Ian Morrison

We have a first class healthcare system. It works pretty well for people in first class but if you are in coach you might not be so happy. Class (by this I mean socio-economic status) is increasingly the predictor of healthcare outcomes, service, and satisfaction, and here’s the really good part, if you are in first class you pay less of your income for healthcare than if you are in coach. So what’s not to like?

The Role of Class in Health

A number of recent studies are reinforcing a point that we have known for a very long time that socio-economic class is a powerful predictor of disparities in health care treatment and outcome, even adjusted for access. Here are two recent examples, quoted directly from the news feeds or the study abstract:

• Study of Disability rates in the US. “U.S. residents ages 55 and older with annual incomes less than the federal poverty level are more likely to have disabilities that limit routine physical activities than those with higher incomes, according to a study published in the New England Journal of Medicine on August 17, 2006. According to the study, respondents ages 55 to 64 with annual incomes less than the federal poverty level -at the time, $8,259 for an individual – were six times more likely to have disabilities that limited activities such as walking, climbing stairs and lifting objects than those in the same age group with incomes of $60,000 or more. The study also found that the rate of disabilities continued to decrease among respondents ages 55 to 64 as annual incomes increased higher than $60,000. Study authors said the disparity did not result only because of more limited access to health care among respondents with lower annual incomes. Meredith Minkler, a professor of health and social behavior at UC-Berkeley and lead author of the study, said, “Social class is a tremendously important risk factor for disability,” adding, “If policy makers are concerned about improving health status, they need to focus not only on medical coverage, which only accounts for 10% to 15% of health status, they need to look at how to improve social class.”
• US and England Comparisons. “The US population in late middle age is less healthy than the equivalent British population for diabetes, hypertension, heart disease, myocardial infarction, stroke, lung disease, and cancer. Within each country, there exists a pronounced negative socioeconomic status (SES) gradient with self-reported disease so that health disparities are largest at the bottom of the education or income variants of the SES hierarchy. This conclusion is generally robust to control for a standard set of behavioral risk factors, including smoking, overweight, obesity, and alcohol drinking, which explain very little of these health differences. These differences between countries or across SES groups within each country are not due to biases in self-reported disease because biological markers of disease exhibit exactly the same patterns. To illustrate, among those aged 55 to 64 years, diabetes prevalence is twice as high in the United States and only one fifth of this difference can be explained by a common set of risk factors. Similarly, among middle-aged adults, mean levels of C-reactive protein are 20% higher in the United States compared with England and mean high-density lipoprotein cholesterol levels are 14% lower. These differences are not solely driven by the bottom of the SES distribution. In many diseases, the top of the SES distribution is less healthy in the United States as well.”

These dramatic differences across socio-economic class are not just about access to healthcare or insurance coverage. They point to the fundamental role of class as a determinant of health. But obviously, these results are further compounded by the well-documented effects on health of both health insurance status and race and ethnicity. For example, analysis by the Commonwealth Fund has shown that among working people, the rate of uninsured is only 5% for those in the top income quintile (roughly $90,000 plus in household income) whereas it is 52% in the lowest income quintile (households earning less than $20,000). The most dramatic recent increase in uninsured rates is among those households earning between $20-35,000 (the second and third quintile of income). All of these effects are even worse when race and ethnicity are added to the mix, as the IOM’s report “Unequal Treatment” carefully documents. (By the way, the UK/England study focused solely on the white population, partially I believe to head off the old canard of international comparison studies, namely that the US is different because of our more heterogeneous population).

The bottom line of these studies is that socio-economic status matters a great deal and there are real smart scientists that believe there are neuro-physiological processes at work affecting human biology that have to do with stress and degree of control. In reviewing the US/UK study with a British journalist from the Financial Times of London, I speculated that we all work too hard in the US, and the poorer you are and the less educational opportunities you have, the harder you have to work. Maybe we should all put down our brooms or our Blackberries and go to the pub and we might be a lot healthier.

Class and Payment

But, I want to link the concept of class to the broader question of who pays for healthcare, because we have a unique set of circumstances in the US, where the income distribution is getting ever more extreme (the very rich getting very much richer) at the same time that we have healthcare financing policies that are regressive in their funding. High deductible health plans, in general and HSAs in particular are regressive forms of payment (rich people pay a smaller share of income to health care than poor people). As I have estimated in this column before, a million dollar a year earner in Canada would pay $150,000 in taxes toward healthcare, a million dollar earner in the US would pay about $58,000 in taxes and premiums toward healthcare. That is why single payer schemes such as the one passed in late August by the California Assembly is an assault to the status quo. The proposed legislation would be paid by an 8% payroll tax and a 3% individual income tax, probably doubling the overall healthcare bill for those million dollar earners. Obviously, only a few hundred thousand folk in America make over a million a year, but we all think we will, if we can’t go the Princeton, Stanford, venture capital route we are betting on the NBA, hip-hop, or No Limit Texas Hold’em to get us to the bling.

