A Prescription For the fitness Care disaster

With all the shouting about America’s healthcare crisis, many are probably finding it difficult to concentrate, much less understand the cause of the problems confronting us. I find myself dismayed at the tone of the discussion (though I know it—people are scared) as well as bemused that anyone would presume themselves sufficiently qualified to understand how to improve our health care system best simply because they’ve encountered it when people who’ve spent entire careers studying it (and I don’t mean politicians) aren’t sure what to do themselves.


Albert Einstein is reputed to have said that if he had an hour to save the world, he’d spend 55 minutes defining the problem and only 5 minutes solving it. Our healthcare system is far more complex than most who offer solutions admit or recognize. Unless we focus most of our efforts on defining its problems and thoroughly understanding their causes, any changes we make will as likely make them worse as they are better.

Though I’ve worked in the American healthcare system as a physician since 1992 and have seven year’s worth of experience as an administrative director of primary care, I don’t consider myself qualified to thoroughly evaluate the viability of most of the suggestions I’ve heard for improving our health care system. I do think. However, I can contribute to the discussion by describing some of its troubles, taking reasonable guesses at their causes, and outlining some general principles that should be applied in attempting to solve them.

Explaining the move, Grainne Doran, chairwoman of the Royal College of GPs, stated: We’ve come to a level where the impact throughout the board changed into such that the faculties felt the want to have a few shapes of stronger voice. We’re certain via vintage budgets and the capability to make cuts; however, we are not to invest now.

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If we had a health minister in place, they have to be able to make those decisions. Whether it’s an instantaneous rule minister or a Northern Ireland meeting minister, we need to have a minister in the area. “If the meeting experience they can not get moving on from where we are, sensible selections want to be made.”


No one disputes that U.S. healthcare spending has been rising dramatically. According to the Centers for Medicare and Medicaid Services (CMS), healthcare spending is projected to reach $8,160 per person per year by the end of 2009, compared to $356 per person per year in 1970. This increase occurred roughly 2.4% faster than the increase in GDP over the same period. Though GDP varies from year to year and is, therefore, an imperfect way to assess a rise in healthcare costs in comparison to other expenditures from one year to the next, we can still conclude from this data that over the last 40 years, the percentage of our national income (personal, business, and governmental) we’ve spent on health care has been rising. Despite what most assume, this may or may not be bad. It all depends on why spending on health care has been increasing relative to our GDP and how much value we’ve been getting for each dollar we spend.


This is a harder question to answer than many would believe. The rise in healthcare costs (on average, 8.1% per year from 1970 to 2009, calculated from the data above) has exceeded the increase in inflation (4.4% on average over that same period), so we can’t attribute the increased cost to inflation alone. Healthcare expenditures are closely associated with a country’s GDP (the wealthier the nation, the more it spends on healthcare). Yet, even in this, the United States remains an outlier (Figure 3). Is it because of spending on health care for people over the age of 75 (five times what we spend on people between 25 and 34)? In a word, no. Studies show this demographic trend explains only a small percentage of health expenditure growth.


Is it because of the monstrous profits the health insurance companies are raking in? Probably not. It isn’t easy to know for certain as not all insurance companies are publicly traded and, therefore, have balance sheets available for public review. But Aetna, one of the largest publicly traded health insurance companies in North America, reported a 2009 second-quarter profit of $346.7 million, which, if projected out, predicts a yearly profit of around $1.3 billion from the approximately 19 million people they insure.

If we assume their profit margin is average for their industry (even if untrue, it’s unlikely to be orders of magnitude different from the average), the total profit for all private health insurance companies in America, which insured 202 million people (2nd bullet point) in 2007, would come to approximately $13 billion per year. Total healthcare expenditures in 2007 were $2.2 trillion (see Table 1, page 3), which yields a private healthcare industry profit of approximately 0.6% of total healthcare costs (though this analysis mixes data from different years, it can perhaps be permitted as the numbers aren’t likely other by any order of magnitude).

Is it because of healthcare fraud? Estimates of losses due to fraud range as high as 10% of all healthcare expenditures, but it’s hard to find data to back this up. Though some percentage of fraud almost certainly goes undetected, the best way to estimate how much money is lost due to fraud is by looking at how much the government recovers. In 2006, this was $2.2 billion, only 0.1% of $2.1 trillion (see Table 1, page 3) in total healthcare expenditures for that year.

