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.

The uninsured get good care anyway and the only uninsured people are bad people, so it’s their fault that they get bad care (eh?) pt 2

The unstated point here of course is that there is mindset of the “deserving” and “undeserving” which equates material wealth with virtue. And the failure to be able to afford insurance makes you a bad person who therefore doesn’t deserve healthcare. The following are comments from a conservative American talkboard. Some are pretty repellent, and looking at this stuff requires you to take a shower afterwards, but it’s sometimes worth it as, like children being naughty when no-one’s watching them, they reveal their true beliefs when they think the only people who agree with them are listening.

“people are too stupid to shop around for the best insurance

You liberals stupidly think health care is a right [Actually 85% of Americans do believe healthcare is a right ]

Couldn't we solve the uninsured problem by deporting illegal aliens?

[Speaking of the California plan for universal insurance] Of the 4.2 million, 4.19999 million are illegal aliens that Perata would love to be able to get their votes. The State of Confusion is already screwed enough, not to insure all the bums and scumbag illegals that have invaded us. Perata talks of mostly the working poor. I think he meant the welfare receiving illegal poor.”

Yeah, what lovely people. And these views are not widely held. The illegal immigrant lie is particularly egregious (and I think we can see where these commentators are coming from, from the tone of their comments) and I will turn to this in a later entry, but suffice to say that the total cost of healthcare for undocument workers is vanishingly small (by the best estimates I could find perhaps between 0.1 and 0.2% of total US healthcare expenditure, even by the worst case scenarios made out by anti-immigration groups this climbs to 0.3%), and at least three quarters of the uninsured are not undocumented workers.

However, expressed less offensively this idea of “deserving and undeserving” mentality is widespread, both in American health policy, and in voter attitudes to healthcare. The morality of dividing groups into deserving and undeserving (which certainly could not be done by wealth, but perhaps could be on grounds of health related behaviours) is profoundly complex and we could debate for years without ever quite resolving it. This is perhaps why when health authorities were seriously considering explicit rationing in the UK in the 1990s it was very difficult to get further in what should be excluded for public purchase than tattoo removal.

So let’s consider the practical consequences, instead. This simplistic division creates massive extra costs. Obviously if some are excluded, then the included must prove their inclusion – this creates bureaucracy and cost around the transaction of proving inclusion, hence filling in 5 forms a the doctors before being seen.

More fundamentally though, the question remains of what does one do with the excluded, those without insurance. The logic of the undeserving position is to let them die in the street – but that’s very difficult to live with. The alternative is to treat those in extremis via emergency care. But this leads to worse outcomes and is incredibly expensive. If this was a sensible way of organizing healthcare – all healthcare would be organized like that. And someone has to pay for it – and that is of course those with insurance. Insurance premiums are more expensive to cover the free-rider problem caused by the uninsured having to get very expensive emergency care because they don’t get adequate preventive care up front.

The American College of Physicians calculated the costs of healthcare to the uninsured in 2001 as juts shy of $100bn, of which $35bn was not borne by the uninsured- increasing costs elsewhere. They also estimated that each hospital stay by an uninsured person was 13% or $650 per stay more than for insured individuals.

Given the real public concern about the unacceptable costs of uninsurance, rather than the philosophical problems of maintaining the idea of an undeserving population should be the focus of those wishing to challenge the first convenient untruth.

The uninsured get good care anyway and the only uninsured people are bad people, so it’s their fault that they get bad care (eh?) pt 1

I once commented on the irony of parts of the pro-life movement apparently believing that life stops at birth – combining a fanatical devotion to the well-being of the foetus and utter indifference to the well-being of poor adults, the inconsistency of which baffled me. I cited the 40+ million Americans without health insurance as an example of this. I received this charming response from someone without the courage to put his name to his comments.