The battle that will ensue in the next round of national and state health policy debates will center on whether the middle class associates itself politically with the top or the bottom of the income distribution. Bear in mind that only slim majorities of national or California voters are willing to pay any more in taxes for healthcare and that the support evaporates after about $200 per year in additional taxes. It will be interesting to watch.

A Modest Proposal

Here’s my little idea. What if we took the best of the right and left. High Deductible Health Plans (HDHPs) are cheaper, because they don’t cover everything and when people have to pay out of pocket they use less (which may be good, bad or ugly depending on what care is foregone, but many of us believe it is generally bad or ugly, for example causing people to postpone needed preventive services or not comply with treatment, particularly for low-income people). The reason HDHPs are cheaper is not because of the tax advantage of HSAs but because of the high deductible. We should cover preventive services and chronic care medications on a comprehensive basis. We should have incentives for patients to be mindful of cost (not just drugs) and we should make the financing system a bit more progressive than regressive if we want to mitigate some of the worst effects of class. So here goes: everyone gets a basic preventive package covered on a first dollar basis, everyone gets a $10,000 per household deductible catastrophic health plan (premium sharing would be based on income), everything in the middle (the $10,000 in patient spending) is on a sliding co-insurance scale where the lowest income folk pay zero co-insurance and the top income folk pay a 100% co-insurance rate. According to the latest data from the Census Bureau for 2005, 19.7 million households (some 17%) earn over $100,000 in household income, 2 million households make over $250,000. Those top 1 or 2% earners would pay a larger share of premium, the taxes necessary to cover the premium subsidy to the poor, and up to $10,000 out of pocket making hospitals, doctor visits, and elective surgery a bit more of a retail experience. Oh and we probably should be using after tax dollars, not pre-tax dollars in a Health Savings Account. By making the affluent, well educated, savvy consumers pay more for first class we might even get the effects promised by the consumer-directed advocates, such as more questioning of the prices charged by providers. Enlightened employers like the University of California have some elements that point in this direction such as income-based premium sharing: janitors pay less toward healthcare than tenured professors, but that is a small step toward addressing the disparities created by socio-economic class.

Before the rich readers go up in arms about socialism and income re-distribution being dangerous and seditious, let me point out it is better for you than the single-payer alternative which is, by its nature, an even more massive transfer of income from rich to poor.

While this or other redistributive schemes is unlikely to be enacted as legislation it is important for all of us in healthcare to remember that class matters. It is always good to be in first class, but way too many of us never get the upgrade.

Ian Morrison is an author, consultant and futurist based in Menlo Park, California.

All economies and all health systems struggle with trade-offs among three key elements: choice, security and stuff.

Choice

Choice is a manifestation of freedom. Americans love freedom and the choice that goes with it. We like choice of doctors, maybe even health plans, and we certainly don’t want our choices limited by government fiat or managed care bureaucrats. When choice is constrained we get very cranky. We hate gatekeeper physicians, we detest pre-authorization, we can’t stand limits on our use of expensive technology, even when it does more harm than good, and we go crazy when we are told we can’t get what we want.

But sometimes we have too much choice for our health. We have a plethora of cheeseburger options (including a cheeseburger embedded in a Krispy Kreme doughnut–I am not making this up). Seniors have 45 or more baffling Prescription Drug Plan choices in the new Medicare Part D world. Doctors are free to perform any procedure they want if a consumer with cash asks for it. Sure there is a wee thing called professional ethics, but the variation literature says there is a lot of excessive care based on provider preferences compared with best practices.

We have codified the health plan of the future as “you can have anything you want as long as you pay for it out of pocket.” Certainly, we have some annoying bureaucratic hurdles, but generally you can get anything you want in health care, if your insurer–or more often now, you–are willing to pay for it.

All this choice comes at a cost. Not only are we being asked to pay more for choice in the form of premium sharing, copayments and deductibles, but because we have so much choice, and we are unwilling to put limits either individually or collectively on our choices, health care is becoming increasingly unaffordable. Our freedom to choose in the short run may limit our choices in the long run. It’s a bit like global warming.

Choice and Security

Unfettered choice is fueling cost escalation, and in the long run it will limit our ability to choose and undermine our health security. We see it in the growing numbers of uninsured: In the last five years there has been a dramatic rise in the percentage of lower and middle-income people without health insurance, largely due to the fact that small businesses and individuals increasingly can’t afford health insurance.

We see it in the dire forecasts of how much money it takes to retire at 65 to pay for out-of-pocket medical costs (currently estimated to be more than $200,000). We see it in the rising number of medical-related bankruptcies. We see it most acutely in the rust-belt industries where retired auto workers have to gamble between health security and income security: For example, GM has offered a $140,000 buyout to workers with at least 10 years on the job who are willing to walk away without continuing benefits.

