Pareto
About 1906, Vilfredo Pareto observed that 80% of the wealth in Italy belonged to 20% of the people. Since then, that principle has been used by Juran and others to look statistically at where improvement efforts should be focused. In today’s Washington Post, David Broder cites a report by Ken Thorpe ("Impacts of Healthcare Reform") suggesting that healthcare improvement efforts should be focused on chronic diseases, since those account for most of the costs.
We’re talking here about asthma, diabetes, hypertension, obesity, and possibly cancer. And the cure advocated is a combination of prevention and disease management. As with most such magic solutions, implementation is another matter. Prevention is a good thing, and most people are willing to roll up their sleeve and get a flu shot--especially if it’s free. We all know that obesity leads to diabetes and has intrinsic costs of its own, but the obesity problem has been getting worse instead of better. Where’s the incentive? Why would anyone want to give up an activity (eating) that brings instant gratification even if it may have negative consequences some years down the road? Want to talk about smoking? And even when successful, prevention and wellness programs take 5 to 10 years to be economically viable. Not that we shouldn’t do these things--just don’t expect a return on investment before the election.
Remember also that this is demand reduction and has nothing to do with the quality or efficiency of healthcare services when they are actually provided. We would still have the same people doing the same things for the same cost. We might theorize that reduction in demand would decrease the overall amount spent on healthcare, except for one thing: What do you think all those providers are going to do with their free time? Take up knitting? They’ll probably find other healthcare services to provide to other people, thus maintaining the same or larger volume of service per year with no net change in overall expenditure.
Any sincere approach to reducing the cost of healthcare has to look at the cost of individual healthcare services and introduce competition at that level. When providers (institutions or physicians) compete on a cost basis, prices will come down and service will improve.
We’re talking here about asthma, diabetes, hypertension, obesity, and possibly cancer. And the cure advocated is a combination of prevention and disease management. As with most such magic solutions, implementation is another matter. Prevention is a good thing, and most people are willing to roll up their sleeve and get a flu shot--especially if it’s free. We all know that obesity leads to diabetes and has intrinsic costs of its own, but the obesity problem has been getting worse instead of better. Where’s the incentive? Why would anyone want to give up an activity (eating) that brings instant gratification even if it may have negative consequences some years down the road? Want to talk about smoking? And even when successful, prevention and wellness programs take 5 to 10 years to be economically viable. Not that we shouldn’t do these things--just don’t expect a return on investment before the election.
Remember also that this is demand reduction and has nothing to do with the quality or efficiency of healthcare services when they are actually provided. We would still have the same people doing the same things for the same cost. We might theorize that reduction in demand would decrease the overall amount spent on healthcare, except for one thing: What do you think all those providers are going to do with their free time? Take up knitting? They’ll probably find other healthcare services to provide to other people, thus maintaining the same or larger volume of service per year with no net change in overall expenditure.
Any sincere approach to reducing the cost of healthcare has to look at the cost of individual healthcare services and introduce competition at that level. When providers (institutions or physicians) compete on a cost basis, prices will come down and service will improve.
