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Doctors. Parents. Citizens. Employers.
They're all ready for the cure to America's health care crisis:
WHO KILLED HEALTH CARE?
“ A brilliant analysis…a must read.”-Bill George, Professor, Harvard Business School and former CEO of Medtronic
“As it becomes more and more obvious to everyone that our current health care system is unsustainable, this is the book that had to be written.”-Daniel H. Johnson, Jr., MD, former president of the American Medical Association
“Regina Herzlinger's ideas to tackle the crisis of the U.S. health care system are based on a keen knowledge of the system's existing difficulties along with insights that introduce the reader to new streamlined choices that have the potential of getting both quality and cost under control.”-Joseph Kennedy, founder, chairman, and president, Citizens Energy Corporation, CEO, Citizens Health Care, former representative (D-Mass)
“Regina Herzlinger...offers a vision of the way things can be, should be, and will be sooner or later. The only question is: how long do we have to wait?”-Greg Scandlen, founder, Consumers for Health Choices
“Regi Herzlinger has brilliantly articulated a better way-embracing the principles of competition and innovation that cause every other sector of our economy to thrive.”-U.S. Senator Tom Coburn (R-Okla), MD
“Following on the heels of her landmark Market-Driven Health Care, Herzlinger lays it on the line with her exposé of what many who work in the health care industry have felt in their gut. Now it is articulated in an entertaining and must-read portrayal, with you and me as the only way out.”-Dennis White, executive vice president for strategic development, National Business Coalition on Health
“Mrs Herzlinger is America's leading advocate of market-driven, consumer-orientated health reform. She wants a national system which requires individuals to buy health insurance, with help in the form of tax breaks for all punters, and subsidies for the poorest. She wants insurance prices to be risk-adjusted and hospitals to be free to charge what they like so they can offer new services as the market demands. Most importantly, she wants the government to demand transparency of price and quality from this notoriously murky industry.”-The Economist
Mrs Herzlinger is America's leading advocate of market-driven, consumer-orientated health reform. She wants a national system which requires individuals to buy health insurance, with help in the form of tax breaks for all punters, and subsidies for the poorest. She wants insurance prices to be risk-adjusted and hospitals to be free to charge what they like so they can offer new services as the market demands. Most importantly, she wants the government to demand transparency of price and quality from this notoriously murky industry.”-The Economist
Jack Morgan needed a kidney transplant. His loving daughter volunteered to donate one of her kidneys and Jack had health insurance.
What could go wrong?
Jack never got the transplant. Debilitated by his kidney disease, Jack Morgan died.
Who killed him?
The U. S. health care system: All the parties in health care whose role was to help him—the health insurers, hospitals, corporate human resource personnel, the U.S. Congress, and the health public policy academics—killed Jack Morgan.
They meant well, but they were more interested in protecting their own welfare than his. Along the way, they diminished and depressed the roles of doctors, the one group most capable of protecting Jack.
With its gargantuan costs, the U.S. health care system is killing our economy too, choking the global competitiveness of American firms and the welfare of future generations of Americans.
If we become sick, all of us are potential Jack Morgans, the victims of our self-serving, bloated health care system.
We can correct these problems; but only if you and I, and our doctors, take control and implement a consumer-driven health care system.
Who Killed Health Care?
Who Killed Health Care? tells the story of how the third parties in health care—neither doctors nor patients—seized control of the money we pay for our health care system and how we can get it back and use it to create the efficient, effective system we need.
This essay is an attack on our present health care system as well as a presentation of a new, future health care system that differs from everything we have today. I am not conducting a minor skirmish or merely suggesting adjustments to your insurance plan's benefits or adding customer-friendly practices to your hospital. This is a full-blown attack on the structures and the architects of our present system.
Our $2 trillion health care system is as large as the economy of China. And yet, despite all this spending, millions of people cannot get the care they need because it costs too much or because our fragmented health care system cannot efficiently supply integrated, multifaceted treatment for their chronic diseases or disabilities. If they are uninsured, our primarily nonprofit hospitals all too often gouge them with the highest prices they charge and then use criminal-like collection tactics to ensure payment.