We may see it in the public sector and local government, in particular, as the GASB (Governmental Accounting Standards Board) Statement #45 provisions begin to take effect starting at the end of the year. (I am no accountant, but in a nutshell these provisions require state and local governments to make their unfunded retiree health benefit costs explicit on their balance sheets, starting with largest entities on December 2006 and phasing in over the following three years.)

A senior financial services executive told me the effect would be to make every municipal bond in America a junk bond. He may be overstating the case, but these provisions will surely put pressure on state and local governments to cut the generous retirement health benefits that schoolteachers, firefighters and folks at the DMV have enjoyed. The private sector has already cut the obligations to future retirees; the public sector will likely follow. Many people chose the public sector for health and retirement security over income security–they may be disappointed in their choice.

Choice, Security and Stuff

To date rising health care costs and the looming threat of a retirement with inadequate or expensive benefits has not really limited our consumption of stuff. Low interest rates and high house prices have buoyed American’s net worth (albeit on paper). We take out home equity lines to buy SUVs and other stuff. We consumers keep the American economy humming by borrowing money and getting bigger houses to store our stuff, as George Carlin so famously pointed out.

Health care may give us cause for concern in the future, but it has not seemed to cramp our style in the consumption of stuff in the present. And we don’t seem that upset about it. This mystifies me. Economists will tell you that health benefits are part of total compensation (albeit tax-advantaged). Yet the lucky folks with health insurance think they get it free, or for the modest premium sharing. The reality is that working people with health insurance haven’t had a wage increase in a decade because it all went to health benefits. Health care has limited their consumption of stuff, yet they blame rising gas prices, not health care for the problem.

Looking Ahead

The trade-off among choice, security and stuff may come to a head in the next presidential election cycle. Voters may seek security over choice. Watch for politicians who will preach about the need for health security for an aging and excessively cheeseburgered middle class. In the Social Security debate we elected for the security part over the choice and the prospect of more stuff that came with the private accounts.

In addition, consumers will be forced to select between a wide choice of providers and having more stuff as health care goes retail, making these trade-offs even more dramatic. In health care we may start to value security over everything else, even if it means limiting our choices and getting a little less stuff.

Ian Morrison is an author, consultant and futurist based in Menlo Park, California.

The greatest compliment you can give another author is to tell them that you so admire their work that you wish you had written it yourself. Now, there may be a wee bit of jealousy that they sold a million copies and you sold only a few hundred to assorted friends and family, but it is still a mark of respect. Being a bestseller is not always the mark of greatness, but it does send a signal that the message has touched many in a way that is accessible and clear. That is why short little books about cheese being moved seem to do very well.

I keep a running list of books that I wish I had written, all of them are non-fiction. Interestingly, there are no books on healthcare on my short list but everyone in healthcare should read them. Here they are, in approximate rank order:

Good To Great by Jim Collins (2001). As a genre, business books are easy to write: you develop a half-baked theory, provide some cute phrases to describe the obvious, and then you add a few anecdotes. Well that’s how I’ve done it. But, Jim Collins, has a rare combination of deep research skills and the ability to synthesize and communicate the essential truth. An award winning teacher, writer, scholar, and consultant, Collins has given us brilliant insight into what makes some companies capable of greatness compared to similarly situated peers. His latest monograph on Good to Great in the Non-Profit Sector should be required reading for every hospital, foundation, and non-profit in healthcare. Collins does not just guess at answers to difficult management questions, he bases his recommendations on rigorous research. And often, he surprises himself because he lets facts and findings drive conclusions not just biases and hunches.

The Tipping Point by Malcolm Gladwell (2002). It is unusual for a phrase to become an enduring part of our vocabulary. Cute one-liners come and go, fads and trends and the language that accompanies them may pass. For example, some day the Blueberry Green Tea Frappacino may be a distant memory. But on occasion, a book, a concept, a phrase, so captures a phenomenon that it becomes a permanent feature of the lexicon. Malcolm Gladwell’s Tipping Point is such a book. It distilled and explained the magic of exponential social change that academic diffusion theorists, marketers, and culture watchers had waffled about for years. Gladwell’s contribution to the language has helped us think more clearly about change, in all areas of life, including healthcare.

Freakonomics by Steven Levitt and Stephen Dubner (2005). Born from the unlikely liaison of a nerdy, obscure behavioral economist and a financial journalist, Freakonomics is a fun, mildly disconnected ride through a whole series of social and economic pheneomena, like why crime rates and abortion are connected, why drug dealers live with their mothers, and why real estate agents rip you off. But, the overarching message to me was that people respond to information and incentives in ways that might not be as obvious through the conventional lenses of micro-economics or psychology. I believe I have been a practitioner of Healthcare Freakonomics for years without knowing it, trying to combine analysis of stakeholder motives, missions, and methods with the usual analysis of who gets the money. Now I feel there is a spiritual home for all us random social scientists that try and make sense of the freaky healthcare world.

