat, black or white, man or woman — will take office with America's power, prestige and popularity in decline, according to bipartisan reports, polls and foreign observers.
"The winner of the 2008 elections will command U.S. forces still at war in Iraq, Afghanistan and against elusive terrorists with a deadly reach. The U.S. economy will remain burdened. ... America's moral leadership and decision-making competence will continue to be questioned," begins a study of foreign-policy choices for the next president, which a Georgetown University task force released last month.
"Restored respect will come only with fresh demonstrations of competence," the study said.
The numbers don't inspire confidence: Oil prices are at an all-time high, the dollar at new lows against the euro. Surveys find the United States' popularity and respect slipping in every part of the globe except Africa. A poll of 3,400 active and retired U.S. military officers by Foreign Policy magazine found that 88 percent agreed with the statement that "The war in Iraq has stretched the U.S. military dangerously thin."
Not all of the challenges facing Bush's successor can be blamed on the invasion and the failure of civilian leadership to plan for what would happen next in Iraq.
There are other forces at work, foreign-policy specialists say, including an increasingly globalized economy with new centers of wealth and power, China's rise and the growth of Islamic extremism.
The federal government's inept response to Hurricane Katrina dealt another blow, causing some prominent U.S. allies to question not America's intentions or its wisdom, but its competence, a prominent Arab ruler once told a top U.S. diplomat.
But because of the invasion of Iraq, "America's strategic position in the world has worsened," said Josef Joffe, the editor and publisher of Die Zeit, a German weekly that's sympathetic to United States. "From a coldly realist perspective, Iraq was the wrong war against the wrong foe at the wrong time."
The removal of Saddam Hussein strengthened Iran and "by entangling itself in an interminable civil war, the U.S. has lost power to spare," Joffe said.
Bush has never wavered in defending the most fateful choice of his presidency.
"The decision to remove Saddam Hussein was the right decision early in my presidency, it is the right decision at this point in my presidency and it will forever be the right decision," he told religious broadcasters earlier this month.
With improvements in security in much of Iraq over the last year, it still seems possible that the country could someday experience stability and even prosperity, thanks to its vast oil deposits.
"The prognosis in Iraq is potentially a lot more promising than it's been in a long time," said Stephen Biddle of the Council on Foreign Relations, who was in Iraq in March and April 2007 as part of commander Gen. David Petraeus' staff.
But even under the best of circumstances, tens of thousands or more U.S. troops may be needed to stabilize Iraq throughout the next president's first term — and beyond.
That could limit the next president's options, even as he or she deals with more basic questions about how to restore the United States' standing in the world.
U.S. credibility also has been undermined, at home and abroad, by the administration's false claims about Saddam Hussein's weapons of mass destruction and ties to al Qaida prior to the Iraq war.
Several recent blue-ribbon panels recommended that the next president make major changes in how the United States deals with the world.
He or she, they said, should rely more on "soft" or "smart " power, such as diplomacy, promoting U.S. values and rebuilding alliances; use persuasion rather than coercion to achieve goals when possible; and invest more in non-military tools such as public diplomacy and foreign aid.
More provocatively, they advocate replacing the "war on terrorism" — which has colored virtually every aspect of Bush's foreign policy — as the focus of American security strategy. Instead, they say, the United States should be the leader in advancing peace, liberty and prosperity worldwide.
"Since 9/11, the United States has been exporting fear and anger rather than the more traditional values of hope and optimism. Suspicions of American power have run deep," Richard Armitage, deputy secretary of state under Bush, and Joseph Nye, a Pentagon official under President Clinton, wrote in a December report published by the Center for Strategic and International Studies.
"At the core of the problem is that America has made the war on terrorism the central component of its global engagement," they wrote.
That doesn't mean going soft on terrorists, said Chester Crocker, the co-chairman of the separate Georgetown University report, which also called for a new guiding principle for U.S. foreign policy.
But Crocker, an assistant secretary of state for Africa under President Reagan, said the war on terrorism has inflamed suspicions of U.S. motives, forced Washington to look the other way when its counterterrorism allies engage in bad behavior themselves, and led to an over-focus on the Middle East.
"Obviously, we can't ignore these hotspots," he said. But "if all we really care about is what's going on in the struggle within the Islamic world, we're not a world power anymore."
Many specialists also advise a more subtle, patient and less hectoring approach when it comes to advancing global democracy, which was one of the justifications Bush gave for invading Iraq.
Instead, the invasion "set it back in multiple senses," said Larry Diamond, a Stanford University expert on democracy promotion and author of the new book, "The Spirit of Democracy."
"Number one, it didn't go well," he said. U.S. efforts to spread democracy "were equated with insecurity, violence, refugees." Arab autocrats then used the specter of instability to argue against political liberalization.
"We have to approach the whole thing on fresh terms," Diamond said, with a strategy that "is incremental, that is more gradual, that doesn't over-reach."
Crafting a new foreign policy may not be easy, even for a new president making a fresh start.
"Europeans may delude themselves in thinking that their problem was with Bush, the president, and not with America, the superpower," said Joffe, the German publisher and academic. But the next president "will still be at the helm of the mightiest nation on earth, one that faces more threats and has more means to combat them than anybody else."
Said Crocker: "We are substantially leveraged or mortgaged by legacies" such as Iraq. "The next president has to figure out a way to dig out of this hole."
Health Haves and Have-Nots
Original Link: http://www.slate.com/id/2216431/
By Timothy Noah
My Slate colleague Mickey Kaus believes I'm wrong to argue that skyrocketing health care costs are a reason to enact health care reform:
[J]ust because rising health care costs have eaten up all of the average American's wage increases, it does not necessarily follow that either this rise was unwarranted or that health care costs need to be controlled. Maybe Americans, like richer people everywhere, want to spend more money on health care (as opposed to, say, newspapers) and advances in health care have given them more valuable services to purchase (or have their employers purchase for them) [boldface his].
It's a fair point, as far as it goes. What we pay for the necessities of life does not remain static over time. In 1935, food accounted for 34 percent of all spending in the United States. In 1959, it accounted for 25 percent. Today it's more like 16 percent. If agriculture's green revolution can halve the proportion of family budgets devoted to purchasing food, why can't expensive scientific and technological advances in medicine take up the slack with health care spending? In fact, they have. In 1959, health care accounted for about 5 percent of all spending in the United States; today it's about 16 percent. During this period, life expectancy has increased about 10 years. A bargain!
But compared with what other countries are getting for their health care buck, it isn't a bargain at all. In Canada and France, for instance, health care accounts for 10 percent of all spending, as compared with the United States' 16 percent. Yet life expectancy is higher, and infant mortality is lower. The United States ranks 34th in life expectancy among the nations of the world, well behind not only Canada and France (which rank sixth and seventh) but also Israel (10th), Jordan (27th), and Bosnia and Herzegovina (29th).*
The problem is largely one of maldistribution. The United States is a great place to be sick if you're rich and a terrible place to be sick if you're poor or middle class. Wealthy people can afford to pay the rising cost of health care; poor and middle-income people can't. This problem obviously becomes worse as the cost spirals upward. According to a study in the April 2009 McKinsey Quarterly, between 1996 and 2005, households that received health insurance through work saw their premiums rise from 7 percent of their total income on average to 10 percent. You could argue that medical advances during this decade justified Americans digging deeper into their pockets for health care. But some dug deeper than others. For households earning more than $130,000, the bump was from 2.6 percent of total income to an irritating but still-manageable 3.3 percent. For households earning less than $27,300, however, the bump was from an already high 14 percent of total income to an extremely burdensome 20 percent.
Remember, too, that like all forms of employer compensation, health insurance gets lavished more generously on higher-paid employees. When the price of health care rises, employers stop offering it to the grunts, or stop offering it with co-payments the grunts can afford. Between 2001 and 2004, the percentage of employees covered by employer-provided health insurance dropped from 81 percent to 77 percent. Two-thirds of these newly uninsured were low-income households. By 2005, 89 percent of all households earning more than $130,000 had employer-provided health insurance, compared with only 22 percent of all households earning less than $27,300. Among middle-income households earning $27,000 to $58,000, only 56 percent had employer-provided health insurance. "Employers are spending more on health care per employee," the McKinsey report concludes, "but for fewer employees." Medical inflation is causing even minimally decent health care to become a luxury item. That's intolerable.
Another kind of maldistribution is occurring, too. In addition to money haves and money have-nots, rising health care costs divide society into good-health haves and good-health have-nots. A spouse's long illness can easily become a financial catastrophe, one that's worsened by rapidly rising premiums, deductibles, and co-payments. I was pretty lucky in that regard after my own wife was diagnosed with terminal cancer in 2001. During Marjorie's three-year illness, our employers were generous with both time and financial assistance, and my health plan was spectacular. (In those days, Slate was owned by Microsoft, a very rich corporation with a very young work force; companywide, the only significant risk factor was megalomania.) Others similarly or better-situated than we were financially have fared far worse. Well-known abortion-rights advocate Kate Michelman published a heart-wrenching essay in the April 8 Nation detailing how her husband's Parkinson's and her daughter's paralysis from a horseback-riding accident have brought her to the brink of bankruptcy. Michelman's husband is a retired college professor with excellent benefits, but neither his private health insurance nor Medicare made much of a dent in the $9,000 per month charged by the assisted-living facility to which he was discharged from the hospital after he shattered his hip and femur getting out of a car. Against his doctors' advice, she brought him home. Michelman's daughter, a young woman in her 20s, had no health insurance at all, which is fairly typical among young adults. Michelman concludes by pointing out that her loss of life savings is not unusual under the current health care system.
For both money have-nots and good-health have-nots, even the most radical options under consideration by the Obama administration are a poor substitute for a government program funded entirely by taxes—no enrollment necessary—that provides health care to all comers. But if we can't get health care for all, the least we owe the have-nots is to lower health care costs to the maximum extent possible without compromising quality. Ignoring the whining of insurance companies that stand to lose market share to Obama's cheaper "public option" is a good start.
By Timothy Noah
My Slate colleague Mickey Kaus believes I'm wrong to argue that skyrocketing health care costs are a reason to enact health care reform:
[J]ust because rising health care costs have eaten up all of the average American's wage increases, it does not necessarily follow that either this rise was unwarranted or that health care costs need to be controlled. Maybe Americans, like richer people everywhere, want to spend more money on health care (as opposed to, say, newspapers) and advances in health care have given them more valuable services to purchase (or have their employers purchase for them) [boldface his].
It's a fair point, as far as it goes. What we pay for the necessities of life does not remain static over time. In 1935, food accounted for 34 percent of all spending in the United States. In 1959, it accounted for 25 percent. Today it's more like 16 percent. If agriculture's green revolution can halve the proportion of family budgets devoted to purchasing food, why can't expensive scientific and technological advances in medicine take up the slack with health care spending? In fact, they have. In 1959, health care accounted for about 5 percent of all spending in the United States; today it's about 16 percent. During this period, life expectancy has increased about 10 years. A bargain!
But compared with what other countries are getting for their health care buck, it isn't a bargain at all. In Canada and France, for instance, health care accounts for 10 percent of all spending, as compared with the United States' 16 percent. Yet life expectancy is higher, and infant mortality is lower. The United States ranks 34th in life expectancy among the nations of the world, well behind not only Canada and France (which rank sixth and seventh) but also Israel (10th), Jordan (27th), and Bosnia and Herzegovina (29th).*
The problem is largely one of maldistribution. The United States is a great place to be sick if you're rich and a terrible place to be sick if you're poor or middle class. Wealthy people can afford to pay the rising cost of health care; poor and middle-income people can't. This problem obviously becomes worse as the cost spirals upward. According to a study in the April 2009 McKinsey Quarterly, between 1996 and 2005, households that received health insurance through work saw their premiums rise from 7 percent of their total income on average to 10 percent. You could argue that medical advances during this decade justified Americans digging deeper into their pockets for health care. But some dug deeper than others. For households earning more than $130,000, the bump was from 2.6 percent of total income to an irritating but still-manageable 3.3 percent. For households earning less than $27,300, however, the bump was from an already high 14 percent of total income to an extremely burdensome 20 percent.
Remember, too, that like all forms of employer compensation, health insurance gets lavished more generously on higher-paid employees. When the price of health care rises, employers stop offering it to the grunts, or stop offering it with co-payments the grunts can afford. Between 2001 and 2004, the percentage of employees covered by employer-provided health insurance dropped from 81 percent to 77 percent. Two-thirds of these newly uninsured were low-income households. By 2005, 89 percent of all households earning more than $130,000 had employer-provided health insurance, compared with only 22 percent of all households earning less than $27,300. Among middle-income households earning $27,000 to $58,000, only 56 percent had employer-provided health insurance. "Employers are spending more on health care per employee," the McKinsey report concludes, "but for fewer employees." Medical inflation is causing even minimally decent health care to become a luxury item. That's intolerable.
Another kind of maldistribution is occurring, too. In addition to money haves and money have-nots, rising health care costs divide society into good-health haves and good-health have-nots. A spouse's long illness can easily become a financial catastrophe, one that's worsened by rapidly rising premiums, deductibles, and co-payments. I was pretty lucky in that regard after my own wife was diagnosed with terminal cancer in 2001. During Marjorie's three-year illness, our employers were generous with both time and financial assistance, and my health plan was spectacular. (In those days, Slate was owned by Microsoft, a very rich corporation with a very young work force; companywide, the only significant risk factor was megalomania.) Others similarly or better-situated than we were financially have fared far worse. Well-known abortion-rights advocate Kate Michelman published a heart-wrenching essay in the April 8 Nation detailing how her husband's Parkinson's and her daughter's paralysis from a horseback-riding accident have brought her to the brink of bankruptcy. Michelman's husband is a retired college professor with excellent benefits, but neither his private health insurance nor Medicare made much of a dent in the $9,000 per month charged by the assisted-living facility to which he was discharged from the hospital after he shattered his hip and femur getting out of a car. Against his doctors' advice, she brought him home. Michelman's daughter, a young woman in her 20s, had no health insurance at all, which is fairly typical among young adults. Michelman concludes by pointing out that her loss of life savings is not unusual under the current health care system.
