Porter & Teisberg: Redefining competition in health care

The Boston Globe
June 8, 2004
A prescription for healthcare
Professor: Get industry to compete over quality instead of shifting
costs
By Robert Weisman

Michael E. Porter has a new problem to fix.

The Harvard Business School professor, often described as America’s foremost
business strategist, has never shied away from tackling intractableproblems.

…his latest challenge is one that has stumped the best and brightest business theorists, politicians, and policy makers: America’s dysfunctional healthcare system. And Porter is staking his reputation on a prescription that calls for a healthy dose of competition.

In a long essay in the June edition of Harvard Business Review, the 57-year-old Porter argues for redefining healthcare competition on the level of specific diseases and treatments, rather than on the level of health plans, networks, or hospital groups. ”The wrong kinds of competition have made a mess of the American healthcare system,” contend Porter and his coauthor, Elizabeth Olmsted Teisberg of the University of Virginia.

”The right kind of competition can straighten it out.”

The article is significant not only for its critique, but also because it bears the Michael Porter stamp. One of only 15 ”university professors” (the highest designation for faculty members) at Harvard University, his 16 books on strategy, competitive advantage, and business clusters have made him among the most sought-after business thinkers in the world. Porter consults for corporations, regions, and even nations.

Porter and Teisberg have a deceptively simple diagnosis: Healthcare competition today works on the wrong level. The players — health plans, payers, providers, and doctors — engage in what the authors call ‘zero-sum competition,” dividing value rather than creating it. They seek to transfer costs onto one another, limit access to care, hoard information, and stifle innovation, all to the detriment of patients.

The right kind of competition should occur at the level of preventing, identifying, and treating patients’ conditions and diseases, Porter and Teisberg assert. They call for collecting and disseminating information about the outcome of medical procedures, so patients can make intelligent choices about physicians and hospitals. They also recommend transparency in billing and pricing to reduce cost shifting, discrimination, and other inefficiencies. And they propose increased specialization by healthcare providers, resulting in more centers of excellence in conditions and treatments that compete for patients.

Most of the tried-and-failed healthcare reform efforts of the past decade have emphasized government playing a larger role, as it does in Canada, the United Kingdom, and other countries. By contrast, the Porter-Teisberg approach would be a largely private sector solution, with employers helping to instigate change by negotiating with health insurers and providers for quality, choice, and transparency.

Government would have a role, not as a ”single payer” or an insurer of last resort, but by blocking network restrictions, hospital consolidation, and multiple hospitalization bills, and helping to set a framework for reform through its Medicare program. The role of health plans, meanwhile, would be more akin to that of coaches and advisers, helping their members navigate the system and find the best care.

Teisberg… speaking of herself and Porter, said, ”Neither one of us has come at this as a healthcare expert. We’re out there talking to people because we care about this. It matters.”

http://www.boston.com/business/articles/2004/06/08/a_prescription_for_healthcare/?

Harvard Business Review
June 2004
Redefining Competition in Health Care
The wrong kinds of competition have made a mess of the American health
care system. The right kinds of competition can straighten it out.
by Michael E. Porter and Elizabeth Olmsted Teisberg

We believe that competition is the root of the problem with U.S. health care performance. But this does not mean we advocate a state-controlled system or
a single-payer system; those approaches would only make matters worse. On
the contrary, competition is also the solution, but the nature of competition in health care must change. Our research shows that competition in the health care system occurs at the wrong level, over the wrong things, in the wrong geographic markets, and at the wrong time. Competition has actually been all but eliminated just where and when it is most important.

The most fundamental and unrecognized problem in U.S. health care today is that competition operates at the wrong level. It takes places at the level of health plans, networks, and hospital groups. It should occur in the prevention, diagnosis, and treatment of individual health conditions or co-occurring conditions. It is at this level that true value is created-or destroyed-disease by disease and patient by patient. It is here where huge differences in cost and quality persist. And it is here where competition would drive improvements in efficiency and effectiveness, reduce errors, and spark innovation. Yet competition at the level of individual health conditions is all but absent.