You may not realize it, but we all pay for all of this. If we are employed, our boss takes part of our salary and uses it to pay for this system.1 If we are self-employed, we pay horrendously high premiums for insurance plans. And as taxpayers, we funded the government's 44 percent share of 2004 health care costs.2
The system giveth and the system taketh away. It takes your money, time, and health, and it gives generously to Wall Street and fat-cat businesspeople and hospital executives who earn millions of dollars. Dr. William W. McGuire, the former CEO of United-Healthcare, one of the country's largest health insurers, not only received $1.7 billion worth of stock options during his tenure,3 but also had a jet at his disposal and a red carpet reportedly rolled out to meet his limo so his tootsies did not have to meet the same ground on which we ordinary mortals step.4 This money, or at least some of it, could have provided better health care or lower costs for United-Healthcare's enrollees, but instead it wound up in Dr. McGuire's very large bank account and literally fell under his feet.
I am not suggesting that we put more money into our health care system. At close to $2 trillion, or nearly 20 percent of our economy, we put more than enough money into it. Nor do I think that we must set up yet another bureaucracy that will take our money and then ration our health care. All of us can likely have all the care we need with current spending levels. What I am advocating is using the money we currently spend differently and more effectively so that we can get the health care we want and even cover those who are now forced to go without health insurance because they cannot afford it.
The solution I will discuss here goes by the name consumer-driven health care. It's a term that I popularized, and it's become a common way to describe this new health care solution. Google it and see for yourself.
Consumer-driven health care empowers individuals and brings their force to bear on the offerings of doctors, hospitals, and insurance and pharmaceutical companies. It converts the entire system to one that is responsive to you and me as the ultimate consumers of its goods and services.
As I show in the course of the book, there are consumer-driven health insurers that give you the health care you need at a price you are willing to pay; there are lower-cost hospitals that do not treat you like a slab of meat; and there are governments that do what they are supposed to—help the poor, provide transparency, and protect against fraud and abuse—rather than telling your doctor how to practice medicine. There is a way to create dynamic markets for health services that are more effective, more efficient, and more responsive to the patient-consumer—and her doctor—than anything we have today. The last chapters are devoted to describing that system, how to make it work, the proper roles of government and business in creating and sustaining it, and the benefits and good health it will bring to you.
Who Killed Jack Morgan?
The day I learned Jack Morgan had died of kidney disease was the day I knew our health care system had died along with him.
The kidney is the body's filtering system. Kidney disease victims are essentially poisoned and drowned. The filters in Jack's kidneys, which were functioning at less than 20 percent of normal, could not effectively remove waste and keep his fluids regulated. When the disease first struck, the people around Jack, who was normally a lean bundle of energy, noticed that he had become lethargic and puffy. His usually glowing skin was dry and scaly. His HMO doctor thought he was depressed, and he gave Jack a prescription for a generic drug. But, after repeated visits, when his symptoms did not improve, Jack was correctly diagnosed. An artificial kidney, called a dialysis machine, replicated the function of his natural kidneys. But after many years of dialysis, it was no longer enough. Jack needed a new kidney, a good one, transplanted into his body.
What could go wrong? Everything. Everything went wrong, and Jack never got the transplant. Instead, he died of his disease. His death was not painful, at least not for him. He died quickly, poisoned by his own waste, drowned by his own fluids. But it was painful for the many people who loved him because they knew his death was premature. With a new kidney, Jack could have lived another 20 or more years.
Jack was killed by an inept, malfunctioning, costly health care system that he thought was protecting him. A system that for all intents and purposes is dead. He was killed . . .
Who exactly killed him? And why?
Remember the book and film Murder on the Orient Express, Agatha Christie's story of a man murdered on a train? It turns out that all the passengers had a hand in his death.5
That's what happened to Jack Morgan—every part of the health care system failed him. Unlike the killers in the Christie mystery, they didn't mean to do it, but they did it anyway. They were so caught up in their self-interest that they forgot what their work was all about—Jack Morgan's health. In the U.S. health care system, and in the United Kingdom, Europe, and Canada, trillions of dollars are spent on health care, but no one gives a voice to its consumers. In these nations, this means that you and I are not being heard. Jack could not speak for himself, and there was no ombudsman to speak for him.
