The Bredesen Experience

The White House and Gov. Phil Bredesen of Tennessee are in serious discussions about the Health and Human Services Secretary position; Bredesen is being vetted for the job. Some activists and health care experts are very anxious because they know that Bredesen, in the lingo of the field, is a cost-cutter, rather than an all-access guy. But his courting by the White House might not be as surprising as it first seems:  Obama's health care plan was always predicated on cost control and a little less than universal. And Bredesen is, above all else, a start-up guy with an enterpreneur's enthusiasm--and waning focus.   This speech to the National Press Club four years ago sums up the PNB approach pretty well:

The bottom line is this: If we want to fix the problem that the states are facing today, and even more importantly if we want to start planning for tomorrow how we in fairness offer a hand to every citizen who needs it; if we want to do these things we have to start by getting the economic fundamentals straightened out; by making the money we have go farther.

Phil Bredesen on health care:

How do we do this? I want to offer today three constructive suggestions. 

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First suggestion, that we redesign what we do so that everyone pays a little something for everything. 

Imagine you are shopping for groceries at the grocery store. You've seen the ads about the latest food products, you wheel your cart up and down the aisles and make your selections. Everything on the shelves is available, as much as you want, nothing is off limits. When you come to the checkout counter, you're rung up, you never even see the total, your wallet stays in your pocket and the bill is just sent to the government and is never heard from again. 

You'd spend a lot more than you do now. But this is exactly the way Medicaid works today. 

It is simple economics that if you want someone to make efficient choices, they have to have a little skin in the game, some personal responsibility. A free-market economy isn't top down, a free-market economy pushes decisions out into the world in a million small choices rather than a few central ones. The way that's done is by respecting people by letting them decide what they are willing to pay for and what they aren't. 

This is not about being hard-hearted. We have in Tennessee a number of wonderful faith-based clinics to serve the uninsured. It is an important principle with them that everyone pays something as they are able. Even these very loving and generous organizations recognize the basic truth that people are careful about things they pay for and aren't so careful about things that are free. 

The first principle is that everyone pays something. The second is for us to pay for the things that are important first. 

Over the years, we've bought into an assumption that everything that can be called "health care" is somehow on an equal footing with everything else. But that's not common sense. 

If you need an appendectomy, it is vital and life saving. Most people would agree that if you are pregnant, you should have a doctor making sure the mother and child are as healthy as possible. But if you have a cold, there is not the same moral imperative that the public sector provide the latest decongestant to clear your head. 

The health care economy is mushrooming. Since the 1960s, there has been a tremendous expansion of the resources available to pay for health care. In the public sector, Medicare and Medicaid together this year will spend over $600 billion and are rapidly approaching a trillion dollars. When I was in college, that $600 billion was zero. We have in America a very efficient and flexible economy, and business has of course found ways to capture as much of this new money as possible. What my mother called heartburn and took Pepto-Bismol for is now acid reflux disease, and the little purple pill is a multi-billion dollar product. 

I've described two commonsense principles we should keep in mind as we reinvent Medicaid: Everybody pays something for everything, and pay for the important things first. 

I now want to suggest a third principle: Pay for what works. 

Think for a moment about drugs, pharmaceuticals. 

Drug companies have a wonderful business model. You invent new things, in a great many cases just variations on old themes, variations on which you can get new patents. You put your enormous marketing muscle behind selling these both to doctors and directly to the patients, you set prices that are typically paid by anonymous third parties and are therefore not a part of the purchasing decision. 

Marsha Angell, a former New England Journal of Medicine editor, has pointed out that in 2002, the FDA approved 78 new drugs, and only seven of them contained new active ingredients that were classified as improvements over existing medications. 

It defies common sense that we would agree to buy whatever some company puts on the market, whether or not it offers better results, whether or not there are less expensive or more cost-effective alternatives. If we limit our oversight to a policy of "buy everything, but argue about discounts" we have completely lost control. We need to stop being payors and start being purchasers. 

If Tennessee and every other state told General Motors "We're going to buy thousands of Chevys from you this year--you're in no danger of not getting the business. But we'd like to ask for a discount and if you're not careful we'll buy them from a Canadian dealership. Chevys in that world would be priced at $120,000 each, but we'd get a discount to $105,000." 

So three thoughts for some strengthening of the fundamentals of Medicaid: Everybody pays something, pay first for what is most important, pay for what works.