To access the report (fee $16.95):
http://harvardbusinessonline.hbsp.harvard.edu/b02/en/home/index.jhtml;jsessionid=FVZ2U4LSFGSSECTEQENSELQ?_requestid=5752
and click on “Curing U.S. Health Care (HBR OnPoint Collection)”

Comment: The debate rages on as to whether the financing of health care should be guided by a government program or by competitive forces in the private marketplace. Innumerable studies have refuted the claim that, in health care, private marketplace competition improves quality and lowers costs. Professors Michael Porter and Elizabeth Teisberg concede that the existing “zero-sum competition” has “made a mess of the American health care system.” They now describe “positive-sum competition” as the solution. They contend that preserving market forces through a new model of competition would be the best means of providing value by improving quality while controlling costs.

Their article is to be followed by a book on the subject, with the intention that it be the guide to revolutionary reform of the health care marketplace. Because of the prestige and credibility of the authors, we should become well informed on their vision of reform, and be prepared to respond appropriately.

As academic leaders in the business world, it is no surprise that they are determined to make competition work in health care, with almost a religious
fervor. They concede that they are relative novices in the health care arena, but they believe that they can introduce innovative approaches to competition that would have a positive impact on the health care system. In spite of being health care novices, they have identified much in the health policy literature that confirms that competition has not provided enough value to offset the impaired quality that permeates our system, thus their “zero-sum” thesis.

As pro-competitive, free market advocates, they cannot accept a model, such
as single payer, that uses government mechanisms to achieve quality and control costs. But in their fervor to depend on private competition as the driving force for value, problems begin to appear as they develop their positive-sum” thesis. Only a small sampling of the issues will be listed here. If, in fact, their proposals gain political traction, a more detailed analysis can be prepared later, describing what is good and what is bad about their concepts.

(Quotations are from their paper.)

* They appropriately emphasize that we need greater value in health care. But most of their concepts are directed at improving quality, the more important component of value, whereas very little are directed toward controlling costs. It is true that eliminating ineffective or detrimental care does reduce costs, but an explosion in technological advances, some of dubious value, has been a major driver of cost escalation. They do not adequately address this important concern.

* Most of their recommendations for improving quality have already been covered extensively in the health policy literature. Efforts are already being made to address them, and even greater efforts will inevitably be made in the future.

* “The most fundamental and unrecognized problem in U.S. health care today is that competition operates at the wrong level. It takes place at the level of health plans, networks, and hospital groups. It should occur in the prevention, diagnosis and treatment of individual health conditions or co-occurring conditions.” What does competition have to do with this? We do recognize that many of the problems are in our approaches to prevention, diagnosis and treatment. We definitely need to continue to identify these problems and then correct them. But is that best approached by establishing an elaborate and necessarily imperfect system of measuring and reporting quality parameters for the purpose of enabling providers to be rewarded by relatively unsophisticated purchasers in the marketplace? Or would it be better to establish a single, integrated system of funding care that directs the financial resources to beneficial preventive, diagnostic and therapeutic services with incentives for higher quality? It seems that the direct approach would be more efficient and effective.

* “Under positive-sum competition, providers would have to issue a single bill for each service bundle, rather than a myriad of bills for each discrete service.” Billing abuses occur both with bundling and unbundling of charges. Suggesting that billing problems for chronic disorders would be solved by mandated bundling is simplistic reasoning at best.

* They suggest that hospitals should develop “unique expertise” and not try to “be all things to everyone.” Hospitals then could compete (nationally?) with other hospitals providing similar unique expertise. This ignores the fact that hospitals provide mostly very routine services and need to be geographically accessible in a timely manner. Also the emphasis on increased specialization has been demonstrated to decrease health care value, driving up spending without a commensurate improvement in outcomes.

* “Network restrictions” would be eliminated, and “co-pays would be the same inside and outside of the network.” Does this mean that price would no longer be a dominant factor in a competitive marketplace? Though it should be stated here that their emphasis on the goal of improving quality is to be commended.

