October 11, 2015

The Dialysis Problem: Why Government-Run Health Plans are a Bad Idea

In past blogs, I have observed that one of the fatal drawbacks to government-run health plans is their inability to respond flexibly to advances in medical science, even when medical evidence is relatively clear and the human and financial costs of not responding are very high.

Rita Rubin of USA Today, in the Monday, August 24, 2009, issue of the news daily, in an article entitled “Dialysis Treatment in USA: High Costs, High Death Rates” describes a clear example supporting my argument. In that article, Ms. Rubin points out that when Medicare began paying for dialysis in the early 1970’s, the prevailing view was that between 3 and 6 hours of dialysis a day three days a week was sufficient. Medical opinion has now come to the conclusion that 3-day-a-week treatments are extremely inadequate. As Ms. Rubin summarizes a set of comments by Dallas nephrologist Thomas Parker III, co-organizer of a conference at Harvard’s Beth Israel Deaconess Medical Center:

“Normal kidneys work 24/7, not a few shifts a week, so the standard treatment replaces only 10% to 13% of their function, Parker says. How much dialysis is enough isn’t clear, he says, because few studies have randomly assigned patients to different amounts to test which approach is more effective.”

Later in the article, she notes that many physicians and patients believe that longer and/or more frequent dialysis can not only improve the quality of life, but also reduce hospitalizations. Given the fact that Medicare paid $8.6 billion in 2007 for dialysis treatment and that 20.1% of the patients on dialysis died in 2006 from heart disease and infections, one would think that correcting this problem and getting to the right answer would have been an urgent priority for the federal government.

Unfortunately, being a highly-politicized program with annual budget targets and many competing politically-driven demands and limited staff, Medicare has not taken up this issue and addressed it. Moreover, it is unlikely that any government program would operate differently because the consequences of a mistake in a highly-centralized program are huge.

In a more decentralized health system, driven by cost-saving and quality improvement objectives, this problem would have been tackled and probably addressed by now.

I do not consider government officials to be incompetent or insensitive to issues like this. However, the reality is that, in a single payer system in which every major decision is highly visible, has political consequences, and affects potentially millions of lives and billions of dollars per year, the likelihood is extremely high that either the decision will take a very long time, or it will never get made.

Think about it for a moment: is any Medicare official or any lawmaker being held accountable for this bad outcome? The answer is very clear: no one has been held accountable or will be held accountable for inaction.

On the other hand, if Medicare radically alters its approach and starts to pay for longer and more frequent dialysis, the short-term cost increases will be highly visible and heavily criticized. The downstream savings in reduced hospitalizations and deaths, and in improved quality of health and life will not be visible, and therefore, the decision will be perceived as a bad one, perhaps shortening the career of whoever makes that decision.

This is not a good way to run a health care system, but a public plan option which ultimately wipes out a more decentralized and innovative set of health care systems would make this mediocre-to-poor decision process the norm across the entire system.