Much changes in less than a year. Yet much stays the same.
Last spring, Dr. Donald Berwick was the administrative head of the Center for Medicare & Medicaid Services (CMS). Now he is out, having left in December, 2011, staying only long enough to arrange $1 billion in funding for Partnership for Patients, a program that gives money for research in what happens to be his old area of work. Conflict of interest? No, simply the ways of Washington.
But while Berwick is no longer at CMS, the ideas he supported still run rampant there, and will impact on Obamacare. With the Supreme Court’s upcoming review of that legislation, I thought it worthwhile to critique an important op-ed Berwick authored in the April 29th issue of the Wall St. Journal last year.
Dr. Berwick said, in his argument “The Right Way to Reform Medicare,” that “Improving quality while reducing costs is a strategy that’s had major success in other fields. Computers, cars, TVs and telephones today do more than they ever have, and the cost of these products has consistently dropped.” That is to say Berwick--then the head of a major government agency--thought the way to save money in Medicare was...Wait For It…to lower costs while improving quality. Such insight! One recalls Lenin’s view that capitalism had made producing goods so simple that any bookkeeper could run an economy.
Dr. Berwick stated a goal but showed little understanding as to how to accomplish it. You don’t get venture capitalists to invest by noting your key insight in running a business is to “lower costs while improving quality.”
Berwick obviously couldn’t have done it as the computer, car, television, and telephone companies did. They did it in a competitive marketplace. Telephone costs didn’t drop under the government monopoly given Ma Bell, and Detroit cars did not show a dramatic improvement until forced to compete against Japanese and European models. Televisions aren’t even made in the USA anymore—competition drove the business overseas—yet with free trade American consumers are continually offered better television products at lower prices.
In each of these areas, quality improvement and cost savings came about by allowing anyone to try anything they thought would most interest and best serve consumers. Yet the model Dr. Berwick recommended we follow in medicine was for a small group of experts to investigate what is the “one best way” to treat or work up or diagnose various diseases. This is exactly the method used by the French government in the 1970s to make the world’s best computer [see “Plan Calcul” and the major French government subsidies to CII and Honeywell in this time frame.] Despite spending billions of dollars on it, you don’t hear much about French computers these days (though if one had outlawed market competition, as the US government has largely outlawed competition in medical care, we might today speak of the wonders of the French computer, able to hold up to 100 MB of data and upload information in mere hours from state-of-the-art floppy disks.)
Another obvious difference between the industries Dr. Berwick commended and medicine is that people pay for their own computers, cars, televisions, and telephones. Did Dr. Berwick think smart phone prices would remain low if the government picked up 90% of the tab? That doesn’t seem to have happened in higher education, whose costs—like medicine—have skyrocketed since government loans and subsidies became the order of the day.
Rather than appreciating the connection between consumers paying for goods and services and producers having an incentive to lower prices, Dr. Berwick condemned last year’s “GOP plans” that “would shift costs to seniors and people with disabilities.” That is, he condemned as a flaw the very essence of the process by which the industries he commended are forced to keep prices low.
One of Dr. Berwick’s command-and-control ideas to keep prices low was to set up a bureaucracy to “[reduce] duplicative tests and procedures that hassle patients and do them [in his judgment] no good at all.” He makes it sound so benign. Yet car companies don’t insist their customers refrain from buying “duplicative” cars, and Steve Jobs was happy to sell people as many iPads as they wished to pay for, even if an outside observer might think one iPad for the den and another for the study is “duplicative.” Prices of cars and computers continue to drop, and I doubt even Dr. Berwick thought the solution in healthcare is to have an oversight committee devoted to preventing consumers from making duplicative purchases.
Here’s the take of a long-practicing radiologist on Dr. Berwick’s idea of duplicative testing, a real-world intrusion on Berwick’s administrative bureaucratic fantasy-land:
A person gets an abdomen CT at a small community hospital. They have general radiologists who do pretty good work but are not among the top-tier in the country. They work with fairly modern but not cutting edge CT machines. They do pretty good, but not state-of-the-art work. And they’re right most, but not all, of the time. Then the patient takes these images to subspecialty expert radiologists working on advanced, cutting edge equipment, and is told the study is inadequate and needs to be repeated to meet their exacting standards. This is a commonplace in medicine. No one here has done anything wrong. Was Dr. Berwick prepared to tell Mayo Clinic or Mass General radiologists that they cannot repeat what to their mind are inadequate exams? Was he ready to tell general radiologists around the country that if they cannot match the quality and standards of subspecialty experts at medical Meccas like Mayo that they should get out of the business or be prepared to not be paid for their efforts? Did he intend to tell patients that to get even basic studies they must travel to Boston, or Rochester? Scottsdale or Jacksonville? Or did he think any physician should be capable of achieving Mayo/MGH standards if they just work and study harder (that is, was he completely oblivious to meritocracy in medicine?)