* Although a major goal would be to keep the government out of the competitive marketplace, “antitrust authorities would scrutinize system participants” to prevent market domination. If higher quality is the goal, shouldn’t higher quality providers be allowed to dominate the market? And would we be able to stabilize the capacity of the system if the remaining providers were not able to survive financially? Wouldn’t it be more rational to adopt programs aimed at improving the quality of all providers, rather than a competitive model that automatically sacrifices those who fall on the lower part of the curve?

* To “eliminate price differentials for favored groups… the federal government could limit the spread between the most discounted price and the highest price charged by a provider for any service and then reduce this spread each year over a five year period.” How do price controls fit in with free market competition? And what happens when destabilization returns after the five years have passed?

* “For high-risk people unable to buy health plans, assigned risk pools, like those used in automobile insurance, will need to be developed.” Why didn’t we think of that?

* “Large deductibles combined with medical savings accounts would let some patients take financial responsibility for their choices.” But also under their model, the legal responsibility for bills would shift from the patients to the payers who would “bear full legal responsibility for the medical bills of paid-up subscribers.” Well, make up your mind. Is the financial responsibility that of the patient or of the payer?

* Although they give competition much credit as a potential driver of quality, they ignore the fact that a single payer system would address many of the quality issues that they describe. In fact, by design, the singlepayer system would attack the quality problems aggressively and effectively, whereas their competition model would approach them with primary attention given to the bottom line. But profits in health care have almost no correlation with quality, and their model, in spite of their rhetoric, provides negligible financial incentives to improve quality on a global basis, though it may be effective in a few isolated instances.

Professors Porter and Teisberg still have much to learn about the health care system. Let’s hope that they do not limit their exposure to their colleagues who believe that we must rely strictly on competition in free markets no matter how compelling the evidence that they simply do not work in health care. Maybe they’d like to take a closer look at the single payer model. A single payer system would provide value by enabling higher quality within the limits of the resources we have, and isn’t that what good business is all about?

The high costs of for-profit care

CMAJ (Canadian Medical Association Journal)
June 8, 2004
Commentary
The high costs of for-profit care
By Steffie Woolhandler and David U. Himmelstein

Why do for-profit firms that offer inferior products at inflated prices survive in the market? Several prerequisites for the competitive free market described in textbooks are absent in health care.

First, it is absurd to think that frail elderly and seriously ill patients, who consume most care, can act as informed consumers (i.e., comparison-shop, reduce demand when suppliers raise prices or accurately appraise quality). Even less vulnerable patients can have difficulty gauging whether a hospital’s luxurious appurtenances bespeak good care.

Second, the “product” of health care is notoriously difficult to evaluate, even for sophisticated buyers like government. Physicians and hospitals create the data used to monitor them; self-interest puts the accuracy of such data into question. By labelling minor chest discomfort “angina” rather than “chest pain,” a US hospital can garner both higher Medicare payments and a factitiously improved track record for angina treatment. It is easier and more profitable to exploit such loopholes than to improve efficiency or quality.

Even for honest firms, the careful selection of lucrative patients and services is the key to success, whereas meeting community needs often threatens profitability. For example, for-profit specialty hospitals offering only cardiac or orthopedic care (money-makers under current payment schemes) have blossomed across the United States. Most of these new hospitals duplicate services available at nearby not-for-profit general hospitals, but the newcomers avoid money-losing programs such as geriatric care and emergency departments (a common entry point for uninsured patients). The profits accrue to the investors, the losses to the not-for-profit hospitals, and the total costs to society rise through the unnecessary duplication of expensive facilities.

Finally, a real market would require multiple independent buyers and sellers, with free entry into the marketplace. Yet, many hospitals exercise virtual monopolies. A town’s only hospital cannot compete with itself, but can use its market power to inflate its earnings. Not surprisingly, for-profit hospital firms in the United States have concentrated their purchases in areas where they can gain a large share of the local market. Moreover, many health care providers and suppliers enjoy
state-conferred monopolies in the form of licensure laws for physicians and hospitals and patent protection for drugs. Additionally, government pays most health costs – even in the United States. Indeed, public funding for health care in
the United States exceeds total health spending in Canada on a per capita
basis. It’s an odd market that relies largely on public funds.