For both money have-nots and good-health have-nots, even the most radical options under consideration by the Obama administration are a poor substitute for a government program funded entirely by taxes—no enrollment necessary—that provides health care to all comers. But if we can't get health care for all, the least we owe the have-nots is to lower health care costs to the maximum extent possible without compromising quality. Ignoring the whining of insurance companies that stand to lose market share to Obama's cheaper "public option" is a good start.
Workers feel squeeze of health bill for others
Original Link: http://www.sfgate.com/cgi-bin/article/article?f=/c/a/2009/03/23/BUEK16LI7S.DTL
By Ricardo Alonso-Zaldivar
American workers - whose taxes pay for extensive government health programs - are getting squeezed like no other group by private health insurance premiums that are rising much faster than their wages.
While just about all retirees are covered, and nearly 90 percent of children have health insurance, workers now are at significantly higher risk of being uninsured than in the 1990s, the last time lawmakers attempted a health care overhaul, according to a study to be released today.
The study for the Robert Wood Johnson Foundation found that nearly 1 in 5 workers is uninsured, a statistically significant increase from fewer than 1 in 7 during the mid-1990s.
The problem is cost. Total premiums for employer plans have risen six to eight times faster than wages, depending on whether individual or family coverage is picked, the study found.
"The thing I think is interesting is how many workers are newly uninsured," said Lynn Blewett, director of the State Health Access Data Assistance Center at the University of Minnesota, which conducted the research. "In the last couple of years, we've seen a deterioration of private health insurance."
About 20.7 million workers were uninsured in the mid- 1990s. A decade later, it was 26.9 million, the study found.
In the 1990s, there were eight states with 20 percent or more of the working age population uninsured. Now there are 14, including California.
Yet workers continue to pay the bill for covering others. Their payroll taxes help support Medicare, which covers the elderly. Income taxes and other federal and state levies pay for covering the poor and the children of low-income working parents.
The study comes as the Obama administration is scrambling to maintain support for a health care overhaul this year in the face of record federal deficits. A program like President Obama's, which would commit the nation to coverage for all, is estimated to cost about $1.5 trillion over 10 years.
If anything, the situation for workers appears to be worse than is reflected in the report. It analyzed census data through 2007, the latest year available. But that was before the economy tumbled into recession.
By Ricardo Alonso-Zaldivar
American workers - whose taxes pay for extensive government health programs - are getting squeezed like no other group by private health insurance premiums that are rising much faster than their wages.
While just about all retirees are covered, and nearly 90 percent of children have health insurance, workers now are at significantly higher risk of being uninsured than in the 1990s, the last time lawmakers attempted a health care overhaul, according to a study to be released today.
The study for the Robert Wood Johnson Foundation found that nearly 1 in 5 workers is uninsured, a statistically significant increase from fewer than 1 in 7 during the mid-1990s.
The problem is cost. Total premiums for employer plans have risen six to eight times faster than wages, depending on whether individual or family coverage is picked, the study found.
"The thing I think is interesting is how many workers are newly uninsured," said Lynn Blewett, director of the State Health Access Data Assistance Center at the University of Minnesota, which conducted the research. "In the last couple of years, we've seen a deterioration of private health insurance."
About 20.7 million workers were uninsured in the mid- 1990s. A decade later, it was 26.9 million, the study found.
In the 1990s, there were eight states with 20 percent or more of the working age population uninsured. Now there are 14, including California.
Yet workers continue to pay the bill for covering others. Their payroll taxes help support Medicare, which covers the elderly. Income taxes and other federal and state levies pay for covering the poor and the children of low-income working parents.
The study comes as the Obama administration is scrambling to maintain support for a health care overhaul this year in the face of record federal deficits. A program like President Obama's, which would commit the nation to coverage for all, is estimated to cost about $1.5 trillion over 10 years.
If anything, the situation for workers appears to be worse than is reflected in the report. It analyzed census data through 2007, the latest year available. But that was before the economy tumbled into recession.
THE COST CONUNDRUM
Original Link: http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande
By Atul Gawande
It is spring in McAllen, Texas. The morning sun is warm. The streets are lined with palm trees and pickup trucks. McAllen is in Hidalgo County, which has the lowest household income in the country, but it’s a border town, and a thriving foreign-trade zone has kept the unemployment rate below ten per cent. McAllen calls itself the Square Dance Capital of the World. “Lonesome Dove” was set around here.
McAllen has another distinction, too: it is one of the most expensive health-care markets in the country. Only Miami—which has much higher labor and living costs—spends more per person on health care. In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average. The income per capita is twelve thousand dollars. In other words, Medicare spends three thousand dollars more per person here than the average person earns.
The explosive trend in American medical costs seems to have occurred here in an especially intense form. Our country’s health care is by far the most expensive in the world. In Washington, the aim of health-care reform is not just to extend medical coverage to everybody but also to bring costs under control. Spending on doctors, hospitals, drugs, and the like now consumes more than one of every six dollars we earn. The financial burden has damaged the global competitiveness of American businesses and bankrupted millions of families, even those with insurance. It’s also devouring our government. “The greatest threat to America’s fiscal health is not Social Security,” President Barack Obama said in a March speech at the White House. “It’s not the investments that we’ve made to rescue our economy during this crisis. By a wide margin, the biggest threat to our nation’s balance sheet is the skyrocketing cost of health care. It’s not even close.”
The question we’re now frantically grappling with is how this came to be, and what can be done about it. McAllen, Texas, the most expensive town in the most expensive country for health care in the world, seemed a good place to look for some answers.
From the moment I arrived, I asked almost everyone I encountered about McAllen’s health costs—a businessman I met at the five-gate McAllen-Miller International Airport, the desk clerks at the Embassy Suites Hotel, a police-academy cadet at McDonald’s. Most weren’t surprised to hear that McAllen was an outlier. “Just look around,” the cadet said. “People are not healthy here.” McAllen, with its high poverty rate, has an incidence of heavy drinking sixty per cent higher than the national average. And the Tex-Mex diet has contributed to a thirty-eight-per-cent obesity rate.
One day, I went on rounds with Lester Dyke, a weather-beaten, ranch-owning fifty-three-year-old cardiac surgeon who grew up in Austin, did his surgical training with the Army all over the country, and settled into practice in Hidalgo County. He has not lacked for business: in the past twenty years, he has done some eight thousand heart operations, which exhausts me just thinking about it. I walked around with him as he checked in on ten or so of his patients who were recuperating at the three hospitals where he operates. It was easy to see what had landed them under his knife. They were nearly all obese or diabetic or both. Many had a family history of heart disease. Few were taking preventive measures, such as cholesterol-lowering drugs, which, studies indicate, would have obviated surgery for up to half of them.
Yet public-health statistics show that cardiovascular-disease rates in the county are actually lower than average, probably because its smoking rates are quite low. Rates of asthma, H.I.V., infant mortality, cancer, and injury are lower, too. El Paso County, eight hundred miles up the border, has essentially the same demographics. Both counties have a population of roughly seven hundred thousand, similar public-health statistics, and similar percentages of non-English speakers, illegal immigrants, and the unemployed. Yet in 2006 Medicare expenditures (our best approximation of over-all spending patterns) in El Paso were $7,504 per enrollee—half as much as in McAllen. An unhealthy population couldn’t possibly be the reason that McAllen’s health-care costs are so high. (Or the reason that America’s are. We may be more obese than any other industrialized nation, but we have among the lowest rates of smoking and alcoholism, and we are in the middle of the range for cardiovascular disease and diabetes.)
Was the explanation, then, that McAllen was providing unusually good health care? I took a walk through Doctors Hospital at Renaissance, in Edinburg, one of the towns in the McAllen metropolitan area, with Robert Alleyn, a Houston-trained general surgeon who had grown up here and returned home to practice. The hospital campus sprawled across two city blocks, with a series of three- and four-story stucco buildings separated by golfing-green lawns and black asphalt parking lots. He pointed out the sights—the cancer center is over here, the heart center is over there, now we’re coming to the imaging center. We went inside the surgery building. It was sleek and modern, with recessed lighting, classical music piped into the waiting areas, and nurses moving from patient to patient behind rolling black computer pods. We changed into scrubs and Alleyn took me through the sixteen operating rooms to show me the laparoscopy suite, with its flat-screen video monitors, the hybrid operating room with built-in imaging equipment, the surgical robot for minimally invasive robotic surgery.
I was impressed. The place had virtually all the technology that you’d find at Harvard and Stanford and the Mayo Clinic, and, as I walked through that hospital on a dusty road in South Texas, this struck me as a remarkable thing. Rich towns get the new school buildings, fire trucks, and roads, not to mention the better teachers and police officers and civil engineers. Poor towns don’t. But that rule doesn’t hold for health care.
At McAllen Medical Center, I saw an orthopedic surgeon work under an operating microscope to remove a tumor that had wrapped around the spinal cord of a fourteen-year-old. At a home-health agency, I spoke to a nurse who could provide intravenous-drug therapy for patients with congestive heart failure. At McAllen Heart Hospital, I watched Dyke and a team of six do a coronary-artery bypass using technologies that didn’t exist a few years ago. At Renaissance, I talked with a neonatologist who trained at my hospital, in Boston, and brought McAllen new skills and technologies for premature babies. “I’ve had nurses come up to me and say, ‘I never knew these babies could survive,’ ” he said.
And yet there’s no evidence that the treatments and technologies available at McAllen are better than those found elsewhere in the country. The annual reports that hospitals file with Medicare show that those in McAllen and El Paso offer comparable technologies—neonatal intensive-care units, advanced cardiac services, PET scans, and so on. Public statistics show no difference in the supply of doctors. Hidalgo County actually has fewer specialists than the national average.
Nor does the care given in McAllen stand out for its quality. Medicare ranks hospitals on twenty-five metrics of care. On all but two of these, McAllen’s five largest hospitals performed worse, on average, than El Paso’s. McAllen costs Medicare seven thousand dollars more per person each year than does the average city in America. But not, so far as one can tell, because it’s delivering better health care.
One night, I went to dinner with six McAllen doctors. All were what you would call bread-and-butter physicians: busy, full-time, private-practice doctors who work from seven in the morning to seven at night and sometimes later, their waiting rooms teeming and their desks stacked with medical charts to review.
Some were dubious when I told them that McAllen was the country’s most expensive place for health care. I gave them the spending data from Medicare. In 1992, in the McAllen market, the average cost per Medicare enrollee was $4,891, almost exactly the national average. But since then, year after year, McAllen’s health costs have grown faster than any other market in the country, ultimately soaring by more than ten thousand dollars per person.
“Maybe the service is better here,” the cardiologist suggested. People can be seen faster and get their tests more readily, he said.
Others were skeptical. “I don’t think that explains the costs he’s talking about,” the general surgeon said.
“It’s malpractice,” a family physician who had practiced here for thirty-three years said.
“McAllen is legal hell,” the cardiologist agreed. Doctors order unnecessary tests just to protect themselves, he said. Everyone thought the lawyers here were worse than elsewhere.
That explanation puzzled me. Several years ago, Texas passed a tough malpractice law that capped pain-and-suffering awards at two hundred and fifty thousand dollars. Didn’t lawsuits go down?
“Practically to zero,” the cardiologist admitted.
“Come on,” the general surgeon finally said. “We all know these arguments are bullshit. There is overutilization here, pure and simple.” Doctors, he said, were racking up charges with extra tests, services, and procedures.
The surgeon came to McAllen in the mid-nineties, and since then, he said, “the way to practice medicine has changed completely. Before, it was about how to do a good job. Now it is about ‘How much will you benefit?’ ”
Everyone agreed that something fundamental had changed since the days when health-care costs in McAllen were the same as those in El Paso and elsewhere. Yes, they had more technology. “But young doctors don’t think anymore,” the family physician said.
The surgeon gave me an example. General surgeons are often asked to see patients with pain from gallstones. If there aren’t any complications—and there usually aren’t—the pain goes away on its own or with pain medication. With instruction on eating a lower-fat diet, most patients experience no further difficulties. But some have recurrent episodes, and need surgery to remove their gallbladder.
Seeing a patient who has had uncomplicated, first-time gallstone pain requires some judgment. A surgeon has to provide reassurance (people are often scared and want to go straight to surgery), some education about gallstone disease and diet, perhaps a prescription for pain; in a few weeks, the surgeon might follow up. But increasingly, I was told, McAllen surgeons simply operate. The patient wasn’t going to moderate her diet, they tell themselves. The pain was just going to come back. And by operating they happen to make an extra seven hundred dollars.
I gave the doctors around the table a scenario. A forty-year-old woman comes in with chest pain after a fight with her husband. An EKG is normal. The chest pain goes away. She has no family history of heart disease. What did McAllen doctors do fifteen years ago?
Send her home, they said. Maybe get a stress test to confirm that there’s no issue, but even that might be overkill.
And today? Today, the cardiologist said, she would get a stress test, an echocardiogram, a mobile Holter monitor, and maybe even a cardiac catheterization.
“Oh, she’s definitely getting a cath,” the internist said, laughing grimly.
