Wednesday, December 06, 2006

COLUMN -- Trade-offs, always trade-offs, but who will control them?

Posted by Craig Westover | 8:19 AM |  

Wednesday, December 6, 2006

Trade-offs, always trade-offs, but who will control them?

Regions Hospital is discontinuing bariatric surgery — reducing the size of the stomach or bypassing parts of it — as a treatment for obesity. According to an article in the Pioneer Press, a key factor in its decision was a decreasing number of patients eligible for the surgery — "eligible" as defined by tighter insurance restrictions.

Regions' action is a Ghost of Christmas Future vision of health care under the managed care model. We ought heed the warning: Managed care necessarily trades off access to health care and quality of service for low cost, but not necessarily in ways beneficial to individual patients or society. Whether it's private interests or government managing health care doesn't matter. The problem is managed care.

Unlike managed care, an individually directed health care system puts purchasing power in the hands of individuals, who make their own health care decisions. "Purchasing power" might be individual funds, insurance proceeds or even government subsidies. The point is that the market adjusts access and price to patient demands, not the financial imperatives of a third party.

From 775 in 1999, bariatric procedures performed in Minnesota rose to 4,778 in 2004. Last year, the number declined and will drop again this year. The increase should not be a surprise. Bariatric surgery appears a (relatively) quick fix for obese patients, profitable for hospitals — and a third party pays the bill. But when it became unsustainable to pay for this "free" procedure, health plans had no choice but to limit the demand by initiating criteria that made bariatric surgery a "last resort" rather than an option for patients. Health plans effectively limited the procedure to those who "really need it."

OK, but that's a good thing, right?

In aggregate, the answer is, "yes," which means it's a good thing if you're healthy and your premiums or taxes are paying the bill. But if you're sick, get in line. Health care must be rationed by access to maintain low-cost premiums or (in a single-payer, government-run system) to avoid tax increases.
When care is rationed by price, the mechanism of individually directed systems, at some point people seek alternatives, and providers compete to offer lower-cost, higher-quality care.

Another financial factor that led Regions to discontinue bariatric surgery was increased use of new, less-invasive techniques that both reduce hospital stays and patient trauma but require a large upfront investment in surgical technology and equipment. Regions couldn't justify the investment.

Given the choice between a paying a lot for painful surgery and a long hospital stay or paying less for a less painful and quicker recovery, most candidates facing bariatric surgery would certainly select the latter. In an individually directed model, hospitals are motivated to use new technology to lower cost, improve service and attract more patients. Even in that situation, Regions might have chosen to get out of the bariatric surgery business for any number of competitive and economic reasons, but in the cost-driven model, it had no choice. Offering better service at lower cost has less market influence when a third party, not patients, determines demand.

When a third party pays the bills and discourages the number of surgeries, hospitals, such as Regions, discontinue that procedure. That reduces competition and lessens the incentive to invest in new technology. Payback for investment in expensive new technology may take longer than in a competitive situation — where price and quality increase demand. The investment may not be made.

It's ironic, but the best way for a managed health plan to appear cost-efficient is to sustain a higher per-patient cost in the long run with the illusion of lower aggregate costs in the present. That is the crux of problem with managed health care — it really doesn't drive any substantial reform.

Ultimately, regardless of the type of health care system, there are always trade-offs between access, cost and quality. The only real question is who gets to make the trade-offs.

In a managed care system, a health plan or government bureaucracy makes decisions for everyone. Regions' decision gives us a vision of that future — reduced cost at the expense of less personalized care, reduced access to some procedures and slower adoption of new medical technology. That's a nightmare but need not be a reality. We need to wake up to the realization that the first imperative of health care reform is putting health care dollars from whatever source under control of patients, the people actually receiving service.

We need to create a system in which individuals have control of the trade-offs.

Note: Thanks to Dr. Robert Geist, Dr. Lee Kurisko, Twila Brase of Citizens Council on Health Care (CCHC), and King Banaian, chairman of the Department of Economics at St. Cloud State, for vetting some of the ideas in this column.