Inputs vs. Outputs

Dick Morris (former Clinton Aide and author of “Catastrophe”) made the comment this morning that “There are only two ways to cut costs in the medical care system: you either reduce doctors’ salaries or you reduce the amount of medical care that patients receive.” In other words, Morris presents us with a fairly basic economic reality regarding cost control: it must take the form of either reducing the cost of inputs, or the cost of outputs. In Morris’ argument, doctors’ salaries represent the inputs, or the cost of goods sold, that force up the price of the final product , in this case healthcare. By reducing these salaries, and by therefore reducing the cost of producing healthcare, it would be possible to sustain our nation’s current level of aggregate output and still reduce the overall cost associated with those output levels.

But wage reductions simply are not feasible. As is, there is an insufficient supply of doctors, and specifically primary physicians, within the system. A reduction in salaries would only further push down the supply of health care providers, creating further market inefficiencies and a raise in the price of healthcare in order to bring the market back into relative equilibrium (i.e. as the supply of doctors reduces and the demand for their services remains constant or increases, the end result is an increase in price).

The other option, according to Morris, is the aggregate cost of the system is reduced by reducing aggregate output. Or, in other words, we reduce the total amount of healthcare being provided in order to reduce the overall cost of the system. This process, referred to by critics as “healthcare rationing”, would have a very real and direct impact on the doctor-patient relationship. It would dictate what and how many tests and procedures could be performed. The system would look to reduce overly expensive or excessive procedures, which, as Morris points out, would translate into a reduction in the level of healthcare provided to seniors, who contribute to nearly eighty percent of the total cost of healthcare.

In Morris’ opinion, the concept of healthcare rationing to seniors is the underlying reason why Obama’s plan wont work. Despite a sixty-vote majority in the senate, Morris argues that the disparate impact of Obama’s legislation on seniors will erode a significant base of political support for many congressional representatives, and therefore prevent the kind of widespread consensus necessary to pass healthcare reform.

For his part, President Obama has attempted to extend the possible sources of cost control outside of the aforementioned areas. He has argued that cost savings are imbedded within moving medical records to an online database (which has unfairly been characterized by some conservatives as a violation of privacy…which it really would not be), and he has hinted to other potential savings, although he has chosen not to specifically define those potential savings.

In the end, Morris’ definition of cost savings has been too limited, and the President’s too undefined. Although, and understandably so, any and everything that was attempted by former President George W. Bush has become political taboo, Bush had a take on healthcare related cost control that lacks the proper attention from both Morris and Obama. Medical liability reform offers a real potential to decrease the inputs associated with healthcare, and it should be a minimum pre-requisite before a broader debate of healthcare reform.

In the hyper-litigation society in which we live, medical malpractice suits have come to represent a significant challenge for the medical industry. According to the New York Time’s bestselling book “Better” by Atul Gawande, on average, a medical practitioner in a high-risk field of practice (such as obstetrics or oncology) is sued once every six years. Seventy percent of the time, the suit is dropped or the doctor wins in court, but the cost associated with the shear amount and size of these suits is significant. Depending upon their field of practice, surgeons pay anywhere from “thirty thousand to three hundred thousand dollars a year in malpractice-insurance premiums…neurosurgeons and obstetricians pay upward of fifty percent more”. With many of these suits requesting six-figure sum payouts, they represent real deterrents for doctors to enter the field. The costs must either be passed on to patients (raising the cost of healthcare), or most eat into the profit margins of the doctors (making the field less attractive, reducing the amount of practitioners, and inevitably raising the price of healthcare).

The system makes little sense. And what makes it worse? Some studies show that the likelihood of a doctor being sued has very little to do with fault or with medical knowledge.

Researcher Wendy Levinson reviewed several hundred conversations between physicians and their patients. Half of the physicians selected had never been sued, while the other half had been sued at least twice. What she found was that there was no disparity between the two groups in terms of medical knowledge or the level of care provided (i.e. tests requested, proper diagnoses made, etc.). What she did find was that the group that had not been sued, on average, spent three minutes more with their patients (18.3 minutes versus 15 minutes for those who had been sued). Second, she found that those who had not been sued were more likely to make orienting comments such as “First I’ll examine you, and then we will talk the problem over” or “I will leave time for your questions”.

Psychologist Nalini Ambady took Levinson’s study a step further and found that you could almost perfectly predict which surgeons would be sued based solely on analyzing the doctor’s tone over a forty second period of time. Ambady took their conversations and stripped the actual words being used, reducing them solely to a mumble that conveyed nothing beyond the doctor’s tone towards the patient. If the surgeon’s tone was dominant, then they almost always were in the group that had been sued, while those who had not been nearly always had a less-dominant and more concerned tone.

