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A Critical Review of Daschle’s Healthcare Book

Related Stocks: Healthcare

06/10/2009: Over the last year I have been unable to blog due to the restrictions of my occupation as an equity research associate at an investment bank in New York. Now that my stint on Wall Street has finally come to a close, I can now return to the world of blogging with a more refined perspective on the world of healthcare.

As my first order of business, I will review Senator Daschle’s book, Critical: What We Can Do About the Healthcare Crisis. For those of you unfamiliar with the Senator, he was President Obama’s initial pick to lead the department of Health and Human Services. However, media scrutiny over an income tax related issue forced him to decline the President’s nomination. Despite this stumbling block, many of Daschle’s points and proposed solutions still resonate within the Obama administration’s discussion of healthcare and I believe will work their way into public policy. Critical is an excellent primer to understanding the debate and the strategies Congress is deploying to solve the problem.

Correct Diagnosis

Senator Daschle tackles the long-lingering problems of our national healthcare system, beginning with the roots of insurance a little over a century ago. The first section of the book describes the evolution of healthcare in the United States and how over time growing complexity has overloaded the payment protocols and systems established decades ago. Importantly, he describes which initiatives have worked, and why certain plans such as the failed Clinton-era reforms of the 1990s led to political disaster.

Daschle does an excellent job pointing out the deficiencies in our current system, such as the misaligned incentives of an employer-based healthcare system. As is, employer-provided healthcare is a problem for the morbidly ill – the sick are unable to find work, which deprives them of the treatment necessary to return to health, leading to a vicious downward spiral. This is not only a financial burden on individuals, but a toll on the greater economy. Startup companies with small pools of workers must grapple with the undue burden of healthcare costs. Entrepreneurs have less freedom to start new businesses due to the risks of not carrying health insurance. Individuals unable to afford regular care are also more likely to let chronic illnesses and minor ailments fester to become more serious conditions, leading to fatalities. Another major inequity occurs when patients without insurance are charged exorbitant fees for emergency hospital services because they do not have the benefit of the negotiated discounts granted by a PPO or HMO.

Daschle proposes that we expand coverage to those not covered by the employer health system by allowing enrollment through the current Federal Employees Health Benefits Plan. Employers unable to cope with the cost of healthcare would also have the option of covering their workforce through this program as an alternative to traditional coverage. However, Daschle provides few further details and I believe he could have done a better job explaining how a public plan would be realistically funded. In current news, the idea of a public plan idea has gained traction. Kathleen Sebelius, the current head of HHS, recently announced her support.

The most radical component of Daschle’s healthcare reform solution lies in creating a Federal Health Board. This proposed Board will be an oversight committee setting rules and standards for federally funded programs. It would not be a regulatory agency, because it would not set rules for private industry. But the hope is that by using the FHB as a tool to direct government programs such as Medicare, it would set a model for private insurance.

He compares the idea of the FHB to the Federal Reserve, because it would act independently of partisan politics. The concept is not new – consider that we already have independent entities such as the FCC or FAA. While Daschle believes that separating healthcare decisions from the political agenda of Congress would increase its objectiveness, I believe that his vision of a Federal Health Board would raise a new set of conflicts and still be prone to human error.

My Points of Contention

I believe Senator Daschle’s vision of using the Federal Health Board as a springboard for cost control could have dangerous consequences. Throughout the book, he alludes to Americans’ trust in innovation and technology as a key driver of healthcare’s ballooning costs. The desire for the latest and greatest is fueling demand for unnecessary but costly tests and procedures. A Federal Health Board would be the decider in determining whether a procedure is deemed clinically "necessary" or not.

This is a double edged sword – I believe that Daschle’s FHB would be caught in a dilemma between allowing patients the best level of care (which many times may be experimental) and denying patients options due to econometric reasons. A crusade to cut back on what is deemed “unnecessary” could stifle innovation over the long term. By working too hard to cut costs, the FHB is likely to kill the spirit that made our healthcare system the most technologically advanced in the world today. We would not have advances in healthcare if it wasn’t for Americans’ willingness to try new, expensive, and untested technologies. This is why Canadians come to the US when they really need medical care.

At several points in the book, Daschle’s points make as much sense as clinical apples and oranges. For example, on page 150:

“In his book Your Money or Your Life: Strong Medicine for America’s Health Care System, David Cutler cites the care of premature babies as an example. In the last several decades we’ve developed high-tech equipment and procedures that have dramatically improved the survival rate of babies with low birth weights. But this care comes with a high price tag, often costing more than $100,000. In contrast we do relatively little to promote a strategy that would be just as effective and much cheaper: convincing expectant mothers to quit smoking. Smokers are twice as likely to have low-birth-weight babies. Giving them advice on how to quit, paying for cessation aids, and following up with them regularly would cost about $50 per woman.”

In this statement, is Daschle suggesting that we curb expensive treatments and instead focus on more lifestyle-based prevention? The danger of smoking is already a widely known fact, but many people still choose to smoke. Likewise with the causes of obesity. Certainly, it would be logical to make people with such vices share a proportionally higher level of the nation’s healthcare costs. However, in the name of taxpayer dollars how much would a powerful Federal Health Board someday be incented to take away your right to both expensive treatment and an unhealthy lifestyle?

With the federal government deciding the best clinical practices for treatment, would this necessarily lead to better care for all individuals? I am concerned that Daschle’s utopian aspirations for the Federal Health Board would someday deny individuals better, but unproven treatments in exchange for more statistically econometric treatments. It seems America will be forced to choose between cost containment and its thirst for innovation.

Some Points with Merit

There are several key areas where I do agree with Mr. Daschle. One is his advocacy for the use of healthcare information technology in practice. Every critical industry in the United States has modernized itself into the information age with fingertip access to information – except healthcare. With medical care becoming ever more complex with new treatments appearing every day, healthcare information technology is a critical step in making our system more efficient.

Through healthcare IT, electronic medical records could track a patient’s history of clinical episodes, lab test results, and treatments. This is a precursor to helping physicians most efficiently work with the patient to manage chronic illnesses such as diabetes or cardiac disease. Healthcare IT could also be used to help inform physicians of best practices, and allow research organizations to mine data to discover the most effective methods of treatment.

Already, we see the Obama administration on the right track by providing incentives for physicians and hospitals to modernize their IT systems. The HITECH Act, a crucial component of the American Recovery and Reinvestment Act of 2009, will provide an estimated $20 billion in Medicare and Medicaid incentives for medical providers to install electronic medical records systems.

However, we still have a long way to go. There is some doubt whether the incentives will be enough for physicians to recover the cost of installing a system. We have yet to see what kind of oversight will be present to make sure installed systems are applied to make medicine better, and do not add a layer of complication that presents an obstacle to efficient care. Finally, the systems must be interlinked over networks to realize their full potential to make healthcare portable.

Summing It Up

Critical is an eye-opening read that addresses the existence of the fatal problems in our healthcare system. Whether you agree or disagree with Senator Daschle’s point of view, this book is an excellent starting point to open a healthcare debate. It is a must-read to stay informed about today’s healthcare crisis and the ideas influencing public policy. Many of Daschle’s lines of thinking are evident in political discussion and are likely to appear within upcoming legislation, in some form or another.