Wealth-Care Reform

Amy and Lane are the sort of entrepreneurs politicians mythologize. Folks who stepped out of the safety of corporate employment, identified a market niche, and filled it. The couple owns a small broadband Internet-access provider in Northeastern Iowa. The work they do matters: A remote corner of a rural state depends on them for connectivity and competitiveness. And they are going bankrupt.

Their finances have not failed because their business has flagged. Nor were they victimized by Wall Street's collapse. Rather, their woes began 17 years ago, long before there was a Google to access or there were download speeds to compare. When Lane was 21 years old, he was diagnosed with cancer. The treatments were vicious: Doctors took a lung, a leg bone, and part of a hip while fighting the disease. But they were successful. Now he is cancer-free. The disease still haunts his life, however: In particular, it haunts his finances. Health insurance consumes 40 percent of the family's income. They have no retirement savings. Loan officers casually mention bankruptcy, a word that breaks Amy's heart. "This is not who we are," she said. "We have done everything we were supposed to do."

Health-care reform, at least as discussed in Washington, is designed to help families like Amy and Lane. Indeed, if their plight sounds straight out of a political speech, that's because it is. Barack Obama told their story in May 2007, when he unveiled his health-care plan at the University of Iowa. This was the situation he chose in order to illustrate the problem he meant to solve. But read it closely. Amy and Lane are not facing a health problem. They are facing a health-financing problem. Reform will make them more economically secure. It will not necessarily make them any healthier.

This is frequently elided in the health-reform debate. Obama's campaign Web page sold his health-reform proposal as "A Plan for a Healthy America." Sen. Ron Wyden calls his bill "The Healthy Americans Act." But for a clearer account of what health reform is really about, consider the congressional committees that have primary jurisdiction over it. In the House, it is the Energy and Commerce Committee. In the Senate, it is the Finance Committee, rather than the Committee on Health, Education, Labor, and Pensions. In both cases, the money committee commands the issue. After all, this is fundamentally an issue of money.

Health-care reform is, in practice, health-care-system-spending reform. Politicians promise that their plans will "bend the curve" and pursue "universal coverage." They do not promise the plans will make everyone healthier, reduce infant mortality, or set targets for life expectancy. The health of the nation, as opposed to its ability to pay hospital bills, is hardly under consideration.

The country's health-care debate is like a driver who has grown so obsessed with the workings of his car that he's largely forgotten where he was driving. We built a health-care system because we care about our health. But the means have become the end, and it is now the system, and not our health, that obsesses us. And that obsession may be preventing us from doing things that would actually make us healthier.


Researchers have studied the various forces that decide whether a person will die early of disease: They call them "the determinants of health." In a 2002 paper for the journal Health Affairs, Michael McGinnis, Pamela Williams-Russo, and James Knickman conclude that the breakdown goes something like this: "genetic predispositions, about 30 percent; social circumstances, 15 percent; environmental exposures, 5 percent; behavioral patterns, 40 percent; and shortfalls in medical care, 10 percent."

If medical care has such a minor impact on a person's longevity, why are we spending so much time and energy reforming the industry? The answer goes back to the money committees. As Office of Management and Budget Director Peter Orszag has said, "Health care is the key to our fiscal future." Without reform, government health spending alone will reach 37 percent of gross domestic product by 2050. When you hear folks fret over the looming entitlement crisis, it is really the health-care spending crisis that is obsessing them. As the Center for Budget and Policy Priorities has written, "Rising health care costs are the single largest cause of rapidly rising expenditures."

The purpose of health reform, in other words, is to pay for health care -- not to improve the health of the population. Paying for care and improving health are, to be sure, both noble goals. The problem is that they have not settled into a peaceful coexistence. Rather, the spending conversation has consumed the health conversation. It is not hard to understand why. "Somebody makes money taking care of a person once they're diabetic," says Shannon Brownlee, author of the book Overtreated. "They don't make money making sure all elementary schools have a playground and neighborhoods have sidewalks." They don't make money preventing the diabetes in the first place. In 2007, we spent $2.2 trillion on health care. A mere 3 percent of that went to measures meant to improve public health. Similarly, Obama's health-care plan in the campaign was estimated to cost $65 billion a year (which was an absurdly low estimate). The plan included a provision that would "promote public health," but it had neither specifics nor a price tag. "The irony is that we use health as a rhetorical trope a lot in the health-reform debate," says Harold Pollack, a professor of public health at the University of Chicago. "There's a big payoff to pointing to health as a beneficial outcome from health reform. There's not a big political payoff to advocating for enacting specific measures that would improve health."