“ the silly yet widespread mistake that if you don't have health insurance, you are denied medical care in the US.Nonsense! There are many ways to get covered medical care, including just walking into an emergency room to getting Medicaid from the federal and/or state government

The statement that these 'uninsured' people have their lives shortened is poppycock, a statement straight from the Democrat talking points, without source and foundation.”

I need to include a disclaimer - these views are not widespread. The majority of Americans do worry about the problems of the uninsured, as many of them are themselves, as the Clintons noted “one pay cheque away from catastrophe”. Nonetheless, I thought this was a revealing insight of the mind of perhaps 10% - and a very vocal 10% - who do much to shape the discourse.

On one level of course this silly little rant should just be ignored, but it is quite revealing of the logical incoherence, and ignorance (or dishonesty) of those who hold these views.

First the logical incoherence is that if it were true that the uninsured were able to get good care, nobody would bother being insured, as having insurance would not provide sufficient advantage to justify its cost. Were this to happen Stephen Levitt would have another chapter for his next book, if nothing else. Of course, this hasn’t happened. Indeed even Health Savings Accounts combined with consumer-directed policies which go a step in this direction have not encouraged this behaviour. (Basically Consumer Directed policies are a misnomer – they’re an exercise in cost-shifting from the insurer to the individual through high-deductibles and co-pays, incentivized by lower premiums and HSAs which allow tax-free savings to cover these potential greater costs). The next post will look at these in much greater detail but suffice to say that take up has been low and people with them are significantly less satisfied than those with conventional health insurance

The response was also, of course, loaded with factual inaccuracy, not least the view that people with Medicaid coverage are included in the population of the uninsured – the problem is the “hole” of the near poor who don’t qualify for Medicaid but can’t afford private insurance, and aren’t offered insurance through their employer. The majority of these people are in working families. Eight to nine million are children.

That the uninsured are likely to receive unacceptably poor care and that this has an effect on their health status seems from the evidence incontrovertible. The uninsured are far less likely to receive recommended screening and preventive care, are likely to delay getting necessary medical care, not fill prescriptions, not get recommended treatment for reasons of cost. The effect of this is estimated by the Institute of Medicine as an excess mortality of 18,000 people a year (or six Iraqs).

So the “uninsured get good healthcare” claim falls flat as soon as one looks at either the evidence or considers the behaviour of Americans in response to having their insurance limited.

Convenient untruths

We all have myths we hold onto, to defend us from the full horror of existence: the good guy wins in the end, virtue is its own reward, England are one of the teams that can win it… but if you really want to make things better you have to start with some cold-hearted analysis before you can get anywhere.

It’s an odd and broad contrast between Britain and America that the UK’s national myths are profoundly pessimistic, while America’s are basically optimistic. Both have advantages, but in extremis both can poison the discourse. What my wife and I have noted from sitting over here on the west coast is that those shouting loudest in the UK (and as we all know from Colbert , truth is now simply a matter of who shouts loudest) are possessed with a dishonest, hate-filled, nihilistic contempt (and this is the single biggest motivation for us not to bother returning). The extremist perversion of US optimism is somewhat more complex, on the one hand it becomes the uncritical and starry-eyed, “best-nation on earth, God’s-own-people, type schtick” on the other its way of dealing with the fact that the world is less than perfect is to find external and internal enemies who have poisoned the Edenic existence. And this is true of both sides – either “Bush, religious fundamentalists, Big Oil, Big Pharma, military industrial complex, Fox Noise” are to blame or “The Clintons, illegal immigrants, secular progressives, godless yurpeens, eco-fascists, femi-nazis, New York Times” are.

The common local understanding of healthcare shows many of these traits. Actually the most common response is "Yeah-healthcare's-a-real-worry-my-premium-goes-up-every-year-oh-look-Anna-Nicole-Smith's-just-died". But where there are strong views they divide in the following ways. The left tends to argue that healthcare would be great but is broken because big pharma and insurance companies are screwing the little guy – and if only we had a European system we’d be sorted. This is too simplistic, but it’s a logically coherent position, to which you can call some facts and arguments to support – the conspiracy theory bit is what can’t be supported (and which probably stops reform).

