Realign Incentives to Hold Down Costs


Everyone agrees that we need to lower the cost of healthcare. After all it represents upwards of 17% of GDP with some sectors still rising. But that’s about where the agreement ends. Immediately we begin to fight over what is making costs rise and what to do about it. I’d like to suggest that before we can even have that conversation, we need to clear up a few major misconceptions.

First is the quality issue. I just simply don’t believe that America has anything less than the finest healthcare in the world. We’re constantly bombarded by comparisons to other countries by groups like the World Health Organization. But comparing the United States to countries who either cook the books on their patients (i.e. don’t count children until they are five days old) or provide little comfort and end-of-life care, is like calling a doctor who takes on high risk patients a bad doctor because he has a higher mortality rate. I challenge anyone to prove that the same kind of patient, with the same problem, is more likely to survive to live a healthier life in another country. Yes, we spend more – much more. But we save babies at 24 weeks gestation. We help people with what would otherwise be crippling disease to live more productive lives. We salvage severe trauma patients and return them to active lives, many of whom would die in other countries with a less aggressive system. Life expectancy, in my humble opinion, is impacted far more by genetics and lifestyle than the application of the medical system. Comparing the health outcomes of a heterogeneous set of Americans who eat too much, smoke too much, and exercise too little to a country the size of Delaware, where everyone eats fish everyday and rides their bikes everywhere (because they can’t afford a car) is ludicrous. American medicine may not always make our patients live longer. Hopefully, though, it will make their lives a little more bearable.

Which brings us to the question of cost. Where does the high cost of American healthcare really come from? Mostly it comes from our futile attempts to fend off death. Everyone knows that a disproportionately high percent of your life expenditure on healthcare comes in the last few years of life. Some studies suggest this figure is as high as 60%. Of course, the obvious solution is for sick people to die sooner before we “waste” too much on their care. Every doctor can point to a demented patient being maintained on supportive care in a nursing home as an example of the cost conundrum. But pull the plug on that patient and the next one on the list won’t look quite as sick or futile. Who decides how many good years a patient has left? The QALY – or Quality Adjusted Life Years – concept has tried to do just that. But the bureaucratic apparatus for applying this concept easily slides into the “death panels” that so many healthy older adults fear.


One thing we do know is that people will make better choices when we communicate with them effectively. The C4 Project out of Johns Hopkins looked at structured communication with family members of ICU patients involving the entire treatment team. They found that patients and families made their own quality of life decisions when properly informed. An interesting side note to the study was the difference between the real and perceived time it took to conduct these information sessions. Communications that took only minutes were perceived by physicians to take much longer, which proved to be their usual source of resistance to cooperation. On the other hand, the amount of time needed by patients families to find satisfactory communication was similarly shorter than they expected. The project concluded that a little communication went a long way to reduce futile, unwanted, and costly care.

But that’s not the whole cost problem. There is the fact that Americans just get too much medicine. They see doctors when they don’t need to. They get tests and procedures that aren’t necessary. And they take costly medicines that aren’t effective (Tamiflu), and may even do more harm than good (I’m talking about you, Heparin for ACS). Why is this? First, Americans have undue faith, even expectation, that our medical system can cure any problem. And fast. Add to this the fact that everyone on the provider side of the equation makes money off their interventions, whether they help or not, and you have a perversely misaligned formula for ever-increasing costs. Anyone who has seriously tried to convince their patient that “No, you don’t need antibiotics for your one day sinus ‘infection’” knows what I am talking about.

On the other end of the spectrum are the cancer drugs that cost hundreds of thousands of dollars and may – just may – extend life a few months. These drugs are expected – no, demanded! – by patients fighting their last battle. And of course, there are the billions of dollars spent on drugs and procedures that give a better erection, less wrinkled face, better sleep, or less anxiety.


“Just say NO!” some say. “Make them pay for it themselves,” others opine. And while these approaches are surely steps in the right direction, having the edicts administered by a distant insurer or worse, government, is cumbersome, unresponsive, and always subject to manipulation by insiders.

As always, the best answer to a complex problem draws from many sources. But there are some guiding principles that emerge. First, we need to line up the incentives. Right now, the hospitals, providers, and insurers make money when the patients are sick or perceive themselves to be so. Let’s turn that around. We make money when the patient is not sick. And I don’t mean that we refuse care. Let insurance, providers, and hospitals work together for a common fee. When the patient is healthy the system spends less and we make more.

My friends who have lobbied for a single payor national health service suggest that this is the answer. And they are right, but only in concept. A national health service would cut costs, for sure, but logistically it would soon become just another DMV, with bloated costs and unresponsive bureaucracy. No, let providers run the system, including the insurance companies, and compete with other providers who are doing the same. Without any wish to canonize Kaiser, they have created an impressive model for this kind of unified care. The University of Pittsburgh Medical Center is also now their own insurance company. While not perfect by any means, it is a step in the right direction to put health care cost decisions back in the hands of the providers who have to look patients in the eye, communicate with them, and let them know what kind of care they need in order to live a longer, better life. And of course, if they disagree with their learned professional provider, they are always free to obtain whatever different care they want on their own. Or they can move to Sweden.




FOUNDER/EXECUTIVE EDITOR Dr. Plaster has been an emergency physician for more than 30 years, working exclusively night shifts for the past 20 years in emergency departments across the country. During that period, he joined the U.S. Navy and served two tours in Iraq. Dr. Plaster is the founder and executive editor of Emergency Physicians Monthly and the founder of Plaster Publishing.


  1. While correctly pointing out that not every statistic comparing health care outcomes in the US to other countries is helpful, ridiculous statements such as “they are riding bikes because they can’t afford cars” make this post quite disappointing to read. As the author appears to be referring to Sweden, one of the wealthiest countries in the world, the only thing on can take away from this post is that he appears to be lacking any insight into what is going on beyond the borders of the U.S.

  2. Chuck Sheppard on

    There may be something to the fact that patients who go on Hospicepalliative care live longer? Gawande’s book Being Mortal should be required reading better happier longer lived patients and cost less I bet. Keep up the good work.
    Figure out how to give docs as much credit for the C-Diff they prevent by not giving you antibiotics for you cold as the blame for poor satisfaction as well. I realize your “cost sharing” plan would do this at least indirectly

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