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Bill Steigerwald Bill Steigerwald, 2/15/2008 [Archive]

Health care its cure -- Interview with Regina Herzlinger



Money magazine has dubbed Regina Herzlinger the "Godmother" of consumer-driven health care, and itís not just because she has written books with titles like "Consumer-Driven Health Care: Implications for Providers, Payers and Policymakers." The first woman to be "tenured and chaired" at Harvard Business School, Professor Herzlinger is widely known for her innovative research into health care. Her latest book is last yearís "Who Killed Health Care?" It outlines her plan for creating a consumer-driven system that would deliver affordable, high-quality care to everyone by putting insurance money in the hands of patients, removing the third-party middleman in the doctor-patient relationship and giving employers cost relief. I talked to Herzlinger Wednesday, Feb. 13, by phone from her office in Cambridge, Mass.:

Q: What is your shorthand description of the health-care system we have now in the United States?

A: Too costly and too erratic in quality, but still a system that preserves peopleís choice.

Q: What do you mean by "still preserves peopleís choice"?

A: Youíre not forced to go with a single-payer system where you have no independent voice about what youíll pay for what kinds of benefits.

Q: Who are the bad guys who are wrecking or ruining or distorting our health-care system?

A: Well, essentially the problem is that you and I have taken part of our salaries and given them to our employers to use in buying health insurance on our behalf. There is no way they could buy our clothes or our homes or anything else as well as we can -- and they donít do a very good job of buying health insurance, either. The only reason weíve done that is because they can use our salaries pre-tax to buy health insurance ... The same problem -- i.e., a third party buying on our behalf -- also holds for Medicare, where the purchasing is done by the U.S. government, and for Medicaid, where the purchasing is done by state and local governments. So the biggest problem with our health-care system is that the agents we have appointed to take care of health insurance and health care -- which are the government and businesses -- are not very good at it.

Q: If we had a consumer-driven system of health care, what would it look like?

A: Everybody would be required to buy health insurance. If you were poor, you wouldnít be stuffed into Medicaid, which is not a great program because lots of doctors refuse to see Medicaid patients because they get paid so badly for them. Instead, you would be given money to go out and shop for health insurance just like everybody else. Eventually, people on Medicare would be cast out and they could buy what they wanted. Thatís what a consumer-driven system would look like -- in other words, you and I would be buying the health insurance.

The second crucial attribute of this system is in order to make sure that we werenít buying stupid, we would need a lot of information, not only about the quality of our health insurers but also about the quality of the health-care providers that they provide access to. I need open-heart surgery? How good is this doctor in that hospital versus another doctor in some other kind of hospital? Thatís what we need.

Q: What or who is the chief obstacle to our developing a better system?

A: One is this tax preference, where only your employer can use pre-tax money to buy health insurance. ... The problem that is much more difficult to correct is the problem of transparency, and that is that providers do not want to be measured and they are hugely powerful. But unless we know whether we are buying a Toyota or an Edsel, weíre never going to get to a higher-quality, lower-cost health-care system. And the only way you and I can know that, because we are not doctors and we are not scientists, is if we had good data that was accessible to us.

Q: What do you think of Hillary Clinton's health-care plan?

A: Well, I like the universal coverage and she does have choice, so allegedly under her plan you could choose to either buy a private health insurance or a public insurance. Thatís the rub. The public choice that she would offer is hugely subsidized. For instance, she would offer Medicare for people like us. Well, Medicare -- ha -- for every eight dollars spent, seven dollars are paid by somebody other than the recipient. So if we were offered Medicare, which is hugely subsidized, of course we would opt for it. But we would put a tremendous burden on our children and grandchildren, and we would enlarge the governmentís stranglehold on the health-care system. Government is not good for health care. Government is political.

Government is bureaucratic. Government kills off innovation. Not a good idea. Her plans for controlling costs are equally bureaucratic. It is that the government would tell doctors how to practice medicine better. Already, physicians in their 50s and 60s canít wait to leave the profession. They just canít stand it. This would put the final nails in the physician coffins.

Q: Does any politician have a better plan than Mrs. Clinton?

A: I think McCain has a pretty good plan. Heís very high on transparency. None of the other candidates really push transparency because the special interests are so powerful and they donít want it. McCain has the courage to say, "Iím going to make data available about how good your doctors and hospitals are," so in that way itís better.

Q: Are you optimistic or pessimistic that our political leaders have the wisdom to take their paws off health care and allow a free market or a semblance of one to develop?

A: No. If the Democrats get elected, absolutely not. And what I now see, they are all about more government -- more government funding, more government control. I teach at the Harvard Business School. In a class of 100 students, I have 20 fully trained doctors. I say, "What the heck are you doing here? Why arenít you practicing medicine?" They say, "I cannot practice medicine any more." Thatís a tragedy and that tragedy will become much worse under a Democratic administration.