The approach of the right though is far more interesting in that it creates a fascinating double think which is very hard for an outsider to understand. American healthcare is simultaneously the best in the world and bad because of bad people. This is bizarre but the following is a useful summation of the points that you will often see made by the same people three sentences apart. Interestingly these arguments are not only factually incorrect but frequently logically inconsistent so showing the evidence and unpicking the flawed logic of will take an entry for each, but here they are, in all their inglory.

Convenient untruth 1: The uninsured problem isn’t a problem because every one still gets good care which is better than anything else in the world and the only uninsured people are bad people, so it’s their fault that they get bad care.

Convenient untruth 2: Any sort of socialized medicine is a bad thing because it leads to rationing but health savings accounts are good because they limit the care that you can buy to what you really need (which isn't rationing... how?). Oh and by the way we shouldn’t have so much bureaucracy in our system.

Convenient untruth 3: We can see who we want – when we want – you have to wait

Convenient untruth 4: We have to have responsibility for our own health...yum donuts

Convenient untruth 5: It’s all the fault of illegal immigrants

The next series of posts deal with each of these arguments in turn.

Yet more gratuitous name-dropping and atypicality

Meeting Senator Durbin (see the other blog) he asked us what we were here for, we said to study US healthcare, and he responded along the lines of whatever you do don’t take it back with you. Which rather set me thinking about why are we here then?

It’s a bit of a truism that America has the best and worst healthcare in the world, but it’s worth thinking what is meant by this. Typically, the point is made about ground breaking innovation – particularly for pharmaceuticals - and contrasts this with the failure to provide proper access for the uninsured (and before any right-wing lunatic anonymouse who might have stumbled here unbidden claims that the uninsured have proper access through an emergency room and that this is better than anything available anywhere else in the rest of the world can I recommend that 1/ you consider the point that waiting until something is an emergency before seeking help is not “proper access” and 2/ you follow the logic of your own position and get rid of your health insurance because if ER based access is so good you are clearly wasting your money).

However I think there is a more interesting contrast to be drawn between the excellence of the really good systems that I and my colleagues are at – Group Health, Kaiser, VA - and much of the rest of the system. I’ve been hugely impressed with the innovation and imagination that I’ve seen in terms of rethinking the process of care, commitment to quality and evidence-based care and use of information technology. So in a sense, those of us inside these systems have much to learn and take back with us. The point is though we are studying the atypical. Extrapolating that US healthcare is therefore superior is like looking at an Aston Martin DB5 and assuming that Austin Allegros had to be good too because both were built in Britain.

Where Durbin is right is that the US system as a whole (or more correctly lack of system) is something which can teach you only what to avoid. The comparison of three simple metrics give some clues (although obviously there is a lifetime’s study in disaggregating some of these effects, it’s not that simple, measurement and comparison issues etc etc). Cost per capita is about 2-3 times the rest of the west , life expectancy is lower than most of the rest of the west and the medical error rate is a third higher than the UK or Germany.

The US is clearly a very diverse country and opinions on all this divide. What is interesting is that the informed voices, regardless of political position, recognize the enormous problems inherent in the system (although in my judgement those on the right are unable to find rational solutions to it because they are hidebound by their ideology – and it’s worth saying that I don’t think the solution here is a single payer system, yet alone a single provider system with equity as a guiding principle like the NHS – so I’m not being a darn socialistic Yurpeen commie here).

What is fascinating though is the self-delusion inherent in the thinking of Red-State America in their refusal to acknowledge the weaknesses of provision of healthcare. This is not meant to patronize, because any attempt to transform the healthcare system will require public support. And interests vested in keeping the current system despite its flaws are very adept at dong two things:
1 Scaring populations into thinking that what they have will be taken away from them
2 Convincing that any progressive reform is a plot of “coastal elites” to show contempt for the “heartlands” [some of this belongs on the other blog, I think]

Drawing on some polling data, and some qualitative arguments from various right wing bloggy types the next post will try to list out the mythology used to avoid addressing the issues and look at some of the facts which debunk these arguments.

