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“American medicine is facing an identity crisis. The COVID-19 pandemic brought renewed attention to socioeconomic health disparities and turned up the heat on the question of whether health care is a right or a privilege. The financial strain on hospitals resulting from the temporary postponement of scheduled surgeries exposed a vulnerability caused by an inherently flawed payment system.
The answer to the right versus privilege question has much more significant implications than the resolution of a philosophical debate. It determines which economic model — that of a public good, a private good, or a common good — makes the most sense for the delivery of medical services. For health care to be what we want it to be, broadly accessible, with no socioeconomic disparities, and long-term affordability, it must eventually be recognized as a common good, with all of the economic implications that come with such a recognition.”
Tom Robertson is a health care economist.
He shares his story and discusses his KevinMD article, “Health care as an uncommon good.”
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Hosted by Kevin Pho, MD, The Podcast by KevinMD shares the stories of the many who intersect with our health care system but are rarely heard from.
Transcript
Kevin Pho: Hi, welcome to the show, where we share the stories of the many who intersect with our health care system but are rarely heard from. My name is Kevin Pho, founder and editor of KevinMD. Today on the show we have Tom Robertson. He is a health care economist, and he wrote the KevinMD article “Health care as an uncommon good.” Tom, welcome to the show.
Tom Robertson: Thank you, Kevin. I really appreciate being with you.
Kevin Pho: So we’ll get into the article in a little bit, but first off, can you share your story and journey to where you are today?
Tom Robertson: I’m the executive director of the Vizient Research Institute. Vizient is a performance improvement company owned by most of the major health systems and hospitals and academic medical centers around the country. I’ve been here for 26 years, leading macroeconomic research studies focused on the delivery system and financing of health care. Our hallmark, if we have one, is that we tend to question the intuitively obvious things that seem natural to assume. We kind of pick them up and turn them over in our hands a little bit and wonder whether or not they’re exactly what they look like.
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Kevin Pho: So a lot of my audience are practicing clinicians, and since one of your roles is to question the obvious, what are some misconceptions about the health care economy, that trap that practicing clinicians tend to fall into?
Tom Robertson: Well, I spend a good bit of my time traveling around the country speaking with faculties of academic medical centers and boards of directors of health systems, and so I have the opportunity to interact with physicians on a regular basis. One of the things that I’m struck by, in terms of your question of where we maybe get it wrong, is that for the longest time, for really most of the 42 years that I’ve been in health care, we have convinced ourselves that managing the number of widgets that we provide, the volume of services, is the key to affordability. We go all the way back to the 1980s and managed care and capitation, HMOs, PPOs, and now recently ACOs. It seems like we focus an awful lot of our attention on how many services we provide.
In fact, when we look at it, it’s actually the prices that we pay ourselves and allow ourselves to be paid that make health care economically unsustainable. We use fewer days per capita of hospital care than Germany, but they spend about 60 percent as much as we do. We use about the same number of days as Canada, and they spend half. It’s really not how much we provide so much as how much we’re paid and how much we pay ourselves.
And so if I were thinking about it from a physician’s perspective, I think sometimes we pressure physicians to try and do more with less. I think if we were to find a way to get our arms around the pricing problem in the country, we would probably find ourselves in a situation where physicians were a little less under duress for the number of services that we provide.
Kevin Pho: Why do we have such high health prices in the United States?
Tom Robertson: Well, that’s actually probably a good point to jump a little bit into the article that I wrote, because it really is a failure of the marketplace. I started to question in my mind why it is that we’ve had four decades of market failure. Ordinarily, if you allow the market to interject itself, what you tend to find is that some equilibrium point arrives where the buyers and the sellers arrive at a price that everybody can live with. So I was wondering, why is it that that hasn’t happened in health care? Why have we got these enormous price variations and big, high prices for things?
