What Does Failure Mean?

I’ve seen a number of responses to recent news that the Medicare demonstration projects were not successful. Some have claimed that they were only demonstration projects, and the fact that some succeeded means we should look into those further. Others asserted that this once again proves that the government is incapable of making the health care system better.

As to the first point, it’s hard to get excited about this. By chance alone, a couple of programs were likely to save money. Four out of 34 reducing hospitalizations (when the best of them might have had inadequate data)? Hardly something to get excited about. Remember that two out of the 34 actually saw increased hospitalizations, too. I think it’s totally reasonable to think hard before just assuming there was something special about those four programs, and throwing more money at them.

But I think the latter point, made by Peter Suderman, is a bit of an over-reach as well. It’s important to remember that these were attempts by private hospitals and private physicians to change the way they care for patients. Granted, government was paying the insurance bills through Medicare, but this would have looked awfully similar if a private company had footed the bill. And, yes, private insurance companies have tried to use care coordination and disease management to reduce costs as well.

At times like this, it’s important to look beyond the roots of our love/hate relationship with government to address the actual programs. I have very little trouble believing that better care coordination results in better quality. Yes, we should check, but there’s face validity to the idea that assigning trained personnel to spend more time making sure patients and doctors communicate is a good idea. It’s only in the crazy world of politics, though, where we assume that better quality also means reduced costs. Over here in the real world, I often assume that better things cost more. So I’m not surprised when programs which likely improve quality don’t save money.

Note that this doesn’t mean we should stop trying. It means that we should be honest about what we’re trying to accomplish. I think lots of things are being sold as cost-saving when they are really quality-improving. Think prevention. And information technology.

As to the second type of demonstration program, “paying for quality, not quantity”, well I’ve always been skeptical of that. I’ve long argued that it is very difficult to get doctors to change their behavior. Some lump-sum payments and a few years of pleading aren’t going to do it. If you want to truly affect physicians behavior through the payment system, you need to make some pretty big changes. Some think ACOs might do it. I’m even skeptical of that.

My major gripe with both sides here is that there’s a general consensus in the public sphere that we can get a handle on costs with no one feeling it. A nibble here, a tuck there, and it will all be affordable, and no one will notice the difference. That’s somewhat delusional. Cutting a couple hundred billion out of health care spending means that people all over the country are going to make a couple hundred billion less. They’re going to notice, and they’re going to scream, and it’s going to hurt. It’s time to start recognizing that some simple slogans and promises of improved quality coupled with reduced spending aren’t going to save the day.

[Cross-posted at The Incidental Economist]