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Bill George

Harvard Business School Professor, former Medtronic CEO

Passage of US Healthcare Reform Legislation

Originally Posted in the Harvard Business School Press on March 23, 2010.

The politicians’ chatter Sunday night during the historic House vote on access to health insurance gave the impression that reform was done. Speaker Nancy Pelosi called it an extension of the Declaration of Independence, declaring, “health care is a right,” not a responsibility. Republican leader John Boehner all but claimed it marked the end of free enterprise.

Wrong on all counts.

Passing this bill is a momentous step in granting health care insurance to 32 million Americans who lack access, something we can finally take pride in. But it certainly doesn’t end the urgent need for health care reform. Rather, this is the end of the beginning. Now the hard work must begin in earnest.

The bill addresses only one of the four essential elements of health care. Beyond insuring the uninsured,cost, quality, and lifestyles are not addressed. Unless we focus on all four, we will continue to have a dysfunctional system with unaffordable costs.

The bill does virtually nothing to constrain health care costs. It is “paid for” with tax increases that take effect this year and projected cuts in Medicare reimbursement, while delaying most benefits until 2014. If we don’t get health care costs under control before then, the Congressional Budget Office’s projected deficit reductions will turn into a trillion dollar increase the following decade.

Even the current round of Medicare cuts – over 20% for many physicians and hospitals – is unsustainable, as politicians plan to reverse them retroactively. If they don’t, many physicians and hospitals will refuse to take Medicare patients, just as the Baby Boomers enter the Medicare system. Last month Mayo Clinic in Scottsdale announced it could not afford to accept Medicare patients. Longer term, this could push the U.S. toward the British system of splitting into private and public systems.

Nor does this bill constrain insurance premiums. Wellpoint’s 38% rate hikes in California are going into effect, in spite of jawboning by Health and Human Services Secretary Kathryn Sebelius. Expect other insurers to follow. Can you think of any other product or service that could pull off price increases of this magnitude?

The incentives for individuals and health care professionals in the current system are perverse. There are no rewards for people who stay well, and no penalties for leading unhealthy lifestyles or overusing the system. Nor are there incentives for doctors and hospitals to keep people healthy and prevent disease. In fact, studies have shown that those physicians and facilities who do so find themselves losing income.

As a result, primary care physicians are forced to pack more office visits into already crowded schedules, while spending less time with each patient. Specialists are incentivized to do more procedures, even when lower cost alternatives are available. Hospitals are forced to conduct more tests and get people out of the hospital before they are ready.

We need to realign these incentives by rewarding people for healthy lifestyles and taking more cost-effective approaches to their health. Hospitals and physicians should be rewarded for keeping people well.

Experts like Donald Berwick, MD, of the Institute for Health Improvement and Charles Denham, MD, of the Texas Medical Institute of Technology have identified ten quality issues whose correction could save billions of dollars. Managing chronic disease, which accounts for 75% percent of health care costs, in a systematic manner instead of as a series of acute events, for example, could improve outcomes and quality of life for millions of people, while dramatically lowering the cost of care. Yet there is no national push to get this done.

It is estimated that lifestyle issues like unhealthy diets, smoking, alcohol, lack of physical exercise, and unmanaged stress account for more than half of all health care costs. Addressing these factors requires a national movement for wellness and prevention, modeled after the highly successful anti-smoking campaign; yet all this is virtually ignored in the current legislation. To motivate people to take responsibility for their health and live healthy lives, there must be rewards for those who do and penalties for those who don’t. On a local level, consumer-driven health plans and the integrated health movement have had some success in this regard. Now these must be taken to scale nationally.

This is a complex set of priorities to realize in a system already under tremendous pressure. It is too complex to leave in the hands of politicians who lack deep knowledge of health care and are swayed by lobbyists. For these reasons it is likely that solutions will arise in local communities before they are adopted nationally. The process will be long and difficult.But unless we begin immediately, the U.S. health care system will make our country not only less healthy but less competitive.

Now is the time for health care leaders locally and nationally to step up to these challenges, and bring about the whole package of needed changes and improvements. Let’s get on with the hard work.

About Harvard Business School:
Founded in 1908 as part of Harvard University, Harvard Business School is located on a 40-acre campus in Boston. Its faculty of more than 200 offers full-time programs leading to the MBA and doctoral degrees, as well as more than 75 open enrollment Executive Education programs and more than 60 custom programs. For more than a century, HBS faculty have drawn on their research, their experience in working with organizations worldwide, and their passion for teaching to educate leaders who have shaped the practice of business and entrepreneurship around the globe.