The Great Equation in Healthcare is Wrong

It is not hard to make the case that American healthcare is the best the world has ever seen. However, it is also easy to effectively argue that there is vast room for improvement. Paradoxically, the profession is falling significantly short of its theoretical potential. This does not negate the obvious advances made over the past century, but it is important to understand this reality because it is the source of much of the current criticism.

The Healthcare Great Equation

In 1977, Aaron Wildavsky, an American political scientist known for his work on public policy, published a book entitled “Doing Better and Feeling Worse: The Political Pathology of Health Policy.” In the book, Wildavsky argued that the traditional belief that “medical care equals health”—the so called “Great Equation”—simply wasn’t true. Most of the bad things that happen to people at present are beyond the reach of medicine. More available medical care does not equal better health.

Determinants of How Well We Live

One of the most-cited statistics in public health is the imbalance of social investments in medical care compared with prevention activities. Approximately 95 percent of the trillions of dollars we spend as a nation on health goes to direct medical care services, while just 5 percent is allocated to population-wide approaches to health improvement. However, some 40 percent of deaths are caused by behavior patterns that could be modified by preventive interventions as shown below. Genetics, social circumstances, and environmental exposure also contribute substantially to preventable illness. It appears, in fact, that a much smaller proportion of preventable mortality in the United States, perhaps 10 to 15 percent, could be avoided by better availability or quality of medical care. Thus, one could question a funding scheme that places so much emphasis on medical care rather than prevention.

Great Equation in Healthcare

The fact that medical care historically has had limited impact on the health of populations has been known for many years. The data clearly indicates we could achieve a much greater impact on total health by going after behaviors than by delivering care. To put this in perspective, a

study published in the British Medical Journal tracked approximately 35,000 people over about 20 years. The study looked at four behaviors related to health (tobacco use, appropriate alcohol

use, diet, and exercise) and demonstrated that people who did well on all four compared to people who did poorly on all four accounted for a 14-year difference in life expectancy. Compare this to all of healthcare delivery accounting for approximately 3.5 to 7 years of additional life expectancy.

How this Impacts the Healthcare Policy Debate

Doctors have little or no control over 90 percent of factors that determine health, from individual lifestyle (smoking, exercise, worry), to social conditions (income, eating habits, physiological inheritance), to physical environment (air and water quality). Most of the bad things that happen to people are at present beyond the reach of medicine.

Everyone knows that doctors do help patients. We can mend broken bones, cure most infections, and successfully operate on diseased organs. Inoculations, infections, and organ repairs are good reasons for having doctors, drugs, and hospitals available. More of the same, however, is likely counterproductive. Nobody needs unnecessary operations, and excessive use of drugs can create dependencies or adverse reactions resulting in patient harm.

More money for clinical care alone cannot advance health. In the absence of medical knowledge gained through new research, or of administrative and clinical knowledge to advance common practice into best practice, current medicine has gone as far as it can. It will not produce more if more money is applied, and one could argue that we should be advancing anyway, especially with the extensive expenditures that the U.S. already applies to clinical care and the well-defined levels of wasted resources that could be applied to advancing clinical care.

Spending on health is not necessarily bad. Would we rather spend our disposable income on a new car, a more powerful personal computer, or a TV instead? The problem is that healthcare spending as a percent of disposable income in the U.S. is growing much faster than disposable income itself is growing. This growth in healthcare spending is impacting other categories of spending — such as education and other socially beneficial programs. The argument is not that clinical care is bad, only that it is not good for everything. The marginal value of spending an additional dollar — or 1 billion dollars — on medical care is likely to be close to zero in terms of improving health.

A simple look at healthcare inflation demonstrates why this has caused policymakers to increasingly take a very hard look at healthcare costs in the United States. In 1960, per capita health costs in the U.S. were $146. In 2012, the per capita costs exceeded $8,000. While there has been a return on this societal investment, it has not been as great as one would want. In addition, as healthcare costs move beyond 20 percent of gross domestic product (GDP), it is becoming an increasing burden for both the public and private sector. The U.S. spends far more on health as a percent of GDP than other industrialized countries. This is making it hard for the U.S. to compete in an increasingly globalized economy.

The Twofold Solution

The solution to this national dilemma is twofold:

  1. First, we need to slow the rate of growth in spending on healthcare.
  2. Second, we have to spend what we devote to healthcare more efficiently. That is, we need to realize greater value from the resources dedicated to clinical care.

Published studies indicate that the rate of waste in healthcare is somewhere between 30 and 50 percent. The causes of waste need to be eliminated. This is where aggressive, data-driven process improvement enters the picture. Experience at leading healthcare delivery organizations has clearly shown that clinician-driven performance improvement can improve outcomes, reduce harm, increase patient satisfaction, reduce waste, and save large sums of money. Such value-based performance improvement efforts can assure that waste is eliminated and health expenditures are more efficiently used.

In addition, new more efficient, patient-centric, and ambulatory based care delivery models need to be implemented. The National Committee for Quality Assurance (NCQA) Medical Home is a clear example of this trend.

Technology and advanced data management will play a role in enabling these new care models. Several studies have shown that these technology enabled models of care can reduce the annual costs to manage some high-profile chronic diseases by up to 40 percent. Given that roughly two dozen chronic diseases account for almost 75 percent of U.S. health expenditures, these new models of care offer great potential to address healthcare inflation. They have also been shown to allow clinicians to manage more patients, which will help address a growing clinician shortage, especially of physicians and nurses.

The Old Equation is Wrong

It is time for a new equation. In a world of increasingly constrained resources, individual life cannot be the sole determination of how we allocate resources.

For more details on this subject and the broader subject of healthcare transformation, you can download the free eBook entitled “Healthcare Transformation:  A Better Way,” with Dr. Haughom as a primary author.

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