Newspaper article The Florida Times Union

HEALTH CARE; Perverse Incentives

Newspaper article The Florida Times Union

HEALTH CARE; Perverse Incentives

Article excerpt

Imagine a house with a foundation that was built poorly.

Therefore, the house creaks, it sways. It needs constant maintenance to make sure it doesn't fall down.

Along comes a handyman who offers to fix the house.

No, it's the foundation that needs to be propped up first.

That's a description of the nation's health care system.

There are a number of perverse incentives that raise costs and don't increase quality.

And the problem with the health care proposals from Congress and the president is that they don't do enough to correct the major flaws in America's patchwork quilt of health care systems.

Thus, President Barack Obama's compromise plan mostly splits the difference between the Democratically controlled House and Senate. He really doesn't dig deeply enough to take advantage of a real market for health care that brings the patient and the doctor into prominence.

Without addressing these cost factors, today's health care summit hosted by Obama will be meaningless.


David Leonhardt, an economics columnist for The New York Times and a staff writer for The Times magazine, wrote last year, "there is no virtuous cycle of innovation, success and expansion."

Consider Intermountain Medical Center, a network of hospitals and clinics in Utah and Idaho that the president and others have described as a model for health reform,

"When Intermountain standardized lung care for premature babies, it not only cut the number who went on a ventilator by more than 75 percent; it also reduced costs by hundreds of thousands of dollars a year," Leonhardt wrote.

"Perversely, Intermountain's revenues were reduced by even more. Altogether, Intermountain lost $329,000.

"Thanks to the fee-for-service system, the hospital had been making money off substandard care. And by improving care - by reducing the number of babies on ventilators - it lost money."


A researcher at Cedars-Sinai heart Institute in Los Angeles estimates the nation could save $5 billion a year if it followed several common-sense protocols before ordering expensive stent surgery for heart patients.

The protocols as reported in The Wall Street Journal:

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