Spending Less and Improving Health Care

In the lead up to this week’s arguments at the Supreme Court over the health care reform law, 23andMe got the opinion of two doctors on what’s ailing the country’s medical system.

On separate visits we heard from Bob Kocher, an MD and partner at Venrock who previously served as a special assistant to the president for Healthcare and Economic Policy and was instrumental in writing the reform law. A few weeks after hearing from Kocher we heard from Robert Pearl, also an MD and the Executive Director and CEO of The Kaiser Permanente Medical Group. Under Pearl’s leadership Kaiser has been singled out as an example of how to deliver quality affordable health.

Robert Pearl, MD

While Kocher’s and Pearl’s opinions on the law and whether the court will uphold it diverged on some points, both men offered a pretty grim diagnosis if some sort of reform doesn’t go forward. Spending on health care continues to grow more rapidly than the economy as a whole. We now spend about 18 percent of our GDP on health care or  — a larger share than what we spend on manufacturing or retail trade. Back in the early 1960s health care costs were only about 4 percent of GDP. According to Pearl, the rapidly growing costs are on course to cripple the economy.

The irony about all this spending is that while we pay out far more than any other country in the world and more than twice the average for industrialized countries, our outcomes are worse. We have lower life expectancy and higher infant mortality rates than countries that spend far less.

Under the current system there aren’t incentives for preventing diseases. All the upside is in treatment or interventions and this drives costs up.

“People have a hard time understanding that we are able to spend less and improve quality,” said Pearl.

He touted Kaiser — the largest medical group in the nation — as a model for better care at less cost.

“If every American got the same care (as they do at Kaiser) there would be 200,000 fewer strokes each year, 75,000 people wouldn’t die of cancer and the mortality rate of AIDS/HIV would be halved; sepsis in hospitals would diminish by 40 percent,” Pearl said.

Some of this is done through better use of data, integrating treatment and preventative care and effectively using technology. He pointed out that in many ways medical care is still a cottage industry in America with doctors providing “piecemeal” services isolated from each other. And he said the system is largely out of touch with the economic efficiencies and technologies we see in other sectors, like banking.  He foresees simple fixes such as the widespread use of electronic records similar to the system used by Kaiser, as well as video-links for some types of doctors visits and the use of more email exchanges between doctors and patients. All these can reduce costs and improve efficiency, he said.

Much of this is in line with Kocher’s prescription for reform.

Bob Kocher, MD

Back in 2009, Kocher and several others authored a report for the Brookings Institute, called “Bending the Cost Curve,” that outlined in detail several strategies for reducing the growth of health care costs. Many of these ideas were incorporated into the health care reform bill.

He outlined for us some of the things he felt were key components of those strategies, foremost of which was moving away from paying by treatments toward a system that bundled payments. For example instead of compensating a hospital for all the different treatments they delivered to a diabetes patient in a year, the hospital would be paid one lump sum for treating everything related to that patient’s care in a year while meeting certain quality metrics.

Both Kocher and Pearl also talked about giving patients access to more information to involve them in their own health decisions and empower them to make choices. Kocher mentioned that giving people more information about the costs and performance of doctors and hospitals empowers them to be better consumers. They’ll know which doctors and hospitals have better outcomes and this will help them make smarter decisions when choosing where they spend their health care dollars. This is also the premise behind the company Castlight Health, where Kocher is on the board of directors.

Both Kocher and Pearl believe that genetics tests like 23andMe’s will play a role in making health care more personal and they believe that the tests will become increasingly more commonplace. But, as Pearl said, there is a long delay in the adoption of new technology within the health care industry. There is also a lot of negative inertia within the system in which the rewards are for treatment not for prevention.

23andMe CEO and co-founder Anne Wojcicki recently wrote about this explaining:

“If I develop type 2 diabetes, the whole healthcare system knows how to deal with it, treat and profit from it. But if I discover I am at high risk for type 2 diabetes, I change my diet and exercise patterns and successfully prevent it, no one profits but me. We believe that engaging people in their own health care by giving people access to their genetic information and informing them of how to prevent disease can help.”

While all the attention this week is on the legal questions being argued in front of the Supreme Court, this broader question about how best to lower costs, improve quality and empower people in their own health care isn’t going to go away any time soon.


  • Carolyn

    The statement about preventive medicine is something I said back in the early 1990s and late 1980s. Practice of medicine in the US is primarily focused on “it’s all about the money” attitude and not prevention. With the addition of preservatives in our food and also in our medicine that only works to enhance the practice of treat the ailment instead of preventing the ailments. With the new mandate of adding Nickle to sugar cane which is not needed for sugar cane that only worsens the problem of allergies and illnesses. There are many people who are allergic to Nickle. That alloy is in canned foods because it is in the cans. Generic medicines contain inactive ingredients that include things many people are allergic to if you research and find out what is in these long named items. Why should wax even be in medicine period? Wood pulp? GeSh…are they deliberately poisoning us?

  • Katrina

    Nothing in the world will help unless people wake up to the basics of whole unprocessed food, exercise, sleep and hydration. But with death grip of the processed food/agribusiness industries, the processed junk lining virtually every supermarket aisle and fast food outlets lining every highway and byway, and people not getting adequate exercise, nothing will change. It’s a spiral into oblivion.

    Not to mention the death grip of the pharmaceutical industry that has forced the medical profession into a toxic “standard of care” using powerful synthetic drugs that both poison the patient and poison the environment and are the 4th leading cause of death — that doctors MUST prescribe or risk lawsuits for not following “standard practices”… and the brainwashing of a dumbed-down populace via Big Pharma TV advertising…

    The system is so incredibly broken that I see no hope other than the few people who actually take personal responsibility for their own health.

    However in the”reformed” system the health conscious will have to foot the bill for the mass of people who don’t take care of themselves — the obese and the unhealthy gobbling their fast food on the fast track to heart attacks and diabetes.

    The “healthcare system” is so inherently toxic that electronic records and technology are mere digital bandaids.

  • Chris

    Infant mortality rates are a poor metric for comparing healthcare across countries, namely because different countries count them differently. In some countries a baby who dies within 48 hours is counted as a stillbirth for instance. This metric has been widely debunked, do some more research next time.

  • Martin

    “We” don’t have lower life expectancy or higher infant mortality, because “we” aren’t a collective and don’t have a collective health care system. People are free to be uninsured and to go to alternative providers. One of the reasons health care spending is higher is because it is a luxury and we are richer.

    For some people there are other priorities, lets not assume, for instance, that recent immigrants are idiots for sending money back to their home countries instead of purchasing health insurance as would be required by Obamacare. There are other priorities. I suspect many would be doing that even if the government didn’t require ERs to treat them.

    Proposals for lump sum payments or pay for condition or diagnosis turn your local physician or health care provider into death panels. Their financial interests coincide with the best interests of the patients less than 100% and with the preferences of the patient probably even less.

    We are rich, we want more healthcare, lets make it less expensive, so we can afford more of it. Let’s try increasing competition and availability of providers. Relax the monopoly on the prescription pad, allow nurses, PAs and perhaps even individuals to “prescribe”. Let competing drugs out on the market earlier and have better post-market monitoring. 10s of thousands of lives will be saved by no longer delaying access to life saving drugs.

    Katrina, Let’s not be so insensitive to the obese. Obesity has a higher heritability than sexual orientation and yet you aren’t faulting their behaviors or complaining about their healthcare costs.

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