The killers work in insurance and hospital firms that have lost their souls, firms that have become more interested in money and perpetuating themselves than in providing health. Employers, as well as the U.S. Congress and a bevy of health policy academics, are also implicated. They were satisfied with substituting simple, utopian abstractions, like the idea that an insurer or a government can "manage health care" cheaper and better than your doctor, for the thousands of complex interactions that should guide the practice of medicine.
The problem begins with the hospitals—the bloated behemoths that account for the largest part of our health care system, nearly a trillion dollars' worth, and represent the major reason for its cost increases. Their costs rise at a pace that generally exceeds the growth of their services. They have managed this through shameless manipulation of their nonprofit image and massive political contributions. The hospitals have convinced the U.S. Congress to suppress potential competitors, such as physician-controlled specialty hospitals, which could provide better and cheaper services, and to grant them valuable tax exemptions. They've also persuaded local judges and juries to strangle competition by allowing mergers of hospitals and other consolidations.
Clearly, the term nonprofit when applied to these hospitals is a joke. The reality behind the saintly caregiver image they like to promote is startling. These supposedly altruistic institutions earn hundreds of millions of dollars in profit, keep billions of dollars in cash reserves, and pay their executives millions in salary. They play hardball, screwing the uninsured with inflated charges and collection tactics worthy of criminals.
Outrageous hospital costs have gravely injured the employers who buy their employees' health insurance. Since 2000, health insurance premiums have increased by 73 percent compared to cumulative increases in inflation and wages of about 15 percent.6 Although they themselves are victimized by the system, employers, in their turn, have become killers.
Some employers, especially small ones, no longer can afford to offer health insurance. As for the other larger employers, in an effort to control costs, they have allowed their human resources (HR) staffs to restrict employees' choice of health insurance plans, frequently offering only one—a managed care insurance plan. The HR types believe that by restricting choice and giving the insurance companies a large volume of enrollees, they can achieve meaningful cost control. But they are profoundly wrong in their belief: to the contrary, choice supports competition, competition fuels innovation, and innovation is the only way to make things better and cheaper.
The paternalistic HR staff became convinced that the managed care insurers would control costs better than the consumers or the doctors. But they put their faith in the wrong institution; the managed care sector has strayed from its early spiritual roots in the Kaiser organization that originally created the concept of "managed care" as a fundamentally different way of providing better, cheaper health care. As managed care organizations transitioned into an industry, rather than a movement, they lost their souls—all too many were focused on profits at the expense of their enrollees' health care.
Next, the U.S. government's Congress and executive branch enabled this series of disastrous events not only by helping hospitals suppress competition but also by passing legislation that forced U.S. employers to offer managed care options whether they wanted to or not. In addition, the Congress has wrung vast, unwitting subsidies out of us to shower on the managed care insurers and drugs they favor. As a final blow, our Congress has begun to practice medicine, through "pay-for-performance" schemes that reward health service providers who follow Uncle Sam's medical cookbook.
Former government executives who sit on the boards of directors of insurance and health services firms keep congressional relationships well oiled. They are well compensated for their work. The person who once ran the U.S. government's massive Medicare program, for example, was a member of the board of directors at United-Healthcare that approved $1.6 billion in payments to Dr. William McGuire, the firm's former CEO and chairman. She did pretty well herself—earning nearly $15 million in stock, in addition to other compensation, for her board services.7
The health policy academics also enabled Jack's death, motivated by their self-interest and belief in their superior intellects to advocate for a large role in the control of the system. They paved the way, through their intellectual discourse and public policy papers, for technocrats to oversee physicians and usurp their judgments and treatment preferences—the ugly core of managed care and pay-for-performance systems.
The academics succeeded in blaming the failures of health care in this country on the doctors who actually treat patients. They claimed that practicing physicians made mistakes that would be eliminated if they were controlled by academic researchers who, somehow, know how to practice better medicine. Their efforts were all about placing the individual doctor under their control or that of their technocrat surrogates. The last few recent studies of the Institute of Medicine, one of the National Academies and a group of health policy experts set up to advise the U.S. Congress, focus on how terrible the doctors are.8 Their solution? Just give us more power to tell the clinical docs how to do it right.
