I am honored to testify today in these hearings
on "Getting Better Value in Health Care"
before the Committee on the Budget. My name
is David Gratzer. I am a physician and a senior
fellow at the Manhattan Institute in New York.
The views I present are my own and do not necessarily
represent those of the Manhattan Institute.
Before speaking directly to the topic at hand,
I wish to put forward an important anecdote.
The daughter of a friend of my family will start
elementary school in the fall. Of course, there
doesn't seem much remarkable about the above
statementmillions of children across the
United States are starting grade 1 in a couple
of months. But my friend's daughter is a cancer
survivor. Just a couple of years ago, she was
diagnosed with leukemia. After a series of treatments,
however, she's fine. Actually, she's more than
fine. She's bright, energetic, full of life.
And why shouldn't she be?
But not that long ago, of course, a diagnosis
of childhood leukemia was a death sentence.
Today, the vast majority of children under the
age of 12 with this illness are cured. That's
not to suggest that life isn't without complicationsrecent
studies peg their SAT scores at lower than average
for their age cohortbut these challenges
seem minor compared to battling cancer.
We're talking today about "getting better
value in health care." At a time when health
costs are spiraling up, it would be difficult
to think of a more timely or relevant topic.
But as we consider what's wrong with American
health care and what's to do, it's important
to remember what's right. People like my friend's
daughter get excellent health care.
Before discussing better value, we should note
our values in making it possible for people
like my friend's daughter to thrive: (1) American
health care is built on the doctor-patient relationship;
(2) health care isn't just about dollars and
cents, but about improving lives; (3) the best
way of saving money is to keep people out of
the health care system by keeping them healthy
in the first place.
We live in challenging times. My co-witness
Peter Orszag provided macronumbers pointing
out the high cost of health care. Let me bring
things back to the household level: Median family
income has dropped by a thousand dollars a year
every year since the beginning of the decade
because of rising health costs.
Why? The central problem is the way Americans
pay for their care. Rather than paying directly,
most people get their health insurance from
their employer (or the parent's or spouse's
employer). Someone else foots the bill. This
odd financing arrangement developed because
of World War II wage controls. Employers began
to provide health benefits as a disguised form
of income, and their incentive to do so only
increased when the IRS ruled that, unlike income,
these employer-provided benefits would not be
The resulting accidental system is wasteful
and bureaucratic. With Americans paying directly
just 13 cents for every health dollar they spend,
there is much incentive to spend first, and
ask questions later. Health managers, meanwhile,
create bureaucratic hurdles in an attempt to
constrain patient choice (and thus costs). During
the 1990sheyday of managed care, for instance,
HMOs attempted to dictate whether and when their
patients were tested. HMOs have fallen away
the economic problem they attempted to address
There is hope: the Miami Herald ran a story
on a Fort Lauderdale woman who shopped around
for physiotherapyand saved herself a thousand
dollars a session.
Obviously, not every health service can be
"shopped for." That said, there are some basic
steps that we should take with health care to
make it easier for patients and providers to
seek out excellence and value:
Moving Decisions Closer to Families
Innovative health insurance products like health
savings accounts encourage Americans to think
more about the financial consequences (and the
value) of the health services they receive.
Medicaid experiments in South Carolina and Florida
also attempt to reward better decisions.
For practically everything other than health
care, Americans are able to access good pricing
information before making a decision. That`s
not true with health care. HHS has started to
reveal more informationan important if small
step. The federal government should make its
pricing information available and encourage
hospitals, clinics, and doctors to do the same.
Better Information on Quality
While some aspects of health care remain difficult
to measure, surgical outcomes, complication
rates, and a raft of other information is availableexcept
to patients. Ultimately, better quality information
should be developed, which probably will come
from both public sector sources (e.g., the New
York State report cards on cardiac surgery)
and private sources (e.g., the Leapfrog Group).
More Competition and Choice
For 60 years, the federal and state governments
have heavily regulated health care. The end
result is that patients are deprived of choice,
innovation suffers and costs ultimately rise.
New regulations ought to be carefully considered
in terms of their impact on choice; existing
regulations should be reviewed.
Some have suggested that a centralized board
should oversee health-care decisions. While
the idea is temptingho wouldn't want a defining
authority to push America to better value in
health care?the international results are
at best mixed. The euphemistically named NICE
in Britain, as an example, is slow to approve
drugs for funding (often taking up to 2 years)
and tremendously biased against new or cutting-edge
cancer treatments, which partially explains
the poor outcomes found in that country.
American medicine has never been better. American
health care, though, is at a cross-roads. Some
see utility in pushing down the path to greater
government involvement. In five-sixth of the
economy, however, we value individual choice,
competition, and responsibility. The prescription
for American health care is thus clear.