Uwe E. Reinhardt

The world health report 2000 – Health systems: improving performance.

Here WHO attempts no less than to rank the vastly different health systems of 191 nations on two one-dimensional measures of performance: (a) ‘‘level of health,’’ represented by disability-adjusted life expectancy (DALE) and (b) an ‘‘index of overall health system performance’’. The latter is calculated as a weighted average of scores on five distinct dimensions: (1) the country’s DALE, (2) the ‘‘distribution of health’’ (based on child mortality distributions within countries), (3) the health system’s ‘‘responsiveness’’ to what people seek from it in terms of ‘‘prompt attention, dignity, autonomy, confidentiality,’’ and so on, (4) an index of the distribution of that ‘‘responsiveness’’ among socioeconomic classes, and (5) the degree of ‘‘fairness’’ with which the health system is financed. The weights for these five measures going into the ‘‘overall health system performance index’’ were culled from a survey of 1006 experts from 125 countries, about half of them on the staff of WHO. The final rankings of countries on both of the two performance measures are not based on the actual values achieved by the nation, but on the ratios of the achieved values to the values that ought to have been achieved, given the country’s educational attainment and spending on health care. The denominator in this ratio was derived from an empirically estimated mathematical relationship that predicts, for any combination of national health spending and national educational attainment, the level of performance that would have been achieved by an efficiently run health system. Because the ultimate rankings emerging from this study are the products of a whole series of inherently subjective analytic judgements on the specific measures of systems performance, on the weights to be attached to each measure and on the model used to compare actual with ideal performance, it is fair to query whether, on balance, so precarious an undertaking does more good than harm. Before addressing that question in regard to the WHO report, it is well to keep in mind that the decision-makers in the socalled ‘‘real world’’ do prefer to have complex phenomena collapsed into one-dimensional indexes. Even professors at top universities despair of multi-line academic transcripts and prefer to see a student’s entire and often varied academic career collapsed into the single, highly dubious measure of the grade point average. Gross domestic product (GDP) is a similarly crude, flawed, onedimensional indicator for national economic performance, as is quarterly earnings per share for a giant corporation. All of these simple measures are the products of whole hosts of precarious assumptions. Yet they are widely used, on the assumption that doing so does more good than harm. Can that assumption be made for the WHO report as well? The chief virtue of the WHO report lies in the challenges it poses for its critics within the health services research community. Could these critics have done better? If so, precisely how? Or can these critics argue that quantitative assessments of this sort are never worth undertaking? In other words, are we stuck in a rut that allows physicians or politicians in every country to proclaim that theirs is ‘‘the best health system in the world’’ without being challenged by data? If that be the verdict of the research community, it would be good to have it flushed out into the open, and on paper. On the other hand, there is reason to wonder whether more good than harm will have been done by the fanfare with which this report was injected into the public media and thence into the world of policy-making. Two requirements should have been met before the report was ready for a major media campaign. First, the WHO research team should have been sure that their estimates are robust. Can they, in good conscience, make that claim? An artificially high ranking, for example, could take the wind out of the sails of desirable health-reform efforts. Similarly, an artificially low ranking could assign a bad grade to past reform efforts that were actually commendable. Rumour in the health services research community has it that France’s no.1 rank was driven in part by a flawed measure of national educational attainment. Under the methodology used by WHO, the more the level of educational attainment or of health spending is underestimated for a country, the higher will be the ratio of actual to ideal performance for that country and the higher will be the nation’s ranking. Second, if the report is addressed to policy-makers, one must judge it poorly written. To be sure, it has a number of fascinating, if chatty, chapters; but these are only loosely connected to the actual work underlying this study. To see what was actually done, one must plough through the cryptic commentary that accompanies the tables in the Annex or dig up and read sundry sources cited in the references. Few policymakers and even fewer journalists will go to that trouble. To be useful as a policy analysis, the report ought to have started with the crisp executive summary that is now de rigueur among policy analysts, certainly in the United States. That summary would have presented the main conclusions emerging from the study and described, in layman’s terms, the methodology that was used to reach these conclusions. Most important of all, the executive summary should have contained the many caveats that must, in good conscience, accompany ambitious analyses of this sort. n

A Systemic Approach to Containing Health Care Spending

Two Sounding Board articles, by Emanuel et al. and Antos et al., discuss different approaches to controlling rising health care costs in the United States. The editors hope that the range of options presented will stimulate discussion and debate on the best ways to bend the health care cost curve.

Making economic evaluations respectable

Policy-makers worldwide are on a quest to control national spending for health care and to enhance the value received for whatever is being spent on health care. One should think that the economic evaluation of clinical practice would play a major role in this quest. Alas, so far it has not, in spite of considerable progress in the development of suitable methodology for such evaluations. The central point of this paper is that the sheer conceptual and practical complexities of economic evaluations in this context are not the only and possibly not the major barrier to a more widespread use of this type of analysis. Just as important may be the suspicion among lay persons that such analyses are easily driven by the assumptions the analyst packages into the analysis which, in turn, opens economic evaluation to hidden bias toward favored results. It is proposed in this paper that this particular barrier to the use of economic evaluations in health policy could be overcome if these analyses were more routinely subjected to the rigorous and penetrating audits that are customary in financial accounting. Typically, research papers in economics are audited through peer review only as to the methodology employed. The suggestions here is that a proper, respectable audit ought to penetrate all the way to the data that were used to produce the findings in a study. The paper concludes with some suggestions on how to develop such an audit infrastructure.