To determine whether overuse of medical care was really the problem in McAllen, I turned to Jonathan Skinner, an economist at Dartmouth’s Institute for Health Policy and Clinical Practice, which has three decades of expertise in examining regional patterns in Medicare payment data. I also turned to two private firms—D2Hawkeye, an independent company, and Ingenix, UnitedHealthcare’s data-analysis company—to analyze commercial insurance data for McAllen. The answer was yes. Compared with patients in El Paso and nationwide, patients in McAllen got more of pretty much everything—more diagnostic testing, more hospital treatment, more surgery, more home care.
The Medicare payment data provided the most detail. Between 2001 and 2005, critically ill Medicare patients received almost fifty per cent more specialist visits in McAllen than in El Paso, and were two-thirds more likely to see ten or more specialists in a six-month period. In 2005 and 2006, patients in McAllen received twenty per cent more abdominal ultrasounds, thirty per cent more bone-density studies, sixty per cent more stress tests with echocardiography, two hundred per cent more nerve-conduction studies to diagnose carpal-tunnel syndrome, and five hundred and fifty per cent more urine-flow studies to diagnose prostate troubles. They received one-fifth to two-thirds more gallbladder operations, knee replacements, breast biopsies, and bladder scopes. They also received two to three times as many pacemakers, implantable defibrillators, cardiac-bypass operations, carotid endarterectomies, and coronary-artery stents. And Medicare paid for five times as many home-nurse visits. The primary cause of McAllen’s extreme costs was, very simply, the across-the-board overuse of medicine.
This is a disturbing and perhaps surprising diagnosis. Americans like to believe that, with most things, more is better. But research suggests that where medicine is concerned it may actually be worse. For example, Rochester, Minnesota, where the Mayo Clinic dominates the scene, has fantastically high levels of technological capability and quality, but its Medicare spending is in the lowest fifteen per cent of the country—$6,688 per enrollee in 2006, which is eight thousand dollars less than the figure for McAllen. Two economists working at Dartmouth, Katherine Baicker and Amitabh Chandra, found that the more money Medicare spent per person in a given state the lower that state’s quality ranking tended to be. In fact, the four states with the highest levels of spending—Louisiana, Texas, California, and Florida—were near the bottom of the national rankings on the quality of patient care.
In a 2003 study, another Dartmouth team, led by the internist Elliott Fisher, examined the treatment received by a million elderly Americans diagnosed with colon or rectal cancer, a hip fracture, or a heart attack. They found that patients in higher-spending regions received sixty per cent more care than elsewhere. They got more frequent tests and procedures, more visits with specialists, and more frequent admission to hospitals. Yet they did no better than other patients, whether this was measured in terms of survival, their ability to function, or satisfaction with the care they received. If anything, they seemed to do worse.
That’s because nothing in medicine is without risks. Complications can arise from hospital stays, medications, procedures, and tests, and when these things are of marginal value the harm can be greater than the benefits. In recent years, we doctors have markedly increased the number of operations we do, for instance. In 2006, doctors performed at least sixty million surgical procedures, one for every five Americans. No other country does anything like as many operations on its citizens. Are we better off for it? No one knows for sure, but it seems highly unlikely. After all, some hundred thousand people die each year from complications of surgery—far more than die in car crashes.
To make matters worse, Fisher found that patients in high-cost areas were actually less likely to receive low-cost preventive services, such as flu and pneumonia vaccines, faced longer waits at doctor and emergency-room visits, and were less likely to have a primary-care physician. They got more of the stuff that cost more, but not more of what they needed.
In an odd way, this news is reassuring. Universal coverage won’t be feasible unless we can control costs. Policymakers have worried that doing so would require rationing, which the public would never go along with. So the idea that there’s plenty of fat in the system is proving deeply attractive. “Nearly thirty per cent of Medicare’s costs could be saved without negatively affecting health outcomes if spending in high- and medium-cost areas could be reduced to the level in low-cost areas,” Peter Orszag, the President’s budget director, has stated.
Most Americans would be delighted to have the quality of care found in places like Rochester, Minnesota, or Seattle, Washington, or Durham, North Carolina—all of which have world-class hospitals and costs that fall below the national average. If we brought the cost curve in the expensive places down to their level, Medicare’s problems (indeed, almost all the federal government’s budget problems for the next fifty years) would be solved. The difficulty is how to go about it. Physicians in places like McAllen behave differently from others. The $2.4-trillion question is why. Unless we figure it out, health reform will fail.
I had what I considered to be a reasonable plan for finding out what was going on in McAllen. I would call on the heads of its hospitals, in their swanky, decorator-designed, churrigueresco offices, and I’d ask them.
The first hospital I visited, McAllen Heart Hospital, is owned by Universal Health Services, a for-profit hospital chain with headquarters in King of Prussia, Pennsylvania, and revenues of five billion dollars last year. I went to see the hospital’s chief operating officer, Gilda Romero. Truth be told, her office seemed less churrigueresco than Office Depot. She had straight brown hair, sympathetic eyes, and looked more like a young school teacher than like a corporate officer with nineteen years of experience. And when I inquired, “What is going on in this place?” she looked surprised.
Is McAllen really that expensive? she asked.
I described the data, including the numbers indicating that heart operations and catheter procedures and pacemakers were being performed in McAllen at double the usual rate.
“That is interesting,” she said, by which she did not mean, “Uh-oh, you’ve caught us” but, rather, “That is actually interesting.” The problem of McAllen’s outlandish costs was new to her. She puzzled over the numbers. She was certain that her doctors performed surgery only when it was necessary. It had to be one of the other hospitals. And she had one in mind—Doctors Hospital at Renaissance, the hospital in Edinburg that I had toured.
She wasn’t the only person to mention Renaissance. It is the newest hospital in the area. It is physician-owned. And it has a reputation (which it disclaims) for aggressively recruiting high-volume physicians to become investors and send patients there. Physicians who do so receive not only their fee for whatever service they provide but also a percentage of the hospital’s profits from the tests, surgery, or other care patients are given. (In 2007, its profits totalled thirty-four million dollars.) Romero and others argued that this gives physicians an unholy temptation to overorder.
Such an arrangement can make physician investors rich. But it can’t be the whole explanation. The hospital gets barely a sixth of the patients in the region; its margins are no bigger than the other hospitals’—whether for profit or not for profit—and it didn’t have much of a presence until 2004 at the earliest, a full decade after the cost explosion in McAllen began.
“Those are good points,” Romero said. She couldn’t explain what was going on.
The following afternoon, I visited the top managers of Doctors Hospital at Renaissance. We sat in their boardroom around one end of a yacht-length table. The chairman of the board offered me a soda. The chief of staff smiled at me. The chief financial officer shook my hand as if I were an old friend. The C.E.O., however, was having a hard time pretending that he was happy to see me. Lawrence Gelman was a fifty-seven-year-old anesthesiologist with a Bill Clinton shock of white hair and a weekly local radio show tag-lined “Opinions from an Unrelenting Conservative Spirit.” He had helped found the hospital. He barely greeted me, and while the others were trying for a how-can-I-help-you-today attitude, his body language was more let’s-get-this-over-with.
So I asked him why McAllen’s health-care costs were so high. What he gave me was a disquisition on the theory and history of American health-care financing going back to Lyndon Johnson and the creation of Medicare, the upshot of which was: (1) Government is the problem in health care. “The people in charge of the purse strings don’t know what they’re doing.” (2) If anything, government insurance programs like Medicare don’t pay enough. “I, as an anesthesiologist, know that they pay me ten per cent of what a private insurer pays.” (3) Government programs are full of waste. “Every person in this room could easily go through the expenditures of Medicare and Medicaid and see all kinds of waste.” (4) But not in McAllen. The clinicians here, at least at Doctors Hospital at Renaissance, “are providing necessary, essential health care,” Gelman said. “We don’t invent patients.”
Then why do hospitals in McAllen order so much more surgery and scans and tests than hospitals in El Paso and elsewhere?
In the end, the only explanation he and his colleagues could offer was this: The other doctors and hospitals in McAllen may be overspending, but, to the extent that his hospital provides costlier treatment than other places in the country, it is making people better in ways that data on quality and outcomes do not measure.
“Do we provide better health care than El Paso?” Gelman asked. “I would bet you two to one that we do.”
It was a depressing conversation—not because I thought the executives were being evasive but because they weren’t being evasive. The data on McAllen’s costs were clearly new to them. They were defending McAllen reflexively. But they really didn’t know the big picture of what was happening.
And, I realized, few people in their position do. Local executives for hospitals and clinics and home-health agencies understand their growth rate and their market share; they know whether they are losing money or making money. They know that if their doctors bring in enough business—surgery, imaging, home-nursing referrals—they make money; and if they get the doctors to bring in more, they make more. But they have only the vaguest notion of whether the doctors are making their communities as healthy as they can, or whether they are more or less efficient than their counterparts elsewhere. A doctor sees a patient in clinic, and has her check into a McAllen hospital for a CT scan, an ultrasound, three rounds of blood tests, another ultrasound, and then surgery to have her gallbladder removed. How is Lawrence Gelman or Gilda Romero to know whether all that is essential, let alone the best possible treatment for the patient? It isn’t what they are responsible or accountable for.
Health-care costs ultimately arise from the accumulation of individual decisions doctors make about which services and treatments to write an order for. The most expensive piece of medical equipment, as the saying goes, is a doctor’s pen. And, as a rule, hospital executives don’t own the pen caps. Doctors do.
If doctors wield the pen, why do they do it so differently from one place to another? Brenda Sirovich, another Dartmouth researcher, published a study last year that provided an important clue. She and her team surveyed some eight hundred primary-care physicians from high-cost cities (such as Las Vegas and New York), low-cost cities (such as Sacramento and Boise), and others in between. The researchers asked the physicians specifically how they would handle a variety of patient cases. It turned out that differences in decision-making emerged in only some kinds of cases. In situations in which the right thing to do was well established—for example, whether to recommend a mammogram for a fifty-year-old woman (the answer is yes)—physicians in high- and low-cost cities made the same decisions. But, in cases in which the science was unclear, some physicians pursued the maximum possible amount of testing and procedures; some pursued the minimum. And which kind of doctor they were depended on where they came from.
Sirovich asked doctors how they would treat a seventy-five-year-old woman with typical heartburn symptoms and “adequate health insurance to cover tests and medications.” Physicians in high- and low-cost cities were equally likely to prescribe antacid therapy and to check for H. pylori, an ulcer-causing bacterium—steps strongly recommended by national guidelines. But when it came to measures of less certain value—and higher cost—the differences were considerable. More than seventy per cent of physicians in high-cost cities referred the patient to a gastroenterologist, ordered an upper endoscopy, or both, while half as many in low-cost cities did. Physicians from high-cost cities typically recommended that patients with well-controlled hypertension see them in the office every one to three months, while those from low-cost cities recommended visits twice yearly. In case after uncertain case, more was not necessarily better. But physicians from the most expensive cities did the most expensive things.
Why? Some of it could reflect differences in training. I remember when my wife brought our infant son Walker to visit his grandparents in Virginia, and he took a terrifying fall down a set of stairs. They drove him to the local community hospital in Alexandria. A CT scan showed that he had a tiny subdural hematoma—a small area of bleeding in the brain. During ten hours of observation, though, he was fine—eating, drinking, completely alert. I was a surgery resident then and had seen many cases like his. We observed each child in intensive care for at least twenty-four hours and got a repeat CT scan. That was how I’d been trained. But the doctor in Alexandria was going to send Walker home. That was how he’d been trained. Suppose things change for the worse? I asked him. It’s extremely unlikely, he said, and if anything changed Walker could always be brought back. I bullied the doctor into admitting him anyway. The next day, the scan and the patient were fine. And, looking in the textbooks, I learned that the doctor was right. Walker could have been managed safely either way.
There was no sign, however, that McAllen’s doctors as a group were trained any differently from El Paso’s. One morning, I met with a hospital administrator who had extensive experience managing for-profit hospitals along the border. He offered a different possible explanation: the culture of money.
“In El Paso, if you took a random doctor and looked at his tax returns eighty-five per cent of his income would come from the usual practice of medicine,” he said. But in McAllen, the administrator thought, that percentage would be a lot less.
He knew of doctors who owned strip malls, orange groves, apartment complexes—or imaging centers, surgery centers, or another part of the hospital they directed patients to. They had “entrepreneurial spirit,” he said. They were innovative and aggressive in finding ways to increase revenues from patient care. “There’s no lack of work ethic,” he said. But he had often seen financial considerations drive the decisions doctors made for patients—the tests they ordered, the doctors and hospitals they recommended—and it bothered him. Several doctors who were unhappy about the direction medicine had taken in McAllen told me the same thing. “It’s a machine, my friend,” one surgeon explained.
No one teaches you how to think about money in medical school or residency. Yet, from the moment you start practicing, you must think about it. You must consider what is covered for a patient and what is not. You must pay attention to insurance rejections and government-reimbursement rules. You must think about having enough money for the secretary and the nurse and the rent and the malpractice insurance.
Beyond the basics, however, many physicians are remarkably oblivious to the financial implications of their decisions. They see their patients. They make their recommendations. They send out the bills. And, as long as the numbers come out all right at the end of each month, they put the money out of their minds.
Others think of the money as a means of improving what they do. They think about how to use the insurance money to maybe install electronic health records with colleagues, or provide easier phone and e-mail access, or offer expanded hours. They hire an extra nurse to monitor diabetic patients more closely, and to make sure that patients don’t miss their mammograms and pap smears and colonoscopies.
