Health care reform: without a correct diagnosis, there is no cure.

A persistent headache is a symptom, but the underlying cause can be anything from a migraine to a brain tumor. Good medicine means identifying and treating the cause as well as the symptom. The same is true in health care reform. Though most Americans are satisfied with their own health care, they also see the need for substantial reform. Unfortunately, the well-meaning plans currently presented to Congress are the wrong therapy because they mistake the symptoms for the underlying disease. Nearly everyone agrees on the symptoms: rapidly growing health expenditures, diminished access to affordable insurance causing many to be uninsured, and inadequate quality and outcomes for the dollars spent. But what are the root causes? While there are many contributing factors, three merit special attention. First, there is our inefficient and inequitable system of tax-advantaged, employer-based health insurance. While the federal tax code promotes overspending by making the majority unaware of the true cost of their insurance and care, the code is grossly unfair to the self-employed, small businesses, workers who stick with a bad job because they need the coverage, and workers who lose their jobs after getting sick. This employer-based system arose not by thoughtful design but as an unforeseen result of price controls during World War II and subsequent tax policy. How this developed and persisted despite its unfairness and maladaptive consequences is a powerful illustration of the law of unintended consequences and the fact that government can take six decades or more to fix its obvious mistakes. Second, in health care as in other markets, real progress depends on innovation. Yet health care markets rarely conduct successful experiments with new ways of paying for and organizing health care delivery. Why? Although health care markets have some unique attributes, these are not the explanation for lack of successful innovation. Rather, health insurance markets suffer from overregulation, which limits innovation in both insurance and new ways of delivering medical care. Third, we have Medicaid and Medicare. These enormous federal programs address critical needs by delivering health care to the poor, the disabled, and the elderly. These programs pay providers by administrative pricing formulas that are well documented to promote both overuse and underuse of appropriate care, have led to rising expenditures decoupled from better health, and obligate massive future deficits that everyone agrees are unsustainable. They are also rife with fraud and abuse. And yet the current political debate and the several and incomplete versions of “reform” proposals do little to address these core problems. Proposals such as those that would create a new public insurance program, for example, would likely magnify them and create a new generation of problems that will be as difficult to fix as Medicare has proven to be. Why does the current set of reforms fall short? One reason is that all changes must pass through the political process. For example, any effort at Medicare reform rapidly morphs into a struggle for influence between insurers and pharmaceutical companies, big-city academic health centers and hospitals in rural areas, specialists and primary care providers, federal and state governments, and on down the line. Sadly, innovators — and all too often patients — get lost in these power struggles. Any reform effort that fails to correct the acknowledged fiscal and organizational flaws of Medicare and Medicaid while extending the political gridlock that attends it to a broader segment of the health care system is doomed to failure. Some have offered novel approaches to “payment reform,” but none of these can realistically claim to both increase quality and reduce costs, while being acceptable to Congress. One proposal would create a new executive branch commission to propose changes to Medicare benefits and price controls that Congress could only override with a supermajority vote. While such an experiment might have the potential to reduce political gridlock, it would centralize power in a manner that seems exceptionally risky for a field that accounts for one-sixth of our economy and affects the lives of hundreds of millions of people. I anticipate many new advances in diagnostics, therapeutics, and devices over the coming decades. Optimal development and application of these will flow from a decentralized and innovative health care market and will be suppressed by a system that relies on politics and an all-powerful commission. Some have proposed that comprehensive reform must be achieved quickly, capitalizing on a sense of crisis. I see unacceptable risks to this approach. Instead of achieving a far-reaching and necessary solution for our economy and the nation’s health, the necessity of pleasing enough special interests to get a bill passed will exacerbate our long-term crisis of cost and access. Who can tell what deals within a thousand-page bill that few, apart from lobbyists, have read will influence the state of health care for decades to come? Now that a vote on health care reform will not occur until at least the fall, we should seize this opportunity by stepping back, making the right diagnosis, and then applying therapies that address the underlying disease. Here are a few ideas, based on the diagnoses discussed above, that may work. As with any therapy, these should be introduced as pilot programs, to be extended only if data reveal the desired outcomes. While such an approach will not fulfill the wish to produce a dramatic cure through a single stroke of legislation, it may avoid the pitfalls of the latter approach and have a greater likelihood of reducing the number of uninsured while controlling costs and enhancing outcomes. I propose this without any relationship to the partisan politics of the day that substitutes slogans and misinformation on both sides for meaningful analysis. First, make the tax shelter for health insurance, currently limited to employers, independent of employment. This single, and morally imperative, step would enable the uninsured to use tax-sheltered money to buy health insurance for themselves while permitting insured employees, who are currently limited to a few employer-selected health insurance choices, to become more central in decision making. Second, identify and eliminate the many barriers to entry and innovation in the health care and insurance marketplace. Eliminating what are often hidden barriers to competition will encourage entrepreneurs to offer lower-cost ways of financing and delivering health care, approaches that will deliver greater health care value for the dollars spent. Third, make a serious effort, despite the context of widespread political demagoguery, toward deeply reforming Medicare and Medicaid. As one of many possible examples, try giving some Medicare and Medicaid enrollees earned income credits so they can make cost-conscious decisions among competing health plans. The sicker and less affluent should receive larger transfers, so they can buy adequate coverage. Among other benefits, such an experiment could break the logjam in payment reform and reliance on fee for service and centralized price controls. Reducing rather than increasing the role of politics in health care decisions, while providing assistance for those in need, these pilot therapies would have the salutary effect of placing patients and innovators in a more central role as we determine the future of health care in America. And we would then, at last, be able to align the treatment with the disease, a fundamental principle of responsible medicine. Addendum. I coauthored an article on health care reform and its underlying issues in 1994, and although it was written fifteen years ago, some of the concepts within this article may be relevant today (1). In addition, a recent article in the Atlantic magazine addresses key issues underlying this discussion that I find quite compelling but could not address due to considerations of length (2).