The Art of the Long View by Peter Schwartz (1996). If you had told me that you could write an engaging book about futures methodology, I would have said you were nuts. There are many yawners in this genre, most of which never saw the light of day beyond obscure academic publishers. Peter Schwartz, founder of the Global Business Network is the world’s leading scenario planner. From his early days at SRI and Shell Oil to his most recent writing, research, and consulting, Schwartz has provoked us to think about radically different futures in a world that is increasingly and perhaps permanently dangerous and uncertain. But, Schwartz’s greatest gift was The Art of the Long View, because he gave away the recipe to the secret sauce. He confirmed for fellow practitioners, like my old colleagues and I at the Institute for the Future, that what we were doing was about right and helped us do it better. But most importantly he laid out for anyone in an organization a basic road map for writing and using scenarios as a strategic planning tool. Although it was written ten years ago, you can use the methods today. Scenario planning isn’t hard to do, but it is hard to do well. Schwartz’s book can help.

How the Scots Invented the Modern World by Arthur Herman (2001). I am a proud Global Scot, a network of expatriate Scots who provide the Scottish Executive with a conduit for promoting trade and investment with Scotland. It’s kind of like the Scottish mafia without the violence. Arthur Herman’s book is required reading for Global Scots and it should be required reading for all Americans. Herman, an American, is a professor of history at the Smithsonian and his brilliantly researched and wonderfully written book tells the tale of how Scotland evolved from a bunch of Braveheart, claymore-wielding maniacs to being the crucible of the industrial revolution and the Age of Enlightenment. The ideas, philosophies, and people of late 18th century Scotland had a profound effect on the Founding Fathers, and on those that followed. As Andrew Carnegie (of Dunfermline, Fife) famously said: “America would have been a poor show had it not been for the Scotch.” I believe he was referring to the people and not the drink. But it is a history we Scottish-Canadian-Californians are proud of, I just wish I had written it.

I learned a lot from these book and from these authors. I am thrilled that two of these authors Jim Collins and Malcolm Gladwell will be keynote participants at the Health Forum Leadership Summit in San Francisco. I can’t wait to learn some more.

Ian Morrison is an author, consultant and futurist based in Menlo Park, California.

Bricks and Clicks was a popular phrase back in the New Economy of 2000 that was used to describe the integration of web-based information technology (clicks) with physical buildings and real estate infrastructure (bricks). The argument was that successful enterprises would have to thoughtfully deploy physical and IT assets to serve customers more effectively and to improve organizational performance.

In health care, we are spending a lot of time, money and attention on the clicks part. We have a National Healthcare Information Technology czar in Dr. David Brailer, as we should. He is galvanizing the field to lead us toward implementation of an interoperable, national healthcare information infrastructure.

Achieving a workable National Health Information Network in five years would require $156 billion in capital investment and $48 billion in annual operating costs, according to estimates by an expert panel published in the Aug. 2 Annals of Internal Medicine. That includes an estimated $50.7 billion in capital and $12.8 billion in operating costs for hospitals over 5 years, or approximately $10 billion per annum capital investment in hospital IT. Remember this is a goal not a fact.

Ironically, hospitals are anticipated to actually spend $15-20 billion per annum in capital investment for new construction over the next decade (almost twice the run rate of the estimated goal for IT). In a recent unpublished Harris Interactive poll, 86% of hospital executives anticipated making significant investments in hospital IT over the next 2-5 years, but an equally impressive 85% anticipated initiating new construction projects. We are obsessing about the clicks and forgetting about the bricks.

I recently joined the board of the Center for Health Design an impressive group that has brought together prominent healthcare architects, designers, researchers, academics, healthcare experts and hospital CEOs on its board to help advance the field of evidence-based design for healthcare facilities. The goal of the Center is to promote safer, more effective, more beautiful and more healing hospitals and facilities, by applying research evidence primarily through a network of more than 30 Pebble partners (as in pebbles creating a ripple effect) of hospitals actively involved in building new facilities. My fellow columnist Joe Flower did a wonderful job reviewing the findings of a recent research report done for the Robert Wood Johnson Foundation by Roger Ulrich and Craig Zimring (also members of the Center’s Board) so I won’t repeat it here, suffice it to say that there is good science to support the conclusions that single patient rooms, proper location of hand washing facilities, greater attention to issues like light and noise, make substantial differences in the outcomes for staff and patients alike. (The entire Ulrich/Zimring report can be downloaded from the Center’s website at www.healthdesign.org).

We need to pay as much attention to the built environment (the bricks) as we are to the IT infrastructure (the clicks). Organizations like the Center for Health Design and its partners and projects are making a major contribution to advancing the state of knowledge and the quality of hospital construction that results. But the entire health field and hospital CEOs in particular, need to focus on the investments we are making in both IT and buildings. The goals are the same: to reduce errors, make patients safer, improve clinical processes, reduce waste and waiting, make patients healthier faster, in an environment that is humane and pleasant for patient and staff alike. And, by the way, perhaps the biggest pay-off of good design and good IT systems may be in improving the life of the nurse.