Then there are the physicians who see their practice primarily as a revenue stream. They instruct their secretary to have patients who call with follow-up questions schedule an appointment, because insurers don’t pay for phone calls, only office visits. They consider providing Botox injections for cash. They take a Doppler ultrasound course, buy a machine, and start doing their patients’ scans themselves, so that the insurance payments go to them rather than to the hospital. They figure out ways to increase their high-margin work and decrease their low-margin work. This is a business, after all.
In every community, you’ll find a mixture of these views among physicians, but one or another tends to predominate. McAllen seems simply to be the community at one extreme.
In a few cases, the hospital executive told me, he’d seen the behavior cross over into what seemed like outright fraud. “I’ve had doctors here come up to me and say, ‘You want me to admit patients to your hospital, you’re going to have to pay me.’ ”
“How much?” I asked.
“The amounts—all of them were over a hundred thousand dollars per year,” he said. The doctors were specific. The most he was asked for was five hundred thousand dollars per year.
He didn’t pay any of them, he said: “I mean, I gotta sleep at night.” And he emphasized that these were just a handful of doctors. But he had never been asked for a kickback before coming to McAllen.
Woody Powell is a Stanford sociologist who studies the economic culture of cities. Recently, he and his research team studied why certain regions—Boston, San Francisco, San Diego—became leaders in biotechnology while others with a similar concentration of scientific and corporate talent—Los Angeles, Philadelphia, New York—did not. The answer they found was what Powell describes as the anchor-tenant theory of economic development. Just as an anchor store will define the character of a mall, anchor tenants in biotechnology, whether it’s a company like Genentech, in South San Francisco, or a university like M.I.T., in Cambridge, define the character of an economic community. They set the norms. The anchor tenants that set norms encouraging the free flow of ideas and collaboration, even with competitors, produced enduringly successful communities, while those that mainly sought to dominate did not.
Powell suspects that anchor tenants play a similarly powerful community role in other areas of economics, too, and health care may be no exception. I spoke to a marketing rep for a McAllen home-health agency who told me of a process uncannily similar to what Powell found in biotech. Her job is to persuade doctors to use her agency rather than others. The competition is fierce. I opened the phone book and found seventeen pages of listings for home-health agencies—two hundred and sixty in all. A patient typically brings in between twelve hundred and fifteen hundred dollars, and double that amount for specialized care. She described how, a decade or so ago, a few early agencies began rewarding doctors who ordered home visits with more than trinkets: they provided tickets to professional sporting events, jewelry, and other gifts. That set the tone. Other agencies jumped in. Some began paying doctors a supplemental salary, as “medical directors,” for steering business in their direction. Doctors came to expect a share of the revenue stream.
Agencies that want to compete on quality struggle to remain in business, the rep said. Doctors have asked her for a medical-director salary of four or five thousand dollars a month in return for sending her business. One asked a colleague of hers for private-school tuition for his child; another wanted sex.
“I explained the rules and regulations and the anti-kickback law, and told them no,” she said of her dealings with such doctors. “Does it hurt my business?” She paused. “I’m O.K. working only with ethical physicians,” she finally said.
About fifteen years ago, it seems, something began to change in McAllen. A few leaders of local institutions took profit growth to be a legitimate ethic in the practice of medicine. Not all the doctors accepted this. But they failed to discourage those who did. So here, along the banks of the Rio Grande, in the Square Dance Capital of the World, a medical community came to treat patients the way subprime-mortgage lenders treated home buyers: as profit centers.
The real puzzle of American health care, I realized on the airplane home, is not why McAllen is different from El Paso. It’s why El Paso isn’t like McAllen. Every incentive in the system is an invitation to go the way McAllen has gone. Yet, across the country, large numbers of communities have managed to control their health costs rather than ratchet them up.
I talked to Denis Cortese, the C.E.O. of the Mayo Clinic, which is among the highest-quality, lowest-cost health-care systems in the country. A couple of years ago, I spent several days there as a visiting surgeon. Among the things that stand out from that visit was how much time the doctors spent with patients. There was no churn—no shuttling patients in and out of rooms while the doctor bounces from one to the other. I accompanied a colleague while he saw patients. Most of the patients, like those in my clinic, required about twenty minutes. But one patient had colon cancer and a number of other complex issues, including heart disease. The physician spent an hour with her, sorting things out. He phoned a cardiologist with a question.
“I’ll be there,” the cardiologist said.
Fifteen minutes later, he was. They mulled over everything together. The cardiologist adjusted a medication, and said that no further testing was needed. He cleared the patient for surgery, and the operating room gave her a slot the next day.
The whole interaction was astonishing to me. Just having the cardiologist pop down to see the patient with the surgeon would be unimaginable at my hospital. The time required wouldn’t pay. The time required just to organize the system wouldn’t pay.
The core tenet of the Mayo Clinic is “The needs of the patient come first”—not the convenience of the doctors, not their revenues. The doctors and nurses, and even the janitors, sat in meetings almost weekly, working on ideas to make the service and the care better, not to get more money out of patients. I asked Cortese how the Mayo Clinic made this possible.
“It’s not easy,” he said. But decades ago Mayo recognized that the first thing it needed to do was eliminate the financial barriers. It pooled all the money the doctors and the hospital system received and began paying everyone a salary, so that the doctors’ goal in patient care couldn’t be increasing their income. Mayo promoted leaders who focussed first on what was best for patients, and then on how to make this financially possible.
No one there actually intends to do fewer expensive scans and procedures than is done elsewhere in the country. The aim is to raise quality and to help doctors and other staff members work as a team. But, almost by happenstance, the result has been lower costs.
“When doctors put their heads together in a room, when they share expertise, you get more thinking and less testing,” Cortese told me.
Skeptics saw the Mayo model as a local phenomenon that wouldn’t carry beyond the hay fields of northern Minnesota. But in 1986 the Mayo Clinic opened a campus in Florida, one of our most expensive states for health care, and, in 1987, another one in Arizona. It was difficult to recruit staff members who would accept a salary and the Mayo’s collaborative way of practicing. Leaders were working against the dominant medical culture and incentives. The expansion sites took at least a decade to get properly established. But eventually they achieved the same high-quality, low-cost results as Rochester. Indeed, Cortese says that the Florida site has become, in some respects, the most efficient one in the system.
The Mayo Clinic is not an aberration. One of the lowest-cost markets in the country is Grand Junction, Colorado, a community of a hundred and twenty thousand that nonetheless has achieved some of Medicare’s highest quality-of-care scores. Michael Pramenko is a family physician and a local medical leader there. Unlike doctors at the Mayo Clinic, he told me, those in Grand Junction get piecework fees from insurers. But years ago the doctors agreed among themselves to a system that paid them a similar fee whether they saw Medicare, Medicaid, or private-insurance patients, so that there would be little incentive to cherry-pick patients. They also agreed, at the behest of the main health plan in town, an H.M.O., to meet regularly on small peer-review committees to go over their patient charts together. They focussed on rooting out problems like poor prevention practices, unnecessary back operations, and unusual hospital-complication rates. Problems went down. Quality went up. Then, in 2004, the doctors’ group and the local H.M.O. jointly created a regional information network—a community-wide electronic-record system that shared office notes, test results, and hospital data for patients across the area. Again, problems went down. Quality went up. And costs ended up lower than just about anywhere else in the United States.
Grand Junction’s medical community was not following anyone else’s recipe. But, like Mayo, it created what Elliott Fisher, of Dartmouth, calls an accountable-care organization. The leading doctors and the hospital system adopted measures to blunt harmful financial incentives, and they took collective responsibility for improving the sum total of patient care.
This approach has been adopted in other places, too: the Geisinger Health System, in Danville, Pennsylvania; the Marshfield Clinic, in Marshfield, Wisconsin; Intermountain Healthcare, in Salt Lake City; Kaiser Permanente, in Northern California. All of them function on similar principles. All are not-for-profit institutions. And all have produced enviably higher quality and lower costs than the average American town enjoys.
When you look across the spectrum from Grand Junction to McAllen—and the almost threefold difference in the costs of care—you come to realize that we are witnessing a battle for the soul of American medicine. Somewhere in the United States at this moment, a patient with chest pain, or a tumor, or a cough is seeing a doctor. And the damning question we have to ask is whether the doctor is set up to meet the needs of the patient, first and foremost, or to maximize revenue.
There is no insurance system that will make the two aims match perfectly. But having a system that does so much to misalign them has proved disastrous. As economists have often pointed out, we pay doctors for quantity, not quality. As they point out less often, we also pay them as individuals, rather than as members of a team working together for their patients. Both practices have made for serious problems.
Providing health care is like building a house. The task requires experts, expensive equipment and materials, and a huge amount of coördination. Imagine that, instead of paying a contractor to pull a team together and keep them on track, you paid an electrician for every outlet he recommends, a plumber for every faucet, and a carpenter for every cabinet. Would you be surprised if you got a house with a thousand outlets, faucets, and cabinets, at three times the cost you expected, and the whole thing fell apart a couple of years later? Getting the country’s best electrician on the job (he trained at Harvard, somebody tells you) isn’t going to solve this problem. Nor will changing the person who writes him the check.
This last point is vital. Activists and policymakers spend an inordinate amount of time arguing about whether the solution to high medical costs is to have government or private insurance companies write the checks. Here’s how this whole debate goes. Advocates of a public option say government financing would save the most money by having leaner administrative costs and forcing doctors and hospitals to take lower payments than they get from private insurance. Opponents say doctors would skimp, quit, or game the system, and make us wait in line for our care; they maintain that private insurers are better at policing doctors. No, the skeptics say: all insurance companies do is reject applicants who need health care and stall on paying their bills. Then we have the economists who say that the people who should pay the doctors are the ones who use them. Have consumers pay with their own dollars, make sure that they have some “skin in the game,” and then they’ll get the care they deserve. These arguments miss the main issue. When it comes to making care better and cheaper, changing who pays the doctor will make no more difference than changing who pays the electrician. The lesson of the high-quality, low-cost communities is that someone has to be accountable for the totality of care. Otherwise, you get a system that has no brakes. You get McAllen.
One afternoon in McAllen, I rode down McColl Road with Lester Dyke, the cardiac surgeon, and we passed a series of office plazas that seemed to be nothing but home-health agencies, imaging centers, and medical-equipment stores.
“Medicine has become a pig trough here,” he muttered.
Dyke is among the few vocal critics of what’s happened in McAllen. “We took a wrong turn when doctors stopped being doctors and became businessmen,” he said.
We began talking about the various proposals being touted in Washington to fix the cost problem. I asked him whether expanding public-insurance programs like Medicare and shrinking the role of insurance companies would do the trick in McAllen.
“I don’t have a problem with it,” he said. “But it won’t make a difference.” In McAllen, government payers already predominate—not many people have jobs with private insurance.
How about doing the opposite and increasing the role of big insurance companies?
“What good would that do?” Dyke asked.
The third class of health-cost proposals, I explained, would push people to use medical savings accounts and hold high-deductible insurance policies: “They’d have more of their own money on the line, and that’d drive them to bargain with you and other surgeons, right?”
He gave me a quizzical look. We tried to imagine the scenario. A cardiologist tells an elderly woman that she needs bypass surgery and has Dr. Dyke see her. They discuss the blockages in her heart, the operation, the risks. And now they’re supposed to haggle over the price as if he were selling a rug in a souk? “I’ll do three vessels for thirty thousand, but if you take four I’ll throw in an extra night in the I.C.U.”—that sort of thing? Dyke shook his head. “Who comes up with this stuff?” he asked. “Any plan that relies on the sheep to negotiate with the wolves is doomed to failure.”
Instead, McAllen and other cities like it have to be weaned away from their untenably fragmented, quantity-driven systems of health care, step by step. And that will mean rewarding doctors and hospitals if they band together to form Grand Junction-like accountable-care organizations, in which doctors collaborate to increase prevention and the quality of care, while discouraging overtreatment, undertreatment, and sheer profiteering. Under one approach, insurers—whether public or private—would allow clinicians who formed such organizations and met quality goals to keep half the savings they generate. Government could also shift regulatory burdens, and even malpractice liability, from the doctors to the organization. Other, sterner, approaches would penalize those who don’t form these organizations.
This will by necessity be an experiment. We will need to do in-depth research on what makes the best systems successful—the peer-review committees? recruiting more primary-care doctors and nurses? putting doctors on salary?—and disseminate what we learn. Congress has provided vital funding for research that compares the effectiveness of different treatments, and this should help reduce uncertainty about which treatments are best. But we also need to fund research that compares the effectiveness of different systems of care—to reduce our uncertainty about which systems work best for communities. These are empirical, not ideological, questions. And we would do well to form a national institute for health-care delivery, bringing together clinicians, hospitals, insurers, employers, and citizens to assess, regularly, the quality and the cost of our care, review the strategies that produce good results, and make clear recommendations for local systems.
Dramatic improvements and savings will take at least a decade. But a choice must be made. Whom do we want in charge of managing the full complexity of medical care? We can turn to insurers (whether public or private), which have proved repeatedly that they can’t do it. Or we can turn to the local medical communities, which have proved that they can. But we have to choose someone—because, in much of the country, no one is in charge. And the result is the most wasteful and the least sustainable health-care system in the world.
Something even more worrisome is going on as well. In the war over the culture of medicine—the war over whether our country’s anchor model will be Mayo or McAllen—the Mayo model is losing. In the sharpest economic downturn that our health system has faced in half a century, many people in medicine don’t see why they should do the hard work of organizing themselves in ways that reduce waste and improve quality if it means sacrificing revenue.