I had a bit of an epiphany a few months ago, which actually caused me to write the article that you were nice enough to publish. The epiphany came when I started to think back to the types of goods that we trust the market to take care of for us. Typically, with a private good like an automobile or a wristwatch, the market works just fine, and the key there is that we don’t mind if folks who can’t afford it don’t buy it. But in health care, we do care that people who don’t have the means to afford it still have access.
And so if you think about it, and that’s the nature of the article, health care aspires to be a common good as opposed to a private good. The difference between those two really is what you do in the instances where folks can’t afford it. In a common good like clean water, we don’t want folks without means to be without clean water, and so we don’t have the market take care of that. We don’t want someone controlling the supply of clean water and charging whatever they can charge.
And so I think where we find ourselves, Kevin, is that we have trusted the market in health care to do something that it’s ill-equipped to do, for a product that we aspire to have available to anyone, whether or not they can afford it. As a result of that, we get the worst of each: We get poor access and health disparities, and unsustainably high prices.
Kevin Pho: Now, this goes to the unending debate, right, of whether health care is a right or a privilege. I think one of the issues is that we as a country haven’t come down on one side or the other. It’s an eternal debate, and this is why we can’t fix our health care system. So I was wondering, can you comment on this everlasting disagreement among our populace about whether health care is indeed a right or a privilege?
Tom Robertson: You’re spot on. You just hit the nail right on the head. We have argued with ourselves as a country as to whether health care is a right or a privilege. If it’s a privilege, then it’s a private good, and, like a Rolex or a Mercedes or anything else, we don’t mind whether anyone who can’t get it doesn’t have it. If it’s a right, then it’s a common good.
What we tend to do in the country with private goods is, as we say, the market will take care of it. With common goods, or even, taken to the extreme, public goods like national defense or fire protection, for public goods the government provides the service, and for common goods what we tend to do is regulate the industry, and you can think of a regulated utility.
And so I think where we’ve missed the boat in health care is that we’ve treated it as a private good in terms of financing it, and what we end up with are all the bad things. We have health disparities, and we have prices that many of us can’t afford. If we were to treat it as a common good, if we were to regulate prices and make sure that access was there, we’d have a better chance of dealing with health disparities, and we’d have a better chance of corralling the rate of increase in health care spending. But it’s that right-privilege dichotomy that you point out that’s at the heart of it. We want it to be a right, and yet we finance it as a privilege.
Kevin Pho: Now, can you contrast that view with the rest of the world? Is it as simple as that, the rest of the world considers health care perhaps as not a private good, and we in the United States finance health care as a private good? Is it as simple as that?
Tom Robertson: To the extent that that feels simple, yeah. It’s probably not as simple as you and me talking about it in plain English, but I think you’re right. For most of the rest of the world, health care is something that the society decides everyone will have. Everyone may not get exactly the same of everything in every other country, but there’s a minimum amount of health care that is higher than ours. Our bottom is lower than the bottom of other countries.
And so you’ll find that most of those countries have regulated what they pay for things. It’s why drugs cost more in the United States than they do for the same product in other countries. We have fewer physicians, and yet we spend more on physician care. We do less hospitalization, and yet we spend more. Those other countries tend to view it, I think, as a right and as something that everyone should have, and as a result of that, they’ve realized that if everyone’s going to have it and they’re going to pay for it, it needs to be controlled. In some places, like England, you’re actually often employed by the government, but in other markets, Switzerland and other places, it’s a privately rendered service, but it’s financed with controls over unit prices.
Kevin Pho: So where do we go from here? As you and I know, we live in a very polarized country. It’s very difficult to have anyone agree on anything. So given something as important as health care, what do you see as our path forward?
Tom Robertson: I think I would stop having the federal government buy insurance for the uninsured from private insurance companies, and I think I would probably have an optional federal health plan. I don’t mean Medicare for All. I think I would take everyone who doesn’t have insurance and I would insure them, rather than subsidizing the purchase of insurance.