The Ambady and Levinson studies show us that our system of medical malpractice does not serve to punish bad doctors, but rather to provide an outlet against doctors with poor inter-personal skills. It raises the cost of care provided, reduces the amount of doctors available, and isn’t even effective in doing what it was designed to do, which is to protect patients.

Creating caps on punitive punishments (or even altogether eliminating them, absent an accompanying criminal conviction) against doctors would provide real cost savings, and it should be a precursor to any additional healthcare reform. It is a real and glaring problem within our system, and needs to be addressed because it is unfair, makes no sense, and is easily remedied.

Sarah Palin Is Ryan Leaf

Sarah Palin is officially Ryan Leaf.

The more and more I think about this whole Sarah Palin thing, that's the idea that I keep returning to. My opinion? I think that Palin is the political equivalent of a top prospect athlete who makes some ESPN Sportscenter Top-10 list for draft picks that never panned out. She's Ryan Leaf, Akili Smith, or Robert "Tractor" Traylor. Take your pick of player, but the metaphor remains sound.

For those of you who know me, you know that I was never a Palin-fanatic. I ascribe more to the George Will or Peggy Noonan element of the Republic party, which never wholly accepted Palin as a viable national figurehead for the Republican brand. But that said, while I don't know that I would vote for Palin any time soon, I do agree with her supporters when they note her political talents and potential. She inarguably has a good feel for a crowd, the ability to draw one, and has all of the core ideological beliefs (fiscal constraint, small government, strong defense) that lend themselves towards becoming a prominent voice within the Republican Party. Much like scouts used to tout about Ryan Leaf, she might look as good on the practice field and on paper as anyone out there. But, also like Leaf, there is something that just hasn't translated into success on the field. Or, in Palin's case, hasn't translated into real national acceptance.

There are a lot of reasons why this might be the case. Maybe it's that she got drafted into the wrong circumstance. How much success can you really expect Matthew Stafford to have on the Detroit Lions? No talent around him and a coaching staff that’s a far cry from the Belichek's and Holmgren's of the world. Much of the same could be said about Palin. In getting drafted onto team McCain, she was placed within a political organization that just didn't provide much support. She was thrown into the game without enough practice, asked to understand political complexities that she had never seen before on the smaller stage of Anchorage, Alaska, and she was asked to help carry a team without a consensus leader and without a fan base that could afford to be very patient. In many ways, the Republican Party may have jumped the gun and pulled Palin up into a situation that she was neither ready for or able to win in.

In the aftermath of her first gig in the majors, Palin is now asked to rally herself, learn from mistakes, and find a way to get back to the top. But, whether in sports or politics, such reintroductions of a player are both difficult and rare to accomplish. First impressions are rather lasting, and the book out around the league on Palin is not met with uniformed favor or enthusiasm. These comeback stories are not altogether impossible, but they involve solid coaching, dedication, and discipline. None of which are necessarily components of the Palin repertoire.

What Palin needed to do was to bide her time as Governor. Sit in the minor leagues and build on the fundamentals. She needed to deepen her resume by engaging as part of international envoys, achieve gains on key domestic issues such as energy independence and deficit reductions (issues she could easily push for in a state such as Alaska, which plays a key role in the national energy debate and that is condensed enough in terms of population size to allow for scaled reductions in state spending and cost structure). If experience was the single most viable complaint put forth by Palin detractors, then she needed to focus on gaining more. And this would have been entirely possible as a sitting governor. If not by 2012 (which I would argue will be a difficult election again for Republicans in the face of Obama Part II…but that’s a different post altogether), then by 2016 Palin could have almost wholly erased any concerns about her readiness for national office. But now? George Will may have said it best when he pointed out that, “the biggest argument against Palin was that she was only a first term governor from Alaska, and now she’s not even that”.

What Palin now lacks is an easily identifiable path to the Presidency, or some similarly significant national post. She has become a quasi-Brandon Jennings, a basketball prospect who chose to forego a year of collegiate basketball in order to play in Italy instead and then declare for the draft. Sure, Jennings’ story resulted in him remaining a lottery pick in this year’s draft, but he did so mostly on previously built-up capital. The lasting image for league executives and general managers, before leaving for the obscurity of Italian pro basketball, was one in which he was a McDonald’s All-American and the top high school point guard in the country. By contrast, what is the lasting image for Palin? One that raised questions, concerns, and ample animosity. If obscurity strengthened the former memory of Jennings, then it might very well serve to vilify the former governor.

There are always exceptions to any rule. There is a reason why most leagues have a “return player of the year” award. But these stories are few and far between, and they are not stories applicable to Ryan Leaf, who more or less fell off of the face of the world. I doubt that Palin will silently fall out of the public eye, but like Leaf, I don’t expect to see her end her career in Canton, Ohio. Or, as a political equivalent, to end up in the White House.