Public, Private, Partnership?

One of the biggest differences I have noted in the US healthcare system is one which is not immediately obvious on casual inspection, but essential as soon as one thinks properly; and that is the role of private sector non-health industries in health care. This is, of course, because they are the purchasers of much US healthcare through employment package healthcare schemes.

Their influence could, for example, be said to have contributed to the death of the HMO as a strategy for limiting health care expenditure growth. As the US economy strengthened around the millennium, the labour market tightened, and employers competed on fringe benefits provided. HMOs were increasingly unpopular (think of Helen Hunt in As Good as it Gets), and it was disadvantageous for employers to offer health insurance through them. (I’m sure this is simplistic- but arguments to this effect are made).

Before Christmas I attended a two day conference on pay for performance organised by the Puget Sound Health Alliance. The Alliance is a cross- boundary organization with the remit to publish information about efficiency and quality of local health services. It was founded basically in response to the concerns of King County as a local employer and has on its board of leadership representation from large local employers such as Starbucks (which is headquartered here), Boeing (ditto), and Washington Mutual Bank (ditto - but - er - probably not that much of a surprise). Accordingly respondents to the fairly academic sessions were from representatives of these organizations who brought insights which were sometimes simplistic, sometimes wrong, but often helpful.

The close involvement of business in public services seems to me to have some problems. The multi-purchaser nature of the US health “system” seems to have real problems in terms of transaction costs (which form do I fill in if you’re with Premier Purple Isoceles Health?), and fragmentation of care (every time you change job, you may have to change health plan, and doctor), and clearly the threats to the employers themselves are considerable – not least the death of the American motor industry (or is that just their useless cars).

This involvement contrasts with the UK where the private sector involvement with the public sector is routine ill-informed disparagement , usually on the grounds that:

1/ public sector unions have had the gumption to stop the divide and rule tactics and gross pay inequality that the fat cats have got away with in the private sector

2/ it's not fair that healthcare isn’t exactly the same as making widgets

And 3/ it’s not fair we can’t get our snouts in the trough for all this extra money.

Which is kinda ironic when the public sector is largely responsible for keeping the UK management consultant industry afloat.

For all its failings, and threat to social solidarity, the purchaser role forced on business involving the corporate world in social provision seems to demand a maturity and responsibility on their part which contrasts refreshingly with the contempt and greed normally on display in Britain. So... how to get Digby Jones to stop being so annoying?

Skin in the game

As I have alluded to already, the concept of moral hazard, or more properly the need to make sure that individuals have an incentive to minimize unnecessary use of health services is a strong driver of US health policy – and a key distinction from British health policy.

It is, of course, reasonable to seek to apply limits to healthcare expenditure, given its capacity to skyrocket. It is hard to think of a sector more prone to supplier-induced demand. And this, particularly in the field of pharmaceuticals, is a fair description of where medicine is at, in all industrial and post-industrial economies. Seeking to limit direct patient demand, or make that demand more focused and efficient is one strategy to achieving a limit to healthcare expenditure.

Broadly put, the theory of moral hazard states that if you make a good or service free to the consumer they will use more of it, and use it frivolously without having a genuine need that requires satisfying By putting some of the cost onto the consumer (making sure that they have “skin in the game”) this frivolity of consumption is reduced. A masterly review by Malcolm Gladwell in the New Yorker has identified the history and limitations of this thesis in American health policy.

