Reinventing American Healthcare: Interview with Dr. Zeke Emanuel

The American healthcare system is complex. It was not created complex and expensive from its origins, but evolved to become this way over a period of about 100 years. There is nothing inherent in the way it evolved. It could have been different. But many decisions, often made for reasons having nothing to do with improving healthcare, shaped the healthcare system we have today. Explaining how it works and doesn’t work, its problems, attempts to reform it, and how recent reforms may transform it requires considering an unusual combination of topics.

Dr. Zeke Emanuel does just this in his book, Reinventing American Healthcare.  His work is truly an amalgam of history, health economics, sociology, contemporary politics, policy analysis, and forecasting that defies simple categorization.

• How did we get here?
• What’s surprising about the history of healthcare reform in the U.S.?
• What about the implementation problems of the Affordable Care Act?
• What are the Megatrends in Healthcare?

Dr. Zeke Emanuel, author of Reinventing American Healthcare, joined me on The Business of Government Hour to explore these questions and more. This is an edited excerpt overview of our conversation.

Zeke, in the first chapter of your book Reinventing the American Healthcare, you describe how we ended up with the healthcare system that we have today.  You point out very clearly that the complex system that's ridiculously expensive did not just start that way, but actually evolved into today’s form over a hundred year period.  Would you elaborate?

I kick off my book with a review of the American health care system to explain how we developed the system we have, with so many specialists, big hospitals, and hundreds of health insurance companies. The history of health care can help us understand why certain aspects of the health care system exist today, and this in turn helps us understand the constraints imposed on any health reform proposal.

Many decisions in the evolution [of the American healthcare system] were not made thinking about the long term future and how it would structure the system.  They were largely decisions of the moment to get out of a particular jam.  You really have to go back to the turn of the 19^th and 20^th  centuries when medicine was really beginning to pay off in terms of scientific and clinical advances -- the development of anesthesia and safer surgery, antisepsis and aseptic techniques that allowed control of infection transformed hospitals and allowed doctors to begin doing things therapeutically. Previously, hospitals were really places for the poor.  Doctors received clinical experience assisting them.  It wasn’t the place for the middle class or rich people.  At the turn of the century suddenly with safe surgery, the germ theory of infection, x-rays came in 1895, things changed and hospitals began to take on more significance.

Simultaneously, in 1910 the Flexner Report which basically states that “we've got to train doctors differently.  Now science matters. We need to have them have college educations, two years of preclinical training, two years of experience on the wards. We need a professional faculty, not just practitioners who were sort of doing this on the side to make money."  You get a boom in the sort of professional authority and expertise of doctors, middle class and rich people supporting hospitals and finding hospitals effective.

In the 1940s and 1950s the federal government fueled a huge expansion in the construction of hospitals. The Hill-Burton Act of 1946 was the first major health care act that the federal government funded. It provided federal support for hospital construction in the United States. Over the next 25 years Hill-Burton contributed funds to approximately a third of all hospital construction programs. Another postwar transformation in hospitals was the creation of Medicare in 1965. Essentially, Medicare paid hospitals costs plus a percentage to compensate for capital expenditures related to expansion. This payment guaranteed all hospitals a profit. It incentivized both increasing costs to increase profits, and hospital expansion which would be paid for. This wildly inflationary payment system lasted until DRGs and prospective payment were introduced in the 1980s. Advances in medical technology after the war, particularly in the 1950s and 1960s, reinforced the importance of the hospital as a place for health care miracles. Through the 1970s and 1980s high-technology medical care blossomed in US hospitals, enabling physicians to diagnose and treat most common conditions. The history of hospitals and physicians shows the transformation that advances in science have catalyzed. Anesthesia, germ theory of disease and sterile techniques, and safe surgery made hospitals and physician services at the turn of the century much more effective and valuable.

Zeke, you have a chapter outlining the five problems with the American healthcare system.  Would you elaborate on those problems?