In El Paso, the for-profit health-care executive told me, a few leading physicians recently followed McAllen’s lead and opened their own centers for surgery and imaging. When I was in Tulsa a few months ago, a fellow-surgeon explained how he had made up for lost revenue by shifting his operations for well-insured patients to a specialty hospital that he partially owned while keeping his poor and uninsured patients at a nonprofit hospital in town. Even in Grand Junction, Michael Pramenko told me, “some of the doctors are beginning to complain about ‘leaving money on the table.’ ”
As America struggles to extend health-care coverage while curbing health-care costs, we face a decision that is more important than whether we have a public-insurance option, more important than whether we will have a single-payer system in the long run or a mixture of public and private insurance, as we do now. The decision is whether we are going to reward the leaders who are trying to build a new generation of Mayos and Grand Junctions. If we don’t, McAllen won’t be an outlier. It will be our future.
By Atul Gawande
It is spring in McAllen, Texas. The morning sun is warm. The streets are lined with palm trees and pickup trucks. McAllen is in Hidalgo County, which has the lowest household income in the country, but it’s a border town, and a thriving foreign-trade zone has kept the unemployment rate below ten per cent. McAllen calls itself the Square Dance Capital of the World. “Lonesome Dove” was set around here.
McAllen has another distinction, too: it is one of the most expensive health-care markets in the country. Only Miami—which has much higher labor and living costs—spends more per person on health care. In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average. The income per capita is twelve thousand dollars. In other words, Medicare spends three thousand dollars more per person here than the average person earns.
The explosive trend in American medical costs seems to have occurred here in an especially intense form. Our country’s health care is by far the most expensive in the world. In Washington, the aim of health-care reform is not just to extend medical coverage to everybody but also to bring costs under control. Spending on doctors, hospitals, drugs, and the like now consumes more than one of every six dollars we earn. The financial burden has damaged the global competitiveness of American businesses and bankrupted millions of families, even those with insurance. It’s also devouring our government. “The greatest threat to America’s fiscal health is not Social Security,” President Barack Obama said in a March speech at the White House. “It’s not the investments that we’ve made to rescue our economy during this crisis. By a wide margin, the biggest threat to our nation’s balance sheet is the skyrocketing cost of health care. It’s not even close.”
The question we’re now frantically grappling with is how this came to be, and what can be done about it. McAllen, Texas, the most expensive town in the most expensive country for health care in the world, seemed a good place to look for some answers.
From the moment I arrived, I asked almost everyone I encountered about McAllen’s health costs—a businessman I met at the five-gate McAllen-Miller International Airport, the desk clerks at the Embassy Suites Hotel, a police-academy cadet at McDonald’s. Most weren’t surprised to hear that McAllen was an outlier. “Just look around,” the cadet said. “People are not healthy here.” McAllen, with its high poverty rate, has an incidence of heavy drinking sixty per cent higher than the national average. And the Tex-Mex diet has contributed to a thirty-eight-per-cent obesity rate.
One day, I went on rounds with Lester Dyke, a weather-beaten, ranch-owning fifty-three-year-old cardiac surgeon who grew up in Austin, did his surgical training with the Army all over the country, and settled into practice in Hidalgo County. He has not lacked for business: in the past twenty years, he has done some eight thousand heart operations, which exhausts me just thinking about it. I walked around with him as he checked in on ten or so of his patients who were recuperating at the three hospitals where he operates. It was easy to see what had landed them under his knife. They were nearly all obese or diabetic or both. Many had a family history of heart disease. Few were taking preventive measures, such as cholesterol-lowering drugs, which, studies indicate, would have obviated surgery for up to half of them.
Yet public-health statistics show that cardiovascular-disease rates in the county are actually lower than average, probably because its smoking rates are quite low. Rates of asthma, H.I.V., infant mortality, cancer, and injury are lower, too. El Paso County, eight hundred miles up the border, has essentially the same demographics. Both counties have a population of roughly seven hundred thousand, similar public-health statistics, and similar percentages of non-English speakers, illegal immigrants, and the unemployed. Yet in 2006 Medicare expenditures (our best approximation of over-all spending patterns) in El Paso were $7,504 per enrollee—half as much as in McAllen. An unhealthy population couldn’t possibly be the reason that McAllen’s health-care costs are so high. (Or the reason that America’s are. We may be more obese than any other industrialized nation, but we have among the lowest rates of smoking and alcoholism, and we are in the middle of the range for cardiovascular disease and diabetes.)
Was the explanation, then, that McAllen was providing unusually good health care? I took a walk through Doctors Hospital at Renaissance, in Edinburg, one of the towns in the McAllen metropolitan area, with Robert Alleyn, a Houston-trained general surgeon who had grown up here and returned home to practice. The hospital campus sprawled across two city blocks, with a series of three- and four-story stucco buildings separated by golfing-green lawns and black asphalt parking lots. He pointed out the sights—the cancer center is over here, the heart center is over there, now we’re coming to the imaging center. We went inside the surgery building. It was sleek and modern, with recessed lighting, classical music piped into the waiting areas, and nurses moving from patient to patient behind rolling black computer pods. We changed into scrubs and Alleyn took me through the sixteen operating rooms to show me the laparoscopy suite, with its flat-screen video monitors, the hybrid operating room with built-in imaging equipment, the surgical robot for minimally invasive robotic surgery.
I was impressed. The place had virtually all the technology that you’d find at Harvard and Stanford and the Mayo Clinic, and, as I walked through that hospital on a dusty road in South Texas, this struck me as a remarkable thing. Rich towns get the new school buildings, fire trucks, and roads, not to mention the better teachers and police officers and civil engineers. Poor towns don’t. But that rule doesn’t hold for health care.
At McAllen Medical Center, I saw an orthopedic surgeon work under an operating microscope to remove a tumor that had wrapped around the spinal cord of a fourteen-year-old. At a home-health agency, I spoke to a nurse who could provide intravenous-drug therapy for patients with congestive heart failure. At McAllen Heart Hospital, I watched Dyke and a team of six do a coronary-artery bypass using technologies that didn’t exist a few years ago. At Renaissance, I talked with a neonatologist who trained at my hospital, in Boston, and brought McAllen new skills and technologies for premature babies. “I’ve had nurses come up to me and say, ‘I never knew these babies could survive,’ ” he said.
And yet there’s no evidence that the treatments and technologies available at McAllen are better than those found elsewhere in the country. The annual reports that hospitals file with Medicare show that those in McAllen and El Paso offer comparable technologies—neonatal intensive-care units, advanced cardiac services, PET scans, and so on. Public statistics show no difference in the supply of doctors. Hidalgo County actually has fewer specialists than the national average.
Nor does the care given in McAllen stand out for its quality. Medicare ranks hospitals on twenty-five metrics of care. On all but two of these, McAllen’s five largest hospitals performed worse, on average, than El Paso’s. McAllen costs Medicare seven thousand dollars more per person each year than does the average city in America. But not, so far as one can tell, because it’s delivering better health care.
One night, I went to dinner with six McAllen doctors. All were what you would call bread-and-butter physicians: busy, full-time, private-practice doctors who work from seven in the morning to seven at night and sometimes later, their waiting rooms teeming and their desks stacked with medical charts to review.
Some were dubious when I told them that McAllen was the country’s most expensive place for health care. I gave them the spending data from Medicare. In 1992, in the McAllen market, the average cost per Medicare enrollee was $4,891, almost exactly the national average. But since then, year after year, McAllen’s health costs have grown faster than any other market in the country, ultimately soaring by more than ten thousand dollars per person.
“Maybe the service is better here,” the cardiologist suggested. People can be seen faster and get their tests more readily, he said.
Others were skeptical. “I don’t think that explains the costs he’s talking about,” the general surgeon said.
“It’s malpractice,” a family physician who had practiced here for thirty-three years said.
“McAllen is legal hell,” the cardiologist agreed. Doctors order unnecessary tests just to protect themselves, he said. Everyone thought the lawyers here were worse than elsewhere.
That explanation puzzled me. Several years ago, Texas passed a tough malpractice law that capped pain-and-suffering awards at two hundred and fifty thousand dollars. Didn’t lawsuits go down?
“Practically to zero,” the cardiologist admitted.
“Come on,” the general surgeon finally said. “We all know these arguments are bullshit. There is overutilization here, pure and simple.” Doctors, he said, were racking up charges with extra tests, services, and procedures.
The surgeon came to McAllen in the mid-nineties, and since then, he said, “the way to practice medicine has changed completely. Before, it was about how to do a good job. Now it is about ‘How much will you benefit?’ ”
Everyone agreed that something fundamental had changed since the days when health-care costs in McAllen were the same as those in El Paso and elsewhere. Yes, they had more technology. “But young doctors don’t think anymore,” the family physician said.
The surgeon gave me an example. General surgeons are often asked to see patients with pain from gallstones. If there aren’t any complications—and there usually aren’t—the pain goes away on its own or with pain medication. With instruction on eating a lower-fat diet, most patients experience no further difficulties. But some have recurrent episodes, and need surgery to remove their gallbladder.
Seeing a patient who has had uncomplicated, first-time gallstone pain requires some judgment. A surgeon has to provide reassurance (people are often scared and want to go straight to surgery), some education about gallstone disease and diet, perhaps a prescription for pain; in a few weeks, the surgeon might follow up. But increasingly, I was told, McAllen surgeons simply operate. The patient wasn’t going to moderate her diet, they tell themselves. The pain was just going to come back. And by operating they happen to make an extra seven hundred dollars.
I gave the doctors around the table a scenario. A forty-year-old woman comes in with chest pain after a fight with her husband. An EKG is normal. The chest pain goes away. She has no family history of heart disease. What did McAllen doctors do fifteen years ago?
Send her home, they said. Maybe get a stress test to confirm that there’s no issue, but even that might be overkill.
And today? Today, the cardiologist said, she would get a stress test, an echocardiogram, a mobile Holter monitor, and maybe even a cardiac catheterization.
“Oh, she’s definitely getting a cath,” the internist said, laughing grimly.
To determine whether overuse of medical care was really the problem in McAllen, I turned to Jonathan Skinner, an economist at Dartmouth’s Institute for Health Policy and Clinical Practice, which has three decades of expertise in examining regional patterns in Medicare payment data. I also turned to two private firms—D2Hawkeye, an independent company, and Ingenix, UnitedHealthcare’s data-analysis company—to analyze commercial insurance data for McAllen. The answer was yes. Compared with patients in El Paso and nationwide, patients in McAllen got more of pretty much everything—more diagnostic testing, more hospital treatment, more surgery, more home care.
The Medicare payment data provided the most detail. Between 2001 and 2005, critically ill Medicare patients received almost fifty per cent more specialist visits in McAllen than in El Paso, and were two-thirds more likely to see ten or more specialists in a six-month period. In 2005 and 2006, patients in McAllen received twenty per cent more abdominal ultrasounds, thirty per cent more bone-density studies, sixty per cent more stress tests with echocardiography, two hundred per cent more nerve-conduction studies to diagnose carpal-tunnel syndrome, and five hundred and fifty per cent more urine-flow studies to diagnose prostate troubles. They received one-fifth to two-thirds more gallbladder operations, knee replacements, breast biopsies, and bladder scopes. They also received two to three times as many pacemakers, implantable defibrillators, cardiac-bypass operations, carotid endarterectomies, and coronary-artery stents. And Medicare paid for five times as many home-nurse visits. The primary cause of McAllen’s extreme costs was, very simply, the across-the-board overuse of medicine.
This is a disturbing and perhaps surprising diagnosis. Americans like to believe that, with most things, more is better. But research suggests that where medicine is concerned it may actually be worse. For example, Rochester, Minnesota, where the Mayo Clinic dominates the scene, has fantastically high levels of technological capability and quality, but its Medicare spending is in the lowest fifteen per cent of the country—$6,688 per enrollee in 2006, which is eight thousand dollars less than the figure for McAllen. Two economists working at Dartmouth, Katherine Baicker and Amitabh Chandra, found that the more money Medicare spent per person in a given state the lower that state’s quality ranking tended to be. In fact, the four states with the highest levels of spending—Louisiana, Texas, California, and Florida—were near the bottom of the national rankings on the quality of patient care.
In a 2003 study, another Dartmouth team, led by the internist Elliott Fisher, examined the treatment received by a million elderly Americans diagnosed with colon or rectal cancer, a hip fracture, or a heart attack. They found that patients in higher-spending regions received sixty per cent more care than elsewhere. They got more frequent tests and procedures, more visits with specialists, and more frequent admission to hospitals. Yet they did no better than other patients, whether this was measured in terms of survival, their ability to function, or satisfaction with the care they received. If anything, they seemed to do worse.
That’s because nothing in medicine is without risks. Complications can arise from hospital stays, medications, procedures, and tests, and when these things are of marginal value the harm can be greater than the benefits. In recent years, we doctors have markedly increased the number of operations we do, for instance. In 2006, doctors performed at least sixty million surgical procedures, one for every five Americans. No other country does anything like as many operations on its citizens. Are we better off for it? No one knows for sure, but it seems highly unlikely. After all, some hundred thousand people die each year from complications of surgery—far more than die in car crashes.
To make matters worse, Fisher found that patients in high-cost areas were actually less likely to receive low-cost preventive services, such as flu and pneumonia vaccines, faced longer waits at doctor and emergency-room visits, and were less likely to have a primary-care physician. They got more of the stuff that cost more, but not more of what they needed.
In an odd way, this news is reassuring. Universal coverage won’t be feasible unless we can control costs. Policymakers have worried that doing so would require rationing, which the public would never go along with. So the idea that there’s plenty of fat in the system is proving deeply attractive. “Nearly thirty per cent of Medicare’s costs could be saved without negatively affecting health outcomes if spending in high- and medium-cost areas could be reduced to the level in low-cost areas,” Peter Orszag, the President’s budget director, has stated.
