Reform Healthcare By Reducing Complexity

This is another installment on reducing government complexity. In these posts, I call on conservatives to direct their focus on reducing complexity of government instead of size. For earlier posts, click here and here


A reminder of how much we spend compared to other nations.

Harvard professor Einer Elhauge has a great article about reducing the complexity of the nation’s healthcare system as reform. It is non-partisan, but fits in perfectly with my series on conservative reforms of government. This is another area where labyrinthine complexity vastly increases costs and reduces effectiveness.

It’s the least painful way to lower health-care costs, because it actually increases quality. It’s bipartisan, because it adopts deregulatory reforms that should appeal to Republicans. And best of all, it can be done through executive action, and thus spares us the agony of trying to pass another health-care statute.

So what is it? It’s defragmenting health care.

To explain: the fragmented nature of the U.S. healthcare system is remarkable. Even physicians who practice within the same hospital are typically independent from each other and from the hospital and its nurses. At some hospitals, case managers gamely try to coordinate the physicians working on a given case but have no direct control and little leverage, because the physicians bill separately. Outside of hospitals, the situation is even worse. The average Medicare patient sees 7 to 8 doctors a year, 13 if the patient has a chronic condition, and no one is paid to coordinate them.

The complexity in this case is fragmentation: the inability to effectively focus services. To begin, it is bad for patients:

Institute of Medicine reports have concluded that this fragmentation within hospitals and across physicians increases both medical errors and avoidable deaths. Under our fragmented system, medical errors in hospitals result annually in 44,000-98,000 deaths—and $17-29 billion in related costs. Only 55 percent of us get recommended preventive care, and only 56 percent of chronic illnesses are treated in accordance with practice guidelines. One striking empirical study found that having more physicians involved in treating a Medicare patient following a heart attack increased patient costs by $3,331 while reducing their odds of surviving by 2.5 percent.

Obamacare already has within it provisions that could reduce the complexity of healthcare.

Obamacare contains provisions that could lift these legal obstacles to efficient health-care integration. Some provisions allow for the creation of Accountable Care Organizations, which can coordinate care and, if they meet quality performance standards, receive a share of savings that they can distribute among providers. So far, the regulations implementing these provisions still provide for separate Medicare payments to each provider that reward them for increased care, which may well override any individual cost-saving share that provider gets from reducing that care.  But these provisions would also allow future regulations that could change the separate payment model itself in a way that fully allows efficient integration.

Obamacare also creates a new Center for Medicare and Medicaid Innovation to test models of integrated payment and care delivery and expand them on nationwide basis if they prove successful, as well as a new Independent Medicare Advisory Board that not only can, but must make proposals that improve health or efficiency through greater integration or coordination.

Now, just because Obamacare could do these things doesn’t mean it will. Conservatives could spend extra time and effort ensuring these provisions are enacted to their fullest. Reducing complexity reduces costs, something conservatives have railed against. If they spend time and effort on pointless Obamacare repeal votes they will waste more opportunities to contribute to the greater good.

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2 Responses to Reform Healthcare By Reducing Complexity

  1. alsanblog says:

    Elhauge actually is only giving us half the story. For a more complete reply to Elhauge, see my post on his article at

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