What would happen, Kevin, is that if there were an optional federal health plan that the uninsured could be covered by, immediately the private insurers, whether it was Blue Cross Blue Shield or UnitedHealthcare, would need there to be all-payer rate regulation in order to level the playing field. Right now the government pays whatever it decides, and the private sector pays whatever gets negotiated. That cross-subsidization from private to public is a troublesome economic reality that we deal with. It makes hospitals and physicians dependent on the private-sector revenue in order to stay afloat. So consequently, they have to chase private-sector business in order to subsidize their public-sector missions, and that puts us in a situation where health disparities are almost a guarantee.
And so what I would like to see happen, if it were left to me, is a federal optional health plan that would stimulate all-payer rate regulations, so that all payers, government and private, paid the same. High-acuity providers would be paid more than low-acuity providers, because the cost is higher, but every payer would pay that provider the same amount.
Once we were there, I think we could get to a point down the road a bit where we had global budgets, not terribly unlike the state of Maryland, although Maryland only does that on the hospital side, not on the entire system side. I’d love to see regions of the country have an all-inclusive global health care budget that the providers then use to take care of folks. I would even go so far as to imagine health care ecosystems, not state by state, but geographically situated according to where the tertiary and quaternary care congregates. I would allow there to be these health care ecosystems that might include multiple cities, but they would have a budget, and that budget would be theirs to be imaginative with, so that we could do some things for patients with chronic disease.
Perhaps in your practice you’ve seen the chronically ill decompensate and end up in the hospital, and we could have avoided that if we had done something on the front end of their care differently, or maybe even done something differently socioeconomically. And so I’d like to see us have a more holistic view of the way that we care for the chronically ill.
Kevin Pho: Now, the Biden administration is supporting a public option for the Affordable Care Act. Is that something that you’re talking about when you talk about a kind of publicly financed option for people who are without health insurance?
Tom Robertson: I would support that. I’m agnostic politically. I’m conservative personally. I’m socially moderate and fiscally conservative, personally. I would absolutely support an optional federal plan for anyone who doesn’t have insurance. I think we made a politically necessary but illogical decision in the Affordable Care Act when we decided to have the federal government subsidize the private insurance purchase rather than giving those folks coverage directly. It would have been far less expensive to put those folks into Medicare than it would be to buy commercial insurance for them, but politics being what it is, in order to get that passed, we had to make some accommodations.
I would love to see the uninsured in a federal health plan, and then have the federal health plan pay its fair share, have it pay the same as the private sector. The private sector would pay less, the federal government would pay more, and we’d end up in a place where physicians and hospitals could be payer agnostic. They wouldn’t have to worry about where the payment was coming from, because it was always going to be the same, and they could act on their clinical conscience rather than be worried about the economics.
Kevin Pho: Now, one of the criticisms of a public plan is that it’s very difficult for private payers to compete, of course, with the federal government, and some will say that’s a stealth way of some type of Medicare for All or some type of public-plan-for-all system. And those resulting decreased payments in an all-payer system perhaps would hurt rural and financially struggling hospitals. So what’s your response to that line of criticism?
Tom Robertson: I think it presupposes that the federal government will continue to pay anything close to what they’ve been paying in the past. As it turns out, when you look at the total revenue associated with rate-regulated providers like those in Maryland, they don’t fall at the bottom of the heap; they’re right in the middle. We’ve looked at it, and their revenue per unit of service is kind of right in the middle, but it’s because in those rare cases where we have moved to all-payer rates, the federal government and the private insurers pay the same price as one another.
Right now we are in a situation where the federal government decides what it’s going to pay, and it’s almost never at the full cost of the care that they’re purchasing. And so we can’t trick ourselves into thinking that health care costs would go down magically by moving everything to a government payer, because the government has never been paying the right number. They should have been paying more all along.