Privatization results in a large net loss to society in terms of higher costs and lower quality, but some stand to gain. Privatization creates vast opportunities for powerful firms, and also redistributes income among health workers. Pay scales are relatively flat in government and not-for-profit health institutions; pay differences between the CEO and a housekeeper are perhaps 20:1. In US corporations, a ratio of 180:1 is average. In effect, privatization takes money from the pockets of low-wage, mostly female health workers and gives it to investors and highly paid managers.

Behind false claims of efficiency lies a much uglier truth. Investor-owned care embodies a new value system that severs the community roots and Samaritan traditions of hospitals, makes physicians and nurses into instruments of investors, and views patients as commodities. Investor ownership marks the triumph of greed.

For the full commentary:
http://www.cmaj.ca/cgi/content/full/170/12/1814

For the CMAJ article, “Payments for care at private for-profit and private not-for-profit hospitals: a systematic review and meta-analysis,” by P.J. Devereaux, et al: http://www.cmaj.ca/cgi/content/full/170/12/1817

Comment: Physicians for a National Health Program is a single issue organization, advocating for the single payer model of universal health insurance. But most of us are strongly opposed to the intrusion into the health care delivery system of for-profit corporate boards and their passive investors. Both the article and commentary should be read in their entirety for a better understanding of why we are so deeply offended by the ethical compromises of investor-controlled health care.

Democracy dwindles with rise in inequality

American Political Science Association
June 7, 2004
American Democracy in an Age of Rising Inequality
By the Association’s Task Force on Inequality and American Democracy

Among the Task Force’s findings based on analysis of the U.S. economy, voting and other forms of political participation, and government policy making:

* The United States has, in effect, 2 classes of citizenship: Wealthier Americans are far more active across the board – from voting to contacting government officials and joining pressure groups in Washington-than are those with lower incomes.

* Both major political parties target many of their resources on recruiting those who are already the most privileged and involved.

* The Internet, which offers opportunities for virtual political participation and communication among citizens, may actually be reinforcing existing inequalities because it is more accessible to affluent, non-Hispanic whites, and the highly educated.

* The decline in union membership has reduced the traditional role of blue-collar trade unions in bringing working Americans into the political process.

* The rise of “public interest” citizen associations has not significantly corrected the bias of the system toward the more privileged.

* The economic disparities of U.S. citizens are growing more sharply in the United States than in other democratic nations like Britain, Canada, France,
Germany and Italy.

Economic gaps have widened not just between the poor and the rest of society
but also between privileged professionals, managers and business owners on
the one hand, and the middle strata of regular white-collar and blue-collar employees on the other. Indeed, the report noted, “the very richest one percent of Americans has pulled away from not only the poor but also the middle class.” Individuals with privilege were less likely to press for policies aimed at problems with medical costs, education, housing, jobs and child care that affect the less well-off.

Theda Skocpol, Director of the Center for American Political Studies at Harvard University:

“…disparities in participation ensure that ordinary Americans speak in a whisper while the most advantaged roar. The concerns of lower or moderate income Americans, racial and ethnic minorities, and legal immigrants are systematically less likely to be heard by government officials. In contrast, the interests and preferences of the better-off are conveyed with clarity, consistency, and forcefulness.”

http://www.apsanet.org/news/index.cfm#inequality

Press release:
http://www.apsanet.org/Inequality/MediaPressRelease.pdf

To download a 22 page short version of the report:
http://www.apsanet.org/Inequality/generalreport.cfm

Comment: As if democracy alone were not enough, it seems that we need new
policies that will incentivize ordinary Americans to become a roaring voice in the democratic process. Without such policies, health care equity will remain only our pipe dream. But then could the roar of the masses with their disparate needs ever drown out the clear, consistent and forceful roar of the better-off?

Back to work. And back to whispering…

Canadian and American health status the same, except for the poor and uninsured in the U.S.

