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ACA Agonistes
Fact-Based Health Care Reform

Handing out subsidies and expanding government programs have become the chief standards by which health reforms are judged. That needs to change.

Appeared in: Volume 13, Number 2 | Published on: August 2, 2017
Scott W. Atlas is the David and Joan Traitel Senior Fellow at Stanford’s Hoover Institution and the author of Restoring Quality Health Care: A Six Point Plan for Comprehensive Reform at Lower Cost.
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  • FriendlyGoat

    For controversy’s sake for “fact-based” health care, we could start from the premise (pretty much a fact) that—-except for our emotional attachments to each other——most of our lives are not worth prolonging at great expense. If we would postulate THAT as the fallback alternative to other approaches, we would have a better debate about what other approaches might be or “ought” to be.

    TAI has an occasional comment writer (GS) who maintains that most people (at least a majority on the lower end of IQ curve) do not warrant much effort put into trying to educate them. We could float that “human value trial balloon” more publicly for health care and then see who wins the politics to do the “reforming”.

    No, I am not advocating the death of compassion. I am advocating that we define the whole spectrum or range of possibilities from “nobody gets nuthin’ to everybody gets everything” before we talk about where in the middle we might want to land.

  • Dan Kearns

    The intellectuals today: busy with grand statements that have absolutely no chance of getting through our democratic system. What happened to the very practical intellectuals who worked from the basic political facts (whether they like those facts or not)? That such pie-in-the-sky dreaming is so casually done by “conservatives” who used to believe in a Burkean sensibility is all the remarkable. What’s the difference between this article and those that advocate a single-payer system? Both systems have about the same chance of getting through the American governmental system and then SURVIVING the push back. Utopian conservatives used to be a contradiction in terms. Didn’t the failure of Obamacare from being a one-sided policy rammed through demonstrate anything? I’ve started to wonder if I should read anything in the features section by the various “senior fellow at…” brigade who so populate its pages.

  • WigWag

    In an otherwise interesting essay, Scott Atlas is guilty of hyperbole in his critique of national health care systems that rely (more or less) on the government as the single payor. Yes, the British NHS is abominable, but there are examples where a nationalized system works better. France is one example; it delivers high quality healthcare at a much more reasonable cost than we do in the United States. Israelis are happy with their national system and it delivers excellent care. While the Canadian system is frequently criticized for long wait times; Canadians seem at least as happy with their system as Americans are with ours. Nor should we forget that based on a number of parameters we perform poorly. Our infant mortality rates are abysmal, our medical error rate in hospitals is quite high and American life expectancy is only so-so compared to other OECD nations. There are many factors that account for all of this, but Mr. Atlas should be more circumspect in his criticism of national health care systems and he should brag less about the superiority of American medical care.

    But these are just quibbles; mostly the author gets things right. He’s correct to point out that most physicians won’t take medicaid patients and that those who say they do, often won’t actually see those patients. Actually, he understates the case. An increasing number of physicians, especially in cities like New York, San Francisco, Los Angeles, Chicago and Boston are opting out of medicare. Trying to find a highly rated surgeon in New York who takes medicare patients is getting to be impossible; New York surgeons are opting out of medicare in huge numbers.

    Price transparency is very important; Atlas is right to emphasize it. He’s also right to suggest that we’ve done something very destructive by convincing patients that they should expect to pay little to nothing for their primary care. A subscription based model, sometimes called concierge medicine for all, could solve this problem. For around $100 per month (an amount that most of us pay for our cell phone bills or cable service), patients could join a physicians (or nurse practitioners) practice and be seen for routine care without any insurance at all. A system like this would permit physicians to earn what they currently earn with far smaller patient rolls which would allow for patients to get faster appointments and spend far more time with their physicians. To make this possible, we would need far more primary care doctors than we have now. Foreign doctors (from selected countries), nurse practitioners and more graduating medical students would facilitate this cost-saving innovation.

    We are already experiencing fantastic growth in the cost of prescription medicine and the problem is likely to get worse not better. There are two basic types of prescription medicines; they’re called “small molecules” and biologics. Small molecule medicines are the type that most of us are familiar with. Their dispensed in pill or liquid form. They’re called small molecules because they have a low molecular weight which allows them to cross cell membranes easily allowing them to do their work inside of the cell. Most of the new blockbuster drugs now being developed for cancer, autoimmune diseases and certain neurological diseases are called biologics or large molecule medicines. These are typically therapeutic proteins that are produced with the aid of a microorganism or plant or animal cell, often using recombinant DNA technology. These drugs are infused into the bloodstream (they can’t be taken orally because they are proteins and the human digestive track digests proteins).