And I think that, rather than worrying that it would damage the providers, I actually think it would be to the providers’ great good, their best interest in the long run, to not be trying to cross-subsidize. Because as the population ages, and I’m 64, as the population ages and the boomers move into Medicare, there are going to be fewer and fewer people paying for those subsidizations, and we’re already at the point where it’s very, very difficult to load up that subsidy on the private sector. I think it would be more rational and would work better for everyone if the government paid more and the private insurers paid less.
Kevin Pho: We’re talking to Tom Robertson. He’s a health care economist, and he wrote the KevinMD article “Health care as an uncommon good.” So, Tom, I think that your suggestion, where the government pays more and private insurers pay less, certainly is a reasonable path forward. What is your prediction in terms of its impact on individual physicians and individual clinicians? Because a lot of times, when they hear about an increase in public pay, their salaries tend to be pressured, and that doesn’t garner a lot of physician support. So what do you say to those individual clinicians?
Tom Robertson: I’d say to them that they, as well as administrators like me, probably need to be prepared over the course of the next 20 or 25 years for all of our incomes to be scrutinized a little bit. I mean, I don’t blame it on doctors. I’m a possible administrator by training, and I make a healthy salary myself. I don’t think we need to take a lot away. I think we need to slow the rate of increase.
I think that we’re on a trajectory, Kevin, where we’re digging a hole that our grandkids are going to find it very difficult to dig out of. And so I’m not a proponent of a steep downward curve; I’m more of a proponent of flattening the trajectory of where we’re headed. I think that if we don’t get out ahead of it and do something proactively, like rate regulation, we may find ourselves in a catastrophic situation sometime three elections from now. We may find ourselves in a situation where we waited too long and now we do have to do something draconian.
I think we have the opportunity to influence the direction of that if we were to proactively get involved now. I think hospitals, physicians, drug companies, device manufacturers, all of us really need to rethink the route that we’re on. In the absence of a crisis, it’s always difficult to change direction, but I think we would be wise to see that if we were just to adjust course a little bit, we could avoid a crash.
Kevin Pho: Now, you said that it’d be wise to get involved. So what are some actionable ways where clinicians can get involved in health care policy?
Tom Robertson: Well, I think the hospital industry, as well as the national physician leadership, might pause and take a look at the difficulty in practicing medicine the way that I think you guys all want to practice. I think the difficulty that we put you in is that on a daily basis you are trying to take care of your patients, some of whom are Medicare, some of whom are privately insured, and some of whom are uninsured. We’re putting you in a situation of needing to be payer blind when the economics are stacked against you being able to do that.
So I think one of the things that physicians could do is to say, “We would like to practice medicine in an environment where we didn’t have to make financial decisions. We simply do what’s right for the patient clinically, and we know that we’re not going to bankrupt them, and we know that our practice will not suffer if the wrong mix of payment types finds its way in there.”
And so if someone were to ask me what we should be pushing for or advocating for, I would advocate for an all-payer rate-regulated environment, where hospitals don’t have to chase surgery, no one has to chase suburban patients at the expense of urban patients, and physicians are able to make clinical decisions in their daily lives in a payer-agnostic way. I think it would be a better way to practice.
Kevin Pho: And my final question: What’s your take-home message that you want to leave with the KevinMD audience?
Tom Robertson: I’m grateful for you asking that. I would love to see, or I’d love to believe, that the health care industry has the will to move away from medicine as a business and to move toward healing as a common good. I would tell you, Kevin, no patient woke up this morning and said, “I hope my health system got bigger.” We are merging and acquiring, we’re growing, we’re acting like General Motors, when in fact our mission is to take care of patients when they need us the most, when they are sick and scared.
And my last message to leave your audience with is that healing takes heroes, and I would urge them to go be heroes and to not think about health care as a business, but to think about it as a calling, which is why I think most of you guys got into medicine. It’s why I got into medicine.
Kevin Pho: Thank you so much for joining me and sharing your time and insight, and thanks again for being on the show.
Tom Robertson: Great being with you, Kevin. Thanks a million for having me.
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