“Show Me The Incentive and I Will Show You The Outcome.”
Last month Berkshire Hathaway Vice-Chairman Charlie Munger reminded audiences that America’s health care problems are all about incentives. As he puts it, “show me the incentive and I will show you the outcome.” In the US, the incentive for health care providers — hospitals, doctors, nurses et al. — is to provide more services than necessary and not to address chronic problems. They make more money when people don’t get healthy. The outcome perfectly matches that incentive: US health is no better than the rest of the developed world despite spending twice as much per capita.
Unfortunately, a Select State Assembly Committee on Healthcare just released a series of bills that don’t address that incentive — and therefore don’t reform healthcare. They also don’t address medical error, now the third largest killer in the US. But they do further enrich the health care providers who regularly roam the halls of the State Capitol.
More than 90 percent of Californians already have health care coverage. But for the 14 million people covered by Medi-Cal, the state’s single-payer program for the state’s poorest residents, that coverage often provides little to no care. Even though spending has doubled in seven years to more than $100 billion, appointments are hard to get, emergency room visits are up, there’s no evidence of greater healthiness, and there’s even evidence than uninsured patients do better than those with Medi-Cal coverage. The only thing that’s absolutely clear is that healthcare provider profits are up. They are $50 billion per year richer.
You would think that California’s legislature would want to make Medi-Cal the finest example of a single-payer system in the country. You might also think they would want to address medical error, now killing 200,000 people per year. But the committee didn’t even liberate California’s “scope of practice” laws that could improve health and make life more convenient for Medi-Cal enrollees. The Committee went nowhere near meaningful reforms.
California prides itself on being a disrupter but in healthcare it’s not even a follower of innovators like Maryland. By not acting not only are they enriching health care providers without boosting healthiness, they are further crowding out funding for UC, CSU, parks, courts and welfare.
Health care reform will not happen until legislators modify incentives for health care providers, including by moving away from fee-for-service reimbursement and towards paying for value and superior outcomes. C’mon California, you can do better!