Statistics Canada
and
Centers for Disease Control and Prevention
June 2004

Joint Canada/United States Survey of Health, 2002-03
By Claudia Sanmartin and Edward Ng, Health Analysis and Measurement Group,Statistics Canada
and
Debra Blackwell, Jane Gentleman, Michael Martinez and Catherine Simile,
National Center for Health Statistics, Centers for Disease Control and Prevention, United States

Conclusions

The JCUSH (Joint Canada/United States Survey of Health) represents a unique
population health survey conducted jointly by two national statistical agencies, Statistics Canada and the United States National Center for Health Statistics. The use of a common questionnaire and identical data collection and processing methods provides highly comparable data. As a result, the findings from JCUSH provide valuable insights regarding similarities and differences between Canada and the United States in a manner not previously possible.

Overall, the health status of Canadians and Americans is generally similar with most individuals in both countries reporting that they are in good, very good or excellent health. More Americans, however, reported being at either end of the health status spectrum – in excellent health and in fair and poor health – compared with Canadians. This was particularly true among women. This may be associated with the higher rate of highly severe mobility limitation and obesity among American women. There were relatively few differences between men.

Canadians and Americans were similar regarding access to health care services provided under similar funding models. In the case of dental services, for example, where most depend on private insurance, access was similar in the two countries.

Canadians and Americans differed overall, however, regarding access to health care services provided under different insurance models such as those covering physician services. While Canadians are similar to insured Americans regarding access to a regular medical doctor and regarding unmet health care needs, they face significantly less barriers to care when compared with uninsured Americans.

The greatest differences between the two countries are related to differentials by income in health. While there has been solid evidence for some time of the social gradient in health status in both Canada and the United States, this is the first time that we have been able to examine the question of whether there are systematic differences in health status by social position in the two countries. One of the important findings of this survey is that Americans in the poorest income quintile report fair or poor health, obesity and severe mobility impairment more frequently than their Canadian counterparts. At the other end of the income spectrum, there are no systematic differences in the reporting of fair or poor health or mobility impairment among the most affluent households on either side of the border.

http://www.statcan.ca/english/freepub/82M0022XIE/2003001/pdf/82M0022XIE2003001.pdf
or
http://www.cdc.gov/nchs/data/nhis/jcush_analyticalreport.pdf

Comment: In the first population health survey to provide both a comprehensive and precise comparison of the United States and Canada, two dramatic conclusions are evident. First, Canadians and insured Americans have similar access, whereas uninsured Americans clearly have impaired access and greater unmet health care needs. Second, affluent Canadians and Americans have comparable levels of health whereas low income Americans have poorer health than low income Canadians.

The conclusion seems inescapable that the unmet health care needs and poorer
health are due to lack of affordability because of lack of insurance. But many opponents of comprehensive health care reform have tried to explain these differences by claiming that there are fundamental cultural differences in low income Americans and low income Canadians, differences that do not extend into the average income and affluent sectors.

Maybe the United States does fail on other parameters of social solidarity that result in less favorable health outcomes for the poor. But a great first step to address these differences would be to eliminate financial barriers to health care by providing comprehensive coverage for everyone.

Feachem’s Kaiser study not credible

British Journal of General Practice
June 2004
Questioning the claims from Kaiser
By Alison Talbot-Smith, Shamini Gnani, Allyson M Pollock and Denis Pereira Gray

Summary

Background: The article by Feachem et al, published in the BMJ in 2002, claimed to show that, compared with the United Kingdom (UK) National Health Service (NHS), the Kaiser Permanente healthcare system in the United States (US) has similar healthcare costs per capita, and performance that is considerably better in certain respects.

Aim: To assess the accuracy of Feachem et al’s comparison and conclusions.

Method: Detailed re-examination of the data and methods used and consideration of the 82 letters responding to the article.