But, presently, medicine is more art than science. Unlike the powerful, universal laws of physics that inform the practice of engineering, there are few inviolate rules in the sciences of biology and biochemistry to inform the practice of medicine. Scientists are just beginning to understand how our bodies function, as new human genome research decodes the uncertainty of our biology, fate, and health. So where is the science that will enable some bureaucrat to tell your doctor, who knows you so much better than the bureaucrat, how to practice medicine on you? It does not exist.
Some academics accuse the practicing doctors of unbridled greed too, claiming that they give patients medical services they do not need just to jack up their income. Yes, some do, but the majority do not.9 To the contrary, many doctors lie to insurers only to make sure that their patients can get the medical care they need, and two-thirds donate 11 hours each month of their time to patients for free.10
The academics and policy makers had their way. After decades of brainwashing with this kind of academic preaching, the U.S. Congress passed a whole set of laws, twice as long as the King James Bible of 1,377 pages, that constrain doctors who want to go into the health care services business.11 But in its rush to pass these restrictive laws, Congress was abandoning this nation's passion for innovations and the entrepreneurs who bring them to life. Many of our most important companies were founded by businesspeople who deeply understood their core technologies, in the way that doctors, and only doctors, understand the practice of medicine. Thomas Edison was not only the brilliant businessman who started General Electric; he was also a brilliant inventor. Henry Ford not only founded the Ford Motor Company; he was also a genius mechanical engineer who in only eight years slashed the price of automobiles by more than half with his technological and managerial innovations.12 Bill Gates was not only the visionary founder of the great business, Microsoft, but also an excellent software writer. But if these guys were doctors, they would likely not be allowed to create the same sort of excellent, effective, efficient businesses in health care.
While the Congress and academics pounded away at the practicing doctors' failures, they did not celebrate their successes. Some of the leaders in the physician community also lost sight of the purpose of health care, having been caught up in the politics. But of all the many participants in the health care system, it is the doctors who have more steadfastly adhered to their ethics as professionals. Through scientific innovations in the practice of medicine, we have witnessed a dramatic increase in life span and decrease in illness. Yet physicians' inflation-adjusted incomes dropped by 7 percent from 1995 to 2003, while those of professional and technical workers increased by 7 percent.13 And, increasingly, physicians are asked to follow medical care recipes concocted by insurers and government bureaucrats. With their professional autonomy and financial well-being compromised, small wonder that the number of applicants to medical schools decreased by nearly 20 percent between 1996 and 2006.14 When I ask my MD students why they have enrolled in the Harvard Business School for an MBA, many say, "I cannot practice medicine anymore."
The kind of system that exists now hates innovation. It hates outsiders with good ideas. Yet sometimes, against all odds, the outsiders succeed. Two brilliant scientists who helped Jack to stay alive as long as he did fit into that category. Their genius profoundly altered the pattern of care for kidney disease.
One was the classic academic—a wiry Dutch MD/Ph.D. with a long face, big nose, and Euro-style goatee, clad in the scientific researcher uniform of rumpled chinos, T shirt, and sneakers. Willem Kolff is his name, and he is a raving genius. When I met him, a decade ago, he was a twenty-something in vitality and intellect boxed into an eighty-something body. He invented an artificial kidney that filters the blood of impurities in a lengthy, painful, but life-saving process called dialysis. The second was more your idea of a good doctor—grandfatherly, pious, smiling, noble Joe Murray, from Boston's Brigham and Women's Hospital. He introduced kidney transplantation from a living donor.
Mother Nature is the best of engineers: because kidneys are so important, she has given us two of them. But, despite the security blanket, they may both fail, largely because of diabetes (nearly half of new cases) and/or high blood pressure (25 percent).15
Transplants are a great solution. Joe Murray performed the first transplant of a kidney taken from a living donor. But as recently as August 15, 2006, there were 67,328 people waiting for a kidney but only 13,268 kidneys available. Sadly, the demand far outstrips the supply.16
Dialysis, which rids the body of impurities, is the only alternative to transplants. Roman sweat baths were likely among the first sites for dialysis. Romans who sweated impurities from their bodies were purified but desiccated, trading profound thirst for kidney failure.