Most Americans would be delighted to have the quality of care found in places like Rochester, Minnesota, or Seattle, Washington, or Durham, North Carolina—all of which have world-class hospitals and costs that fall below the national average. If we brought the cost curve in the expensive places down to their level, Medicare’s problems (indeed, almost all the federal government’s budget problems for the next fifty years) would be solved. The difficulty is how to go about it. Physicians in places like McAllen behave differently from others. The $2.4-trillion question is why. Unless we figure it out, health reform will fail.
I had what I considered to be a reasonable plan for finding out what was going on in McAllen. I would call on the heads of its hospitals, in their swanky, decorator-designed, churrigueresco offices, and I’d ask them.
The first hospital I visited, McAllen Heart Hospital, is owned by Universal Health Services, a for-profit hospital chain with headquarters in King of Prussia, Pennsylvania, and revenues of five billion dollars last year. I went to see the hospital’s chief operating officer, Gilda Romero. Truth be told, her office seemed less churrigueresco than Office Depot. She had straight brown hair, sympathetic eyes, and looked more like a young school teacher than like a corporate officer with nineteen years of experience. And when I inquired, “What is going on in this place?” she looked surprised.
Is McAllen really that expensive? she asked.
I described the data, including the numbers indicating that heart operations and catheter procedures and pacemakers were being performed in McAllen at double the usual rate.
“That is interesting,” she said, by which she did not mean, “Uh-oh, you’ve caught us” but, rather, “That is actually interesting.” The problem of McAllen’s outlandish costs was new to her. She puzzled over the numbers. She was certain that her doctors performed surgery only when it was necessary. It had to be one of the other hospitals. And she had one in mind—Doctors Hospital at Renaissance, the hospital in Edinburg that I had toured.
She wasn’t the only person to mention Renaissance. It is the newest hospital in the area. It is physician-owned. And it has a reputation (which it disclaims) for aggressively recruiting high-volume physicians to become investors and send patients there. Physicians who do so receive not only their fee for whatever service they provide but also a percentage of the hospital’s profits from the tests, surgery, or other care patients are given. (In 2007, its profits totalled thirty-four million dollars.) Romero and others argued that this gives physicians an unholy temptation to overorder.
Such an arrangement can make physician investors rich. But it can’t be the whole explanation. The hospital gets barely a sixth of the patients in the region; its margins are no bigger than the other hospitals’—whether for profit or not for profit—and it didn’t have much of a presence until 2004 at the earliest, a full decade after the cost explosion in McAllen began.
“Those are good points,” Romero said. She couldn’t explain what was going on.
The following afternoon, I visited the top managers of Doctors Hospital at Renaissance. We sat in their boardroom around one end of a yacht-length table. The chairman of the board offered me a soda. The chief of staff smiled at me. The chief financial officer shook my hand as if I were an old friend. The C.E.O., however, was having a hard time pretending that he was happy to see me. Lawrence Gelman was a fifty-seven-year-old anesthesiologist with a Bill Clinton shock of white hair and a weekly local radio show tag-lined “Opinions from an Unrelenting Conservative Spirit.” He had helped found the hospital. He barely greeted me, and while the others were trying for a how-can-I-help-you-today attitude, his body language was more let’s-get-this-over-with.
So I asked him why McAllen’s health-care costs were so high. What he gave me was a disquisition on the theory and history of American health-care financing going back to Lyndon Johnson and the creation of Medicare, the upshot of which was: (1) Government is the problem in health care. “The people in charge of the purse strings don’t know what they’re doing.” (2) If anything, government insurance programs like Medicare don’t pay enough. “I, as an anesthesiologist, know that they pay me ten per cent of what a private insurer pays.” (3) Government programs are full of waste. “Every person in this room could easily go through the expenditures of Medicare and Medicaid and see all kinds of waste.” (4) But not in McAllen. The clinicians here, at least at Doctors Hospital at Renaissance, “are providing necessary, essential health care,” Gelman said. “We don’t invent patients.”
Then why do hospitals in McAllen order so much more surgery and scans and tests than hospitals in El Paso and elsewhere?
In the end, the only explanation he and his colleagues could offer was this: The other doctors and hospitals in McAllen may be overspending, but, to the extent that his hospital provides costlier treatment than other places in the country, it is making people better in ways that data on quality and outcomes do not measure.
“Do we provide better health care than El Paso?” Gelman asked. “I would bet you two to one that we do.”
It was a depressing conversation—not because I thought the executives were being evasive but because they weren’t being evasive. The data on McAllen’s costs were clearly new to them. They were defending McAllen reflexively. But they really didn’t know the big picture of what was happening.
And, I realized, few people in their position do. Local executives for hospitals and clinics and home-health agencies understand their growth rate and their market share; they know whether they are losing money or making money. They know that if their doctors bring in enough business—surgery, imaging, home-nursing referrals—they make money; and if they get the doctors to bring in more, they make more. But they have only the vaguest notion of whether the doctors are making their communities as healthy as they can, or whether they are more or less efficient than their counterparts elsewhere. A doctor sees a patient in clinic, and has her check into a McAllen hospital for a CT scan, an ultrasound, three rounds of blood tests, another ultrasound, and then surgery to have her gallbladder removed. How is Lawrence Gelman or Gilda Romero to know whether all that is essential, let alone the best possible treatment for the patient? It isn’t what they are responsible or accountable for.
Health-care costs ultimately arise from the accumulation of individual decisions doctors make about which services and treatments to write an order for. The most expensive piece of medical equipment, as the saying goes, is a doctor’s pen. And, as a rule, hospital executives don’t own the pen caps. Doctors do.
If doctors wield the pen, why do they do it so differently from one place to another? Brenda Sirovich, another Dartmouth researcher, published a study last year that provided an important clue. She and her team surveyed some eight hundred primary-care physicians from high-cost cities (such as Las Vegas and New York), low-cost cities (such as Sacramento and Boise), and others in between. The researchers asked the physicians specifically how they would handle a variety of patient cases. It turned out that differences in decision-making emerged in only some kinds of cases. In situations in which the right thing to do was well established—for example, whether to recommend a mammogram for a fifty-year-old woman (the answer is yes)—physicians in high- and low-cost cities made the same decisions. But, in cases in which the science was unclear, some physicians pursued the maximum possible amount of testing and procedures; some pursued the minimum. And which kind of doctor they were depended on where they came from.
Sirovich asked doctors how they would treat a seventy-five-year-old woman with typical heartburn symptoms and “adequate health insurance to cover tests and medications.” Physicians in high- and low-cost cities were equally likely to prescribe antacid therapy and to check for H. pylori, an ulcer-causing bacterium—steps strongly recommended by national guidelines. But when it came to measures of less certain value—and higher cost—the differences were considerable. More than seventy per cent of physicians in high-cost cities referred the patient to a gastroenterologist, ordered an upper endoscopy, or both, while half as many in low-cost cities did. Physicians from high-cost cities typically recommended that patients with well-controlled hypertension see them in the office every one to three months, while those from low-cost cities recommended visits twice yearly. In case after uncertain case, more was not necessarily better. But physicians from the most expensive cities did the most expensive things.
Why? Some of it could reflect differences in training. I remember when my wife brought our infant son Walker to visit his grandparents in Virginia, and he took a terrifying fall down a set of stairs. They drove him to the local community hospital in Alexandria. A CT scan showed that he had a tiny subdural hematoma—a small area of bleeding in the brain. During ten hours of observation, though, he was fine—eating, drinking, completely alert. I was a surgery resident then and had seen many cases like his. We observed each child in intensive care for at least twenty-four hours and got a repeat CT scan. That was how I’d been trained. But the doctor in Alexandria was going to send Walker home. That was how he’d been trained. Suppose things change for the worse? I asked him. It’s extremely unlikely, he said, and if anything changed Walker could always be brought back. I bullied the doctor into admitting him anyway. The next day, the scan and the patient were fine. And, looking in the textbooks, I learned that the doctor was right. Walker could have been managed safely either way.
There was no sign, however, that McAllen’s doctors as a group were trained any differently from El Paso’s. One morning, I met with a hospital administrator who had extensive experience managing for-profit hospitals along the border. He offered a different possible explanation: the culture of money.
“In El Paso, if you took a random doctor and looked at his tax returns eighty-five per cent of his income would come from the usual practice of medicine,” he said. But in McAllen, the administrator thought, that percentage would be a lot less.
He knew of doctors who owned strip malls, orange groves, apartment complexes—or imaging centers, surgery centers, or another part of the hospital they directed patients to. They had “entrepreneurial spirit,” he said. They were innovative and aggressive in finding ways to increase revenues from patient care. “There’s no lack of work ethic,” he said. But he had often seen financial considerations drive the decisions doctors made for patients—the tests they ordered, the doctors and hospitals they recommended—and it bothered him. Several doctors who were unhappy about the direction medicine had taken in McAllen told me the same thing. “It’s a machine, my friend,” one surgeon explained.
No one teaches you how to think about money in medical school or residency. Yet, from the moment you start practicing, you must think about it. You must consider what is covered for a patient and what is not. You must pay attention to insurance rejections and government-reimbursement rules. You must think about having enough money for the secretary and the nurse and the rent and the malpractice insurance.
Beyond the basics, however, many physicians are remarkably oblivious to the financial implications of their decisions. They see their patients. They make their recommendations. They send out the bills. And, as long as the numbers come out all right at the end of each month, they put the money out of their minds.
Others think of the money as a means of improving what they do. They think about how to use the insurance money to maybe install electronic health records with colleagues, or provide easier phone and e-mail access, or offer expanded hours. They hire an extra nurse to monitor diabetic patients more closely, and to make sure that patients don’t miss their mammograms and pap smears and colonoscopies.
Then there are the physicians who see their practice primarily as a revenue stream. They instruct their secretary to have patients who call with follow-up questions schedule an appointment, because insurers don’t pay for phone calls, only office visits. They consider providing Botox injections for cash. They take a Doppler ultrasound course, buy a machine, and start doing their patients’ scans themselves, so that the insurance payments go to them rather than to the hospital. They figure out ways to increase their high-margin work and decrease their low-margin work. This is a business, after all.
In every community, you’ll find a mixture of these views among physicians, but one or another tends to predominate. McAllen seems simply to be the community at one extreme.
In a few cases, the hospital executive told me, he’d seen the behavior cross over into what seemed like outright fraud. “I’ve had doctors here come up to me and say, ‘You want me to admit patients to your hospital, you’re going to have to pay me.’ ”
“How much?” I asked.
“The amounts—all of them were over a hundred thousand dollars per year,” he said. The doctors were specific. The most he was asked for was five hundred thousand dollars per year.
He didn’t pay any of them, he said: “I mean, I gotta sleep at night.” And he emphasized that these were just a handful of doctors. But he had never been asked for a kickback before coming to McAllen.
Woody Powell is a Stanford sociologist who studies the economic culture of cities. Recently, he and his research team studied why certain regions—Boston, San Francisco, San Diego—became leaders in biotechnology while others with a similar concentration of scientific and corporate talent—Los Angeles, Philadelphia, New York—did not. The answer they found was what Powell describes as the anchor-tenant theory of economic development. Just as an anchor store will define the character of a mall, anchor tenants in biotechnology, whether it’s a company like Genentech, in South San Francisco, or a university like M.I.T., in Cambridge, define the character of an economic community. They set the norms. The anchor tenants that set norms encouraging the free flow of ideas and collaboration, even with competitors, produced enduringly successful communities, while those that mainly sought to dominate did not.
Powell suspects that anchor tenants play a similarly powerful community role in other areas of economics, too, and health care may be no exception. I spoke to a marketing rep for a McAllen home-health agency who told me of a process uncannily similar to what Powell found in biotech. Her job is to persuade doctors to use her agency rather than others. The competition is fierce. I opened the phone book and found seventeen pages of listings for home-health agencies—two hundred and sixty in all. A patient typically brings in between twelve hundred and fifteen hundred dollars, and double that amount for specialized care. She described how, a decade or so ago, a few early agencies began rewarding doctors who ordered home visits with more than trinkets: they provided tickets to professional sporting events, jewelry, and other gifts. That set the tone. Other agencies jumped in. Some began paying doctors a supplemental salary, as “medical directors,” for steering business in their direction. Doctors came to expect a share of the revenue stream.
Agencies that want to compete on quality struggle to remain in business, the rep said. Doctors have asked her for a medical-director salary of four or five thousand dollars a month in return for sending her business. One asked a colleague of hers for private-school tuition for his child; another wanted sex.
“I explained the rules and regulations and the anti-kickback law, and told them no,” she said of her dealings with such doctors. “Does it hurt my business?” She paused. “I’m O.K. working only with ethical physicians,” she finally said.
About fifteen years ago, it seems, something began to change in McAllen. A few leaders of local institutions took profit growth to be a legitimate ethic in the practice of medicine. Not all the doctors accepted this. But they failed to discourage those who did. So here, along the banks of the Rio Grande, in the Square Dance Capital of the World, a medical community came to treat patients the way subprime-mortgage lenders treated home buyers: as profit centers.
The real puzzle of American health care, I realized on the airplane home, is not why McAllen is different from El Paso. It’s why El Paso isn’t like McAllen. Every incentive in the system is an invitation to go the way McAllen has gone. Yet, across the country, large numbers of communities have managed to control their health costs rather than ratchet them up.