Is it due to pharmaceutical costs? In 2006, total prescription drug expenditures were approximately $216 billion (see Table 2, page 4). Though this amounted to 10% of the $2.1 trillion (see Table 1, page 3) in total healthcare expenditures for that year and must be considered significant, it remains only a small percentage of total healthcare costs.

Is it from administrative costs? In 1999, total administrative costs were estimated to be $294 billion, 25% of the $1.2 trillion (Table 1) in total healthcare expenditures that year. This was a significant percentage in 1999, and it’s hard to imagine it’s shrunk significantly since then.

In the end, though, what probably has contributed the greatest amount to the increase in healthcare spending in the U.S. are two things:

1. Technological innovation.

2. Overutilize health care resources by patients and health care providers.


Technological innovation. Data proving increasing health care costs are due mostly to technological innovation is surprisingly difficult to obtain, but estimates of the contribution to the rise in health care costs due to technical innovation range from 40% to 65% (Table 2, page 8). Though we mostly only have empirical data for this, several examples illustrate the principle. Heart attacks used to be treated with aspirin and prayer. Now, they’re treated with drugs to control shock, pulmonary edema, and arrhythmias, as well as thrombolytic therapy, cardiac catheterization with angioplasty or stenting, and coronary artery bypass grafting. You don’t have to be an economist to determine which scenario is more expensive.

We may learn to perform these same procedures more cheaply over time (the same way we’ve figured out how to make computers cheaper). Still, as the cost per procedure decreases, the total amount spent on each method increases because the number of procedures performed increases. Laparoscopic cholecystectomy is 25% less than the price of an open cholecystectomy, but the rates of both have increased by 60%. As technological advances become more widely available, they become more widely used, and one thing we’re great at doing in the United States is making technology available.

Overutilization of health care resources by both patients and health care providers themselves. We can easily define overutilization as the unnecessary consumption of healthcare resources. What’s not so easy is recognizing it. Every year, from October through February, most patients who come into the Urgent Care Clinic at my hospital are, in my view, doing so unnecessarily. What are they coming in for? Colds. I can offer support, reassurance that nothing is seriously wrong, and advice about over-the-counter remedies, but none of these things will make them better faster (though I can often reduce their concern).

Further, patients have a hard time believing the key to arriving at a correct diagnosis lies in history gathering and careful physical examination rather than technologically-based testing (not that the latter isn’t important—just less so than most patients believe). How much patient-driven overutilization costs the healthcare system is hard to pinpoint as we have mostly only anecdotal evidence.

Further, doctors often disagree about what constitutes unnecessary healthcare consumption. In his excellent article, “The Cost Conundrum,” Atul Gawande argues that doctors’ regional variation in the overutilization of healthcare resources best accounts for the regional variation in Medicare spending per person. He argues that if doctors could be motivated to rein in their overutilization in high-cost areas of the country, it would save Medicare enough money to keep it solvent for 50 years.

A reasonable approach. To get that to happen, however, we need to understand why doctors are overutilizing healthcare resources in the first place:

1. Judgment varies in cases where the medical literature is vague or unhelpful. A variation in practice invariably occurs when faced with diagnostic dilemmas or diseases for which standard treatments haven’t been established. If a primary care doctor suspects her patient has an ulcer, does she treat herself empirically or refer to a gastroenterologist for an endoscopy? If certain “red flag” symptoms are present, most doctors would prefer. If not, some would, and some wouldn’t, depending on their training and the intangible exercise of judgment.

2. Inexperience or poor judgment. More experienced physicians tend to rely on histories and physicals more than less experienced physicians and consequently order fewer and less expensive tests. Studies suggest primary care physicians spend less on tests and procedures than their subspecialty colleagues but obtain similar and sometimes even better outcomes.

3. Fear of being sued. This is especially common in Emergency Room settings but extends to almost every area of medicine.

4. Patients tend to demand more testing rather than less. As noted above. Physicians often have difficulty refusing patient requests for many reasons (e.g., wanting to please them, fear of missing a diagnosis and being sued, etc.).

5. In many settings, overutilization makes doctors more money. Doctors have no reliable incentive to limit their spending unless their pay is capitated or they receive a straight salary.

Gawande’s article implies there exists some level of utilization of health care resources that’s optimal: use too little, and you get mistakes and missed diagnoses; use too much, and excess money gets spent without improving outcomes, paradoxically sometimes resulting in worse products (likely as a result of complications from all the extra testing and treatments).

