US President, Barack Obama, has identified the cost of health care as the number one threat to the American economy.  In a 55-minute speech to the American Medical Association earlier this month, in which he articulated a thorough understanding of the main issues, Obama outlined his proposals for a public health insurance option that would compete alongside private insurers.  Obama’s initiative is an effort to provide an affordable insurance option for 47 million uninsured Americans and for others who are struggling with the high costs of their current health plans.  Not surprisingly, the plan has met with opposition from the private insurance lobby, which claims that it will drive them out of business.

The cost of American health care is out of control.  Currently, it eats up 17% of GDP, a figure that may soon reach 20%.  That figure is 50% higher than that of the next country in the high spend league table and is more than double what most European countries spend.  To make matters worse, Americans are no healthier for all this expenditure - they have shorter life expectancy and higher infant mortality than many EU countries.

In the AMA speech, Obama referred to an article published in the New Yorker on June 1, by Atul Gawande, a Boston-based endocrine surgeon and former Rhodes scholar who while still a medical student in his mid-twenties became a senior health advisor in the Clinton administration.  Gawande’s article illustrates how the blame lies squarely with doctors and for-profit health facilities.  The fee-per-item payments have produced a system of perverse incentives.

Obama said,

“What accounts for the bulk of our costs is the nature of our healthcare system itself - a system that automatically equates more expensive care with better care…..it is a model that rewards the quantity of care rather than the quality of care…It is model that has taken the pursuit of medicine from a profession - a calling - to a business.”

Researching his article, Gawande visited McAllen, a town in Hildago County, Texas, which has the lowest household income but one of the most expensive health-care markets in the country.  In 2006, Medicare expenditures in El Paso County were $7,504 per enrollee - half as much as in McAllen, where expenditures are $15,000 per enrollee - despite the fact that the two counties have a similar demographic profile.

Gawande found the answer to the cost conundrum by turning to Dartmouth’s Institute for Health Policy and Clinical Practice, which has three decades of expertise in examining regional patterns in Medicare payment data and to two private firms to analyze commercial insurance data for McAllen.  Compared with patients in El Paso and nationwide, patients in McAllen got more of pretty much everything - more diagnostic testing, more hospital treatment, more surgery, more home care.  This is a problem because accumulating evidence suggests that more expensive care tends to equate with worse care.  Economists working at Dartmouth found that the more money Medicare spent per person in a given state the lower that state’s quality ranking tended to be. In fact, the four states with the highest levels of spending - Louisiana, Texas, California, and Florida - were near the bottom of the national rankings on the quality of patient care.

The issue, according to Gawande is “the culture of money”.  He tells of

‘…a hospital administrator who knew of doctors who owned strip malls, orange groves, apartment complexes - or imaging centers, surgery centers, or another part of the hospital they directed patients to. They had “entrepreneurial spirit,” he said. They were innovative and aggressive in finding ways to increase revenues from patient care. “There’s no lack of work ethic,” he said. But he had often seen financial considerations drive the decisions doctors made for patients - the tests they ordered, the doctors and hospitals they recommended - and it bothered him. Several doctors who were unhappy about the direction medicine had taken in McAllen told me the same thing. “It’s a machine, my friend,” one surgeon explained’.

There are salutary lessons for Ireland in all of this, at a time when a frenzy of privatisation has been the salient feature of the current government’s health policy.  Increasing privatisation has coincided with an increase in health spending of, on average, 8.8% per annum between 2000 and 2006, the second highest rate of increase in the thirty OECD countries, after Korea.  Indeed, Irish health privatisation has followed closely the US model and involves the same core elements - the number of for-profit hospitals has increased greatly, and more are promised; nursing home care has been largely handed over to investors and property developers; home care has been outsourced to investors; private dialysis units have opened; and, instead of making the necessary investments in the public system, the National Treatment Purchase Fund (NTPF) is diverting vast amounts of money to private hospitals to provide operations at a cost of thousands of euros more than the same procedures would cost in the public system.

Rapidly rising costs, serial privatisations and the national shame that is inequality of access characterize the Irish health system.  Sara Burke (no relation) has catalogued the facts accurately in her recent Irish Times article in which she, too, questioned the false premises on which the privatisation policy has been based.  It is a ‘dogma with no clothes’, as American health experts, David Himmelstein and Steffi Woolhandler have said.

Like the US, Ireland must confront our health system’s inequality and rising costs - while the current government remains in office, there seems little prospect of either problem being resolved. To its shame, this government has reinforced inequality, instead of attempting to eradicate it.

A hash has been made of efforts to control health spending.  Expenditure will be increased, rather than reduced, by privatization, in which the fee-per-item (paid to both doctors and private hospitals) model rewards quantity rather than quality of care and where clinical practice becomes a revenue stream for providers.

Atul Gawande got to the root cause of rising costs and showed how doctors on salaries do a better job for patients.

“The primary cause of McAllen’s extreme costs was, very simply, the across-the-board overuse of medicine. This is a disturbing and perhaps surprising diagnosis. Americans like to believe that, with most things, more is better. But research suggests that where medicine is concerned it may actually be worse. For example, Rochester, Minnesota, where the Mayo Clinic dominates the scene, has fantastically high levels of technological capability and quality, but its Medicare spending is in the lowest fifteen per cent of the country-$6,688 per enrollee in 2006, which is eight thousand dollars less than the figure for McAllen.”

“Decades ago Mayo recognized that the first thing it needed to do was eliminate the financial barriers. It pooled all the money the doctors and the hospital system received and began paying everyone a salary, so that the doctors’ goal in patient care couldn’t be increasing their income. Mayo promoted leaders who focused first on what was best for patients, and then on how to make this financially possible.”

The biggest cost conundrum in Ireland is why, in the face of a large and expanding body evidence from a variety of international sources, does the Irish government remain so mesmerized by the private health sector?  And is it not alarming the same names and faces, which have featured so conspicuously in the financial scandals of recent months, have begun to turn up in the for-profit private health sector, like bad pennies?

Dr Gerry Burke, FRCOG, is a consultant obstetrician & gynaecologist in Limerick’s Regional and Maternity Hospitals.