I talked to Denis Cortese, the C.E.O. of the Mayo Clinic, which is among the highest-quality, lowest-cost health-care systems in the country. A couple of years ago, I spent several days there as a visiting surgeon. Among the things that stand out from that visit was how much time the doctors spent with patients. There was no churn—no shuttling patients in and out of rooms while the doctor bounces from one to the other. I accompanied a colleague while he saw patients. Most of the patients, like those in my clinic, required about twenty minutes. But one patient had colon cancer and a number of other complex issues, including heart disease. The physician spent an hour with her, sorting things out. He phoned a cardiologist with a question.
“I’ll be there,” the cardiologist said.
Fifteen minutes later, he was. They mulled over everything together. The cardiologist adjusted a medication, and said that no further testing was needed. He cleared the patient for surgery, and the operating room gave her a slot the next day.
The whole interaction was astonishing to me. Just having the cardiologist pop down to see the patient with the surgeon would be unimaginable at my hospital. The time required wouldn’t pay. The time required just to organize the system wouldn’t pay.
The core tenet of the Mayo Clinic is “The needs of the patient come first”—not the convenience of the doctors, not their revenues. The doctors and nurses, and even the janitors, sat in meetings almost weekly, working on ideas to make the service and the care better, not to get more money out of patients. I asked Cortese how the Mayo Clinic made this possible.
“It’s not easy,” he said. But decades ago Mayo recognized that the first thing it needed to do was eliminate the financial barriers. It pooled all the money the doctors and the hospital system received and began paying everyone a salary, so that the doctors’ goal in patient care couldn’t be increasing their income. Mayo promoted leaders who focussed first on what was best for patients, and then on how to make this financially possible.
No one there actually intends to do fewer expensive scans and procedures than is done elsewhere in the country. The aim is to raise quality and to help doctors and other staff members work as a team. But, almost by happenstance, the result has been lower costs.
“When doctors put their heads together in a room, when they share expertise, you get more thinking and less testing,” Cortese told me.
Skeptics saw the Mayo model as a local phenomenon that wouldn’t carry beyond the hay fields of northern Minnesota. But in 1986 the Mayo Clinic opened a campus in Florida, one of our most expensive states for health care, and, in 1987, another one in Arizona. It was difficult to recruit staff members who would accept a salary and the Mayo’s collaborative way of practicing. Leaders were working against the dominant medical culture and incentives. The expansion sites took at least a decade to get properly established. But eventually they achieved the same high-quality, low-cost results as Rochester. Indeed, Cortese says that the Florida site has become, in some respects, the most efficient one in the system.
The Mayo Clinic is not an aberration. One of the lowest-cost markets in the country is Grand Junction, Colorado, a community of a hundred and twenty thousand that nonetheless has achieved some of Medicare’s highest quality-of-care scores. Michael Pramenko is a family physician and a local medical leader there. Unlike doctors at the Mayo Clinic, he told me, those in Grand Junction get piecework fees from insurers. But years ago the doctors agreed among themselves to a system that paid them a similar fee whether they saw Medicare, Medicaid, or private-insurance patients, so that there would be little incentive to cherry-pick patients. They also agreed, at the behest of the main health plan in town, an H.M.O., to meet regularly on small peer-review committees to go over their patient charts together. They focussed on rooting out problems like poor prevention practices, unnecessary back operations, and unusual hospital-complication rates. Problems went down. Quality went up. Then, in 2004, the doctors’ group and the local H.M.O. jointly created a regional information network—a community-wide electronic-record system that shared office notes, test results, and hospital data for patients across the area. Again, problems went down. Quality went up. And costs ended up lower than just about anywhere else in the United States.
Grand Junction’s medical community was not following anyone else’s recipe. But, like Mayo, it created what Elliott Fisher, of Dartmouth, calls an accountable-care organization. The leading doctors and the hospital system adopted measures to blunt harmful financial incentives, and they took collective responsibility for improving the sum total of patient care.
This approach has been adopted in other places, too: the Geisinger Health System, in Danville, Pennsylvania; the Marshfield Clinic, in Marshfield, Wisconsin; Intermountain Healthcare, in Salt Lake City; Kaiser Permanente, in Northern California. All of them function on similar principles. All are not-for-profit institutions. And all have produced enviably higher quality and lower costs than the average American town enjoys.
When you look across the spectrum from Grand Junction to McAllen—and the almost threefold difference in the costs of care—you come to realize that we are witnessing a battle for the soul of American medicine. Somewhere in the United States at this moment, a patient with chest pain, or a tumor, or a cough is seeing a doctor. And the damning question we have to ask is whether the doctor is set up to meet the needs of the patient, first and foremost, or to maximize revenue.
There is no insurance system that will make the two aims match perfectly. But having a system that does so much to misalign them has proved disastrous. As economists have often pointed out, we pay doctors for quantity, not quality. As they point out less often, we also pay them as individuals, rather than as members of a team working together for their patients. Both practices have made for serious problems.
Providing health care is like building a house. The task requires experts, expensive equipment and materials, and a huge amount of coördination. Imagine that, instead of paying a contractor to pull a team together and keep them on track, you paid an electrician for every outlet he recommends, a plumber for every faucet, and a carpenter for every cabinet. Would you be surprised if you got a house with a thousand outlets, faucets, and cabinets, at three times the cost you expected, and the whole thing fell apart a couple of years later? Getting the country’s best electrician on the job (he trained at Harvard, somebody tells you) isn’t going to solve this problem. Nor will changing the person who writes him the check.
This last point is vital. Activists and policymakers spend an inordinate amount of time arguing about whether the solution to high medical costs is to have government or private insurance companies write the checks. Here’s how this whole debate goes. Advocates of a public option say government financing would save the most money by having leaner administrative costs and forcing doctors and hospitals to take lower payments than they get from private insurance. Opponents say doctors would skimp, quit, or game the system, and make us wait in line for our care; they maintain that private insurers are better at policing doctors. No, the skeptics say: all insurance companies do is reject applicants who need health care and stall on paying their bills. Then we have the economists who say that the people who should pay the doctors are the ones who use them. Have consumers pay with their own dollars, make sure that they have some “skin in the game,” and then they’ll get the care they deserve. These arguments miss the main issue. When it comes to making care better and cheaper, changing who pays the doctor will make no more difference than changing who pays the electrician. The lesson of the high-quality, low-cost communities is that someone has to be accountable for the totality of care. Otherwise, you get a system that has no brakes. You get McAllen.
One afternoon in McAllen, I rode down McColl Road with Lester Dyke, the cardiac surgeon, and we passed a series of office plazas that seemed to be nothing but home-health agencies, imaging centers, and medical-equipment stores.
“Medicine has become a pig trough here,” he muttered.
Dyke is among the few vocal critics of what’s happened in McAllen. “We took a wrong turn when doctors stopped being doctors and became businessmen,” he said.
We began talking about the various proposals being touted in Washington to fix the cost problem. I asked him whether expanding public-insurance programs like Medicare and shrinking the role of insurance companies would do the trick in McAllen.
“I don’t have a problem with it,” he said. “But it won’t make a difference.” In McAllen, government payers already predominate—not many people have jobs with private insurance.
How about doing the opposite and increasing the role of big insurance companies?
“What good would that do?” Dyke asked.
The third class of health-cost proposals, I explained, would push people to use medical savings accounts and hold high-deductible insurance policies: “They’d have more of their own money on the line, and that’d drive them to bargain with you and other surgeons, right?”
He gave me a quizzical look. We tried to imagine the scenario. A cardiologist tells an elderly woman that she needs bypass surgery and has Dr. Dyke see her. They discuss the blockages in her heart, the operation, the risks. And now they’re supposed to haggle over the price as if he were selling a rug in a souk? “I’ll do three vessels for thirty thousand, but if you take four I’ll throw in an extra night in the I.C.U.”—that sort of thing? Dyke shook his head. “Who comes up with this stuff?” he asked. “Any plan that relies on the sheep to negotiate with the wolves is doomed to failure.”
Instead, McAllen and other cities like it have to be weaned away from their untenably fragmented, quantity-driven systems of health care, step by step. And that will mean rewarding doctors and hospitals if they band together to form Grand Junction-like accountable-care organizations, in which doctors collaborate to increase prevention and the quality of care, while discouraging overtreatment, undertreatment, and sheer profiteering. Under one approach, insurers—whether public or private—would allow clinicians who formed such organizations and met quality goals to keep half the savings they generate. Government could also shift regulatory burdens, and even malpractice liability, from the doctors to the organization. Other, sterner, approaches would penalize those who don’t form these organizations.
This will by necessity be an experiment. We will need to do in-depth research on what makes the best systems successful—the peer-review committees? recruiting more primary-care doctors and nurses? putting doctors on salary?—and disseminate what we learn. Congress has provided vital funding for research that compares the effectiveness of different treatments, and this should help reduce uncertainty about which treatments are best. But we also need to fund research that compares the effectiveness of different systems of care—to reduce our uncertainty about which systems work best for communities. These are empirical, not ideological, questions. And we would do well to form a national institute for health-care delivery, bringing together clinicians, hospitals, insurers, employers, and citizens to assess, regularly, the quality and the cost of our care, review the strategies that produce good results, and make clear recommendations for local systems.
Dramatic improvements and savings will take at least a decade. But a choice must be made. Whom do we want in charge of managing the full complexity of medical care? We can turn to insurers (whether public or private), which have proved repeatedly that they can’t do it. Or we can turn to the local medical communities, which have proved that they can. But we have to choose someone—because, in much of the country, no one is in charge. And the result is the most wasteful and the least sustainable health-care system in the world.
Something even more worrisome is going on as well. In the war over the culture of medicine—the war over whether our country’s anchor model will be Mayo or McAllen—the Mayo model is losing. In the sharpest economic downturn that our health system has faced in half a century, many people in medicine don’t see why they should do the hard work of organizing themselves in ways that reduce waste and improve quality if it means sacrificing revenue.
In El Paso, the for-profit health-care executive told me, a few leading physicians recently followed McAllen’s lead and opened their own centers for surgery and imaging. When I was in Tulsa a few months ago, a fellow-surgeon explained how he had made up for lost revenue by shifting his operations for well-insured patients to a specialty hospital that he partially owned while keeping his poor and uninsured patients at a nonprofit hospital in town. Even in Grand Junction, Michael Pramenko told me, “some of the doctors are beginning to complain about ‘leaving money on the table.’ ”
As America struggles to extend health-care coverage while curbing health-care costs, we face a decision that is more important than whether we have a public-insurance option, more important than whether we will have a single-payer system in the long run or a mixture of public and private insurance, as we do now. The decision is whether we are going to reward the leaders who are trying to build a new generation of Mayos and Grand Junctions. If we don’t, McAllen won’t be an outlier. It will be our future.
The Health Insurance Industry Doesn't Deserve Our Trust
Original Link: http://www.commondreams.org/view/2009/06/19-0
By Jim Goodman
Farmers often depend on off farm jobs to provide health insurance, if that wasn't an option they could generally afford an individual plan. Farming is one of the most dangerous occupations in America, heavy machinery, large animals, long hours in the sun, chemicals and that always present independent streak that keeps us from seeing the doctor when we should. Still, we need insurance.
Most jobs are cutting insurance benefits, if the jobs are still there. Individual plans for farmers are expensive with high deductibles since our work is dangerous, we probably have pre-existing conditions and we are nearing an average age of 58 years.
The Center for Rural Affairs in Nebraska notes that rural residents are twice as likely to be uninsured as urban Americans while farmers and ranchers are four times as likely to be “underinsured”, covered by insurance with reduced benefits and a high deductibles.
Montana Senator Max Baucus says single payer health care “ is off the table”. Who made him king? What are we, chopped liver, doesn't our opinion count? A January CBS/New York Times poll showed 59% of respondents favored a national health care plan. A February CNN poll showed 72% favored a government controlled plan. Any issue with that much across the board support should be “on the table”.
It seems especially surprising that Baucus, from Montana, a rural state, one that would benefit most from a single payer plan, is opposed to any discussion. However if one looks at campaign contributions from the health insurance industry to Baucus, we see why he supports the status quo.
The insurance companies, in hopes of killing single payer, say they are willing to cover those with “pre-existing conditions” provided "everyone" buys their health insurance. The the insurance companies dream, every American with an insurance policy and private insurers collecting premiums on another 49 million people. Of course they can still deny payment of claims, they're good at that.
But they say trust us, we will cut costs, as long as everyone buys a policy from us; but, there will be no competition from a public option.
No competition? Workers and farmers are expected to compete in the world market but insurance companies are afraid to compete against a public option?
Trust us? Trust insurance companies to care about our health over their profits?
According to the New England Journal of Medicine, insurance companies own billions of dollars of tobacco industry stock. Clearly, their motive is profit, not the best interest of the American public.
While health insurance companies downplay their tobacco investments as being only a small percentage of their total investment portfolio, with billions invested in tobacco, one wonders how much money do these guys have, where did they get it and why won't they pay it to their policy holders when they deserve it?
While New York Attorney General Andrew Cuomo investigates industry wide rate manipulation in the health insurance industry, they say trust us. Trust an industry that employs an "army of claim deniers" and administrative personnel whose numbers have grown 25 times faster than the number of physicians in the US over the past 30 years?
They expect us to believe they care about the health of the 49 million uninsured Americans or the 53,000 that die yearly due to denied claims?
A “public option” should be an option, just as public education, transportation, and legal protection are available, but not required.
Some of my neighbors, like many Americans, lack confidence in the governments ability to administer a public health insurance plan. But they are beginning to trust private insurance companies even less. So to legislators who say the public option is off the table, think again, there are 49 million uninsured and 25 million underinsured in America, we may lack health insurance but we can still vote.