Bill Steigerwald is a columnist at the Pittsburgh Tribune-Review. E-mail Bill at steigerwald@caglecartoons.com. ©Pittsburgh Tribune-Review, All Rights Reserved.

RESTRICTIONS: Bill Steigerwald's columns may not be reprinted in general circulation print media in Pennsylvania's Allegheny, Beaver, Butler, and Westmoreland Counties.

If you're not a paying subscriber to our service, you must contact us to print or post this column on the web. Distributed exclusively by Cagle Cartoons, Inc. Sales sales@cagle.com (805) 969-2829.

Longer version for Web sites

Money magazine has dubbed Regina Herzlinger the "Godmother" of consumer-driven health care, and itís not just because has written books with titles like "Consumer-Driven Health Care: Implications for Providers, Payers and Policymakers." The first woman to be "tenured and chaired" at Harvard Business School, Professor Herzlinger is widely known for her innovative research into health care and has written extensively for publications like the Wall Street Journal and health care industry journals. Her latest book is last yearís "Who Killed Health Care?: America's $2 Trillion Medical Problem -- and the Consumer-Driven Cure." It outlines her plan for creating a consumer-driven system that would deliver affordable, high-quality care to everyone by putting insurance money in the hands of patients, removing the third-party middleman in the doctor-patient relationship and giving employers cost relief. I talked to Herzlinger Feb. 13 by phone from her office in Cambridge, Mass.

Q: What is your shorthand description of the health-care system we have now in the United States?

A: Too costly and too erratic in quality, but still a system that preserves peopleís choice.

Q: What do you mean by "still preserves peopleís choice"?

A: Youíre not forced to go with a single-payer system where you have no independent voice about what youíll pay for what kinds of benefits.

Q: Is our health-care system as bad as our politicians and the media tell us it is?

A: Well, not all the politicians think itís that bad, but certainly the media trumpets that -- and it is a hugely unfair kind of trumpeting. One of the issues is that the World Health Organization ranks us as very low in quality of care. Of course, one of its criteria for quality of care is whether everybody is insured or not. That seems like not a good criterion to use. Most of the important research in medicine, which is so promising to finally make medicine into a real science, is done in the U.S. And certainly, if you compare the U.S. to a country like Japan or Germany or the Scandinavian countries, itís a ridiculous comparison because if you go to Japan or Germany you wonít see the diversity we have in the United States. And certain ancestries are much more prone to certain kinds of illnesses than others. For example, African-Americans are much more prone to cardiovascular disease and diabetes than Caucasians. So this kind of willy-nilly quality measure that doesnít adjust for the differences within the population seems to me ridiculous.

Q: Who are the bad guys who are wrecking or ruining or distorting our health-care system?

A: Well, essentially the problem is that you and I have taken part of our salaries and given them to our employers to use in buying health insurance on our behalf. There is no way they could buy our clothes or our homes or anything else as well as we can -- and they donít do a very good job of buying health insurance, either.

The only reason weíve done that is because they can use our salaries pre-tax to buy health insurance, whereas if I were cashed out by Harvard and it gave me back the $15,000 I use on health care, I would have to pay taxes on those $15,000; I could only use after-tax money. So as inept as employers are in buying health insurance for their employees -- and they are inept not because they are stupid but because how can they possibly know what you want versus what I want; we only do it because of the tax status, and thatís a big problem.

The same problem -- i.e., a third party buying on our behalf -- also holds for Medicare, where the purchasing is done by the U.S. government, and for Medicaid, where the purchasing is done by state and local governments. So the biggest problem with our health-care system is that the agents we have appointed to take care of health insurance and health care -- which are the government and businesses -- are not very good at it.

Q: If we had a consumer-driven system of health care, what would it look like?

A: Everybody would be required to buy health insurance. If you were poor, you wouldnít be stuffed into Medicaid, which is not a great program because lots of doctors refuse to see Medicaid patients because they get paid so badly for them. Instead, you would be given money to go out and shop for health insurance just like everybody else. Eventually, people on Medicare would be cast out and they could buy what they wanted. Thatís what a consumer-driven system would look like -- in other words, you and I would be buying the health insurance.

The second crucial attribute of this system is in order to make sure that we werenít buying stupid, we would need a lot of information, not only about the quality of our health insurers but also about the quality of the health-care providers that they provide access to. I need open-heart surgery? How good is this doctor in that hospital versus another doctor in some other kind of hospital? Thatís what we need.

Q: What or who is the chief obstacle to our developing a better system?