    When you hear about new pharmaceutical miracle drugs for cancer, for example, we are almost exclusively talking about biologics, not small molecules. Biologic drugs cost dramatically more to develop than small molecule drugs and they cost dramatically more to manufacture. Even when these drugs lose patent protection it is extremely hard to make a generic version of the product (generic versions of biologic drugs are called biosimilars). Many biologic drugs cost thousands or even tens of thousands of dollars a month.

    Unfortunately, it gets even worse than that. The newest trend in medicines, especially for cancer, is to develop designer biologic agents which target the specific genetic mutations in the patient’s tumor. Developing designer products designed to attack the hundreds of thousands of potential mutations in any particular patient’s cancer is inevitably going to be extraordinarily expensive. There is no doubt that these new drugs are miraculous. Patients who routinely died of various disease in relatively short order will be able to use these drugs and go on to live normal, productive and healthy lives. How our medical system or any medical system is going to be able to afford to pay for these remarkably expensive products is another story. Mr. Atlas is right; finding a way to lower the regulatory burdens and expense of developing these products and getting them approved for sale is absolutely critical. It’s not hard to understand why these drugs are priced so high once you realize that thanks to the FDA, the cost of bringing these products to market often exceeds $1 billion.

    There is some good news that Mr. Atlas doesn’t mention. One excellent way to reduce the cost of prescription medicines is to focus on drug repurposing. There are around 1,500 drugs in the FDA’s Orange Book (the list of all FDA approved medicines) and these drugs have been approved to treat about 5,800 different medical conditions. Many, if not most of these medicines are approved for more than one indication, but there is reason to expect that many approved drugs can actually treat numerous diseases that they have never been approved for or even tried in.

    As an example, metformin is a generic drug typically used to treat Type II diabetes, pre-diabetes and metabolic syndrome. It is highly effective, has few side effects and is very inexpensive. Metformin is produced by several generic manufacturers and typically costs less than five cents a pill. It’s becoming increasingly apparent that metformin has a mechanism of action that makes it a potentially excellent treatment for various forms of cancer and autoimmune disease, There are now scores of clinical trials experimenting whether metformin can serve as a useful treatment for breast cancer, prostate cancer and other cancers.

    Another example is tamoxifen, a generic product that has been used for decades to prevent breast cancer recurrence. Tamoxifen is also quite inexpensive in the grand scheme of things. Investigators are conducting clinical trials to see if tamoxifen might be useful as a treatment for autoimmune diseases that cluster in women like lupus.

    Repurposing drugs costs a tiny fraction of what it costs to develop new drugs from scratch. Unfortunately no pharmaceutical company has a financial incentive to spend the tens of millions or perhaps hundreds of millions of dollars to conduct the necessary clinical trials to see if the repurposed drugs work for a new indication. If the money is going to be spent, it will have to be spent by the NIH, which is why Trump’s plan to dramatically reduce the NIH budget is foolish.

    There also needs to be a breath of fresh air at the FDA. Until recently, the FDA punished drug companies for encouraging physicians to prescribe approved drugs for unapproved indications. In fact, just about a decade ago, the U.S. Government fined Glaxo Smith-Kline $3 billion for encouraging physicians to prescribe one of their drugs for an unapproved indication even though there was published evidence that the drug worked for that indication. Mr. Atlas is right, Scott Gottlieb was an excellent appointment to the FDA by Trump. Hopefully, Gottlieb will pursue his mandate for reform the FDA with reckless abandon.

    At at time where drug prices are bound to escalate dramatically because of the advent of miraculous new biologic agents, an emphasis on drug repurposing might provide a partial antidote.

    • Curious Mayhem

      All of these systems have gone through at least one bankruptcy and, except for the UK, all have been reformed to both allow and encourage private health insurance to supplement the public, single-payer system. The government-supported systems are universal but provide limited services, by design.

      And all of them engage in age-based rationing. You just have to look at survival rates from the major diseases (cancer, cardiovascular, diabetes, etc.) in different countries and compare to the US, as a function of age.