How can we get doctors to employ uniformly good judgment to order the right number of tests and treatments for each patient–the “sweet spot”–to yield the best outcomes with the lowest risk of complications? Not easily. Fortunately or unfortunately, there is an art to good healthcare resource utilization. Some doctors are more gifted at it than others. Some are more diligent about keeping current. Some care more about their patients.

An explosion of studies of medical tests and treatments has occurred in the last several decades to help guide doctors in choosing the most effective, safest, and even cheapest ways to practice medicine. Still, the diffusion of this evidence-based medicine is a tricky business. Just because beta-blockers, for example, have been shown to improve survival after heart attacks doesn’t mean every physician knows it or provides it. Data clearly show many don’t. How information spreads from the medical literature into medical practice is a subject worthy of an entire post. Getting it to happen uniformly has proven extremely difficult.

In summary, then, most of the increase in spending on health care seems to have come from technological innovation coupled with its overuse by doctors working in systems that motivate them to practice more medicine rather than better medicine, as well as patients who demand the former thinking it yields the latter. But even if we could snap our fingers and magically eliminate all overutilization today, health care in the U.S. would remain among the most expensive in the world, requiring us to ask next—


According to an article in the New England Journal of Medicine titled The Burden of Health Care Costs for Working Families—Implications for Reform, growth in health care spending “can be defined as affordable as long as the rising percentage of income devoted to health care does not reduce standards of living. When absolute increases in income cannot keep up with absolute increases in health care spending, health care growth can be paid for only by sacrificing consumption of goods and services unrelated to health care.”

When would this ever be an acceptable state of affairs? Only when the incremental cost of health care buys equal or greater total value. For example, if you were told to spend 60% of your income on health care shortly. As a result, you’d enjoy a 30% chance of living to the age of 250. Perhaps you’d judge that 60% to be a small price.

It seems to me that the debate on healthcare spending needs to be about this. Certainly, we should work on ways to eliminate overutilization. But the real question isn’t what absolute amount of money is too much to spend on health care. The real question is, what are we getting for the money we spend, and is it worth what we must give up?

People alarmed by the notion that as health care costs increase, policymakers may decide to ration health care don’t realize that we’re already allocating at least some of it. It just doesn’t appear as if we are because we’re giving it on a first-come-first-serve basis—leaving it at least partially up to chance rather than to policy, which we’re uncomfortable defining and enforcing. Thus, we don’t realize why our 90-year-old father in Illinois can’t have the liver he needs because a 14-year-old girl in Alaska got in line first (or maybe our father was in line first and got it while the 14-year-old girl didn’t).

Given that most of us remain uncomfortable with the notion of rationing health care based on criteria like age or utility to society, as technological innovation continues to drive up health care spending, we very well may at some point have to make critical judgments about which medical innovations are worth our entire society sacrificing access to other goods and services (unless we’re so foolish as to repeat the crucial mistake of believing we can keep borrowing money forever without ever having to pay it back).

So, what value are we getting? It varies. The risk of dying from a heart attack has declined by 66% since 1950 due to technological innovation. Because cardiovascular disease ranks as the number one cause of death in the U.S., this would seem to rank high on the scale of value as it benefits a huge proportion of the population. As a result of advances in pharmacology, we can now treat depression, anxiety, and even psychosis far better than anyone could have imagined, even as recently as the mid-1980s (when Prozac was first released). Some increases in healthcare costs have yielded enormous value we wouldn’t want to give up.

But how do we decide whether we’re getting good value from innovations? Scientific studies must prove the innovation (whether a new test or treatment) provides a clinically significant benefit (Aricept is a good example of a drug that works but doesn’t provide great clinical benefit—demented patients score higher on tests of cognitive ability while on it but probably aren’t significantly more functional or substantially better able to remember their children compared to when they’re not). However, comparative effectiveness studies are extremely costly, take a long time to complete, and can never be perfectly applied to every patient. This means some healthcare providers must always use good medical judgment for every patient’s problem.

Who’s best positioned to judge the value to society of the benefit of an innovation—that is, to decide if an innovation’s benefit justifies its cost? I would argue that the American public is the group that ultimately pays for it. How the public’s views could be reconciled and effectively communicated to policymakers efficiently enough to affect actual policy lies far beyond this post’s scope (and perhaps anyone’s imagination).


Many of the population are uninsured or underinsured, limiting or eliminating their access to health care. As a result, this group finds the path of least (and cheapest) resistance- emergency rooms- which has significantly impaired the ability of our nation’s ER physicians to render timely emergency care. In addition, surveys suggest a looming primary care physician shortage relative to the demand for their services.