No one expects a general radiologist to do as good a job as an academic sub-specialist, any more than they expect a Chevrolet to be as good as a Rolls Royce or a Compaq to be as good as an Apple. But in competitive markets Compaq and Chevrolet can say, “Yes, we may not be the best in quality but the bottom line is we’re sufficient for your needs the vast majority of the time and we’re cheaper.” No one in medicine can do this. And no patient insists on it because, after all, they don’t suffer any significant financial cost from the duplication.
The Medicare system Berwick headed pays all radiologists the same for an “abdomen CT,” whether they are a recognized world expert or just out of training. It’s part of the “objective” RBRVS payment system Medicare set up years ago that measures inputs like time and effort but completely ignores differences in quality. Not exactly how Honda and Apple manage things.
Is the solution to have the government pay for services based on their assessment of quality? That depends on whether or not you believe the government is the best judge of the quality of a study you received. Comparing the USPS with FedEx, most would conclude the government is not the best judge of quality in mail delivery, but perhaps judging the quality of medical care is easier…
So, having created a system that pays for services independent of quality, based on time and effort, unshackled from cost concerns of actual consumers who receive the services but do not pay the bills, Dr. Berwick was shocked to find it doesn’t run quite as smoothly or save as much money over time as the computer or cell phone businesses. Did he really think that if a select group of experts determined what the one best phone or computer was that phones and computers would continue to dramatically improve while their prices continued to drop?
Do we want Berwickian experts dealing with questions like this: You have cancer; there are two treatment options. One is painful. The other costs $30,000 more but isn’t painful. Which is the one best method? Clearly it’s not a medical question at all. It is a question of value: How much money are you willing to spend to avoid pain? Did Dr. Berwick think the answer to such questions was completely independent of whether the patient was paying the bill or could foist it off on others? I personally am willing to spend inordinate amounts of Dr. Berwick’s money to avoid pain.
Before they were sent back to the drawing boards, having failed to get any significant buy-in from major medical organizations, Dr. Berwick explained his Accountable Care Organizations by noting they would “coordinate better care for patients” by holding doctors and hospitals “to a strict set of quality standards to ensure they aren’t lowering costs by cutting necessary care.” He then immediately followed this with “Seniors will not have their choice of physician or hospital limited at all.” He apparently couldn’t see the obvious contradiction. What if a senior’s choice involves a doctor or hospital who disagree with Berwick’s experts as to what constitutes “a strict set of quality standards”? It’s as if an educational bureaucrat said “Parents will have no restriction in their choice of teacher, as long as every teacher teaches exactly as we tell them to.”
Meanwhile, nursing staff is rapidly buried in paperwork, and simple procedures have had associated paperwork balloon in the files from 1 page to 15, so as to track and confirm the “strict set of quality standards” are being complied with. Nurses more and more complain that over 50% of their day is spent NOT taking care of patients, because national regulatory agencies demand a growing list of forms be properly documented.
Every pediatric patient seeing the doctor in the United States must now be asked, "Do you feel safe at home?" and "Is there a gun in your house?" This, not cutting edge computer-industry-like-efficiency, is what Dr. Berwick's "strict set of quality standards" becomes: politically correct intrusions on medical practice.
This is why I say Dr. Berwick was an excellent bureaucrat, if a poor economist. He was happy to develop layer after layer of accounting and justification devoted to the claim he would control prices. And when prices rose anyway, as they did during his tenure, no doubt had he stayed he would have been happy to develop even more layers. What he wouldn’t do—for it scares bureaucrats and others whose income is a function of their control of medical dollars—is allow patients to choose for themselves with their own money and allow a market to work. He recognized, and paid homage to, the market in cars, computers, televisions, and telephones, but he wouldn’t dare duplicate the mechanisms of their successes in any but the most superficial of terms.
It’s as if Dr. Berwick had an Escher print—the one, say, of Penrose stairs, or the one of an object having three prongs on the bottom but only two roots at the top—and said he intended to build them in reality. When it’s pointed out that such objects cannot exist in reality—any more than a centralized yet efficient bureaucratic government medical system can work in reality—Berwick would respond that cars and computers and telephones and televisions are all becoming physically more complex yet they are all built in reality, so it’s simply a matter of talking to the right engineers. But technocratic efforts do not solve what Nobel economist Friedrich Hayek called the “Socialist calculation problem,” the inability of centralized systems to take account of the millions of constantly changing facts, desires, and preferences that the market price system deals with automatically. The Soviet Union finally learned that lesson, the hard way.
It’s a lesson that Dr. Berwick, his successors, and President Obama, will learn sooner or later as well…