Results: Analyses revealed four main areas in which Feachem et al’s methodology was flawed. Firstly, the populations of patients served by Kaiser Permanente and by the NHS are fundamentally different. Kaiser’s patients are mainly employed, significantly younger, and significantly less socially deprived and so are healthier. Feachem et al fail to adjust adequately for these factors. Secondly, Feachem et al have wrongly inflated NHS costs by omitting substantial user charges payable by Kaiser members for care, excluding the costs of marketing and administration, and deducting the surplus from Kaiser’s costs while underestimating the capital charge element of the NHS budget and other costs. They also used two methods of converting currency, the currency rate and a health purchasing power parity conversion. This is double counting. Feachem et al reported that NHS costs were 10% less per head than Kaiser. Correcting for the double currency conversion gives the NHS a 40% cost advantage such that per capita costs are $1161 and $1951 for the NHS and Kaiser, respectively. Thirdly, Feachem et al use non-standardised data for NHS bed days from the Organisation for Economic Cooperation and Development, rather than official Department of Health bed availability and activity statistics for England. Leaving aside the non-comparability of the population and lack of standardisation of the data, the result is to inflate NHS acute bed use and underestimate the efficiency of performance by at least 10%. Similar criticisms apply to their selective use of performance measures. Finally, Feachem et al claim that Kaiser is a more integrated system than the NHS. The NHS provides health care to around 60 million people free at the point of delivery, long-term and psychiatric care, and continuing care after 100 days whereas Kaiser provides care to 6 million people, mainly employed and privately insured. Important functions, such as health protection, education and training of healthcare professionals, and research and development are not included or properly costed in Feachem et al’s integrated model.

Conclusion: We have re-examined the statements made by Feachem et al and show that the claims are unsupported by the evidence. The NHS is not similar to Kaiser in coverage, costs or performance.

http://www.rcgp.org.uk/webmaster/ebjgp/journallogin.asp?OrigURL=/journal/index.asp

BBC
JAN. 17, 2002
NHS ‘worse value than US provider’

Professor Richard Feachem:

“If an NHS patient moved to Kaiser they would be delighted with the experience, and if a Kaiser patient moved to the NHS they would be horrified.”

http://news.bbc.co.uk/1/hi/health/1764713.stm

Comment: The 2002 BMJ article by Richard Feachem et al has been cited frequently as proof that an American HMO is superior to the British National Health Service. 82 letters were published in response to the BMJ article, all challenging the validity of Feachem’s conclusions.

This article by Alison Talbot-Smith et al provides a definitive compilation and analysis of the criticisms of Feachem’s article. There is now absolutely no doubt that Feachem’s claims are not supported by the evidence.

The opponents of public models of reform likely will continue to cite Feachem’s work as proof that private HMOs are superior to publicly administered or publicly owned models of health care funding and delivery (even though this is an unwarranted extrapolation of his invalid conclusions). But with the publication of Talbot-Smith’s definitive critique, anyone who continues to use Feachem’s study to advance his or her arguments can be summarily dismissed as not being a credible voice in the debate.

——————————————————————————————-

Message: 2
Date: Sat, 29 May 2004 11:42:19 -0700
Subject: qotd: Judy Feder on single payer

Kaisernetwork.org HealthCast
5/11/2004
Policy Options To Expand Health Insurance Coverage Lauren Leroy: …a recent report that was published by the Institute of Medicine called “Insuring America’s Health” … set out a set of principals that any proposal or any policy that would be adopted to provide insurance coverage should meet. And those include coverage that is universal, continuous, affordable to individuals and society, sustainable, and offers access to high quality care. …which of the options of the proposals do you think best meet these criteria?

Judy Feder, dean of policy studies at Georgetown University: I think that the criteria that the Institute of Medicine has laid out are certainly the right ones for evaluating our health care system, but they are one mean feat for any kind of political proposal. And because Lauren asked me to keep the answers short, and because I am an honest woman, whatever one’s politics, the only thing that comes close to meeting all these criteria I would say would be a single payer system. It could be Medicare for all, but it would be substantially improved benefits than Medicare now offers evenwith the new drug benefit. So if you really are going to hold yourselves to those criteria, you don’t have a lot of choices…

And later…

Lauren Leroy:
…what have you learned about what are the critical messages that might convince the us, the 85% who are insured about the value of covering them, the 15%, to shift political will a bit?…

Judy Feder:
…What I believe is to start where the questioner asked about what is in it for me who has insurance. And we do need more stability. We do want lower costs. We do want to know that our coverage will be secure for us. And there are policy proposals that do make coverage more affordable and more secure for those of us who have it at the same time that we bring in other people. And I think being explicit about that is fine. I think that it is – and I am persuaded by others who have been making this argument longer than I – I think that we have to be willing to mobilize people around what’s the right thing to do. And what kind of a society do we want to live in? And I think that if we avoid that question and try to con people into “it’ll be okay,”

we’re not going to get from here to there. And so I would urge everybody, if you believe that, to start saying it and to say it loud and often and to tell elected officials you are willing to pool your resources to make that possible.

