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Mar 3 / Jonathan

The Best Care Anywhere

In my last post, I mentioned Paul Krugman’s mention of Phillip Longman’s Washington Monthly article on the remarkable turnaround of the Veterans’ Health Administration system.

But when it comes to health care, it’s a government bureaucracy that’s setting the standard for maintaining best practices while reducing costs, and it’s the private sector that’s lagging in quality. That unexpected reality needs examining if we’re to have any hope of understanding what’s wrong with America’s health-care system and how to fix it. It turns out that precisely because the VHA is a big, government-run system that has nearly a lifetime relationship with its patients, it has incentives for investing in quality and keeping its patients well—incentives that are lacking in for-profit medicine.

One reason is that the market incentives in our privatized health care system are dysfunctional. For example,

Or suppose an HMO decides to invest in improving the quality of its diabetic care anyway. Then not only will it risk seeing the return on that investment go to a competitor, but it will also face another danger as well. What happens if word gets out that this HMO is the best place to go if you have diabetes? Then more and more costly diabetic patients will enroll there, requiring more premium increases, while its competitors enjoy a comparatively large supply of low-cost, healthier patients. That’s why, Casalino says, you never see a billboard with an HMO advertising how good it is at treating one disease or another. Instead, HMO advertisements generally show only healthy families.

And cost?

The [VHA] system runs circles around Medicare in both cost and quality. Unlike Medicare, it’s allowed by law to negotiate for deep drug discounts, and does. Unlike Medicare, it provides long-term nursing home care. And it demonstrably delivers some of the best, if not the best, quality health care in the United States with amazing efficiency. Between 1999 and 2003, the number of patients enrolled in the VHA system increased by 70 percent, yet funding (not adjusted for inflation) increased by only 41 percent. So the VHA has not only become the health care industry’s best quality performer, it has done so while spending less and less on each patient.

Longman concludes,

As the health-care crisis worsens, and as more become aware of how dangerous and unscientific most of the U.S. health-care system is, maybe we will find a way to get our minds around these strange truths. Many Americans still believe that the U.S. health-care system is the best in the world, and that its only major problems are that it costs too much and leaves too many people uninsured. But the fact remains that Americans live shorter lives, with more disabilities, than people in countries that spend barely half as much per person on health care. Pouring more money into the current system won’t change that. Nor will making the current system even more fragmented and driven by short-term profit motives. But learning from the lesson offered by the veterans health system could point the way to an all-American solution.

Longman is skeptical of our ability to move directly to universal health care, where a VHA-style system would work well. Instead, he argues for an expansion of the VHA to cover more people.

I hope he’s wrong about universal health care.

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