The Disruptive Innovation of Price Transparency in Health Care

Until very recently, health care in the United States was delivered behind the secure walls of a fortress that kept information on the prices charged for health care and the quality of that care opaque from public view. Over time, enormous and ever-increasing amounts of money have disappeared behind the fortress walls. Much good undoubtedly was done for patients entering the castle in search of succor. But it has been nearly impossible for prospective patients thinking of entering the health care system to know what they or someone else will have to give up in return for whatever care they will receive from the inhabitants of the fortress. In recent years, the US public has been made aware through decades of cross-national research and by the media that US health spending per capita is roughly twice as high as it is in most other developed nations, in comparable international purchasing-power parity dollars, even though the American population on average is much younger than those of, for example, most European nations. The bulk of that spending differential cannot be explained by the relatively higher use of health care per capita in the United States. In terms of real health care resources consumed per capita, many other countries

Can Efficiency in Health Care Be Left to the Market

Kenneth Arrow’s “Uncertainty and the Welfare Economics of Medical Care” (1963) was published at a time when health economists were still a small sect of adventurous scholars. Regular economists wondered why any ambitious young academic would venture into such strange, uncharted territory from which one might never be able to return—to the comfort of academic tenure. The natives of the uncharted territory, on the other hand, greeted the sect as arrogant missionaries bent upon imposing neoclassical economic doctrine on a people who viewed their land as a semireligious place that would forever remain impenetrable to commercial forces. What greater comfort for the adventurous sect than to receive from the hand of one of the world’s most renowned regular economists a treatise that not only lent professional respect to the sect’s exploits, but also served as an authoritative road map for much bolder incursions into health care. Arrow’s script is dated by the graceful prose then still customary among social scientists. It is, however, so richly laden and so compact that it demands from readers nothing less than the academic analogue of talmudic scholarship. As James Robinson remarks at length in his essay in this volume, casually read, or selectively cited, the article can be made to serve all manner of entrenched economic interests or preferred ideology. Arrow’s objective in his article was to identify the special characteris-

Humbled in Taiwan

Taiwan’s highly efficient system of national health insurance should humble and inspire the United States

Divide et impera: protecting the growth of health care incomes (COSTS).

It is proper to preamble an essay of this sort with the observation that anyone who has received health care for a serious illness is likely to agree that, with few exceptions, health care sectors in the USA and elsewhere tend to be staffed with millions of smart and highly trained professionals who sincerely seek to improve the quality of their patients’ lives. Their admirable clinical efforts, however, are embedded in a ceaseless struggle over money. That struggle is the focus of this essay.

Shepherding Major Health System Reforms: A Conversation With German Health Minister Ulla Schmidt

Americans looking for role models among foreign health systems may find Germanys, along with the Dutch system, of particular interest. These countries seek to harvest the power of competition among nongovernmental insurers and providers of health care within a unifying regulatory framework aimed at keeping the competition fair and preserving for health care, as much as is possible, Europes hallowed Principle of Solidarity. In this interview, conducted on behalf of Health Affairs by Tsung-Mei Cheng and Uwe Reinhardt, Germanys long-serving minister of health, Ulla Schmidt, explains what ethical and economic imperatives have shaped Germanys health reforms in recent years.

Probing Our Moral Values in Health Care: The Pricing of Specialty Drugs

JAMA: The US House Committee on Appropriations has approved a draft 2016 budget for Health and Human Services that would terminate funding for AHRQ. That happened in 2012 and AHRQ survived. What’s your take on how you’re in the same place again, and what do you see as the way forward? DR KRONICK: My job as director is to try to explain as clearly as I can the work we do and the value of that work. The appropriated budget of the agency is about 1/100th of 1% of national health spending. The return on investment from this 1/100th of 1% is very large, as evidenced by recent reports on quality of care and patient safety. I am confident that if more money were devoted to trying to figure out how to improve the delivery of care, the return would continue to be extremely large.

Health Care Price Transparency and Economic Theory

Citizens inmosteconomicallydevelopednationshavehealth insurance coverage that results in only modest cost sharing at the time health care is used. Furthermore, physicians, hospitals, and other clinicians and entities that prov ide health care within most systems outside the United States are paid on common fee schedules uniformly applied to all clinicians, health care organizations, and insurers. That approach spares the insured the need to seek out lower-priced health care and obviates the need for transparency on the prices charged by individual clinicians and organizations that provide health care. Not so in theUnited States,where everyprivate health insurernegotiatespriceswith everyhealth carepractitioner and organization,where largepublichealth insurancesystemssuch as Medicaid and Medicare pay fees that do not cover the full cost of treatingpatients coveredby theseprograms, andwhere uninsured, self-payingpatients canoftenbeasked topaywhatever can be extracted from their household budgets, sometimes with the help of debt collectors and the judiciary.1,2 Economists call the approach price discrimination, which means the identical service is sold to different buyers are different prices. This approach to pricing health care has led in the United States to a system in which, at one end of the spectrum, hospitals and physicians are expected by society to treat lowincome patients free of charge, on a charitable basis,3 or for modest fees that donot cover the cost of those treatments and thento finance that informalcatastrophichealth insurancesystem for the poor out of the other part of their enterprises that they can operate as profit-maximizing business firms. This is true even in some of the large segment of institutions referred to as not-for-profit. The harsh excesses that this quest for profits in health care can unleash—even among not-forprofit hospitals—havebeenwell reported in various articles in the popular press. Private employers in the United States have played a pivotal role in the evolution of this system. They hired as their agents in health care the private insurerswhohelpedput that system into place, and they supported it.4 To gain better control over the growthof their health spending, employers have of recent resorted to a technique long recommended to them bythemarketdevoteesamonghealtheconomists,namely,putting the patient’s “skin in the game,” as the jargon goes. It is done with health insurance policies imposing on the insured very high annual deductibles before insurance coverage even begins, followed by significant coinsurance, perhaps requiring patients to pay 10% to 20% of every medical bill, up to a maximumtotal annualout-of-pocket expenditure that canpotentially exceed