Indeed, lots of interest groups stand to lose money if society becomes more concerned about health. As Brownlee notes, "Our agricultural policy is actually counterproductive for health. We subsidize everything that gives you diabetes and nothing that keeps you healthy. Every grain you can think of is subsidized, particularly corn, but are carrots subsidized? No. Is the advertising of carrots subsidized? No." But if you want to change that, you've added the agricultural industry and politicians from corn states to your list of opponents. "As you expand this question you gain more enemies who prefer the status quo than you gain friends," says Sen. Sheldon Whitehouse, a Democrat from Rhode Island.

That's because the beneficiaries of pro-health policies are diffuse. With better prevention policies, people would be healthier, taxpayers would see entitlement costs drop, and employers would see health spending slacken. But these are all indirect and speculative payoffs.

It's not easy for the political system to combine health promotion with health-system reform. Nutrition is inarguably a major determinant of health. But the Senate Finance Committee, which has jurisdiction over health-care reform, has little power over farm subsidies. Those go through the Agriculture, Nutrition and Forestry Committee. Crime reduction is similarly important -- children don't play outside if their community is unsafe. But public safety is handled by the Judiciary Committee. Pollution is also a huge issue, as one might expect. But that's the Committee on Environment and Public Works. "One thing I've learned here," sighs one senior administration official, "is that the structure of the committees inhibits you from considering multifaceted, complicated legislation."

In early April, the Robert Wood Johnson Foundation released a 111-page report titled "Beyond Health Care," which concluded that health insurance does not equal health. "College graduates," it notes, "can expect to live at least five years longer than Americans who have not completed high school. Poor Americans are more than three times as likely as Americans with upper-middle-class incomes to suffer physical limitations from a chronic illness. Upper-middle-class Americans can expect to live more than six years longer than poor Americans. People with middle incomes are less healthy and can expect to live shorter lives than those with higher incomes -- even when they are insured."

Our health is not determined by what happens inside a hospital ward or a doctor's office. It is determined, as the Robert Wood Johnson report puts it, by "where people live, learn, work and play." We are making health decisions when we choose whether to walk or drive to work, when we fill our bags at the supermarket, when we enroll our children in early-childhood education programs. None of these is specifically a "health care" moment, but in the aggregate, they add up to the state of being we call "health." Or, increasingly, to the state of being we call "sick." There are ways to spend public dollars such that the scale tips toward "health" and away from "sick." But the ever-increasing portion of the budget we direct toward medical spending is squeezing them out.


Money, economists say, is fungible. A dollar can be used to buy most anything. Importantly, however, it can only be used to buy one thing. A dollar spent on insurance premiums is a dollar not spent on groceries. Choices must be made. "One unintentional benefit of health-care reform," Pollack says, "would be that if we get health-care financing on a better footing, we would stop killing all sorts of social programs that do more on the margins for health than health care does but are being starved for resources."

The problem is that health-care costs are on autopilot. In other areas of life, decisions are made based on whether a particular use of a dollar is a good value as opposed to other uses of that dollar. A company forced to choose between a new copier and a new air-conditioning unit must ask itself which purchase is more necessary. A Congress confronted by a limited budget has to decide whether to subsidize nutritional food or fix a bridge.

The American health-care system doesn't work like that. We are not comfortable saying that the price tag on one person's life is appropriate but the price tag on another's life is exorbitant. So rather than asking whether a given treatment is an effective use of money, we only ask whether it's effective. Full stop.

Society is understandably uncomfortable pricing the value of someone's life, or quality of life. Speaking to The New York Times, Obama gave an example from his own family. "My grandmother got very ill during the campaign," he said. "She got cancer; it was determined to be terminal. And about two or three weeks after her diagnosis she fell, broke her hip." The doctors said that her life expectancy was likely to be mere months. And a hip replacement surgery might be too much for her heart. But she elected for the replacement. A few weeks later, she died.

"I don't know how much that hip replacement cost," Obama continued. "[But] I would have paid out of pocket for that hip replacement just because she's my grandmother. Whether, sort of in the aggregate, society making those decisions to give my grandmother, or everybody else's aging grandparents or parents, a hip replacement when they're terminally ill is a sustainable model, is a very difficult question. If somebody told me that my grandmother couldn't have a hip replacement and she had to lie there in misery in the waning days of her life -- that would be pretty upsetting."

