How Incentives have Affected Healthcare


Correct Incentives:  what do you think?  

Let's look at some basic numbers:  74% of all costs are confined to four chronic conditions (cardiovascular disease, cancer, diabetes and obesity). Furthermore, 80% of cardiovascular disease and diabetes is preventable, 60% of cancers are preventable, and more than 90% of obesity is preventable. 

The incentives are quite out of whack with a market driven industry, as the AEI video at right indicates.  Motivations over time have become quite distorted in each of the different sectors in Healthcare:

•Pharma / Device “My job is innovation that helps people . . . it's up to the doctors to control use.”

•Payers   “We want to pay for the right things there’s things, but there s little data…and our customers want us to control costs.”

•Clinicians  “My job is doing everything I can to help my patient . . . if I say no to studies, I might get sued.” 

•FDA   “Safety, not cost effectiveness, is my job.”

•Consumer-Patient   “I want the best of everything. Don’t ask me to pay more.”


The objective of reform should first be to improve these incentives, measure the results, while also carrying for the ones affected in the worst way. 

•What about having insurance companies be a risk reducer rather than a treatment decider and cost shifter (due to Medicare, Medicaid)? 

•How about having doctors with a rising satisfaction in what they do, able to manage outcomes rather than do paper work and concern themselves with law suits and increasing costs of doing business?

•How about hospitals having a focus on efficiency and outcomes and patient satisfaction rather than cost vs. payment algorithms?

•What about FDA measured as a function of saving lives rather than reducing risk?  

•What about pharmaceutical companies seeing a clear manner to change the world and truly sensing a market and not political competition model? 

•What about the government being focused on the effectiveness of healthcare and not mandates and having to deal with lobbyists? 


This world is possible with resolve on the part of the citizens first to demand it, and the government to get out of the way and enable this environment to be free of centrist favoritism policy making.

As a person wrote:  "Let  me get this straight. Obama's health care plan will be written by a committee whose head says he doesn't understand it, passed by a Congress that hasn't read it and whose members will be exempt from it, signed by a president who smokes, funded by a treasury chief who did not pay his taxes, overseen by a surgeon general who is obese, and financed by a country that is broke.

What could possibly go wrong?"



Entitlement: what can be said     Link

Certainly in most cases the sense of entitlement is at odds with the notion of individual responsibility. This is certainly most evident when citizens consider if healthcare is a right or are they responsible for managing their healthcare and its cost. Philosophically we love individual initiative and responsibility, as long as some conditions are met. Individualist place very few conditions on this notion, while liberals place a great deal. And how does this relate to healthcare and its reform?

If we consider that our current system of healthcare insurance is considered by most to be prepaid healthcare, not health insurance, we see how key the discussion and distinctions on "rights or not" becomes. If healthcare is in the same category as the air we breathe, then it is considered more a right than a service. Auto insurance is a better model than the one we have today for healthcare. The sense of individual responsibility is quite different for most folks.

Individually responsible folks manage their health by taking steps to understand first of all what makes them healthy. Obesity is a major cost factor in the overall cost of healthcare, more so in this country than any other. Life Style related costs are a dominate factor in any discussion on overall costs. So the responsible thing for individuals to do is to loose weight, and take more responsibility for preventative care. This alone might solve the cost issue in healthcare, but how to support this idea?

Returning to the issue of a "right", we see it manifested in the two Bills in Congress, for having all pay the same price for insurance, and no one pay a penalty for their life style choices is a disservice to the individuals and to the public, all for the sake of having healthcare be an entitlement. In addition to make these Bills work, a great deal of freedom has to be lost and taxes raised along the way.

One cannot have healthcare reform and not have an increase in individual responsibility built in, in a manner perhaps as Safeway has done, and found also that it reduces the costs significantly and increased the well-being of its employees. It is clear that the liberal caucus in Congress does not want that step towards individual responsibility to be taken.

The further irony is that by focusing on healthcare as a right and its entitlement for all, we will likely see a determination of the system and still higher costs in the form of taxes, while we also see rationing occurring as it is today in select States. Pipes writes (see below) on the cost side of the equation, but what about the lack of compassion to install by force a lack of choice, a crippling set of proposals as we see in Congress today, all for the sake of helping the "poor dying person in the street", the poster child of universal care. I am concerned about that individual, and want to see the best system possible to make the issue a moog point.

It would seem to me that the best means to help "this person in the street" is to lower the cost of healthcare, and do some form of the compassionate policies in the Proposal section, and improve the overall system. Do we really feel that the person in the street is gong to suffer as a result? They will if they are waiting in line for rationed care. The increased costs of healthcare threaten this person's option and affect us all. The mere fact that the major cost driver for these increases, among the many detailed in Trends/Costs, was the growth of the public sector in healthcare.

I return to the example of the $500 computer that is benefitting all, and that condition of low cost productivity was created not by a government public option but by enterprising, self-reliant individuals working in a competitive industry. How about trying this in healthcare, and treating it as a service and not a right. It will serve all very well if we can take this step.

Sally Pipes writes (Jul 29, 2009): In the end, the only way to control costs inside a bureaucratic structure is to cut doctors' pay, transfer patients into managed care, impose government global budgets and introduce price controls. And that's exactly what Bay State leaders have announced they'll do.

Last week, a state commission recommended that the government stop paying health care providers for each procedure and instead compensate provider networks with a flat fee per patient. Of course, such a system of global payments, or "capitation," encourages provider groups to skimp on care, as they get to keep as profit any money not spent treating patients.

If congressional Democrats get their way, every American can look forward to a similar system of capitation in the future. This would upset the care of 85% of Americans who are currently insured and greatly increase government control. Exactly the results Democratic leaders assure can't possibly happen.



What are the correct incentives and do they matter?