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Larry Summers On Health Reform: Bottom Up Is Better Than Top Down

Economist Lawrence Summers
Economist Lawrence Summers

He began with a great disclaimer, avowing that he had no special expertise on health care. Then he proceeded to sum up the country's whole health care mess with such perfect pithiness that it made my toes curl.

Uber-economist Lawrence Summers, former secretary of the U.S. Treasury and former controversial president of Harvard, spoke yesterday at the inaugural Health Policy Symposium at Beth Israel Deaconess Medical Center. He's back at Harvard now as a professor, and mostly speaks at note-taking speed, but I've had to paraphrase here and there. I'll begin with the ending, which felt a bit like the kind of "Go forth and do good work" benediction he might have offered graduating Harvard seniors:

"This is all very, very difficult. And I guess the thought that I would want to leave you with, assessing this debate from the outside, is that if there is a happy end to this tale — if, looking back from 2030, we’re seeing that not just was the arc of justice bent towards liberty but the arc of health care costs was bent toward flatness —  if that is what we look forward to, I think it is less likely that it came from a sweeping act of Congress and it is more likely that it came from widely emulated innovation in individual settings.

That it came from hospitals that found creative and inventive way to improve the quality of care and cut costs, and then whose procedure was so compelling that it had to be emulated elsewhere.

[module align="right" width="half" type="pull-quote"]We are much more likely to succeed...from the bottom up than we are from the top down.[/module]

That it came from cities where coalitions of hospital providers and major employers worked out improved reimbursement understandings, found ways of fine-tuning reimbursements so that costs grew less rapidly.

We are much more likely to succeed, both with respect to the cost-containment challenge and with respect to the closely related quality challenge, from the bottom up than we are from the top down.

So my hope...would be that just as we live in a remarkable period of scientific innovation, we can live in a remarkable period of institutional innovation — and, if you like, social scientific innovation that points toward emulatable solutions to these problems.

President Clinton used to say that there was no problem in American education that had not been solved somewhere in America, and I suspect that most of the problems in health care have been solved somewhere in America. And our challenge is to match scientific innovation with innovation in patterns of practice, in provision of incentives, in monitoring and rewarding of outcomes.

It’s a feature of exponential growth that the stakes get larger every year. I think we are going to succeed with respect to broadening the availability of coverage very substantially, but I cannot claim that we're securely on a path toward better cost-containment or improvement of quality. I think that's the task for all of you."

Now back to the beginning:

There are three broad sources of dissatisfaction with health care:
-Unequal access
-Costs are too high and rising too rapidly — and no outcomes justify spending an extra $1 trillion.
-An increasing sense that health care does not work as well as it could.

"There is better information technology in the typical 7-11 than in the median medical facility in the United States. That it is estimated that 100,000 people a year die due to avoidable medical errers in a country where less than 3 million peope die each year is more than a little bit chilling.

Almost anyone who has been in a hospital, including some of the nation’s leading hospitals, reports that either there were signficant errors in the delivery of medicines or that such efforts were avoided not through the work of the hospital but through an alert family member. There is almost no one who feels entirely safe all of the time in one of our major hospitals. And make no mistake, a reasonable estimate of needless fatalities due to avoidable in-hospital errors is comparable or greater than the estimates that arise from inadequate access to our hospitals and to medical care at all.”

All three of these problems constitute the health care agenda if health care is to make a greater and more effective contribution to our national economy...

"We have adopted the most libertarian, most market-oriented, most with-the-grain-of-the-market system approach to universalizing health care that is possible. We have in essence required that everyone get health insurance. Why have we done that? We could, as candidate Obama proposed during the campaign, have called for universal availability at an attractive price and then said, 'It’s your tough luck whether you do or you do not get the insurance.' What’s clear is that that does not work. If there’s universal availability of insurance then there’s no reason to purchase it until you get sick, and if only sick people purchase it, the whole thing unravels."

If you wish to have universally available health insurance without discriminating against the sick, which defeats the whole point, there’s now almost no disagreement that there is no alternative but to have a mandate...It is an ineluctable consequence of the decision that you want to have a reaosnably priced insurance policy without discrimination...It’s the most pro-market, conservative way of achieving that objective.

It is not intellectually legitimate to argue that there’s some other way of having universal health care that will work and will somehow go more with the grain of the market system. That, by the way, is the reason why ObamaCare is far to the right of the proposals that Richard Nixon and Bob Dole put forward.

We now have this system. It is, to be properly understood, it is an expansion of government in order to make health care universally available and it is pretty close to the minimum expansion of government's role that is consistent with making health care universally available. I believe that we're a better country for it. I believe that ultimately it will be regarded as remarkable that such a universal system was not in place.

It is profoundly counterintuitive, and it is in some sense legitimately counterintuitive, to argue that bringing in a system of universal health care will somehow cut costs. And the reality is that about $1 trillion is going to be spent on health care that would not otherwise be spent on health care because of the 50 million people who didn't have health coverage.

I wish it were true that because people went to regular doctors and clinics rather than ERs, the total cost of health care would be lower. I wish it were true that greater preventive care will reduce total costs. But..."[like the Republican argument that cutting taxes leads to greater revenues] the liberal Laffer curve is that making health care more widely available will cut costs in a way that will make total health care costs cheaper is equally not true.

How then does one think about controlling health care costs?

"It's important to recognize that no one has great answers.

I like to divide public policy problems into two categories:
There's a set of problems like the budget deficit or peace in the Middle East, where you kind of know what the answer is but the politics are impossible.

There's another set of problems where even if you could be the czar you’re not entirely sure what to do, and I’d regard the growth in health care costs as having sub-elements of the second problem."

There are four broad ways to control health care costs:
1. Simply pay less; drive down reimbursements.
But very few people believe that you can achieve large permanent savings simply through reimbursement controls.

2. Control incentives on the individual side: In some areas, there's no question it works; if you tell parents they have to pay in full for their children's glasses, they're likely to scrimp on their children's glasses, but it's not altogether clear that that's a positive thing.

To be sure, probably, less extensive health insurance would operate to encourage some economies on people’s part but even that raises a very, very deep question. It is not possible to logically believe two things: You can believe that health care should be market-oriented and you can believe that the rich and poor should get the same health care, but those two beliefs cannot be held consistently.

The rich and the poor do not get the same houses, the rich and the poor do not get the same clothes. The rich and poor do not eat equally fresh foods.

My judgment: There are things you can do at the margin — to put more co-insurance in, to discourage frivolous use.

But I am indifferent to it financially and annoyed psychologically every time I walk into the Harvard Health Clinic because I have a sprained knee or a potential strep throat and somebody asks me for $15. I say to myself, 'If this $15 isn’t going to discourage my behavior then why are we doing it? And if it is going to discourage my behavior, is that really something we want to be doing?

3, and probably most promising: the realignment of provider incentives.
The way it’s frequenlty put is that instead of paying people for doing procedures we pay people for keeping people healthy. Wouldn't we have a better system? And the answer is yes, we would.

4. Miscellaneous, including malpractice reform.
[If malpractice reform] were only one-third as good as the average physician believes it is, which is about my guess, it would still be an enormously good thing.

Now please re-read the top, which was the ending. Readers, thoughts? Can bottom-up really work?

This program aired on September 13, 2011. The audio for this program is not available.

Carey Goldberg Twitter Editor, CommonHealth
Carey Goldberg is the editor of WBUR's CommonHealth blog.

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