The key to an artificial kidney lay in the most mundane of materials—plastics: a membrane so porous that it allowed the impurities in the blood to leach out but sufficiently strong to withstand the pressure created by the flow of blood. During World War II, in Nazi-occupied Holland, Willem Kolff found this membrane in sausage casing made of cellulose acetate. He wound yards and yards of it around a drum, seated it in a vat of liquid, used an engine scavenged from a lawn mower as a power source, and thus created the first artificial kidney.
No good deed goes unpunished in health care. Sure, these two helped people with kidney disease to live good and useful lives, but these doctors also took a lot of abuse along the way. They persevered in the face of unrelenting opposition to their innovations in kidney disease treatment by the status quo medical establishment. You'll hear more about that later.
In the course of my attack, you will meet some other riveting personalities amid the hundreds of thousands of faceless businesspeople, hospital executives, politicians, academics, and bureaucrats who created this destructive system. One was the Prince of Darkness, former President Richard Nixon, who kick-started the managed care insurance movement with legislation that forced employers to offer HMOs as health insurance options to their employees and supported these HMOs with massive federal government subsidies that were funded by the taxpayers and that lowered the prices of the HMOs. They also include the Odd Couple who created Kaiser, a large California HMO—a can-do, huffing, puffing entrepreneur, Henry Kaiser, and Dr. Sidney Garfield, who so admired Kaiser, 24 years his elder, that he married the sister of Kaiser's wife so he could become Kaiser's brother-in-law. Believe it or not, there are some heroes, too, such as doctors Willem Kolff and Joe Murray, whom you've already briefly met, and Richard "Dickie" Scruggs, a Mississippi plaintiff lawyer who, despite his boyish nickname, is as huggable as a shark. Scruggs is bringing the hospitals to their knees in suits about their outrageous overcharges of uninsured patients.
A Bold New Consumer-Driven Health Care System
We have incrementalized our way, one law at a time, into the health care system that killed Jack Morgan. U.S. health care costs too much, and it does too little for too few. Let's toss out the old laws that empowered all the third parties who helped to kill Jack Morgan—the employers, hospitals, insurers, Congress, and academics. We need bold new laws that empower us and the entrepreneurial medical care providers who provide our health care so we can make the system work the way it should.
For political, policy, and corporate leaders, for families and children, for all of us who need and who practice health care, we are only a few major actions away from a consumer-driven system in the United States and from seeing similar benefits in Canada and Europe. In the United States, these actions will involve our federal and state governments, but most of all they will involve all of us as individuals using our influence to convince our governments to heal our $2 trillion health care problem.
To cure our health care problem, we need innovators and laws that sweep away the obstacles. Incremental changes to our laws without a clear vision of what we are trying to attain got us into this mess; for example, Richard Nixon's ad hoc stabs at health care public policy entangled us with managed care and congressional management of the care for kidney disease. Incremental changes to our laws will not solve the problem. We need vision and boldness, not politics as usual.
A consumer-driven health care system can keep the Jack Morgans hale and healthy without breaking the back of our economy or the spirit of our doctors. When you control the money in the health care system, the institutions that helped to kill Jack Morgan will either change their behavior or find themselves replaced by new, entrepreneurial, consumer-driven ones.
Consumer-driven insurers will design consumer-friendly insurance policies that give you the benefits, coverage, and doctors you want at a price you are willing to pay. If you want managed care, OK; but if you want another kind of policy, you will have access to that too. Consumer-friendly hospitals will take part in integrated teams that give you everything you need for your disease or disability. They will abandon their quest to dominate the health care delivery system.
Consumer-friendly employers will direct their HR staff to give you back the part of your salary that they used to buy your health insurance, and then they will help you choose from the many new varieties of policies that become available.
The U.S. Congress will pass laws that enable you to buy your health insurance with tax-free income, help to create information about the quality and prices of medical care providers, and transfer money to the poor so they can shop for health insurance like all other Americans. Senators and representatives will stop practicing medicine and setting prices. They will get out of the way, and let the doctors do the doctoring and us do the shopping.
Last, the academics will research how to make this consumer-driven market work better, just like the Nobel Prize-winning economists who help to uncover inefficiencies in the financial markets and devise ways to correct them.
