The Quote of the Day for November 28, 2008 briefly discussed the JHPPL article by Pauline Vaillancourt Rosenau and Christiaan J. Lako, “An Experiment with Regulated Competition and Individual Mandates for Universal Health Care: The New Dutch Health Insurance System.” The authors referred to the Dutch reform as “Enthoven-inspired.”

Alain C. Enthoven, Ph.D. is the Marriner S. Eccles Professor of Public and Private Management, emeritus, at Stanford University, and a core faculty member at CHP/PCOR. Known as the “father of managed competition,” he was one of the founders of the Jackson Hole Group, a national think-tank on healthcare policy.

Professor Enthoven provides this response to the November 28 Quote of the Day message:

Don’t leap to unfounded conclusions too quickly in this complex and important subject.

In 1977-8, when I designed and proposed Consumer Choice Health Plan, a plan for universal health insurance based on regulated competition in the private sector, I observed that, in the United States, there were many alternatives to inflationary uncoordinated fee-for-service which dominates our scene. They were mainly prepaid multi-specialty group practices (PGPs), also other multi-specialty group practices, all proven to be able to reduce and manage costs, as well as physician-created individual practice associations some of which were and are being successful in managing and reducing costs. So the main idea was to subject inflationary uncoordinated fee for service to competition to produce value for money from organized alternatives that were reducing costs, and ultimately to replace uncoordinated fee for service almost entirely. Unfortunately, the USA has not created market conditions favorable to efficient economical health care (most employers do not even offer PGPs as a choice), so these systems have not been able to prove themselves on a national scale. And Medicare has remained dominated by fee for service, and it is a huge strain on Federal finances. In smaller regional situations, however, competing multi-specialty group practices have been proved to be far less costly than fee for service when embedded in a competition model. Perhaps the best example is the public employee’s Employee Trust Funds in the State of Wisconsin. The state employees plan is a good model of managed competition. Employees are offered a variety of choices and the state pays approximately the low priced plan. They have some excellent multi specialty group practices with their own insurance plans, and some group health cooperatives which are similar. The great majority of employees have chosen HMOs. And the costs in Madison, the state capitol where the market is dominated by public employees are far less than they are on the east coast of Wisonsin dominated by fee for service (a difference of approximately $4000 per family per year.)

Unfortunately, the Dutch have no prepaid group practices or even multi specialty group practices. Their insurance companies are selling what we call “preferred provider insurance” which is a variation of fee for service solo practice. For several reasons, they have not been able or willing to become highly selective in their provider networks. For one, many prices are still regulated by government. For another, they lack public quality measures that the insurers could use to select narrower networks. So, as I told the Dutch leaders in a 2006 lecture, they have implemented only half of the managed competition concept. They need integrated delivery systems as we have in America. I suggested to the Minister of Health that after studying American integrated delivery systems, they get to work on starting some in Holland. That will take time. Nothing can change the whole health care system in a short time. So many Dutch people have been over here studying American integrated delivery systems, including the Minister of Health and his team. They need to find some doctors who are interested in the project and then fund some startups. That would put a lot of pressure on the insurance companies to innovate in more economical health care.

It is interesting to note that the British have several teams studying American integrated delivery systems. The process started in 2002 when a famous British doctor and his wife, a former Kaiser Permanente executive, published an article in the British Medical Journal called “More For their Dollar: A comparison of California’s Kaiser Permanente and the British National Health Service.” They found that after making appropriate price and other adjustments, that Kaiser costs were similar to the NHS and for that, Kaiser members got far more for their dollar than the NHS, including such things as much more prompt access to advanced technologies, aggressive outreach for cancer prevention, etc. That was met with a storm of debate. But when the dust settled, their conclusion proved unshakeable. British scholars found, for example, that members 65 and over in the UK spent 3.5 times as many days in hospital as did similar people in Kaiser in California. Their follow up studies found that the essential ingredient was far superior integration of medical practices. My editorial accompanying the 2002 article was entitled “Competition Made them Do It.”

