Health Care’s — and Romney’s — Kodak Moment

September 3, 2012
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Every reputable budget analyst recognizes that dealing with the long-term budget deficit depends on holding government health care costs in check. One line in Republican presidential candidate Mitt Romney’s speech last night not only ignored that reality, it posed a direct threat to efforts already underway to return to fiscal sanity.

Every reputable budget analyst recognizes that dealing with the long-term budget deficit depends on holding government health care costs in check. One line in Republican presidential candidate Mitt Romney’s speech last night not only ignored that reality, it posed a direct threat to efforts already underway to return to fiscal sanity.

The threat wasn’t in his repetition of his campaign’s factually challenged claim that the president’s “$716 billion cut to Medicare to finance Obamacare” will hurt today’s seniors, which has been panned by numerous fact-checking organizations. The $716 billion will come from reductions in scheduled payment increases for insurance companies and health care providers – not cuts in services. Its repeal will increase costs for seniors by making them pay more for drugs and preventive services.

Rather, the irresponsible part came when Romney charged that imposing those cuts would “depress innovation – and jobs – in medicine.” When did spending more on health care become innovative? When did pouring a greater share of the economy and the government’s tax take into caring for the sick turn into a jobs program?

This is silly, indeed, dangerous talk that needs to be challenged by every organization that claims to be concerned about the nation’s long-term fiscal health. More health care spending isn’t a solution. It’s the problem.

If it isn’t a problem, why would Romney and his vice presidential pick Paul Ryan even bother to turn Medicare over to private insurers while providing seniors with a capped grant – so-called premium support or a voucher – to buy their plans? If at the same time Romney-Ryan guarantee that health care providers’ revenue stream will stay on the same old upward trajectory to insure jobs and new technology, premium support becomes nothing more than a prescription for either bankrupting future seniors or forcing many of them to forgo “innovative” care they can’t afford.

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For decades the nation has defined innovation in health care by the new drugs, new medical devices and fancier imaging, operating and testing machines that come on the market. Companies always charge higher prices for their latest wares even when there is little evidence that they improve outcomes. Other than changing demographics, technological change has become the number one driver of rising health care costs.

It has reached the point where some hospitals and private firms are spending over $100 million to install “proton beam” cyclotrons to deliver radiation treatment for cancer, even though there is zero evidence that these complexes do any better at targeting tumors than the last generation of advanced radiation equipment.
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Despite our huge investment in advanced health care technology, improvements in public health have slowed to a crawl. This declining return on investment – a concept you’d think Romney would have learned in business school – is one of the biggest reasons why Americans spends 50 percent more per person on health care than any other country, yet lag sadly behind when it comes to basic measures like longevity and infant mortality.

And despite spending $2.7 trillion on “sick care,” the population is getting sicker. Why? Because technology has no effect on an uncontrolled obesity epidemic that is driving rates of diabetes – the most costly chronic condition – skyward. Obesity is also closely associated with heart disease and cancer, two other expensive chronic conditions that dominate health care spending. True innovation would come from reducing the number of people who get those chronic conditions, not in coming up with ostensibly better ways of treating them.

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Researchers from the Wharton School and the Philadelphia Veterans Affairs Medical Center said as much this week in the New England Journal of Medicine. They compared the U.S. health care system to the Eastman Kodak Company, which for a century was the most innovative firm in photography.

The firm failed, they argued, because its managers didn’t realize they weren’t in the film making business. They were in the image making business. When a new way of making images – digital photography – came along, they didn’t adapt and went bankrupt.

“The analogous situation in health care is that whereas doctors and hospitals focus on producing health care, what people really want is health,” they wrote. “Health care is just a means to that end — and an increasingly expensive one. . . In the future, successful doctors, hospitals, and health systems will shift their activities from delivering health services within their walls toward a broader range of approaches that deliver health.”

In other words, the next wave of innovation in health care will come from providers who figure out how to take the level of reimbursement they already receive and deliver better outcomes at lower cost.

Romney likes to talk about competition in health care. But he doesn’t want to talk about what that really means. If he were truly a savvy business leader, Romney would be on the forefront of this coming revolution. But based on what we heard last night, he sounded more like a Kodak middle manager seeking to prop up a dying industry.