How to conquer health care challenges

Glenn Melnick, health care economist with the RAND corporation and USC professor

TEXT OF INTERVIEW

Kai Ryssdal: How much doctors and hospitals and the rest of the health-care industry are compensated for their work is only one of many problems that any system-wide fix is going to have to cover. And those problems are interrelated. They're constantly changing. And they are intensely personal. I asked health-care economist Glenn Melnick why the president is tackling such a difficult topic now, when he's got so many other things on his plate.

Glenn Melnick: The reason the administration is pushing so hard is because the numbers show that health-care spending by the government, if something isn't done, will consume the federal budget sometime around 2030. And so between Medicare, Medicaid, and Social Security, that will take a 100 percent of the federal budget, leaving nothing left over for defense or anything else. Then the question is, how do you get a control of health-care spending, and at the same time, add potentially another 50 million people into the health-care system, a large fraction of whom will have to be subsidized by the government.

Ryssdal: Think for a second about all the places where savings could come. Where are we going to be able to save those tens of millions of dollars that are going to make any kind of health-care change real?

MELNICK: A centerpiece of the plan is this idea of information technology. And I certainly, the health-care system certainly is a ripe candidate to become more computerized and digitized. So that will save some money, because there's lots of duplications, lots of paperwork and things like that. But even if we digitize and computerize the entire system, administrative costs are not going to go to zero. There is still going to be some administrative costs. And that's going to be a one-time savings. We get those costs out of the system. But the rate of growth is really what the government needs to slow down through government regulation, controlling the prices that are paid for providers.

Ryssdal: If you assume that the American Medical Association and doctors' groups and hospitals in this country are going to have to go along with any health-care change and reform, how do you do it and convince them that what they're doing has to become less expensive to the rest of us? That is, that some of the costs have to come from them, some of those savings?

MELNICK: Well, I think that's going to be a very difficult sell in my opinion. I think when the president talks about cost efficiencies and helping doctors to do what they do better, more cost effectively, I think they're for that. The real problem, though, is that in order for the administration to generate savings to pay for these programs, it's going to have to pay doctors and hospitals less. And as time goes on, a lot less than they are being paid now. And I think that's going to be a very difficult sell.

Ryssdal: Well, let me make sure I understand that. If doctors and hospitals are making less money, what is that do for the quality of care? I'm just trying to think about the argument that's going to come up on Capitol Hill on this one.

MELNICK: Quality will have to suffer in some way. Whether it's through reduced access, whether it's through slower development of new technology. There are a number of economists who feel that health-care is expensive for good reason. And the reason is that it's valuable. That new innovation and new technology, while it may add to the cost of the health-care system, also brings with it tremendous benefits. The real challenge is can we develop a system to do the research to identify those things that are going to be high value in the first place, and to screen out those things that are low value and not adopt them as quickly as we have in the past. And that will be a challenge, but I think there's potential savings there. I don't know any country that has done it very well so far, because new innovation is just so complex and hard to predict.

Ryssdal: Glenn Melnick is a health-care economist with the Rand Corporation, also at the University of Southern California. Glenn, thanks a lot.

MELNICK: My pleasure, Kai.

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