Since first discussed seriously in the context of healthcare in the late 1960s, the fear of moral hazard has had a profound influence on how the American system seeks to limit healthcare expenditure. This is increasingly important given the increase in expenditure since 2000 as the HMO model of managed care has been increasingly rejected. Understanding the importance of this requires a little history and context. In most instances, historically, reimbursement for healthcare providers has been on a fee for service basis. Reasonable enough, except that this creates a situation where the incentive for providers is to do more where the health benefit is marginal. This, inevitably will lead to increased cost. A good example of this is the enthusiasm for diagnostic testing, or a lot of treatments that would be seen as on the cusp between lifestyle and clinical in the UK. This is one major cause (there are others) of a very high expenditure on healthcare in the US without necessarily having better results to show for it – see the Commonwealth Fund report referred to below.

An obvious economic response is that there is a need to discourage demand for services, but the question then is "demand from whom". One approach is to diminish the demand for services made by doctors' choices. Simplifying somewhat, most HMOs sought to do this by providing a capitation funding for each patient, thereby providing an incentive not to use services which were likely to have only a marginal benefit.

The other approach (and, given the rejection of the HMO model, explicit "socialized" rationing, or a single payer system, about the only one left) is to reduce the demand for services from patients themselves, through putting an upfront charge for the use of services. The logic is that consumers (and in this case this would be an appropriate word) will only use services that they need if they have to pay for them. As the HMO experiment has been increasingly rejected (at least in its pure, captitation-based form) this has become an increasing focus for cost-reduction (or more accurately cost-shifting) policies. This may be done through creating co-pays for basic services such as prescriptions and doctors' office visits, it may be done through a high annual deductible (i.e you pay for the first $500 dollars of healthcare per year) or it may be done through limiting coverage (i.e you have to pay for certain services yourself). This is reaching its apotheosis in policy terms with the creation of high-deductible or “consumer-directed” policies which are specifically designed to encourage consumers taking a risk on having to pay a lot should they be ill on the likelihood that they won't have to.

The trouble with the concept of moral hazard is that it applies imperfectly (if at all) to health services. These services cannot be sensibly considered as “goods and services” in the usual way. Hospitals are not hotels. People tend not to go there for fun, but rather because this is a required for their health. An important study by the RAND institute, nearly 30 years ago, showed that while there was a reduction in health service use once patient charges were introduced, this reduction applied to necessary and unnecessary healthcare equally - patients had insufficient skills and knowledge to work out for themselves when they should take two Tylenol and go to bed and when they really did need to see the doc. Even with the advent of the expert patient, and the mushrooming of health information via the web, there is little reason to suppose that this situation has changed.

In other words, “skin in the game” is too blunt an instrument to increase the efficiency (properly understood) of healthcare. Indeed, there is even an argument that by reducing the incentive to seek effective (and relatively cheaper) healthcare early, it may increase emergency (expensive) access to healthcare later, and may not even be, in the long run, effective in reducing expenditure overall. These arguments, of course, do not even address the issues around equity of access for deprived and marginalised groups.

So is there any form of financial commitment by patients which could be successful? Well, the track record of prescription charges in the UK could be an example of an approach which has, if not clearly limiting demand, at least represented a form of income, and has not had negative effects of people not getting prescriptions for reasons of cost, presumably because the safeguards built in for the old, sick and poor have been effective. I must also confess a certain sympathy with the idea of charging a nominal fee for non-attendees.

However, moral hazard as currently being applied in the US seems little more than intellectual figleaf for a major programme of cost shifting from major corporations as purchasers of care to individual patients. The desire of the corporate purchasers to do this is understandable - the "big three" automotive manufacturers for example are becoming increasingly uncompetitive because of their healthcare costs, and then there is the apocryphal(?) story that Starbucks spends more on health insurance than coffee (which explains a lot - not least why I go to Zoka's). Nonetheless at some point this must lead to a consumer revolt. Eventually, the right will run out of plausible "values issues" to distract low to middle income earners in the heartlands from noticing that they are being shafted. At which point what? Clinton 2? (under Clinton 2?)

Stop Press - someone talks about health policy shock

First sighting of health policy issues in the mid-term. Barak Obama (Dem senator from Illinois), twice, on tonight's Countdown.