My plea is that we think about these two massive areas of investment as equally important, complementary, and deeply connected. They are two critical building blocks (pardon the pun) in the required transformation of health care delivery. My only concern is that both construction and IT are hugely expensive when done right. Where is the 50% price point breakthrough that Charles Schwab delivered in financial services largely through a bricks and clicks strategy? If we could do this right and save money that would be fantastic, as yet I don’t see it. Healthcare delivery is going to be much better because of bricks and clicks, but it’s not going to be cheaper.

Ian Morrison is an author, consultant and futurist based in Menlo Park, California.

I have been a student of structural change in society for thirty-five years. I started as an undergraduate at Edinburgh University studying how the Scottish Highlands were transformed by a combination of political, economic, and cultural forces in the 18th century (not exactly a degree you could get a job with). As an urban planner, I studied how cities develop and change, and how they can be changed for the better through public and private investment and leadership. As a futurist and consultant, I have analyzed trends and developed scenarios, and tried to help my clients prepare for and respond to change. As I always say, you cannot predict the future but that doesn’t mean you can’t think systematically about it.

Change happens in many ways, of course and for many reasons, but in thinking about the prospects for structural change in health care (such as big health reform or a shift in paradigm toward prevention or a rise of true consumer directed healthcare) three simple models might help.

Pearl Harbor. The dreadful attack on Pearl Harbor on December 7th, 1941 brought a reluctant US into World War II and changed the course of world affairs. American blood and treasure helped liberate and reconstruct Europe and transformed Japan to a modern state, fundamentally altering the global economy. At a recent global healthcare meeting, a senior British health official remarked that health care in America would not fundamentally change without a “Medical Pearl Harbor”. He speculated that it would take avian flu, SARS or some event-driven crisis or disaster to totally transform the health care system. This has been a popular notion in health policy: that Americans respond best to crisis and that it will take an event-driven form of change to really move the system in a meaningful way.

The Tipping Point. Malcolm Gladwell changed our vocabulary forever with his excellent book “The Tipping Point”. In this form of change, circumstances, trends, and people conspire to create a Tipping Point where complex social systems go off in a different direction and change rapidly to a new state when the Tipping Point is reached. Again in health policy, Tipping Point theories and metaphors have become popular. Hey, I have used them myself. In one Tipping Point model of change, aging baby-boomers, burdened by ever escalating out of pocket costs and the looming financial chasm of retirement, reach a point where they tip toward asking for a bigger role for government funding and regulation. Similar Tipping Points have been argued with regard to drug prices or even a backlash against overweight unhealthy people by the well-behaved and buff who refuse to pay the subsidy from well to sick that is implicit in all health insurance. (The concept of disruptive innovation, or discontinuous change brought about by technology falls into this general Tipping Point category).

Glacial Erosion. A third model of change is glacial erosion: huge forces that move slowly and inexorably with great power but that can grind down mountains, scoop out valleys, and totally alter the landscape. I would argue that this is the most common form of change in American healthcare (okay, a wee bit quicker than glacial erosion but play with me here). For example:

• Demographic Change. We get older one year at a time. It’s a pretty slow process. The percentage of population over age 65 in the US has moved from 11.2% in 1980 to 12.5% in 2000 (compared to 9% and 17% in Japan in the same period) admittedly when the baby boom starts turning 65 in 2012 we will see a bigger jump to 16.6% in 2020 but that is still a way off. In addition, all the respected academic literature shows that aging per se, has a very small impact on the growth in utilization (a 1-2 % per annum increase), that doesn’t nearly explain double digit cost increases.
• Cost-Shifting. While it is true that cost-shifting to consumers might wake them up and cause them to go to the barricades to demand major health care reform, we see little evidence of this in the polls. The reason may be that these changes are incremental, diffused, insidious, and experienced very differently depending on your circumstances. We could have a lot of coverage erosion before the ice dam breaks.
• The Rising Costs of High-Tech Care. One core driver of expense is our unwillingness to control, harness, regulate or suppress the use or profitability of new medical technology. Americans like the idea of technology and innovation. Many of our leading economists tell us we are getting good value from this innovation in terms of life extension and quality of life (even though Koreans spend less than one fifth per capita what we do on health care and live longer) and we seem incapable individually or collectively to say no at the margin to the new hi-tech interventions whether they are cost-effective or not. I do not anticipate that we will suddenly get tough on technology any time soon. We may ask for discounts, or even some price controls, but in general we want the new stuff, and we have no institutions to limit the spread of marginally effective but expensive technologies.
• Healthcare as a Superior Good. The international comparative healthcare data tell us that the richer a nation gets, a higher proportion of its GDP goes to healthcare. (This argument breaks down at the micro-economic level in the US, because of the regressive-premium rather than taxes-nature of our financing. Rich people pay a much smaller share of their income on healthcare as they get richer, but let’s not let data interfere with the general point). As costs rise and more costs are shifted to consumers, the top 10% of households based on income are probably going to be fine (meaning they can pay for both medicine and merlot), even the top third of households may be OK, but the rest of us may be trading off healthcare for cars, or vacations, or maybe even food.

