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Read Making a Killing

home / healthcare / in the media

The Los Angeles Times
Feb 25, 2004

by Jamie Court, Special to The Times

BOOK REVIEW; An economist prescribes 'Strong Medicine';

Your Money or Your Life: Strong Medicine for America's Health Care System;By David M. Cutler; Oxford University Press: 158 pp., $25.
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Too many patients today feel like mice in a maze. In his new book, "Your Money or Your Life: Strong Medicine for America's Health Care System," healthcare economist and Harvard professor David M. Cutler fills us in on the mind-set of the maze designers.

The problem is that Cutler wrote the book for the system's engineers, not for its travelers. A player in President Clinton's healthcare reform efforts, Cutler has insight to offer reformers, but less to give to average families trying to deal with their healthcare choices.

Still, Cutler's book does offer the average reader a glimpse, whether he intended it or not, into how economists see healthcare developments. Because of the increasing influence of economists and actuaries over so-called managed care, this is an important viewpoint for readers to understand.

It's also important for readers to understand the cost effectiveness behind developments in treating such conditions as cardiovascular disease, infant mortality and mental illness; chapters devoted to these are the best material in Cutler's book. His case studies are well researched and offer a tremendous amount of information about medical history and its economic significance. The reader can learn, for example, how to diagnose depression and how treatments have evolved for dealing with the condition.

For all that's wrong with the healthcare system, in fact, it's good to see in Cutler's study an analysis of some of what has gone right. Consider the reduction in hypertension and high cholesterol over the last 50 years, and a 25% decrease in patients who develop serious cardiovascular disease since the 1950s.

To fix the system, Cutler offers "strong medicine" that centers on two recommendations. First, he'd create incentive payments to doctors, hospitals and insurers -- "pay for performance" -- for achieving high-quality outcomes. He would also establish universal healthcare by allowing all Americans to have access to the same coverage that federal employees now have. These proposals have been advanced before (and the latter may even become the law of the land if a Democrat wins the White House in 2004). But what is new in Cutler's book is his explanation of their economic raison d'etre.

Cutler argues that the average American values his life at roughly $3 million: That translates, in his analysis, into a justification for most of the high-cost treatments in the current medical care system. Overall, he says, the money spent on healthcare is well worth it, and ultimately America will do better by spending more.

But the question is, how do we get the most value out of the dollars being spent. "Your Money or Your Life" raises that question but falls short of adequately answering it. Least compelling of all are Cutler's conclusions, based on his assumptions as an economist and consultant to unidentified corporations. He says that government regulation is ineffective, litigation is self-defeating and corporate greed is not a serious obstacle to a better healthcare system.

After showing that Canadians spend far less than we do on heart bypass surgery and angioplasty and have virtually the same survival rates, he states elsewhere, without much explanation, that the Canadian-style single payer system isn't good for America. Why not? He also claims that there is an increased cost of tens of billions of dollars for covering more Americans despite recent studies, commissioned by the state of California, that show billions would be saved if a Canadian-style system were adopted.

Consumers spend an average of $654 out of pocket on drugs every year. Nearly 100 million Americans lack adequate prescription drug coverage. Year after year, the pharmaceutical industry is the country's most profitable industry. Profiteering is not a concern for Cutler, but it should be. Instead he argues that it is precisely this incentive to profit greatly that has driven the pharmaceutical industry to produce drugs with cost-effective results. What Cutler doesn't explain is why Canada and other countries are paying one-third the cost for the same drugs. Canadians buy in bulk and Americans do not.

Similarly, studies have shown that healthcare premiums in the United States are increasing 250% faster than the rate of medical inflation, which is why middle-class families are losing coverage faster than any other group for the first time in a decade. Nonetheless, Cutler does not take issue with the typical 20% premium that HMOs and other insurers take for their own profit and overhead: Compare that to Medicare's 2% administrative costs.

Cutler's solution is one that HMOs, hospitals, pharmaceutical companies, doctors and politicians can agree on, but it is not likely to solve the problems of the escalating cost of healthcare. Cutler would say it makes sense to just pay more, but as any patient knows, he is not the only one footing the bill.


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