Tuesday, January 25, 2011

Principles of Efficiency

So why is it that other countries deliver health care with greater economic efficiency than the United States?

For starters, it would be hard not to: The United States doesn't really have a health care system. It's a more like a fragmented, uncoordinated apparatus linked by a loose and often contradictory regulatory framework and characterized by both overtreatment and undertreatment. An onerous administrative burden, health care driven by profit and not value, and the absence of several vital traits of an economically efficient system combine to give the United States the most expensive health care in the world, although by no means the best.

What are some of those key traits? Let's look briefly at two systems that are efficient, despite diametrically opposed approaches to universal access. The health care system of Finland (%GDP on health care of 8.5%, HCE of 7.6) is government-owned and -operated -- classic Beveridge Model socialized medicine. Singapore (%GDP on health of 3.4%, HCE of 21.5) is a public-private partnership funded by a combination of government subsidies, a limited NHI scheme, mandatory Health Savings Accounts, and out-of-pocket payments. Nonetheless, these two disparate systems have much in common:

  • a national health policy formed by a democratic process and directed by the national government
  • a commitment to universal access and care, regardless of ability to pay
  • an emphasis on preventive health based on primary care and public education
  • a strong government regulatory presence
  • targeted policies and incentives aimed at bolstering efficiency within the model (Finland, for example, has a pharmaceutical policy that rewards use of generic drugs.)
As we'll see again and again, these are vital elements in the successful delivery of health care based on value, a results-driven approach that Michael Porter and Elizabeth Olmstead Teisberg, in their influential book, Redefining Health Care: Creating Value-Based Competition Based on Results, that produces both quality and efficiency. (Click here to for Porter and Teisberg's excellent web site.)

So, it turns out that the road to efficiency is straight enough. Obviously, negotiating the obstacles of special interests along the way is another story. 

HealthMatters will discuss each of these conditions in detail in later entries.