http://www.kaisernetwork.org/health_cast/hcast_index.cfm?display=detail&hc=1139

Comment: …start saying it and say it loud and often…

Feachem’s Kaiser study not credible

British Journal of General Practice
June 2004
Questioning the claims from Kaiser
By Alison Talbot-Smith, Shamini Gnani, Allyson M Pollock and Denis Pereira Gray

Summary

Background: The article by Feachem et al, published in the BMJ in 2002, claimed to show that, compared with the United Kingdom (UK) National Health Service (NHS), the Kaiser Permanente healthcare system in the United States (US) has similar healthcare costs per capita, and performance that is considerably better in certain respects.

Aim: To assess the accuracy of Feachem et al’s comparison and conclusions.

Method: Detailed re-examination of the data and methods used and consideration of the 82 letters responding to the article.

Results: Analyses revealed four main areas in which Feachem et al’s methodology was flawed. Firstly, the populations of patients served by Kaiser Permanente and by the NHS are fundamentally different. Kaiser’s patients are mainly employed, significantly younger, and significantly less socially deprived and so are healthier. Feachem et al fail to adjust adequately for these factors. Secondly, Feachem et al have wrongly inflated NHS costs by omitting substantial user charges payable by Kaiser members for care, excluding the costs of marketing and administration, and deducting the surplus from Kaiser’s costs while underestimating the capital charge element of the NHS budget and other costs. They also used two methods of converting currency, the currency rate and a health purchasing power parity conversion. This is double counting. Feachem et al reported that NHS costs were 10% less per head than Kaiser. Correcting for the double currency conversion gives the NHS a 40% cost advantage such that per capita costs are $1161 and $1951 for the NHS and Kaiser, respectively. Thirdly, Feachem et al use non-standardised data for NHS bed days from the Organisation for Economic Cooperation and Development, rather than official Department of Health bed availability and activity statistics for England. Leaving aside the non-comparability of the population and lack of standardisation of the data, the result is to inflate NHS acute bed use and underestimate the efficiency of performance by at least 10%. Similar criticisms apply to their selective use of performance measures. Finally, Feachem et al claim that Kaiser is a more integrated system than the NHS. The NHS provides health care to around 60 million people free at the point of delivery, long-term and psychiatric care, and continuing care after 100 days whereas Kaiser provides care to 6 million people, mainly employed and privately insured. Important functions, such as health protection, education and training of healthcare professionals, and research and development are not included or properly costed in Feachem et al’s integrated model.

Conclusion: We have re-examined the statements made by Feachem et al and show that the claims are unsupported by the evidence. The NHS is not similar to Kaiser in coverage, costs or performance.

http://www.rcgp.org.uk/webmaster/ebjgp/journallogin.asp?OrigURL=/journal/index.asp

BBC
JAN. 17, 2002
NHS ‘worse value than US provider’

Professor Richard Feachem:

“If an NHS patient moved to Kaiser they would be delighted with the experience, and if a Kaiser patient moved to the NHS they would be horrified.”

http://news.bbc.co.uk/1/hi/health/1764713.stm

Comment: The 2002 BMJ article by Richard Feachem et al has been cited frequently as proof that an American HMO is superior to the British National Health Service. 82 letters were published in response to the BMJ article, all challenging the validity of Feachem’s conclusions.

This article by Alison Talbot-Smith et al provides a definitive compilation and analysis of the criticisms of Feachem’s article. There is now absolutely no doubt that Feachem’s claims are not supported by the evidence.

The opponents of public models of reform likely will continue to cite Feachem’s work as proof that private HMOs are superior to publicly administered or publicly owned models of health care funding and delivery (even though this is an unwarranted extrapolation of his invalid conclusions). But with the publication of Talbot-Smith’s definitive critique, anyone who continues to use Feachem’s study to advance his or her arguments can be summarily dismissed as not being a credible voice in the debate.

