3 min read

The Maynard Doctrine: Lessons from America - can we bend the cost curve?

Health economist Professor Alan Maynard looks at the integration panacea hypothesis, and points the finger at where we need to act to alter the cost curve.

The Americans spend 16 per cent of their GDP on healthcare i.e. about twice as much per capita as the UK. When President Obama was elected, 46 million Americans had no health insurance and illness could bankrupt them: it is suggested that over 60% of US personal bankruptcies are caused by healthcare costs.

The US problem of access to care was epitomised by a recent robbery, where a man demanded $1 from a bank and then waited to be arrested so he could get free healthcare for his chronic conditions in prison!

Obama was elected to increase coverage by Federal funding of private insurance for citizens. Sadly, he had to give up an attempt to offer Americans a public insurance competitor as the US private insurers were fearful and their Republican cronies struck this out of the bill.

The President also lost his attempt to create a US-NICE. This was also a product of commercial interests; this time, the drug dealers who peddle marginally cost-effective pharmaceutical products. They nobbled the Republicans to ensure that the legislation was toothless.

The new non-NICE agency is well-funded, but can only analyse the effectiveness of competing products. As we all know, what is clinically effective may not be cost-effective but what is cost-effective is always clinically effective. Big Pharma has ensured that advice on clinical effectiveness will not be “polluted” by evidence of cost-effectiveness!

The Republicans have thus ensured that insurers and the drug industry will be kept in the style to which they are accustomed. With the absence of a Federal insurer and a NICE, they can inflate prices and volume in the usual irresponsible way.

One way the Obama reforms seek to mitigate this inflationary pressure and bend the cost curve is insurance exchanges. The reforms open up insurance for a basic minimum package of care to all below 400 per cent of the US poverty line.
The cost of this reform, which will largely come in from 2014, is unloved by Republicans - who are challenging it at the local and national level. This opposition is due to hatred of “big government” and the dire US fiscal situation.

The latter enables Obama’s opponents to oppose his desire to improve at last the access to care of the disadvantaged by demanding reductions in the Federal budget deficit.

Obamacare requires each US State to establish insurance exchanges, where transparency should lead to competition and better choices for those buying their insurance with Federal funding.

Most of the newly-insured have never bought an insurance policy before. In part, this is because they are bad risks due to deprivation and poor health. Insurers don’t really want to attract such folk into their businesses: it is estimated that 13% of new enrolees will be poor risks. If the market is not well-regulated, insurers will play “pass the parcel bomb” with these enrolees!
Another new policy “wheeze” is Accountable Care Organisations (ACOs). The Obama administration modelled these on premier healthcare organisations such as the Mayo Clinic, Intermountain Care and the Cleveland Clinic.

The idea (and doesn’t it sound so familiar?) is that care should be provided by networks of providers and, through the consequent integrated care, quality will be driven up and costs will be driven down.

Don’t you love it? Wait while some well-intentioned gnome in a UK think-tank offers this as the solution to The Nicholson Challenge!

Why the scepticism? The premier organisations admired by Obama and all those who study them, such as Mayo and Cleveland, have not been able to replicate themselves. They are islands of excellence in a sea of despair produced by cost inflation, clinical practice variations and patient non-safety.

How can history be reversed and the Clinics’ good practices be emulated across the USA, or dare one say it the UK-NHS?

Accountable Care Organisations are but QIPP, aggressive PbR tariff setting and other Whitehall wheezes dressed up in US propaganda. If we knew how to magic large efficiency improvements, the hope of ACO advocates, David Nicholson could collect his peerage and retire content to the People’s Republic of Yorkshire!

In the USA hope springs eternal that ACOs will bend the cost curve. But why will they succeed where ‘managed competition’, ‘health maintenance organisations’ and sundry other policy wheezes have failed to stop the inexorable rise in US healthcare expenditure? Providers dominate the healthcare market - and in the USA, this guarantees both expenditure inflation and inefficient use of budgets.

’Single payer systems are a necessary but not sufficient condition of improving efficiency.’

To bend the cost curve in the US, as in the UK, we need greater control of provider incomes and through evidence-based reform.

We also need a redistribution of the spoils of war - e.g. perhaps less hospital expenditure and more spending outside these institutions if evidenced?

The small State of Vermont in the USA has addressed the first problem with legislation for a single payer system, like the NHS. However, single payer systems are a necessary but not sufficient condition of improving efficiency.

Despite the huge differences between the NHS and the US healthcare systems (Medicare, Medicaid, Veterans Administration and the inefficient insurance industry), the problems confronted by those wishing to bend the cost curves of both countries are very similar.

In the austerity-era USA and UK, improved expenditure control and improved efficiency in using society’s scarce resources are top of the agenda; but addressed more in hope than with evidence of good fixes.