By Jim Goodman
Farmers often depend on off farm jobs to provide health insurance, if that wasn't an option they could generally afford an individual plan. Farming is one of the most dangerous occupations in America, heavy machinery, large animals, long hours in the sun, chemicals and that always present independent streak that keeps us from seeing the doctor when we should. Still, we need insurance.
Most jobs are cutting insurance benefits, if the jobs are still there. Individual plans for farmers are expensive with high deductibles since our work is dangerous, we probably have pre-existing conditions and we are nearing an average age of 58 years.
The Center for Rural Affairs in Nebraska notes that rural residents are twice as likely to be uninsured as urban Americans while farmers and ranchers are four times as likely to be “underinsured”, covered by insurance with reduced benefits and a high deductibles.
Montana Senator Max Baucus says single payer health care “ is off the table”. Who made him king? What are we, chopped liver, doesn't our opinion count? A January CBS/New York Times poll showed 59% of respondents favored a national health care plan. A February CNN poll showed 72% favored a government controlled plan. Any issue with that much across the board support should be “on the table”.
It seems especially surprising that Baucus, from Montana, a rural state, one that would benefit most from a single payer plan, is opposed to any discussion. However if one looks at campaign contributions from the health insurance industry to Baucus, we see why he supports the status quo.
The insurance companies, in hopes of killing single payer, say they are willing to cover those with “pre-existing conditions” provided "everyone" buys their health insurance. The the insurance companies dream, every American with an insurance policy and private insurers collecting premiums on another 49 million people. Of course they can still deny payment of claims, they're good at that.
But they say trust us, we will cut costs, as long as everyone buys a policy from us; but, there will be no competition from a public option.
No competition? Workers and farmers are expected to compete in the world market but insurance companies are afraid to compete against a public option?
Trust us? Trust insurance companies to care about our health over their profits?
According to the New England Journal of Medicine, insurance companies own billions of dollars of tobacco industry stock. Clearly, their motive is profit, not the best interest of the American public.
While health insurance companies downplay their tobacco investments as being only a small percentage of their total investment portfolio, with billions invested in tobacco, one wonders how much money do these guys have, where did they get it and why won't they pay it to their policy holders when they deserve it?
While New York Attorney General Andrew Cuomo investigates industry wide rate manipulation in the health insurance industry, they say trust us. Trust an industry that employs an "army of claim deniers" and administrative personnel whose numbers have grown 25 times faster than the number of physicians in the US over the past 30 years?
They expect us to believe they care about the health of the 49 million uninsured Americans or the 53,000 that die yearly due to denied claims?
A “public option” should be an option, just as public education, transportation, and legal protection are available, but not required.
Some of my neighbors, like many Americans, lack confidence in the governments ability to administer a public health insurance plan. But they are beginning to trust private insurance companies even less. So to legislators who say the public option is off the table, think again, there are 49 million uninsured and 25 million underinsured in America, we may lack health insurance but we can still vote.
Sunday, June 14, 2009
America’s Sea of Red Ink Was Years in the Making
Original Link: http://www.nytimes.com/2009/06/10/business/economy/10leonhardt.html
By DAVID LEONHARDT
There are two basic truths about the enormous deficits that the federal government will run in the coming years.
The first is that President Obama’s agenda, ambitious as it may be, is responsible for only a sliver of the deficits, despite what many of his Republican critics are saying. The second is that Mr. Obama does not have a realistic plan for eliminating the deficit, despite what his advisers have suggested.
The New York Times analyzed Congressional Budget Office reports going back almost a decade, with the aim of understanding how the federal government came to be far deeper in debt than it has been since the years just after World War II. This debt will constrain the country’s choices for years and could end up doing serious economic damage if foreign lenders become unwilling to finance it.
Mr. Obama — responding to recent signs of skittishness among those lenders — met with 40 members of Congress at the White House on Tuesday and called for the re-enactment of pay-as-you-go rules, requiring Congress to pay for any new programs it passes.
The story of today’s deficits starts in January 2001, as President Bill Clinton was leaving office. The Congressional Budget Office estimated then that the government would run an average annual surplus of more than $800 billion a year from 2009 to 2012. Today, the government is expected to run a $1.2 trillion annual deficit in those years.
You can think of that roughly $2 trillion swing as coming from four broad categories: the business cycle, President George W. Bush’s policies, policies from the Bush years that are scheduled to expire but that Mr. Obama has chosen to extend, and new policies proposed by Mr. Obama.
The first category — the business cycle — accounts for 37 percent of the $2 trillion swing. It’s a reflection of the fact that both the 2001 recession and the current one reduced tax revenue, required more spending on safety-net programs and changed economists’ assumptions about how much in taxes the government would collect in future years.
About 33 percent of the swing stems from new legislation signed by Mr. Bush. That legislation, like his tax cuts and the Medicare prescription drug benefit, not only continue to cost the government but have also increased interest payments on the national debt.
Mr. Obama’s main contribution to the deficit is his extension of several Bush policies, like the Iraq war and tax cuts for households making less than $250,000. Such policies — together with the Wall Street bailout, which was signed by Mr. Bush and supported by Mr. Obama — account for 20 percent of the swing.
About 7 percent comes from the stimulus bill that Mr. Obama signed in February. And only 3 percent comes from Mr. Obama’s agenda on health care, education, energy and other areas.
If the analysis is extended further into the future, well beyond 2012, the Obama agenda accounts for only a slightly higher share of the projected deficits.
How can that be? Some of his proposals, like a plan to put a price on carbon emissions, don’t cost the government any money. Others would be partly offset by proposed tax increases on the affluent and spending cuts. Congressional and White House aides agree that no large new programs, like an expansion of health insurance, are likely to pass unless they are paid for.
Alan Auerbach, an economist at the University of California, Berkeley, and an author of a widely cited study on the dangers of the current deficits, describes the situation like so: “Bush behaved incredibly irresponsibly for eight years. On the one hand, it might seem unfair for people to blame Obama for not fixing it. On the other hand, he’s not fixing it.”
“And,” he added, “not fixing it is, in a sense, making it worse.”
When challenged about the deficit, Mr. Obama and his advisers generally start talking about health care. “There is no way you can put the nation on a sound fiscal course without wringing inefficiencies out of health care,” Peter Orszag, the White House budget director, told me.
Outside economists agree. The Medicare budget really is the linchpin of deficit reduction. But there are two problems with leaving the discussion there.
First, even if a health overhaul does pass, it may not include the tough measures needed to bring down spending. Ultimately, the only way to do so is to take money from doctors, drug makers and insurers, and it isn’t clear whether Mr. Obama and Congress have the stomach for that fight. So far, they have focused on ideas like preventive care that would do little to cut costs.
Second, even serious health care reform won’t be enough. Obama advisers acknowledge as much. They say that changes to the system would probably have a big effect on health spending starting in five or 10 years. The national debt, however, will grow dangerously large much sooner.
Mr. Orszag says the president is committed to a deficit equal to no more than 3 percent of gross domestic product within five to 10 years. The Congressional Budget Office projects a deficit of at least 4 percent for most of the next decade. Even that may turn out to be optimistic, since the government usually ends up spending more than it says it will. So Mr. Obama isn’t on course to meet his target.
But Congressional Republicans aren’t, either. Judd Gregg recently held up a chart on the Senate floor showing that Mr. Obama would increase the deficit — but failed to mention that much of the increase stemmed from extending Bush policies. In fact, unlike Mr. Obama, Republicans favor extending all the Bush tax cuts, which will send the deficit higher.
Republican leaders in the House, meanwhile, announced a plan last week to cut spending by $75 billion a year. But they made specific suggestions adding up to meager $5 billion. The remaining $70 billion was left vague. “The G.O.P. is not serious about cutting down spending,” the conservative Cato Institute concluded.
What, then, will happen?
“Things will get worse gradually,” Mr. Auerbach predicts, “unless they get worse quickly.” Either a solution will be put off, or foreign lenders, spooked by the rising debt, will send interest rates higher and create a crisis.
The solution, though, is no mystery. It will involve some combination of tax increases and spending cuts. And it won’t be limited to pay-as-you-go rules, tax increases on somebody else, or a crackdown on waste, fraud and abuse. Your taxes will probably go up, and some government programs you favor will become less generous.
That is the legacy of our trillion-dollar deficits. Erasing them will be one of the great political issues of the coming decade.
By DAVID LEONHARDT
There are two basic truths about the enormous deficits that the federal government will run in the coming years.
The first is that President Obama’s agenda, ambitious as it may be, is responsible for only a sliver of the deficits, despite what many of his Republican critics are saying. The second is that Mr. Obama does not have a realistic plan for eliminating the deficit, despite what his advisers have suggested.
The New York Times analyzed Congressional Budget Office reports going back almost a decade, with the aim of understanding how the federal government came to be far deeper in debt than it has been since the years just after World War II. This debt will constrain the country’s choices for years and could end up doing serious economic damage if foreign lenders become unwilling to finance it.
Mr. Obama — responding to recent signs of skittishness among those lenders — met with 40 members of Congress at the White House on Tuesday and called for the re-enactment of pay-as-you-go rules, requiring Congress to pay for any new programs it passes.
The story of today’s deficits starts in January 2001, as President Bill Clinton was leaving office. The Congressional Budget Office estimated then that the government would run an average annual surplus of more than $800 billion a year from 2009 to 2012. Today, the government is expected to run a $1.2 trillion annual deficit in those years.
You can think of that roughly $2 trillion swing as coming from four broad categories: the business cycle, President George W. Bush’s policies, policies from the Bush years that are scheduled to expire but that Mr. Obama has chosen to extend, and new policies proposed by Mr. Obama.
The first category — the business cycle — accounts for 37 percent of the $2 trillion swing. It’s a reflection of the fact that both the 2001 recession and the current one reduced tax revenue, required more spending on safety-net programs and changed economists’ assumptions about how much in taxes the government would collect in future years.
About 33 percent of the swing stems from new legislation signed by Mr. Bush. That legislation, like his tax cuts and the Medicare prescription drug benefit, not only continue to cost the government but have also increased interest payments on the national debt.
Mr. Obama’s main contribution to the deficit is his extension of several Bush policies, like the Iraq war and tax cuts for households making less than $250,000. Such policies — together with the Wall Street bailout, which was signed by Mr. Bush and supported by Mr. Obama — account for 20 percent of the swing.
About 7 percent comes from the stimulus bill that Mr. Obama signed in February. And only 3 percent comes from Mr. Obama’s agenda on health care, education, energy and other areas.
If the analysis is extended further into the future, well beyond 2012, the Obama agenda accounts for only a slightly higher share of the projected deficits.
How can that be? Some of his proposals, like a plan to put a price on carbon emissions, don’t cost the government any money. Others would be partly offset by proposed tax increases on the affluent and spending cuts. Congressional and White House aides agree that no large new programs, like an expansion of health insurance, are likely to pass unless they are paid for.
Alan Auerbach, an economist at the University of California, Berkeley, and an author of a widely cited study on the dangers of the current deficits, describes the situation like so: “Bush behaved incredibly irresponsibly for eight years. On the one hand, it might seem unfair for people to blame Obama for not fixing it. On the other hand, he’s not fixing it.”
“And,” he added, “not fixing it is, in a sense, making it worse.”
When challenged about the deficit, Mr. Obama and his advisers generally start talking about health care. “There is no way you can put the nation on a sound fiscal course without wringing inefficiencies out of health care,” Peter Orszag, the White House budget director, told me.
Outside economists agree. The Medicare budget really is the linchpin of deficit reduction. But there are two problems with leaving the discussion there.
First, even if a health overhaul does pass, it may not include the tough measures needed to bring down spending. Ultimately, the only way to do so is to take money from doctors, drug makers and insurers, and it isn’t clear whether Mr. Obama and Congress have the stomach for that fight. So far, they have focused on ideas like preventive care that would do little to cut costs.
Second, even serious health care reform won’t be enough. Obama advisers acknowledge as much. They say that changes to the system would probably have a big effect on health spending starting in five or 10 years. The national debt, however, will grow dangerously large much sooner.
Mr. Orszag says the president is committed to a deficit equal to no more than 3 percent of gross domestic product within five to 10 years. The Congressional Budget Office projects a deficit of at least 4 percent for most of the next decade. Even that may turn out to be optimistic, since the government usually ends up spending more than it says it will. So Mr. Obama isn’t on course to meet his target.
But Congressional Republicans aren’t, either. Judd Gregg recently held up a chart on the Senate floor showing that Mr. Obama would increase the deficit — but failed to mention that much of the increase stemmed from extending Bush policies. In fact, unlike Mr. Obama, Republicans favor extending all the Bush tax cuts, which will send the deficit higher.
Republican leaders in the House, meanwhile, announced a plan last week to cut spending by $75 billion a year. But they made specific suggestions adding up to meager $5 billion. The remaining $70 billion was left vague. “The G.O.P. is not serious about cutting down spending,” the conservative Cato Institute concluded.
What, then, will happen?
“Things will get worse gradually,” Mr. Auerbach predicts, “unless they get worse quickly.” Either a solution will be put off, or foreign lenders, spooked by the rising debt, will send interest rates higher and create a crisis.
The solution, though, is no mystery. It will involve some combination of tax increases and spending cuts. And it won’t be limited to pay-as-you-go rules, tax increases on somebody else, or a crackdown on waste, fraud and abuse. Your taxes will probably go up, and some government programs you favor will become less generous.
That is the legacy of our trillion-dollar deficits. Erasing them will be one of the great political issues of the coming decade.
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