Part I – The Nature of the Beast
Chapter 1 – An Introduction
Why should you care about our dysfunctional healthcare system and how to fix it? The slow-motion disaster of American healthcare. How it affects you – even if you think that your employer or the government is picking up the tab. Close to a trillion dollars per year is now wasted, amounting to a non-legislated tax of $3,000 on every American man, woman and child.
Chapter 2 – Are We Getting What We’re Paying For?
Although we’re used to hearing that our healthcare is “the best in the world”, we’re hardly getting what we pay for. By most objective measures, Americans are no better off (and sometimes worse off) than the citizens of most developed countries. The big difference is that we spend more – a lot more – to get these mediocre results. Why is this? To find out, we have to follow the money.
Chapter 3 – Where Does All of Our Money Go?
What accounts for this enormous difference in U.S. healthcare spending? Are we getting more services, are prices higher, or are we simply wasting the money we’re spending? As it turns out, we have fewer and shorter hospital admissions than elsewhere. We pay more for brand-name drugs, but less for generics. We spend vastly more on outpatient care and our outpatient charges are much higher, but physician fees are not high enough to account for the difference. Something strange is going on.
Chapter 4. Into Thin Air
The fact is that about one-quarter of our hard-earned healthcare dollars simply vanish into thin air. The vast majority of these dollars are being funneled into administrative expenses that do not provide a single iota of clinical benefit. We spend almost three and one-half times as much per capita on healthcare administration cost than Canada. Since 1968 the number of U.S. healthcare administrators has grown 500%, from 750,000 to well over 4 million. In that same time, the number of practicing physicians grew only 60%, from 500,000 to only 800,000. Just the excess amount that we spend on overhead and administration would be enough to buy private insurance for all 47 million uninsured Americans and still have $83 billion left over each year. Inefficiency, not the level of care, is what’s killing us.
Chapter 5. The Healthcare Machine
Why is inefficiency the hallmark of U.S healthcare? If we think of the healthcare system as a machine, ours is too complex, has too much friction, and is being jammed by outside tinkering. The sheer number of moving parts is staggering. Where other countries might have one insurer for doctors to deal with, America has thousands, each with different forms and processes. When multiplied by millions of providers, patients, labs, pharmacies and government rules, tens of millions of different transaction combinations must be accommodated. Each of these combinations consumes energy and generates overhead expense; expense that has no counterpart in most other healthcare systems. When combined with ill-considered regulation, the result is a machine that is primed to waste time and money.
Chapter 6. How and Why They Spin: Inside Key Wheels
Within the healthcare machine four gears stand out as being the most important components of the system: (1) doctors and other healthcare providers; (2) health insurers; (3) government; and (4) patients. Understanding the system means that we have to understand the motives and business models of each of these components. Each acts logically within the context of their own business model. Once these business models are explained it becomes easy to see how the interaction between them has created a system that is illogical, counterproductive, and even destructive.
Part II – Why the Machine is Breaking Down
With the stage set and the players accounted for, we can now identify specific problems that are wastinng billions of healthcare dollars each day.
Chapter 7. Too Many Parts
How did our healthcare system come to have so many parts? Poor planning and state regulations have produced thousands of insurers – each with their own systems, rules and paperwork. Other well-intentioned government regulations accumulate over time and are never revisited, coordinated or rescinded. Paranoia about “quality” and “performance” breeds evermore regulation with diminishing returns.
Chapter 8. Sand in the Gears
While its bad enough to have so many parts, governments and insurers go further by throwing “sand” in the gears of healthcare delivery. The federally mandated way in which providers are paid is artificial, arbitrary and destroys efficient care practices. Attempts to force standardized “best practices” and “guidelines of care” are often counterproductive and costly. The existing medical malpractice system is fragmented, inefficient and unfair to patients an providers alike.
Chapter 9. Friction
“Friction” can be used to describe portions of the healthcare machine that are poorly designed and operated. There are lots of them. They include the lack of a universal patient identifier, paper recordkeeping, and ill-conceived efforts at medical record automation. In fact, many of our efforts to “save money and gain efficiencies” by forcing providers to use electronic medical record systems are only making things worse.
Part III – How to Fix It
Chapter 10. Defining the Desired Outcome
It’s impossible to fix any system unless we first define what we would like the end result to be. This section sets forth some presumptive structural requirements for any acceptable healthcare system that might be adopted. These include ensuring that everyone is covered, fostering simplicity and efficiency, and utilizing market forces. Specific strategies we can use to accomplish these goals are described in detail over the next four chapters.
Chapter 11. Overhauling Payment for Healthcare Goods and Services
How we handle funding, buying and selling of healthcare goods and services serves as the foundation of the entire healthcare system. This chapter sets forth the essential elements of an efficient health insurance and payment system, along with one example that meets all of the design requirements. We see how this particular configuration can be used to greatly simplify both the financing and payment for medical services, and better balance the supply and demand for goods and services. In contrast to the current situation, market forces can allow us to optimize costs rather than simply minimize them. Potential cost savings are quantified and documented.
Chapter 12. Dumping Redundancy
Raw, unadulterated duplication of effort accounts for a large fraction of healthcare’s spending on administrative overhead. Much of this can be easily eliminated by simple administrative steps. These include uniform federal licensure of health professionals, single-source credentialing, and the adoption of unique patient identifiers. Potential cost savings are quantified and documented.
Chapter 13. Blowing Sand Out of the System
Many of the government’s best intentions backfire when it comes to regulating healthcare systems and services. The newest example is the proliferation of “healthcare quality improvement” programs. These cost money and measure worthless parameters, while creating new ways to “game” the system. Ironically, patient safety might be best served by halting these efforts entirely. The management of medical errors and the medical malpractice system can also be made far more effective and efficient while reducing costs. Potential cost savings are quantified and documented.
Chapter 14. Lubricating Points of Friction
Many claims have been made about the enormous cost savings of electronic medical records and healthcare information technologies. Most of these are simplistic, unrealistic and just plain wrong. In this chapter we discuss the rational application of healthcare information technologies and their role in making life simpler and easier for patients and providers alike. Potential cost savings are quantified and documented.
Chapter 15. Where Does the Money Come From?
Claims about cost savings in healthcare are worthless unless you can specify exactly whose budget is going to be affected and why. This chapter is devoted to describing exactly where the cost reductions we’re described will come from, and why (in many cases) these players will be happy to part with the money. The great thing about strategies that improve efficiency is that they frequently create a win-win situation for patients, providers and payers alike.
Chapter 16. The End of An Era
Complex machines that are not properly maintained eventually seize up. The existing U.S. healthcare system is no exception. Our healthcare system has begun to break down rapidly, with costs that are rising even as fewer and fewer people can afford coverage. Real reform consists of reversing this situation by making healthcare simpler rather than more complex. But herein lies a dilemma. Only the federal government can bring about many of the necessary changes, but government is the source of many of these same problems. How can we reform the existing system and ensure that the same problems don’t occur all over again in the future?
Appendix 1 – The HIT-Industrial Complex
This appendix describes the political-economic feedback loop developing between the healthcare information technology industry and federal programs that mandate the use of increasingly expensive and elaborate HIT systems and services.
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