A: One is this tax preference, where only your employer can use pre-tax money to buy health insurance; thatís a huge barrier and itís a big (undertaking) for employers. They donít like buying insurance; they have a business to run. They have a paper to publish or something else to do and they are obligated to buy this very important item for us. So the tax preference is a huge item and Democrat or Republican, that will be corrected by the next president. The problem that is much more difficult to correct is the problem of transparency, and that is that providers do not want to be measured and they are hugely powerful. But unless we know whether we are buying a Toyota or an Edsel, weíre never going to get to a higher-quality, lower-cost health-care system. And the only way you and I can know that, because we are not doctors and we are not scientists, is if we had good data that was accessible to us.

Q: The same kind of data we have when we buy a car?

A: Or a computer. Nobody understands how they work. Nevertheless, computers have become cheaper and better and they have become consumer items because thereís terrific information. Thatís why Dell, for example, flourished because people like me who donít know a bit from a byte nevertheless knew Dell was a good purveyor. It no longer is, but when I first bought a computer it was a good purveyor.

Q: What do you think of Hillary Clinton's health-care plan?

A: Well, I like the universal coverage and she does have choice, so allegedly under her plan you could choose to either buy a private health insurance or a public insurance. Thatís the rub. The public choice that she would offer is hugely subsidized. For instance, she would offer Medicare for people like us. Well, Medicare -- ha -- for every eight dollars spent, seven dollars are paid by somebody other than the recipient. So if we were offered Medicare, which is hugely subsidized, of course we would opt for it. But we would put a tremendous burden on our children and grandchildren, and we would enlarge the governmentís stranglehold on the health-care system. Government is not good for health care. Government is political.

Government is bureaucratic. Government kills off innovation. Not a good idea. Her plans for controlling costs are equally bureaucratic. It is that the government would tell doctors how to practice medicine better. Already, physicians in their 50s and 60s canít wait to leave the profession. They just canít stand it. This would put the final nails in the physician coffins.

Q: Does any politician have a better plan than Mrs. Clinton?

A: I think McCain has a pretty good plan. Heís very high on transparency. None of the other candidates really push transparency because the special interests are so powerful and they donít want it. McCain has the courage to say, "Iím going to make data available about how good your doctors and hospitals are," so in that way itís better.

Both Mrs. Clinton and McCain advocate something else thatís very important, and that is they want to get away from "pricing by procedures," where a doctor makes money only when he does something for you. That might seem like a good way to price, but what it stops doctors from doing is doing things that might make you a lot healthier, because if they make you a lot healthier, the doctor wonít be paid anymore. This is called "procedure-based pricing" and itís very pernicious. It stops providers from making sure that they catch diseases early on, for example, or that they use less-costly interventions because although doctors are very good human beings, they are also financial human beings, so they get a financial benefit for doing more rather than a financial benefit for making us healthier so we donít need them so much. Both Clinton and McCain understand this and have promised to change this form of pricing.

Q: Are we heading in the right or wrong direction on health care?

A: I think weíre headed toward universal coverage, which I think is a very good idea for the simple reason that if youíre sick, the 20 percent of the people who are sick spend 80 percent of the money on health care. If you are sick and uninsured, thereís no way you will be able to get health insurance because it is so expensive. So until we have the healthy subsidizing the sick, the sick in the United States who donít have health insurance are going to be in the terrible situation of being both sick and uninsured.

McCain doesnít like universal coverage. Neither does Obama. Only Mrs. Clinton is for it. However, Mrs. Clinton and Obama are both for a lot of government intervention. In health care, thatís a really bad thing. McCain is the only one who wants everything to be done through the private sector. For example, he would subsidize people so they could go out and buy health insurance rather than having the government dictate the insurance policy to them.

Q: Like food stamps?

A: Like food stamps. Correct.

Q: Are you optimistic or pessimistic that our political leaders have the wisdom to take their paws off health care and allow a free market or a semblance of one to develop?

A: No. If the Democrats get elected, absolutely not. And what I now see, they are all about more government -- more government funding, more government control. I teach at the Harvard Business School. In a class of 100 students, I have 20 fully trained doctors. I say, "What the heck are you doing here? Why arenít you practicing medicine?" They say, "I cannot practice medicine any more." Thatís a tragedy and that tragedy will become much worse under a Democratic administration.

Bill Steigerwald is a columnist at the Pittsburgh Tribune-Review. E-mail Bill at steigerwald@caglecartoons.com. ©Pittsburgh Tribune-Review, All Rights Reserved.

RESTRICTIONS: Bill Steigerwald's columns may not be reprinted in general circulation print media in Pennsylvania's Allegheny, Beaver, Butler, and Westmoreland Counties.

If you're not a paying subscriber to our service, you must contact us to print or post this column on the web. Distributed exclusively by Cagle Cartoons, Inc. Sales sales@cagle.com (805) 969-2829.



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