Together these long-term, glacially slow processes may accumulate and radically alter the landscape just as glaciers did in the physical world. If the glacial processes of change come to dominate over the event driven (Pearl Harbor) or the Tipping Point models of change, here is what to expect: huge and widening disparities in cost, quality and service based on income of the patient; large and growing out of pocket costs for all, regardless of income and wealth; higher taxes for everybody (because on the one hand the ranks of Medicare and Medicaid must grow because of the glacial demographic forces we describe and because we are not heartless bastards, yet and we will not leave people with absolutely nothing); lower reimbursement and profit per unit (maybe, but you technology vendors enjoy the inverse trend for the moment); and a perpetual sense of system in crisis.

I have been in America twenty years, anticipating structural change. Eli Ginzberg formerly of Columbia University, was a mentor and colleague to many of us students of structural change before he passed away, and he always counseled us to not over anticipate massive structural change, as he said, the system may just “schlep along” forever. We will spend more, we will complain, and nothing will stop it. He was thinking glacial erosion, not Tipping Points or Pearl Harbor. And I think he was probably right.

Ian Morrison is an author, consultant and futurist based in Menlo Park, California..

Bird Flu is everywhere. Nobody has it in Europe or North America, as far as we know, yet everyone is worried about it. Bird flu is the cover story in all our major national magazines. The threat is so severe and imminent that President Bush clearly stated (at the height of his troubles with Harriet and Scooter, no less), “The reporting needs to be not only on the birds that have fallen ill but also on tracing the capacity of the virus to go from bird to person, to person. That’s when it gets dangerous, when it goes bird-person-person.” Well said.

Bird flu is a problem in the bird population. It has not crossed species barriers in great numbers, but of course the fear, worry, and paranoia stems from the extrapolation of the threat that the virus will mutate and infect humans as it has done in a few isolated cases in China and Vietnam.

Birds fly, so the virus has moved, according to the Wall Street Journal: “It is currently being spread across continents along the flyways of birds. It was confined to Southeast Asia until this spring, when birds carried it north to Qinghai Lake in China, and then to Siberia in July, where the north-south flyway meets the east-west flyway, thereby broadening its reach to places like Greece and Turkey, by October.” That’s where I come in.

In early October, we were on a spectacular trip with a bunch of friends on a Gulet (a big fat Turkish sailboat) down the Lycian coast of Turkey from Bodrum to Fethiye (where the Aegean officially meets the Mediterranean). At, the risk of sounding like a shill for the Turkish tourist board, let me say you can rent the boat, (food, drinks, and crew included) for less than $150 per day per person. It must be good, Bill Gates was cruising the same waters at the same time we were, only in a much larger vessel.

On the trip, my brother-in law, Fred was fretting about avian flu. His Canadian investment guru, at one of Canada’s banks, had done a thought piece on the economic impact of the coming pandemic. The thrust of the report was that the economic impact of pandemic would be devastating, and that the safe bet was to hold on to Canadian mining stocks (say what?). Anyway, I was trying to have a nice break and did not particularly want to get lathered up about the bird flu. I was aware of the awful mortality rate among the few humans who have contracted it, I was aware of the spread among birds, and vaguely aware of investments in and difficulties with vaccine production. In the wake of Katrina, I am deeply skeptical that our healthcare system is prepared for pandemic, or much else, for that matter. But, with 45 million uninsured, soaring healthcare costs, and uneven quality, I am not sure that bird flu is the number one healthcare priority.

Then, on our trip home via Istanbul, the lead story in the Istanbul papers was about the culling of sick Turkish chickens in Akbaslar, a village in Bursa Province, because of suspected avian flu.

We flew home via London’s Heathrow and LAX. In the next two weeks, I was in LA, Tucson, New York, Boca Raton, Boston, Palm Springs and San Diego and had been through Denver, Chicago, and Las Vegas airports en route. I managed to avoid floods, hurricanes, pestilence, and No Limit Texas Hold ‘Em along the way. But I had an infected bug bite on my arm, and got treatment in Tucson (antibiotics) and then in Palo Alto (the reaming out of what would have been a boil in Scotland, but is an infected sebaceous gland in America). The ER doctors smirked about Turkey, bug bites, and avian flu, but we reassured each other that I had not been anywhere near the farm where the infected birds were culled. But then, I thought about Wall Bay in Turkey, a magical bay with a semi-submerged ruin of a Roman bath, that I had visited a week before, where coincidentally ducks and humans were in close cohabitation. Fast forward a week to Palm Springs and a fancy resort (where I was speaking) and again ducks and humans in close and profoundly unsanitary co-habitation. In Turkey we call it dirty, in Palm Springs it’s cute.

