Socialised coda

Social solidarity versus individual responsibility is I think the greatest difference in mindset between here and home. It's interesting that our chairman raised this with my when I was preparing my application to come here. Arguments about which is more useful strikes me as a rather unhelpful bit of theological wrangling.

At the international symposium in November, the Dutch delegates (who perhaps unfairly I always think of as Pim Fortuyn's lot) were by far the most rightwing - insofar as that means anything anymore - of the non-American governments and yet they stressed the centrality of strengthening social solidarity - particularly trangenerational social solidarity - being an aim of any health insurance system. in other words the insurance system was a pooling of societal risk where the young and healthy paid for the old and sick on the expectation that when they grew old and got sick their children's generation would pay for them. Thus premiums were related not to individual risk but ability to pay. A quite different notion of insurance to, say, motoring insurance - or private health insurance in the US or UK where premiums reflect risk.

Last week in Chicago I had the privilege of meeting the CEO of a hospital reinsurance system an he said somethign aout thie which was quite interesting. Simply put his view was that the publicly quoted insurers were so fixated with short term gains and losses that they were no longer effectively pooling risk, but seeking to avoid it entirely. Is it really realistic to guarantee any insurance scheme will be in profit every quarter? I'm not qualified to know (Bruce - if you read this could you comment!) - but it may explain some of the cost-shifting to patients that is going on through the Health Saving Plan/Consumer Directed insurance schemes.

Socialised medicine part 2

Rationing in healthcare is complex. The myth of unrationed healthcare in the US is pervasive. Like the rest of the world healthcare in the US is rationed, it’s rationed by payment. Interestingly, health policy under the Bush Administration has been about increasing the level of rationing in the system through shifting costs from insurers to the patient, all part of the theory of “skin in the game”.

This is the real agenda of health savings accounts and the so-called ‘consumer directed’ health plans (other than giving rich Republican voters another tax-break, of course). These have huge deductibles (i.e. the amount each year that you pay out of your own pocket) and large co-pays for services. You can learn more about HSAs here . As an outsider, it is obvious that rationing care by the ability to pay is the purpose and aim of this reform. Henry A. McKinnell, CEO of Pfizer, rather let the cat out of the bag when his first argument in favour of the HSA experiment was as follows
“When you pay for procedures, don't be surprised that you get a lot of procedures.”
(In other words we can reduce the number of (unnecessary? – hmmm discuss) procedures we do. In the rest of the world we call this rationing). However the appeal to personal responsibility hides the fact that HSAs are about rationing to its enthusiasts.

For example, the commentator who condemned socialized medicine for rationing went on to say,
“Health Savings Accounts are a great idea… if your car insurance had to cover oil change, car washes, etc. it would go through the roof”. Effectively, this is an argument for rationing by price and ability to pay, but because your ability to pay is 'your responsibility' the fact that this is rationing is ignored.

The available evidence shows that increased rationing has been the consequence of the HSAs. The Commonwealth Fund noted that about one-third of individuals in such plans reported delaying or avoiding care, compared with 17 percent of those in comprehensive health plans. Now it might be argued that this is appropriate rationing – it is too early to know how the outcomes of patients in consumer directed plans compare to those in traditional plans - but it is very clear from the survey that there is a much higher dissatisfaction level among patients in such plans than those in traditional plans.

Socialised systems ration by declaring some technologies off limits (or delaying their introduction) and/or imposing waits to receive treatment (a time cost). The UK waiting time for elective surgery as a famous example of the latter, and this gets cited regularly, and increasingly inaccurately by US critics of socialised medicine. Interestingly, mean and median waits for surgery were always pretty low – this is a consequence of the fact that the size of the entire UK waiting list was only 3 months worth of elective work pretty consistently for the 30 years prior to 1997. What has changed in the last 10 years is that the very long maximum waits have largely been removed. Curiously, though, access to primary care in the US involves LONGER waits than in the UK. Not only is out-of- hours care much harder to get in the US than most other western countries , but surprisingly a greater proportion of patients could not get a GP appointment within 6 days. Interestingly, socialised Germany does better on waits than anywhere else (even on access to elective surgery). This fits with our experiences. Getting an appointment with a family doctor has proved to be tricky – but you can get a scan tomorrow.