Many of these problems are well-known from access to exorbitant costs to the less-discussed problems of lack of information about prices and quality and malpractice. I think we had the sort of traditional problems of access, quality and cost. 

On the access side, some 50 million people living in America that did not have health insurance. This puts costs on the rest of us when they go to hospitals and they don't pay the bill; hospitals shift that uncompensated care to us and the government. We know it also affects their health that if you don't have insurance, you actually have a higher chance of dying and a higher chance of having conditions not addressed.

The second problem centers on issues of quality. We have pinnacles of greatness in this country at leading institutions that are the envy of the world, but we also have systems that provide poor quality care.  The number of people who die from hospital acquired infections and medication errors are very common. There is also bad service with many systems having not focusing on patients.

Then there are cost problems. We spend $2.97 trillion dollars on healthcare. This makes the U.S. healthcare system the fifth largest economy in the world.  We spend more on healthcare than the entire French economy and we're catching up to Germany.  Yet, it’s a matter of not enough money in the system; it's a matter of too much money in the system.  Healthcare's been growing much faster than the economy for the last 50 years really since Medicare came into existence.  It's robbing lots of other programs.  It's taking money away from wages.  It's taking money away from state funding of higher education.  It's putting our federal government in real financial debt problems.  These high costs are not benign.  It's not like, well, if we spend more on healthcare people -- it'll be good.  That's not true. There are other problems.  There are problems with transparency about costs and quality. You have no idea what the total costs of say cancer chemotherapy is going to be for you.  You have no idea what the cost of a knee replacement is and plus, you can't measure or assess or determine quality of care of a hospital much less a doctor. We often make the choices of which doctor we go to or which hospital we go to in some of the haphazard ways.  If we think healthcare is very vital to our being, we should have much more data.

The last point I make is somewhat separate, but we have a malpractice system that doesn't work for anyone.  It doesn't work for patients.  It doesn't work for doctors.  It is completely broken.  If you're a doctor even in a very low risk specialty, pediatrics, psychiatry, dermatology, your chance of being sued over the course of your career is 70 percent and then in a high risk profession like cardiac surgery or neurosurgery, it's 100 percent.  That's not a really good system. Second, if you're a patient and you get injured, you might not file a claim because you don't know.  Whether you get compensated it'll take a very long time.  How much you get compensated is totally haphazard.  That just is not a good way and none of it is making the system safer.  We need a better system.

Zeke, when it comes to health care reform, to what extent is the past is truly prologue?

The U.S. has been trying to reform health care for 100 years. It finally got its chance on March 23, 2010, with the enactment of the Affordable Care Act. The history of previous failed efforts to enact legislation is full of unexpected twists: when physicians supported universal coverage but unions opposed it, when Republicans championed comprehensive reform and Democrats stymied change, and when health care reform gave birth to paid public relations campaigns to oppose legislation. A major reason to focus on this history is that the last battle shapes the future war. Previous failed reform efforts have shaped subsequent efforts. When it comes to health care reform, the past is truly prologue. The passage of the [ACA] it's truly an historical event.  A hundred years of trying.  That's pretty amazing.

Zeke, what’s your perspective of the botched roll of the healthcare.gov website and other aspects of the implementation of the ACA?

As the botched launch of healthcare.gov laid bare, the execution of the ACA was seriously flawed. Three factors contributed to the rocky rollout: the nature of lawmaking, poor personnel decisions, and poisonous politics.

If you're running an e-commerce site or a startup, you're constantly thinking, "All right, how am I going to get to my customers?  What do my customers want?  How do I make their experience shopping with me as opposed to the next guy better?"  So that's a kind of mentality.  If you're running a government program, you say, "All right, here's the rules of the program.  You come to me."  And that is not conducive it seems to me to worrying about how do I expand market share?  How do I increase people satisfaction? 

First, unlike business, lawmaking is not focused on execution, and its inflexibility makes the constant adjustments needed for effective implementation much more difficult.