Then I thought about Gaetan Dugas, the gay French Canadian flight attendant, who was credited with being Patient Zero in the AIDs pandemic, according to Randy Shilts’s excellent book “And the Band Played On”. Gaetan was a gorgeous, promiscuous, frequent flyer who apparently spread the virus through his liaisons in gay nightspots from San Francisco to New York. I am not drawing an exact parallel, here, please understand, but to point out simply that both birds and people fly. If this virus mutates and crosses species, if it is passed through airborne contact or through people and birds being in close proximity, then it will spread like wildfire, as my recent travels attest. Many of the experts and all of the alarmists agree that it is when not if. But, for the moment they are still ifs. As the President says we must be vigilant, in monitoring the transmission patterns, we must invest in public health preparedness, we must invest in vaccine development and production. (It is cruelly ironic that vaccines are produced in chicken eggs). And we probably should have a little bit more separation between the people and the poultry in our fancy hotels.

I am an optimist about these things: bird flu has been around five years or more, and we have not seen huge numbers of deaths in humans, yet. Still, my family is putting together the flu protection kit: masks, water, granola bars, and cash. And quietly I am hoping that AFLAC comes up with bird flu insurance. We need to be prepared, and we are not.

Ian Morrison is an author, consultant and futurist based in Menlo Park, California.

We know there are enormous variations in medical care across the United States and even within small geographic areas. Dr. Jack Wennberg and his colleagues at Dartmouth have painstakingly documented these variations over the last 30 or more years. Most of the variations can be explained by two factors: 1) larger supply of providers (facilities and specialists) driving overall higher utilization, and 2) provider preferences in use of diagnostic tests and procedures, where doctors simply do more for a given patient with a specific condition. These two factors combined can result in three- to fourfold variations in utilization and costs without any apparent differences in quality and outcome.

Fresh off the boat as an immigrant in Canada, I got my first health care job as an analyst for a consulting group that served the Vancouver teaching hospitals. One of my first projects (which turned into a seven-year gig as a researcher) was focused on clinical laboratory utilization. My boss was a pathologist interested in a few simple questions: Why do doctors order lab tests, and do they really need them? In a global budgeted world, these were prudent questions. We found a threefold variation in use of lab tests across a whole range of diagnoses (DRGs before they existed).

We presented our data to the clinical chiefs of Vancouver General Hospital: “Ya, but did you adjust for severity?” No, like dolts we hadn’t. Off we went, hat in hand, and spent six months developing a case-mix adjustment index. Same answer: a threefold variation and a 5 to 10 percent per annum escalation in lab use for the same diagnosis. I have called this the “Ya, but” defense ever since: When doctors are challenged about their patterns of utilization they always balk.

From Variation to Tiers

Fast forward to today’s threefold variation in use and costs that is not tied to quality. Tiered networks of hospitals, specialists, primary care, reference laboratories, you name it–are all becoming the rage. From Aetna to Wellpoint, health plans are defining skinny networks where as few as 25 percent of the providers in a particular area are included. The goal of the proponents is to drive patients to these efficient, high-value providers through incentives. However, most doctors and hospitals are busy enough; they may be short of payment, but they aren’t short of patients. If the high-value providers don’t have the capacity to absorb more patients, at least the poor performers might be embarrassed into shaping up and emulating the high-performance folk in their clinical behavior. That’s the theory.

But, like my colleagues in Vancouver 25 years ago, the delivery system will not go quietly. Hospitals and doctors who get placed in an economically disadvantaged tier (where the patient has to pay significantly more out of pocket for care) will bitch and complain. If the tiering is not based on transparent, scientific evidence, the provider system has a legitimate beef. This was the case in St. Louis recently, where United Healthcare hastily constructed a narrow network for General Motors employees that omitted a large proportion of specialist and hospitals, including the large, prestigious and enormously ecumenical Barnes Christian Jewish Health System. Specialists in St. Louis went nuts.

In this case, United screwed up. It doesn’t normally do that; it is usually pretty smart. But under pressure from a desperate GM–which had no other health care options, given the generosity of the UAW contract and the prohibition on cost sharing–network design was the only choice GM had, and United listened to the customer. (Advice: Don’t listen to your customers if they ask you to do something stupid.)

From Tiers to Transformation

Tiered networks can shake up the game in a positive way. But we must be very careful that the tiers are based on evidence, that the evidence is transparent and that it passes the laugh test. You can’t exclude the provider that everyone agrees is the best in town and say that your network is based on quality.

The greatest problem with tiered networks and all the variation research is that the punch line is always the same: We need to re-engineer all clinical care to be higher quality and lower cost. Why? Because you can’t actually move all the patients to the 25 percent best providers. They don’t have the capacity, and the other 75 percent will be pissed.

Similarly, you can’t take all the Medicare enrollees from Florida–where medical care utilization is apparently profligate, excessive, ineffectual and larcenous–and move them to Minnesota for the nice, decent, conservative and effective care that the variation folk tell us exists there. The elderly retire to Florida and other warm places with high utilizing doctors, not to cold, northern Midwest states with conservative physicians. (Remember, before you “Ya, but” me, all these sweeping generalizations are backed by data that is on a per capita, risk-adjusted and quality-adjusted basis.)