So in my view, it would be a serious error to leap to the conclusion that the Dutch model is a flop. It is a work in progress. The Dutch health care model does get good ratings in international surveys and their costs remain far below ours in America. Whether we are talking Holland or the USA, costs will not be contained and quality not improved, until we replace uncoordinated fee for service with efficient organized delivery systems that use information technology to measure and improve results, that accept responsibility for managing costs and quality. The good news is that when given a responsible choice, most consumers choose the efficient organized delivery systems. So the change does not need to be forced on an unwilling population (as, unfortunately, many employers tried in the 1990s.)

Alain Enthoven

Quote of the Day, “Lessons from the Netherlands,” Nov. 28, 2008:

Quote of the Day, “Feachem’s Kaiser study not credible,” June 1, 2004:

We share with Alain Enthoven the concern over our very high and ever increasing spending for a mediocre health care system that leaves so many out. We have disagreed with him (sometimes obnoxiously so) on the best approach to return value and high performance to our health care delivery system. He supports “universal health insurance based on regulated competition in the private sector,” whereas we support a publicly administered and publicly financed single payer national health program.

Enthoven discusses prepaid multi-specialty group practices (PGPs) and physician-created individual practice associations (IPAs) as examples of integrated systems that can manage and control costs. Although there are several variations, Kaiser Permanente can serve as a proxy for the concept of an integrated health care delivery system.

We certainly have no problem with integrated health care delivery systems. In fact, we have included them in our models of single payer reform, though with the primary function of delivering health care, rather than in a risk-beariing insurance role. Arnold Relman, a single payer supporter, has stressed the importance of not only reforming health care financing, but also the importance of using multi-specialty, not-for-profit organizations to deliver health care.

It seems that where we part with Prof. Enthoven is over the role of competition. I think that we all agree that physicians, hospitals, and other health care providers competing based on the quality of their services would be beneficial in the health care marketplace. Competing on price is quite another issue.

Most economists agree that price competition plays almost no role for individuals who must access the system for health care. So most of the discussion of price competition has been in the choice of insurance products. We agree with Enthoven that our existing, dysfunctional, fragmented, multi-payer system in the USA “has not created market conditions favorable to efficient, economical health care.”

Enthoven seems to concede that the Dutch model is not yet a model for the United States since it relies on “preferred provider insurance” (PPOs). He considers the Dutch reform to be a work in progress, still requiring the transformation of the health care delivery system into “integrated delivery systems.”

Imagine maybe four competing integrated health care delivery systems within a metropolis, again using Kaiser Permanente as a proxy. Each one would have its own exclusive professionals, hospitals and other facilities to provide the full range of health care services, including the most advanced technological services. Would each one have an organ transplant service? What about the suburban and rural sectors served by these integrated systems? Would each integrated system provide a primary care outpost, four in each community, duplicating services in these outreach areas? Could one metropolis support four very costly, duplicative, integrated health delivery systems?

The point is that integrated delivery systems are an important part of our entire health care delivery system, but they can never serve as an exclusive single financing model to herd us into systems competing on price (and quality), with no other place to turn for health care.

In one paragraph above, Enthoven mentions the comparison of Kaiser Permanente with the British National Health Service, citing a study that was done by Richard Feachem, et al. Enthoven states that their study “met with a storm of debate… but when the dust settled, their conclusion proved unshakeable.” Feachem’s flawed study is a diversion from the important issues discussed here, but the dust never did settle. A critique of Feachem’s study can be found at the link above, and nothing more will be said about it here (Quote of the Day, June 1, 2004).

Prof. Enthoven raises a red flag that our policy makers need to take heed of. He attributes the failure of the Dutch to achieve their goals of reform to the fact that, to date, the insurers are selling only “preferred provider insurance.” That is currently the predominant form of private insurance in the United States. It forms the basis of the competing private insurance plans that we will be required to purchase under the current leading proposals for reform. Although some choices are nominally HMOs, in fact they are functionally PPOs in disguise. True HMOs such as Kaiser Permanente are not available to the majority of us.

We should listen to Prof. Enthoven and reject PPOs. We can obtain our care from any accessible integrated health delivery system, if we so choose. But let’s adopt a system that actually will slow the growth in health care costs while providing a mechanism for improving the allocation of our health care dollars: a single payer national health program (even if that is not Prof. Enthoven’s preferred model of reform).