In my view, this imbalance between supply and demand explains most of the poor customer service patients face in our system every day: long wait times for doctors’ appointments, long wait times in doctors’ offices once their appointment day arrives, then short times spent with doctors inside exam rooms, followed by difficulty reaching their doctors in between office visits, and finally delays in getting test results. This imbalance would likely only partially be alleviated by less healthcare overutilization by patients.


As Freakonomics authors Steven Levitt and Stephen Dubner state, “If morality represents how people would like the world to work, then economics represents how it does work.” Capitalism is based on the principle of enlightened self-interest, a system that creates incentives to yield behavior that benefits suppliers and consumers and, thus, society as a whole. But when incentives get out of whack, people begin to behave in ways that continue to benefit them, often at the expense of others or even at their own cost down the road. Whatever changes we make to our health care system (and there’s always more than one way to skin a cat), we must be sure to align incentives so that the behavior that results in each part of the system contributes to its sustainability rather than its ruin.

Here, then, is a summary of what I consider the best recommendations I’ve come across to address the problems I’ve outlined above:

1. Change the way insurance companies think about doing business. Insurance companies have the same goal as all other businesses: maximize profits. And if a health insurance company is publicly traded and in your 401k portfolio, you want them to maximize profits, too. Unfortunately, the best way to do this is to deny their services to the very customers who pay for them. It’s harder for them to spread risk (the function of any insurance company) relative to a car insurance company because far more people make health insurance claims than car insurance claims. Therefore, it would seem that the private health insurance model is fundamentally flawed from a consumer perspective. We need to create a disincentive for health insurance companies to deny claims (or, conversely, an extra incentive to pay them).

Allowing and encouraging across-state insurance competition would at least partially engage free market forces to drive down insurance premiums and open up new markets to local insurance companies, benefiting both insurance consumers and providers. With their customers now armed with the all-important power to go elsewhere, health insurance companies might come to view the quality they provide service to their customers (i.e., the paying out of claims) to retain and grow their customer business. For this to work, monopolies or near-monopolies must be disbanded or, at the very least, discouraged.

Even if it does work, however, the government will probably still have to tighten regulation of the health insurance industry to ensure some of the heinous abuses that are going on now stop (for example, insurance companies shouldn’t be allowed to stratify consumers into sub-groups based on age and increase premiums based on an older group’s higher average risk of illness because healthy older consumers then end up being penalized for their period rather than their behaviors).

Karl Denninger suggests some intriguing ideas in a post on his blog about requiring insurance companies to offer identical rates to businesses and individuals and creating a mandatory “open enrollment” period. Participants could only opt in or out of a plan every year. This would prevent individuals from only buying insurance when they got sick, eliminating the adverse selection problem that’s driven insurance companies to deny payment for pre-existing conditions.

I would add that. However, reimbursement rates to health care providers are determined in the future (again, an entire post unto itself); all health insurance plans, whether private or public, must reimburse health care providers by an equal percentage to eliminate the existence of “good” and “bad” insurance that’s currently responsible for motivating hospitals and doctors to limit or even deny service to people with low incomes and which may be responsible for the same thing occurring to the elderly in the future (Medicare reimburses only slightly better than Medicaid).

Finally, regarding the idea of a “public option” insurance plan open to all, I worry that if it’s significantly cheaper than private options while providing near-equal benefits, the entire country will rush to it en masse, driving private insurance companies out of business and forcing us all to subsidize one another’s health care with higher taxes and fewer choices. Yet, at the same time, if the cost to the consumer of a “public option” remains comparable to private options, the people it’s meant to help won’t be able to afford it.

2. Motivate the population to engage in healthier lifestyles that have been proven to prevent disease. Prevention of disease probably saves money, though some have argued that living longer increases the likelihood of developing diseases that wouldn’t have otherwise occurred, leading to the overall consumption of more healthcare dollars (though even if that’s true, those extra years of life would be judged by most valuable enough to justify the additional cost. After all, the whole purpose of health care is to improve the quality and quantity of life, not save society money. Let’s not put the cart before the horse).

