Debating prescription drug coverage is like trying to put a patch on a tire when you really need a new car. For example, although proposed legislation to permit the importation of price-controlled drugs from other countries would surely help those poor Americans who struggle to pay for prescription drugs, what would be the long-term cost of price controls on promising innovations in the pharmaceutical industry?
What we need is an overhaul of our approach to health insurance. We should cover treatments for specific health problems instead of doling out money for each individual doctor, hospital, drug or procedure.
All other forms of insurance provide remedies for problems--a destroyed roof, a bashed-in fender, the inability to continue earning a living wage. Health insurance, in contrast, provides coverage for inputs--such as hospitals, doctors and, sometimes, outpatient pharmaceuticals.
This curious form of insurance is akin to a restaurant menu that prices each ingredient of an entree. A health insurance version of payment for salsa, for example, would list separate prices for tomatoes, onions and spices, rather than a flat price for salsa. The insurer could then control its costs by limiting use of the expensive ingredients--tomatoes and spices--and opening up the gates for cheap onion consumption.
The result of such an approach on pricing? The chef would no longer focus on creating the best salsa for the money but on minimizing the cost of the salsa ingredients. Innovations in salsa recipes, say the introduction of coriander, would be sacrificed. The whole, a tongue-tingling, lip-smacking salsa, would be much less than the sum of the parts.
Provider-based pricing of health insurance causes a similarly pernicious result in the delivery of healthcare. The whole is less than the sum of the parts. Because, with a few exceptions, there is no health insurance for problems--such as congestive heart failure, diabetes, cancer, back pain. Victims of chronic diseases and disabilities, among others, are hard-pressed to find integrated teams to treat the many complex aspects of their problems.
Consider the plight of diabetics, who typically require not only a primary-care provider and endocrinologist but a whole platoon of experts: cardiologists and nephrologists, because heart and kidney disease are frequent, costly complications of diabetes; podiatrists and dermatologists, for the foot problems and ulcers it causes; and nutritionists and behavioral therapists to support diabetics in the taxing, scrupulous management of their daily lives that the disease requires.
Where can diabetics find such an integrated team? Hardly anywhere. And the results are deadly. Diabetics fall between the cracks of the present, fragmented, provider-oriented system. Only 16% of elderly diabetics received a crucial test of their health status, according to one large study. Poor-quality, fragmented care raises the costs of treating diseases such as diabetes by ignoring cost-effective treatment of early-stage problems and deferring access to needed specialists.
In my book Market-Driven Health Care, I dubbed these integrated problem-solving healthcare teams "focused factories," likening them to their manufacturing equivalents, organizations that raised quality and lowered cost by focusing on one objective. Healthcare-focused factories hold special promise for fighting chronic diseases such as cancer, heart disease, AIDS, etc., that account for 76% of healthcare costs and the disabilities such as back pain and respiratory ailments that lower our productivity.
Some courageous hospital directors have already adopted focused factories, ignoring the reimbursement problems they create. Duke Hospital's program for congestive heart failure illustrates both the strengths and weaknesses of this approach. The program integrated providers from the home to the hospital under one umbrella and made round-the-clock clinical support available to the participants. The results were spectacular: Per-patient costs declined by 28%, largely because improvements in health status reduced the need for costly hospital stays. But the Duke system took a financial hit. After all, insurers pay for hospital stays, not improving the cost-effectiveness of healthcare.
The debate over pharmaceutical coverage is rooted in the definition of coverage. Health insurance must pay for problem-solving treatments, not for individual benefits. Pharmaceuticals should be part of most healthcare treatment packages, as should other mostly noncovered benefits such as long-term care. We must not sacrifice the salsa for a debate over coriander vs. onions. When visionary managers are finally compensated by insurers for creating healthcare-focused factories, a flood of innovation will substantially improve healthcare quality and control its costs.