Only way to reduce cost is to reduce the waste in the system

Look no further than Steven Brill's "Why Medical Bills Are Killing Us," in the March 4 issue of Time, to see why there is little role, if any, for the marketplace in health care. Simply put, government must be a key player if we are ever to rein in runaway health-care costs.

Brill presents a bill-by-bill description of the staggering costs associated with hospital care:

An uninsured patient billed $7,997.54 for a stress test using a radioactive dye (Medicare reimbursement rate for this procedure is $554).

Patient billed $13,702 per dose of Rituxan, a cancer drug, for which the hospital paid less than $4,000.

Uninsured patient billed $157.61 for complete blood count, a simple and routine blood test, for which Medicare pays $11.02

As Brill points out, the health-care market is a crapshoot, where patients are "powerless buyers in a sellers' market where the only consistent fact is the profit of the sellers."

Much of the health-care reform debate is centered on cost: the skyrocketing cost of medical care, spiraling health-insurance premiums, the cost to cover the uninsured, administrative costs that eat up a sizable chunk of every health-care dollar, and the cost of defensive medicine to avert malpractice lawsuits. All of these issues are important.

But they miss the core driver of our health-care cost problem: the quality and safety of health-care delivery in the United States. Medical errors cost our overburdened health-care system about $17.1 billion a year; the cost of avoidable hospital readmissions adds another $13 billion to $18 billion a year. Up to one-third of all hospital stays lead to hospital-related injuries, ranging from serious acquired infections to deadly surgical mistakes.

While the Affordable Care Act does provide access to affordable health insurance, it ignores three out of four essential pillars of meaningful health reform. Those four pillars are create value in the system, cover everyone, coordinate care, and promote prevention and wellness.

Creating value in the system means we must recognize that, despite spending more for health care than any other society in the developed world, we do not achieve value for the money we spend. Our health-care spending continues to rise, threatening the health of our national economy. And yet, we rank 37th on societal measures of well-being. Unless the financing system puts pressure on the delivery system to eliminate waste and inefficiency, it faces ruinous inflation.

We must implement a program that makes a bargain with our health-care providers: "No outcome, no income." Namely, we should have more widespread pay-for-performance programs, bundled payments, and related mechanisms that emphasize payment only to be received when care is based on solid evidence and achieves appropriate outcomes. The current legislation funds nearly a dozen federal demonstration projects, which are a small step toward achieving the value equation.

High-quality health care must cost less. The only way to reduce cost is by reducing waste, which requires a better evidentiary basis to reduce clinicians' unexplained practice variation. Lower cost and higher quality are complementary. It must be true that if we use the right drug or treatment on the right patient for the right indication and in the right way, we will achieve a good outcome at a lower cost.