However, preventing a potentially bad outcome sometime in the future is only weakly motivating psychologically, explaining why so many people have so much trouble getting themselves to exercise, eat right, lose weight, stop smoking, etc. The idea of financially rewarding and punishing desirable behavior is highly controversial. Though I worry this kind of strategy risks enacting policies that may impinge on basic freedoms if taken too far, I’m not against thinking creatively about how we could leverage stronger motivational forces to help people achieve the health goals they want to conduct themselves. After all, most obese people want to lose weight. Most smokers want to quit. They might be more successful if they could find more powerful motivation.

3. Decrease overutilization of health care resources by doctors. I agree with Gawande that finding ways to get doctors to stop overutilizing healthcare resources is a worthy goal that will significantly reduce costs, require a willingness to experiment, and take time. Further, I agree that focusing only on who pays for our health care (whether the public or private sectors) will fail to address the issue adequately. But how can we motivate doctors, whose pens are responsible for most of the money spent on health care in this country, to focus on what’s truly best for their patients? The idea that external bodies—whether insurance companies or government panels—could be used to set standards of care doctors must follow to control costs strikes me as ludicrous. Such bodies have neither the training nor overriding concern for patients’ welfare to be trusted to make those judgments.

Why else do we have doctors to employ their expertise to apply nuanced approaches to complex situations? As long as they work in a system free of incentives that compete with their duty to their patients, they remain in the best position to make decisions about what tests and treatments are worth a given patient’s consideration, as long as they’re careful to avoid overconfident paternalism (refusing to obtain a head CT for a headache might be overconfidently paternalistic; refusing to offer chemotherapy for a cold isn’t).

So perhaps we should eliminate any financial incentive doctors have to care about anything. Still, their patients’ welfare, meaning doctors’ salaries, should be disconnected from the number of surgeries they perform and the number of tests they order. Market forces should instead set them. This model already exists in academic healthcare centers and hasn’t seemed to promote shoddy care when doctors feel they’re being paid fairly. Doctors must earn a good living to compensate for their years of training and the massive debt. Still, no financial incentive for practicing more medicine should be allowed to attach itself to that good living.

4. Decrease overutilization of health care resources by patients. This, it seems to me, requires at least three interventions:

* Making available the right resources for the right problems (so patients aren’t going to the ER for colds but rather to their primary care physicians). This would require hitting the “sweet spot” concerning the number of primary care physicians, best at front-line gatekeeping, not of health care spending as in the old HMO model, but triage and treatment. It would also require recalculating reimbursement levels for primary care services relative to specialty services to encourage more medical students to go into primary care (the reverse of the alarming trend we’ve seen for the last decade).

* A massive effort to increase the health literacy of the general public to improve its ability to triage its complaints (so patients don’t go anywhere for colds or demand MRIs of their backs when their trusted physicians tell them it’s just a strain). This might be best accomplished through a series of educational programs (though given that no one in the private sector has the incentive to fund such programs, it might be one of the few things the government should—we’d need to study and compare different educational programs and methods to see which, if any, reduce unnecessary patient utilization without worsening outcomes and result in more health care savings than they cost).

* Redesigning insurance plans to make patients more financially liable for their healthcare choices. We can’t have people going bankrupt due to illness, nor do we want people to underutilize health care resources (avoiding the ER when they have chest pain, for example), but neither can we continue to support a system in which patients are motivated to over-utilize resources, as the current “prepay for everything” model does.


Given the enormous complexity of the healthcare system, no single post could address every problem that needs to be fixed. Significant issues not raised in this article include the challenges associated with rising drug costs, direct-to-consumer marketing of drugs, end-of-life care, skyrocketing malpractice insurance costs, the lack of cost transparency that enables hospitals to paradoxically charge the uninsured more than the insured for the same respect, extending health care insurance coverage to those who still don’t have it, improving administrative efficiency to reduce costs, the implementation of electronic medical records to reduce medical error, the financial burden of businesses being required to provide their employees with health insurance, and tort reform.

All are profoundly interdependent, standing together like the proverbial house of cards. To attend to anyone is to affect them all, which is why rushing through health care reform without careful contemplation risks unintended and potentially devastating consequences. Change does need to come, but if we don’t allow ourselves time to think through the problems clearly and cleverly and implement solutions in a measured fashion, we risk bringing down that house of cards rather than cementing it as a fitness Care disaster.

Sandy Ryan
Writer. Music advocate. Devoted bacon trailblazer. Hardcore web fanatic. Travel junkie. Avid creator. Thinker. Skateboarder, coffee addict, record lover, reclaimed wood collector and RGD member. Producing at the junction of minimalism and mathematics to craft delightful brand experiences. I'm a designer and this is my work.