But you might not be covered for it. And this points to an important part of the issue. Socialised medicine tends to give greater structure and co-ordination to systems. At a conference before Christmas I was asked whose system I would rather be ill in. I had to think hard about that. And my answer was, despite all its flaws and weaknesses, and the fact that the absolute best care in the world would be more likely to be found in the US (probably), was the NHS. The reason for this was the relative ease with which I could enter and negotiate the system. I didn’t have to worry about what my insurance covered, and by having my GP is gatekeeper and advocate – plus some knowledge of the system, I would be pretty confident of ending up in the right place. I could find no way of gaining such assurance in the US. The problem with the type of rationing that the US uses is that it is not transparent or rational. This adds two major disadvantages (even excluding the equity issues associated with price). First, because I as the patient am unsure about what is or is not available to me, I either have to carry uncertainty or spend a lot of time and expense chasing through the system working out what the costs are. Something as simple as getting a vaccination for my youngest daughter had the capacity to vary in out-of pocket cost to me by as much as $175 depending upon how I got it done and what I qualified for, and resolving this conundrum required 30 minutes on the phone to my health plan, a continent away. And the problem was they didn’t know this either. So this was a cost to them – and thus ultimately to the consumer.

This increase in cost and inconvenience mirrors the second real problem with the type fragmented and untransparent organisation that socialised systems largely avoid. The transaction costs because of the fragmentation are massive – both in terms of administrative process associated with the flow and collection of money and the micro-management of the care process by agencies external to the doctor patient relationship. This thoughtful and non-partisan piece by a US doctor beautifully illustrates the complexities - nay absurdities - of the situation. In contrast to the 20% of a king's ransom that goes into administering health services in the US, the huge and unwieldy bureaucracy of the NHS consumes substantially less than 10% of its costs (themselves only 40% of US per capita health care costs) in its administrative machinery. I’ll allow that this is an underestimate – if the admin costs were 10% of NHS expenditure - this would mean that the costs associated with administration in the NHS are proportionally 1/5 of those in US healthcare. So the next blow-hard that starts ranting on about the tremendous efficiencies that come from marketised solutions may meet with a quizzically-raised eyebrow from this direction.

Transaction costs, like the exceptionally enthusiastic adoption of new technologies in the absence of much evidence that they are likely to much improve care, is implicated in the inflated cost of US healthcare. Socialised medicine is not a panacea, and I’d be tempted to argue that the US cultural aversion to it makes attempting to introduce it likely to be counter productive. But the defragmentation of services and rational and transparent basis for rationing that it introduces addresses both causes of cost inflation. Achieving a system which has these advantages while recognising the cultural aversion to socialised medicine would be an attractive alternative to the policy of unsustainable and unethical shifting of costs to individuals represented by the consumer directed innovation.

Myth 2: stop socialising so much

A distrust of what is called ‘socialized medicine’ is the principal argument made by the right against any solutions to US health care issues which involve an attempt at universal coverage and any governmental intervention in healthcare. A quote that captures this thinking is as follows.

“Socialized medicine is a bad idea. It stifles innovation and leads to rationing of services”.

(There are, unsurprisingly, many more intemperate quotes that fit here, mainly ones that articulate a bizarre and irrational hatred of Canadians (who are almost universally a thoroughly charming group of people in my experience) and which are only on a nodding acquaintance with English as she is spoke (even as she is spoke over here). But beyond the amusement of counting how many (sics) I can insert into eight lines of purple prose, the value of quotation is questionable.)

The argument though depends upon following being true to hold water.

1) First that healthcare innovation is greater in the US than countries with socialised medical systems (i.e. the rest of the west)
2) Innovation is the same thing as good quality care
3) That America has no rationing of care – or at least better access than elsewhere.

In addition, implicit in the argument is that the same problems of access and rationing occur in all socialized systems (and effectively because this is attributed to excessive government control, that all socialised health systems are large government bureaucracies.

It is worth testing each of these facts to check the argument.

