Upton Sinclair, Elinor Ostrom, and the end of the illusion

February 4, 2013 at 12:11 PM Leave a comment

Why do we think we can continue to increase what we spend on health care forever?  And if we cannot, how will we ever develop the discipline to control costs?  A friend of mine asked this in an email conversation several months ago.  Here was my answer:

What I think we are watching is the end of an illusion, so well maintained, that there are no limits in time, money, or resources that we can devote to the pursuit of the medically-based fix.  We have created and maintained this illusion so very well that we have two generations of medical professionals who claim as birthright this illusion and defend it with passion and fervor.  We medical professionals make outstanding incomes from this illusion, and so in the words of Upton Sinclair, “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”  And nonetheless, we are out of money in this richest of all societies to continue to believe what isn’t true.

The mechanisms by which we have preserved this illusion are instructive.  The third party payer system allows us to feel emotionally that the cost of an intervention is just the copay or deductible, even though intellectually we know that to be untrue.  The separation of payment of premiums and delivery of services uncouples them emotionally, and so we don’t feel them as causal.  Indeed, if you have employer based insurance, you don’t even see about 70% of the cost as a payroll deduction, as it’s coming out of your company’s profitability.  In essence, we don’t notice the true cost of medical stuff because we are using pooled dollars, metaphorically grazing our sheep on the village green, in our time of need.  Haven’t we done that for others in their time of need, and so aren’t we entitled to the same?  Of course we are, we think, and the “best” (read: most expensive) intervention possible because of a vague and fervent hope that the additional dollars buy some benefit that we can neither directly sense nor articulate.

The grand challenge of payment reform is to restore some sense of limits to those who allocate finite resources that are fungible into medical interventions.  In essence, we are trying to undo the spending behaviors that have arisen from the lack of accountability that insurance offers us.  While neither I nor anyone I know would want to do without the peace of mind that insurance offers, it also creates moral hazard, the decreased sensitivity to the true costs of goods that comes with not paying the tab out of pocket and at the time of service.

I do some work in payment reform around the country, and I am starting to note a trend: those places with the least are often the first to understand this, and are beginning to behave in ways that reflect health care as a limited and shared community asset.  They are doing it before communities and regions that have more wealth, and therefore the luxury of preserving the aforementioned illusion.  The late Elinor Ostrom’s theory of common pool resource management, for which she won the 2009 Nobel Prize in Economics, is a reasonable first approximation of those mechanisms and structures that create sustainable use of shared resources: http://en.wikipedia.org/wiki/Common-pool_resource.  While its pretty dense, and requires an economist to explain it to us all, it does outline those things that successful communities build to prevent the depletion of stuff all might need at some time but can’t have simultaneously.

So in the best of worlds, when a shiny new medical intervention appears in your community, someone in your community would evaluate this intervention, its cost, and the health it creates, against the aggregated resources your community has to spend on health in general.  They would understand that spending on that intervention necessarily means other interventions would likely not be funded, and it would have to stand up to that test of value.  As all of us know, this evaluating someone doesn’t exist in American communities, and we have a primal cultural dread of that someone that goes back to the reason many of our ancestors migrated here.  Despite this, as I like to say, being out of money has an amazing clarifying effect on people’s thinking, and we are figuring it out with a speed inversely proportional to the amount of disposable income we have to spend on preserving the illusion.

Thus, as usual, Don Berwick is right: cost is the quality dimension of our time, as continuing to delude ourselves increases the odds that some in our society will receive nothing, as we decide that the way to make sure there is enough in the common pool is to exclude some of us, to make the pool of recipients smaller, to decide that really we were only meant to share with those who look, think, and behave like us. And therein lies the great moral dilemma of our time: who are we talking about when we use the term “we”?

Who indeed.

Entry filed under: Uncategorized.

Congratulations to Jane Brock and CFMC Warren Buffett, ketchup, airlines, and health care consolidation

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