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May, 18th 2009

How to fix health care? Read what McKinsey has to say

– Liz Mair

Health care is an area of policy that is of almost outsized importance to me, even though I don't write about it all that much these days.  So, naturally, I found this interesting-- it summarizes a McKinsey article about how to fix the US health care system (or perhaps more accurately, what to focus on in attempting to fix it).  I was pleased to see that much of what is detailed here corresponds to things I've been saying for quite awhile, and even a lot of what I was saying last year in my capacity as RNC spokeswoman, advocating for John McCain:

Back in December, 2008, the folks at McKinsey - one of the world’s most well known consulting firms -  wrote an interesting article on health care reform in the U.S.  What’s striking about it now as we all watch the debate unfold in Washington, DC is how different McKinsey’s approach is to the one being taken in our nation’s capital.  McKinsey focused on three things - personal behavior, cost and quality transparency, and administrative simplification. 

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People in DC would argue that doing anything about personal behavior is virtually impossible, so why bother, but McKinsey’s case on this one is pretty compelling.  In fact, McKinsey argues that the whole “40% of individual health care expenses occur in the last year of life” is no longer true - primarily due to the rise in costs associated with managing chronic conditions.  Quote - “…our findings suggest that the management of chronic disease outside of acute-care environments accounts for at least 20 percent of total U.S. health care spending, perhaps more.  That level of expenditure, compounded over decades in many cases, dwarfs the cost of end-of-life care…”  They indicate that end-of-life health care spending - on average - for people who pass away between the ages of 65 and 95 represents less than 10% of the total amount of money they spend on health care during their lifetimes.

McKinsey references obesity as a specific example.  The incidence of clinically defined obesity has doubled in the U.S. since 1980 - to roughly 34% of the adult population.  Clinically obese patients spend almost twice as much as someone with a normal body mass index on health care - every single year.  Put another way, if we were as obese today as we were in 1980, we’d spend $60 billion less on health care.  McKinsey says ignoring the impact personal behavior - and here, I’m mostly referencing diet and exercise - has on the rising cost of health care is a huge missed opportunity, and their data points make a compelling case.

Second, McKinsey points out that the same service provided by two different providers in the same geographic area with the same patient and the same outcome can vary in cost by as much as 40%, and no one knows it.  “In no other industry are service attributes and prices so opaque.”  No kidding.  Some of us having been banging this drum for years, and we are still in the crawl stage in terms of making this sort of information publicly available.  And while I’ve always thought of that as a way to rationalize provider prices, McKinsey thinks it could also rationalize insurance plan design and re-frame the health care conversation generally.  They note that without publicly available information on price and performance, the move from delivery and insurance models that are based on acute episodes of injury or illness to ones that are based on promoting healthy behaviors and managing chronic conditions will take forever to occur.

You can read the rest of the item for the administrative portion, which isn't nearly as interesting to me as these first two points, both of which were (incidentally) specific focal points of the McCain health care plan and which I personally feel were not, and are not, being given nearly as much attention as they deserve from the Obama administration (then the Obama campaign).  Note the below excerpts of this Carly Fiorina item on health care policy written last year for evidence that someone was thinking about these aspects of the health care dilemma last year, even if it's not the guy who ultimately got elected:

But those are not the only components of what John McCain is proposing with regard to health care. In addition, he plans to expand the benefits of Health Savings Accounts (HSAs), and bring down actual health care costs (as opposed to insurance costs). In part, this would be accomplished by bringing greater competition to our pharmaceutical markets via safe reimportation of drugs and faster introduction of generic drugs into the market. It also would be accomplished by focusing federal research efforts on curing chronic disease, promoting new treatment models, rewarding quality and encouraging preventive health care. Incredibly, treating chronic disease accounts for three-quarters of America’s annual health care bill. So, getting chronic disease under control will help bring costs under control, while improving Americans’ health, overall.

Increasing transparency with regard to health care costs also is critical. Too frequently, patients find themselves in the dark when it comes to medical costs and outcomes, which does nothing to promote keeping costs down and quality high. John McCain wants prices and doctors’ and hospitals’ ratings up on the Internet for everyone to see — and he firmly believes that will serve to promote quality treatment while helping to drive costs down.

My point here is not to whine, though, or play sore loser.  More where I'm going is to ask whether Obama, who wants to be seen as implementing the best policy ideas irrespective of where they emanate from in virtually every area of policy, is prepared to actually do that on health care.  McKinsey may not be the be-all-and-end-all, but they are a very credible organization, and are treated as such by people on both sides of the aisle inside and outside DC.  These aspects of the McCain health care plan were also, from what I understood at the time, treated pretty credibly by a lot of those focused on the issue of health care (if not the Obama campaign itself, from everything I saw) irrespective of philosophy or ideology. 

If Obama is serious about reforming and improving American health care, rather than just pursuing what looks like health care reform in the genus of what is pretty comfortable and predictable for Democrats and their supporters, he might give real consideration to these points.  Focusing deeply on what to do about chronic disease and on introducing transparency in costs and outcomes is not a "liberal" or "conservative" thing to do-- it's a pragmatic and smart thing to do, though one that would involve paying attention to potential solutions beyond those typically touted as part of liberal health care orthodoxy.

(Full disclosure: One of my brothers works for McKinsey). [intro]

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