——————————————————————————————-

Message: 2
Date: Sat, 29 May 2004 11:42:19 -0700
Subject: qotd: Judy Feder on single payer

Kaisernetwork.org HealthCast
5/11/2004
Policy Options To Expand Health Insurance Coverage Lauren Leroy: …a recent report that was published by the Institute of Medicine called “Insuring America’s Health” … set out a set of principals that any proposal or any policy that would be adopted to provide insurance coverage should meet. And those include coverage that is universal, continuous, affordable to individuals and society, sustainable, and offers access to high quality care. …which of the options of the proposals do you think best meet these criteria?

Judy Feder, dean of policy studies at Georgetown University: I think that the criteria that the Institute of Medicine has laid out are certainly the right ones for evaluating our health care system, but they are one mean feat for any kind of political proposal. And because Lauren asked me to keep the answers short, and because I am an honest woman, whatever one’s politics, the only thing that comes close to meeting all these criteria I would say would be a single payer system. It could be Medicare for all, but it would be substantially improved benefits than Medicare now offers evenwith the new drug benefit. So if you really are going to hold yourselves to those criteria, you don’t have a lot of choices…

And later…

Lauren Leroy:
…what have you learned about what are the critical messages that might convince the us, the 85% who are insured about the value of covering them, the 15%, to shift political will a bit?…

Judy Feder:
…What I believe is to start where the questioner asked about what is in it for me who has insurance. And we do need more stability. We do want lower costs. We do want to know that our coverage will be secure for us. And there are policy proposals that do make coverage more affordable and more secure for those of us who have it at the same time that we bring in other people. And I think being explicit about that is fine. I think that it is – and I am persuaded by others who have been making this argument longer than I – I think that we have to be willing to mobilize people around what’s the right thing to do. And what kind of a society do we want to live in? And I think that if we avoid that question and try to con people into “it’ll be okay,”

we’re not going to get from here to there. And so I would urge everybody, if you believe that, to start saying it and to say it loud and often and to tell elected officials you are willing to pool your resources to make that possible.

http://www.kaisernetwork.org/health_cast/hcast_index.cfm?display=detail&hc=1139

Comment: …start saying it and say it loud and often…

Economic and Social Research Institute
May 2004
How Can National Policymakers Improve Health Coverage Tax Credits
Provided
under the Trade Act of 2002?
By Stan Dorn

Health Coverage Tax Credits (HCTCs) provided under the Trade Act of 2002 are
important far out of proportion to the number of qualifying individuals, fewer than 300,000 workers who lost their jobs because of international trade plus early retirees receiving pension payments from the Pension Benefit Guarantee Corporation (PBGC). HCTCs provide the country’s first test of whether the uninsured can be helped effectively by fully refundable tax credits that are paid directly to insurers when premiums are due each month.

…problems have already emerged that, earlier this month, prompted 54 Senators in both parties to support reforms that would increase the size of the credit, expedite credit payment to ease beneficiaries’ cash flow problems, offer new health plan choices to some beneficiaries, increase the number of beneficiaries receiving consumer protections, and make certain other changes.

http://www.esresearch.org/newsletter/trade_act_options.pdf

Comment: Much has been written about the fundamental policy flaws of using tax credits in an attempt to expand health care coverage. The report by Edwin Park of the Center on Budget and Policy Priorities describes some of these problems (http://www.cbpp.org/2-18-04health2.htm).

This Economic and Social Research Institute report by Stan Dorn addresses the narrower issue of the logistical difficulties in administering the tax credits under Trade Act of 2002. If you read only the two page Executive Summary of this report, you will see that the current design and various proposed solutions have created a logistical nightmare. You’ll understand why only 3.6% of those currently eligible have enrolled.

Tax credits that support our current fragmented system will drive up costs and fall far short on goals of universality and equity. We can do far better without increasing costs. A single payer system would ensure affordable access to comprehensive services for all of us. Why aren’t the Democrats and Republicans putting this model on the table? Members of both parties support these flawed tax credits. In a democracy, shouldn’t the electorate be fully informed about superior alternatives as well?