The real question is, Who will do the clinical transformation? Dr. Don Berwick and his valiant colleagues at the Institute for Healthcare Improvement are teaching hundreds to make these changes. But we have hundreds of thousands to go.

We are seriously deluded if we expect doctors in ones and twos to spontaneously redesign their clinical practice as a result of exposure to tiered networks. They are more likely to complain their way to inclusion (or actively bamboozle their patients that the tiered networks are meaningless rubbish) without embracing the transformation required.

The clinical redesign requires a set of actors with the organizational, financial and clinical scale as well as the resources to pull this off. Integrated delivery systems, large-scale medical groups and community hospitals that are constructively engaged with their medical staffs are the most likely candidates to lead appropriate clinical transformation that will reduce variation, improve quality and safety, and reduce the rate of cost increase.

Ian Morrison is an author, consultant and futurist. He is also a regular contributor to H&HN OnLine.

Across the country, state legislators frustrated by the rising costs of health care and the 45 million uninsured are proposing their own state solutions for the health care mess. One interesting twist is a proposal for mandatory catastrophic insurance purchased by individuals.

California has a bipartisan bill (AB1670) sponsored by Keith Richman, a Los Angeles Republican, and Joe Nation, a Democrat from San Rafael, that got shot down recently in committee, because big labor didn’t like any proposal in which employers were not compelled to offer benefits. A bill to do just that (SB2) was initially passed and then narrowly repealed in a special ballot measure in California’s last election. Such American-style alternatives seem to get rejected because of special interest pressure; either big labor or big business take offense and end the debate before it really starts.

Perhaps as a consequence of this failure of incrementalism, many states have their own single-payer advocates. In California the torch is being carried by State Senator Sheila Kuehl, a Democrat from Santa Monica, who has sponsored a single-payer proposal called the California Health Insurance Reliability Act (SB840). The act is estimated to save money and expand access largely through administrative simplification and the bulk purchasing power of a massive single payer system. Many opponents of Canadian-style health care who advocate market-based models worry that continued cost shifting to consumers may lead to a backlash and growing support for such state-sponsored single payer systems. (Although passage of such legislation would require a massive change in the politics and values of America as measured by opinion polls.)

At the same time, Canadians are having enough trouble keeping their own health system afloat amidst demand from sophisticated consumers who want more and better technology and specialty care and who are resisting the pressure to raise taxes that an adequately funded single payer system inevitably creates. Canadian Prime Minister Paul Martin has been forced to ally with the left-leaning NDP and pump more money into the health system to shore up political support and quell the rising tide of complaints about underfunding of the health care system.

There is no perfect health care system; every country has made an ugly compromise among quality, access and cost. But Canada still keeps popping up as an irritating comparison in that it is close, has American-style doctors and spends almost 4 percentage points of GDP less than we do.

Most Canadians believe there should be only one payer because that’s the way to get a good, equitable bargain for patients and taxpayers. I was always trained that there are three equal components to the Canadian difference in spending, each derived from the single-payer structure:

Use of high technology. Canada does not have as much high tech. It’s not that they don’t have fancy hospitals and ICUs; large teaching hospitals are pretty similar. But the typical small hospital is not as extravagantly equipped in Canada as it is in the United States. Canadians are constantly moaning about the fact that they can’t get timely access to MRI and other sophisticated technology. But, you can buy a lot of MRIs for 4 percentage points of GDP.

Incomes of health care professionals. The United States has a higher mix of high-priced specialists and pays those specialists more than in Canada. This is not just doctors, but nurses, administrators, consultants and futurists. Remember: Health care cost equals health care incomes. When you talk of containing costs, that’s someone’s income you plan to contain, and normally they don’t like it.

Administrative waste. Estimates are that 25 percent of American health care is administrative waste: armies of clerks are upcoding, downcoding, adjudicating, faxing, scribbling and kvetching over payment. In Los Angeles County alone there are 1,900 people who do nothing but fill out forms for Medicaid eligibility with a productivity target of two such forms a day. In Canada all doctors in each province are paid based on a standard simple fee schedule. There are no discounts, no pay for performance, not much utilization review and very little faxing (one would think).

While it is unlikely that we in America will give up the high technology and the high incomes without a big screaming fight, we could still learn a lot from Canada on the administrative simplicity front. Streamlining our claims systems, standardizing our forms and formats, encouraging Regional Health Information Organizations and supporting electronic health records could move us down this path. But unfortunately, many of the shifts we are seeing–including HIPPA implementation, consumer-directed health care, pay for performance and quality reporting–make the American health care system even more complex and administratively expensive. Canada may not have a practical solution but it will be a constant benchmark against which our dysfunctional pluralism will be judged.

Ian Morrison is an author, consultant and futurist. He is also a regular contributor to H&HN OnLine.