The United States spent $2.6 trillion on healthcare in 2010—an amount larger than each of the GDPs of Brazil, India, Russia and the United Kingdom. More than half of that spending went toward covering hospital (31 percent) and physician (20 percent) services, and a non-trivial amount went toward paying for prescription drugs (10 percent) and nursing home (5 percent) costs. As I am sure you have heard, all of those costs will continue to go up over the next decade.
Though we constantly laud our healthcare system as the greatest concentration of medical and scientific talent in the world, could anyone actually imagine us celebrating that system as the British did their National Health Service during the 2012 London Olympics? As successful as our system may have been in the past, it is not equipped to effectively deal with the challenges of the 21st century. Our system is broken—and it won’t be easy to fix.
As the best-selling author and surgeon Atul Gawande, author of “The Checklist Manifesto,” puts it, “We concentrate on getting the very best people and the best technologies, in the same way you might put a car together by saying, ‘Hey, let’s takes the brakes of a Ferrari and the chassis of a BMW and the body of a Volvo.’ When you put it together, you just get a pile of junk that’s very expensive and doesn’t work very well.”
From Gawande’s point of view, we need to take a systems-based approach to reforming medicine. That means facilitating conversations between physicians across specialties and hospitals. It means learning about how to improve efficiency from business leaders and economists. And it means listening to patients and their families to make sure that the most appropriate treatment plan, rather than the most expensive, is recommended.
Achieving these goals will depend on giving physicians and healthcare managers the right set of incentives. Gawande is right to point to the explosion of new and expensive technologies as one of the drivers of growing healthcare costs. But concern with costs also needs to be balanced by the benefits of the care received. In his 2005 book “Your Money or Your Life,” David Cutler, a prominent health economist at Harvard, gives a compelling argument for why the increase in medical spending over the past 50 years has been worth it.
Americans are living longer and healthier lives than at any other point in history. But physician incentives don’t align with the country’s current needs. The United States is an aging society. More than half of all deaths each year are caused by chronic conditions such as arthritis, cancer and diabetes. These conditions don’t just limit peoples’ quality of life; they also limit work opportunities and make people and society poorer as a result. When you factor in loss of productivity from untreated, mismanaged or over-treated chronic disease patients, the total cost of American healthcare far exceeds $2.6 trillion.
How do we alter incentives to bring medical practice more in line with current patient needs? One of the most cited solutions is to abandon the dominant fee-for-service model of physician compensation. By compensating physicians for the number of procedures and tests they perform, the fee-for-service model often incentivizes over-treatment. In her book, “Overtreated,” Shannon Brownlee suggests that one-fifth to one-third of the money spent on health care is spent on medical procedures and tests that are actually unnecessary, even harmful.
However, there are doubts as to just how effective—not to mention politically feasible—eliminating the fee-for-service model would be. Would it reduce costs at the expense of quality of care? For example, physicians don’t just order tests to confirm diagnostic suspicions, and sometimes a test reveals unexpected results—such as the growth of a tumor—which require expensive, but life-enhancing, interventions. Which is worse: over treatment or under treatment?
I think that there is sufficient evidence to suggest that tying physician salaries to health outcomes, rather than compensation to procedures or tests, can reduce costs and preserve quality of care. But healthcare reform is never as easy or as straightforward as we would like. The growing number of salaried physicians is a case in point. That trend has not been due to any intentioned policy—it’s a matter of business. The high administrative costs of handling insurance compensations and electronic records have led to a rapid decline in private practice.
Physicians are opting to sell their practices and/or join hospital systems to escape the hours of paperwork and diminished revenues associated with administration. The rise of so-called “Big Med” (see Atul Gawande’s article of the same name in The New Yorker) has given some economists and health policy experts reason for optimism. Supporters of this trend see increased standardization and greater economies of scale as great boons for the quality and costs of care.
Although I am a tepid supporter of this trend, I have two great concerns. The first is this: Who serves as advocates for physicians and patients in such a big system? The second: What happens when treating patients is not good for the bottom line?
Paul Horak, Trinity ’13, is a Duke pre-med. This column is the 11th installment in a semester-long series of weekly columns written on the pre-med experience at Duke, as well as the diverse ways students can pursue and engage with the field of medicine.
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