Consumer-Driven Health Care: The Bold Laws That Can Make It Happen
Consumer-driven health care has powerful enemies, the status quo fat cats or single-payer ideologues who spin powerful, seductive tales about its dangers.
The only ones who can make it happen are you and I.
So I am ending this essay not with the literary equivalent of a flurry of drums but with a list of the five points that we should ensure are in the legislative plans that will make consumer-driven health care happen.
If we want excellent health care and insurance for all Americans at a price that citizens and taxpayers can afford, here then is the bold legislative solution, to be implemented in state legislatures and the U.S. Congress, that will create it:
To your good health and prosperity!
Posted February 26, 2008
Consumer-driven healthcare means that we shop for our healthcre services just like we shop for a car, furniture, a handyman or a plumber. We try to get the best value for the dollar. We leave it up to the entrepreneurs to provide us with the best for the least. Competition brings down the cost of most everything, and healthcare costs are no exception. Regina Herzlinger makes an excellent argument for this in her book in a most pasionate manner. It is quite obvious by the tone of her book that she wants to get her message across. As I critique her book I will lightly address Medicare and Medicaid as they are both very broad subjects unto themselves, albeit they come under the same umbrella. I shall address the 'healthcare for all mantra' only. I am a licensed nursing home administrator, who owned and operated a skilled nursing home from 1986 to 2001, with as many as 60 employees, and like most employers, I provided health care coverage. As an entrepreneur I never worked so hard in my life! Before purchasing the nursing home and becoming an entrepreneur, I spent 18 years working at the University of Washington. And although at the time, I felt I really worked hard, after arriving at 8 am and leaving at 5 pm, I rarely took my work home with me. Not so when I was operating my own business. It was 24/7! This is not unusual for entrepreneurs. This is the way it works, and this is the reason consumer-driven health care will work. Doctors, nurses,and all healthcare providers will all compete for the same consumer dollar. And Dr. Herzlinger explains succinctly and explicitly how this can be done. Moreover, individuals who cannot afford healthcare will be empowered with tax monies to shop for their own services. That is, get the most bang for their buck! What a concept! Mitt Romney, former Governor of Massachusetts, set up a program similar to what Dr. Herzlinger proposes. And, Secretary of Health and Human Services, Michael Leavitt, from what I've read supports a radically different healthcare system from what is in place today. The reason I share this with you is to explain what Dr. Herzlinger is trying to tell America. Make healthcare a consumer-driven operation and keep the government out of it. Let the entrepreneurs keep costs down by competing with one another hard and strong. This will bring about more innovation, research and invention than ever before. America can and should be the leader in providing the best healthcare in the world effectively, efficiently and economically. Spending more doesn't necessarily translate into making it better--at least it hasn't so far. Dr. Herzlinger identifies brilliantly who killed healthcare and delineates how it was done, and why it was done. It makes for facinating reading. And she names names. Her book covers much of the history of healthcare in America. But, most importantly, she explains exactly what she thinks can and should be done immediately. It's up to us to make it happen! Virginia Frost DeBordWas this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted August 14, 2007
Finally, someone is saying what must be said about the debate that goes on everyday regarding health care costs in America and what should be done about it. We have two choices. The first is to move toward a government sponsored single payor system, in which physicians are relegated to the role of civil servants, even more abused and demoralized than they are today. In this system, managerial and technical innovation is penalized out of existence, patients have little or no choice, and care is rationed to control costs. This seems to be the direction our federal government is heading. In this system, health care is considered a right. But does anyone really have the God given right to demand the services of another human being? Would this not be indentured servitude? Doesn't this go against what our country stands for? The second is a consumer driven free market system, in which the actual consumer of a health service is allowed to chose where and with what intensity his or her care is delivered. In this system free market forces shape cost and availability of services and providers of health services are accountable to their customers. This book is the most accurate description of this war for control of the massive health care budget this reader has ever experienced. If you are one of the participants in the war, you will not be able to put this book down. As a physician, I really appreciate Dr. Herzlinger's acknowledgment that physician's still are most closely aligned with their patient's best interests. This is truly a great book!Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted April 3, 2012
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Posted September 25, 2011
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Posted August 26, 2011
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Posted April 7, 2009
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