We pay handsomely for the luxury of not confronting these questions. "We don't have a health-care budget," Brownlee says. "Countries that say we'll spend X amount on health care this year because we have a single-payer system tend to think about the tradeoffs in what they pay for. They're making constant judgments about whether it's more useful to pay for childhood vaccinations than ventilators for the last year of life. Medicare doesn't follow a budget. They just pay whatever is ?reasonable and necessary.'"

Pollack gives the example of implantable cardiac defibrillators. ICDs are effective, but they are expensive. Medicare pays $25,000 for each device. In 2002, it spent more than a billion dollars on them. "Then," Pollack says, "when the Center for Disease Control's budget comes up, Congress asks whether it can really afford to be spending this money on the CDC given all the other priorities." Sure enough, in 2003, the CDC -- which administers several heart-disease-prevention programs -- saw its budget cut by $300 million.

What we need, says health-care researcher Michael McGinnis, is a willingness to see health-care dollars as health dollars. The question should not be how much health care we can buy. It should be how much health we can buy. Whether that health comes through a doctor's office or a preschool is immaterial.

The health-care system speaks often of cost. McGinnis wants to see it operate on value instead. "Value is a very straightforward notion," he says. "It's how much a return you get for the effort you put in. In this case effort is dollars. And return is health. There's no reason we can't focus a lot more attention on improving our ability to understand the likely return for a dollar invested in a particular priority."

But in practice, we don't know how to assess the health value of different medical procedures. Health-care policy is a dream issue for wonks: Identify a problem in the system and you can find five scholars willing to offer you five fully developed solutions, each one supported by a coalition of five interest groups. Public health is a less mature industry. In part, that's because there's less money to be made in preventing health problems, and thus fewer people working on solutions and less project funding. "The public-health sector is the poor stepsister to the sick care industry," Brownlee says. In its report, even the Robert Wood Johnson Foundation admits, "We do not know enough about how to improve health and reduce health disparities using strategies outside of ... health care." Some have even suggested a health analogue to the ubiquitous "environmental impact statements" that accompany new buildings and projects. And why not? Why shouldn't the farm bill have to file a "health impact statement" to answer for its long-term effects on the national waistline?

"The first step in a more rational set of social-resource decisions is understanding where the tradeoffs are," McGinnis says. "And we're nowhere at this point in understanding those tradeoffs in the way that we should."

The irony is that though the health-care system might not make individuals much healthier, improving the health of individuals might do a lot to ease the problems of the health system. Health promotion could help health reform. At the end of the day, costs are going to come down in one of three ways: We will buy less care, give fewer people access to care, or need less care. Indeed, estimates hold that between 20 percent and 30 percent of the rise in health costs since 1987 is attributable to the doubling of obesity rates over the same period. That's spending driven by need. Reduce need, and there's a good case to be made that you can reduce spending. And if you reduce total spending, in theory Amy and Lane's insurance premiums will come down.

That said, there's still some argument in the literature over whether better health actually saves money. A smoker who dies early from lung cancer doesn't live to be treated for cardiovascular disease and, after that, Alzheimer's. In terms of "health value," early death is clearly preferable. "From the perspective of a government actuary," McGinnis laughs, "the only good person is a dead person. They won't take Social Security or Medicare resources." Peter Orszag, however, is pretty close to the government's chief actuary, and he's emphatic on this point: "The objective can't just be to reduce costs. If the objective was just to reduce costs than we should just let life expectancies drop to cut Medicare costs. That's a very bad outcome."

But there are also arguments that the chronic conditions driven by poor health are uniquely expensive. Living with diabetes is not like dropping dead of a heart attack. Chronic conditions require sustained and frequent contact with the medical system. And as we get better at keeping sick people alive, we increase those costs exponentially. The economist Kenneth Thorpe has estimated that 75 percent of our current health spending is on chronic conditions. "If we're going to continue on this track," White House health-policy adviser Dr. Ezekiel Emmanuel has said, "the system will be unsustainably expensive. If a quarter of the population has Type 2 diabetes by the time they're 40, then we know this'll be completely unsustainable. The solution to obesity can't be bariatric surgery." That's true even if you reform health care. In fact, with 47 million individuals currently uninsured and unable to afford care, it might be true especially if you reform health care.

Which is not to take too much away from health-care reform. For too many, a trip to the emergency room ends in bankruptcy, or a child's fall results in massive credit-card debt. And those who can't afford regular care often suffer terribly from chronic pain and preventable illness. Fixing the health-care system is imperative from both a moral and an economic perspective, but it is not the end of the story. "The reason we care about health care," Orszag says, "is to improve health," and he's right. But if we want to improve health, we're going to have to reform more than just health care.