Second, in the case of the ACA there were personnel decisions that hampered effective execution. The people entrusted with implementation were skilled policy advisers, but they lacked managerial experience, particularly in e-commerce, health insurance, and related areas.

Third, these challenges were compounded by the need to implement in an intensely partisan atmosphere. 

Nonetheless, the fiasco of healthcare.gov was neither preordained nor inevitable. Today, the real question is not who is to blame for the failures and delays with the federal marketplace. Rather, the real question for the future of American health care is whether the poor launch of healthcare.gov and other delays will necessarily undermine the ACA’s long-term positive impact. I do not think so.

Zeke, in your book Reinventing American Healthcare, you identify a host of megatrends in healthcare.  Would you give us an overview of these trends?

We're undergoing a big transformation and one of the ways I describe it -- I'll give you the headline and, then I'll try to explain it:  “It’s the Kaiserification of the American healthcare.”  We are in an evolutionary process from fragmented delivery system to the creation of accountable care organizations that are accountable for the health care from primary care to specialist care to hospital care to home -- integrating the full scope of care. 

End of insurance companies as we know them - Insurance companies will either become purveyors of management, analytics, and actuarial services or integrated delivery systems actually employing (or contracting with) hospitals, physicians, and other providers to render patient care. I think the traditional notion of what we think of as an insurance company is going away and I note that Well Point already bought a Medicare advantage plan in California to find out the secrets.  To us this is a very highly, a high quality, low cost provider.

VIP care for the chronically and mentally ill - Physicians and hospitals will focus on keeping patients with chronic illnesses healthy and out of the emergency room and hospital, thereby decreasing the frequency of avoidable complications and rate of hospitalization. Then they will begin routinely screening for depression and other mental health problems and develop standardized rapid interventions.

The emergence of digital medicine and closure of hospitals -Over 1,000 acute-care hospitals will close. We will see a slew of new technologies for remote monitoring, testing, and treating patients in real time outside of the hospital and physicians’ offices. One consequence is you don't need so many hospital beds and with hospitals already running under 70 percent occupancy on average across the country, a thousand hospitals I predict are going to close.

End of employer- sponsored health insurance - Fewer than 20% of workers in the private sector will receive traditional employer-sponsored health insurance.  Today, most employers do not know whether they will continue to offer health insurance 5 or 10 years from now; instead, they are focused on complying with the ACA. They do not have enough information or experience to know whether continuing to sponsor health insurance or dropping coverage is the better approach. That will change. By 2025 few private-sector employers will still be providing health insurance. Some will provide defined contributions to their workers and offer them a variety of plans through the company. These are called private exchanges in which a benefits company sets up an exchange by getting a variety of insurance plans for workers at a particular company. The workers then choose among the plans, receiving financial support from the employer. Other private-sector employers will simply increase workers’ salaries to help them pay for insurance in the state-based, public exchanges.

Transformation of medical education - Medical education will be transformed in 4 fundamental ways: (1) three-year medical schools and shorter residencies; (2) half of medical school clinical training will be outside of hospitals; (3) integration of nurses, pharmacists, social workers with medical students in multi-professional team training; and (4) formal incorporation of population health and management skills in training. We're going to have to transform how we train doctors to care for patients.  I mean another one important -- if the hospitals are actually going to be declining as the center of care, we need our doctors trained in outpatient care much more. I think that's vitally important that they move out of the four walls of the hospitals much more into outpatient facilities, urgent care facilities, treating people at home and get that experience. But we're not set up that way.  Medical schools are very, very slow to adopt any innovative changes.

Clearly these megatrends interrelate. Instituting tertiary prevention and keeping chronically ill patients healthier requires greater use of digital medicine and is essential to achieving lower health care inflation. Similarly, having physicians use digital medicine more effectively requires a change in medical education.

I invite you to listen and download a complete version of my interview with Dr. Zeke Emanuel on The Business of Government Hour.