      (I have direct knowledge of these from Canadian and Israeli friends.)

  • Curious Mayhem

    Obamacare will fail by next year. The root of the failure was the system of cross-subsidies, whereby a large group of healthier and younger citizens (ironically, a lot of Millennials who voted for Obama) face much higher premiums to pay for the insurance subsidies for the uninsured. Then there are the people who lost of their insurance because of the change in federal mandates. The number of people who have lost or will lose their medical insurance from the jump in premiums and the changed mandates is somewhere in the 20-30 million range, quite a bit more than the number of newly-insured, fewer than 10 million. The failure of Obamacare will deprive all of them of medical insurance by next year, not some action of the current Congress. The media, of course, continue to misreport this, by and large.

    The simplest way to fix Obamacare is to imitate Romneycare: get rid of the extra mandates and put the needed subsidies on the federal budget, rolling up Medicaid in the process into this new TrumpRyanObamaCareAboutYou. It’s not cheap, but it is honest.

    Universal single-payer isn’t going to happen, because it would require abolishing Medicare and applying rationing of care based on age, which is what virtually all developed countries do. As long as there’s a huge bulge of aging Boomers alive and they vote so disproportionately — voter participation is a function of the interrelated variables of age and socioeconomic status — Medicare will stay as it is, and universal single-payer won’t happen.

  • Joe Eagar

    “Rational tax reform should limit eligibility for tax exclusions to HSA contributions and high deductible catastrophic coverage premiums”

    And this is politically possible how. . .? You’re talking about a major change to how a majority of the population gets health insurance. It’s just impossible politically.

    • Jeff Gepner

      Considering the failure of the Congress to repeal the failing ACA, I don’t think it is just the tax reform part that is unrealistic. It seems that any of the reforms suggested here are politically unrealistic, so I absolutely agree with your comment.

      However, we will run out of money eventually, and reform will be necessary. When that happens, let’s hope that the reforms push health care in this direction as opposed to single-payer.

  • Glenn Noreen

    Scott Atlas’s proposal is eerily familiar to me — I recently read Sean Flynn’s book “The Singapore Solution:How Singapore Delivers the World’s Best Healthcare While Spending 75 Percent Less Than We Do.” The Singapore comes very close to meeting most of Scott’s prescription, and is a terrific validation of its practicality.

    Sean is an associate professor of economics at Scripps College and co-author of Macroeconomics, the best-selling economics textbook worldwide. He also wrote Economics for Dummies.

    I first met Sean at a lecture he gave at Scripps College (the women’s college member of the Claremont Consortium) on the Singapore healthcare system. He pointed out that Business Week ranked Singapore as the world’s healthiest country after examining 21 different health statistics across 145 nations, but Singapore spends 72% less per person on healthcare than the United States and between 46 and 57 percent less than the United Kingdom, Japan, Canada, and France.

    I was intrigued by Sean’s description of Singapore’s magic sauce. In short (and grossly oversimplified), the formula is:

    -High deductibles, so that consumers have skin in the game.
    -Forced savings into health savings accounts, which are heritable.
    -Transparent pricing and quality rankings.
    – A no-frills safety net.

    Sean’s book on the Singapore system is highly readable and very compelling. Unfortunately, is unpublished, but if asked nicely Sean might be convinced to forward it ([email protected]). In the book, Sean shows how Mitch Daniels instituted a program much like Singapore’s for Indiana state employees that has been very successful, proving that the model can work in America. The book includes clever ideas on how we can transition to a Singapore-like system, given institutional and political restraints in the U.S.

    By the way, Sean is running for Congress in the 31st district of California, which includes San Bernardino. He has a real chance of taking the seat next year.

  • Grant K.

    I am disappointed that the American Interest chose to publish this piece. If I want to read tendentious and politicized policy papers, I can easily find them at the think tanks directly—I don’t need to see them re-printed here.

    The article feigns comprehensiveness while not mentioning major/critical components of the PPACA such as Accountable Care Organizations and capitation, which are among the most impactful to help bend the cost curve, change provider and payer behavior, promote transparency, and ultimately drive at “the root problem” of cost.

    We can have a reasoned debate about healthcare and the PPACA, but in this forum let’s avoid the partisan babble if we can.

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