First the suggestion that all socialised medical systems are essentially the same and are effectively large government bureaucracies is nonsensical. While all share some degree of social solidarity as an underpinning principle, variation is manifold. For example provision may be via a single monopolistic provider or a range of competing providers; healthcare professional may be employed by or contract with the state, or they may have no legal relationship with the state at all; funding may be through tax, social or individual insurance; there may or may not be rationing of services via waiting times; if an insurance-based system the insurance may be administered by the state or by private companies; insurance premiums may be paid by employers, employees or all citizens. I could go on. Therefore, tarring all socialized healthcare with the failings of one system – as an inevitable consequence of a healthcare system that is socialized is not only a failure of logic (a is bad, a is an example of b, therefore all b must be bad- by way of analogy replace ‘a’ with “Carlton Palmer’, ‘b’ with English midfielders, and then consider the vision of general footballing loveliness that is Paul Scholes), but also shows an ignorance of the diversity of socialised systems. (I would just like to point out that the above paragraph is the first occasion in the history of the English language that the words “vision of loveliness” and “Paul Scholes” have been used in the same sentence unironically).

The view that socialised medicine necessarily prevents innovation seems fallacious and dependent on a behavioralist view of the incentives to deliver innovation – i.e. you’ll only do it if there’s a buck in it for you. This seems to misunderstand doctors, scientists and health professionals. My reviews of research into the levers for improvement in healthcare point to intrinsic motivations such as altruism and professionalism being a much clearer driver than payment. Whether there is more innovation in the US is a moot point. It is certainly true that American’s are more interested in and optimistic about the development of medical technologies, and it is also true that the proportion of government non defence research expenditure spent on health is higher in the US than in the rest of the west (but the second highest level of expenditure is in the highly socialised UK) . What seems undoubtedly true is that American healthcare is much quicker to adopt expensive technological innovations (rather than necessarily innovate – there is a subtle difference here) and that this leads to increased costs. See for example this article.

Whether this necessarily adds up to better care is questionable. Wennburg (cited op cit), amongst others, has argued that innovation is prone to overuse and excess cost. “Lurking behind the variation in patterns of care are often huge hospital investment in expensive technologies that are directly tied to their economic stability”. In other words, heavy capital investment in expensive technologies can only be supported by making heavy use of the machinery in order to charge a bill and gain a return on capital employed. Typically this investment has been made in diagnostic machinery. A fellow Fellow of mine is working out of Brown University in Rhode Island. Rhode Island is the smallest state in the union (in area at least) and has a population of about 1.25 million. It also has 45 MRI scanners. When he asked why this was he was told

“marketing. Hospitals are not considered cutting edge unless they have their very own MRI.”

Essentially this means that working 8 hours a day – weekends excluded - with one scan every 20 minutes, there is sufficient capacity for every Rhode Islander to have a scan every month. This might be considered a tad excessive. In a rational market, the organisations with under-utilised machines should drop out of the market – BUT GIVEN THE UP FRONT COSTS OF INVESTMENT IN THE MACHINERY THEY CAN’T AFFORD TO. So the only option left under this hyper-expensive PR strategy is to get as much return on the asset as possible through very high levels of referral. This inevitably inflates costs. Hard to think of a nicer example of supply-induced demand – but of- course the supply itself is responding to a cultural myth about the thrill of the new. For a succinct expose of the fallacy that quick adoption of new technologies necessarily means better quality healthcare please check the writing of Paul Krugman here .

This argument also collapses because it assumes that socialised medicine is incapable of innovation. In fact the one part of the US healthcare system that is most socialised, the Veterans Administration, has, recently, one of the best track records in true innovation (i.e. genuinely developing better quality services – not just being too hasty in paying a lot more for new products that are only slightly better than those that pre-exist). This is referenced in the economist’s article above (in terms of its use of IT – which having seen demonstrated is genuinely impressive), and in terms of its adoption of quality improvement techniques, and transformation of its model of care (which not only got of higher quality but became cheaper too. Good references for this are contained here. If you have Pub Med or Medline you can find a plethora of papers in peer reviewed journals.

The stifling innovation argument is wrong both in its logic (innovation necessarily equals better care) and in its fact (socialised systems innovate – and may innovate more wisely). The next post considers the charge of rationing.