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What the Healthcare Reform Effort Needs is Better Business Intelligence

Originally published January 11, 2010

The expectations are high that something is going to happen on the healthcare legislation front, especially now that both the House and the Senate have passed their own versions of the law and they now have to be reconciled in Committee. Those expectations have ranged from “killing the bill” to passing a law that features a strong “public option” and cover all the middle ground in between. Sides have been chosen and lines in the sand have been drawn.

The fact is that the House and Senate bills differ substantially in substance, and it will take a fair amount of compromise from all involved to get a decent statute since, first and foremost, what we have is a huge amount of uncertainty and confusion over what it is that we need, what is in the draft legislation, what the cost is going to be and, most troubling, whether the outcomes of any government action are going to result in having better healthcare for the American people.

It is difficult to sort out the different claims being thrown out just by reading headlines:

“The U.S. is the best healthcare system in the world” versus “No, it’s just the most expensive healthcare system in the world.”

“Our healthcare system is broken and we need to fix it” versus “Don’t fix it cause it’s not broken.”

“Everyone has the right to healthcare insurance” versus “We cannot afford to provide healthcare insurance to all.”

“Let the market forces deal with healthcare,” versus “Government must step in and regulate healthcare.”

The confusion is rampant and Congress, as usual, has not provided clarity. Rather it has tried to substitute quality with quantity. Just digest the following numbers. On July 14 the House of Representatives introduced its first version of the health reform legislation as bill H.R.3200 – America's Affordable Health Choices Act of 2009. It consisted of 176,276 words. By the time it had been marked up and the changes incorporated, it was reported in the House on October 14, with 395,096 words. The Senate spared us somewhat, but still gave us 1,504 pages in its bill, S.1796 – America’s Healthy Future Act of 2009.

Why do I insist that these are attempts to substitute quantity for quality? Well, keep in mind that according to the National Archives, it took Thomas Jefferson 1,458 words to give us the Declaration of Independence, and that our original Constitution, without the Amendments but including the signatures, consists of only 4,543 words. It is inconceivable to think that we need close to ninety times as much narrative to draft this law as what the Founding Fathers needed to write the Constitution of the United States.

Some of the basics related to our healthcare system in general have been out there for a while. Yes, it seems to be true that as long as the economic incentives reward volume of interventions versus patient outcomes, as the current fee-for-service approach seems to do, the cost of healthcare will continue to soar. And that seems to be the most significant problem that we face as a society on the healthcare front – that costs are growing at such a clip that they substantially limit our ability to undertake other social programs of arguably the same or even higher priority.

So on to health reform. How much is it going to cost us? There is a lot of confusion about this also. Depending on who you listen to and what definitions you accept, the numbers vary, often dramatically. In rough terms, the U.S. will spend about $2.5 trillion on healthcare in 2009. This is a lot of money. By some estimates it is 17% or 18% of the total economy. Approximately 50% of this corresponds to Medicare, Medicaid and other government programs.

As a matter of fact, if we focus just on federal healthcare spending, a more accurate picture emerges given the existence of budgets and accounting records. We know that in 2008 federal spending on healthcare amounted to $752 billion, which is about a quarter of all federal spending.

But if this number is scary, then its growth rate is even scarier, since in 1980 federal healthcare expenditures were only $65 billion, or 11% of the federal total. And if healthcare costs continue to increase at their historic rate, some experts estimate that we will be spending over $30 trillion on healthcare in the second decade of this new millennium.

So, again, what is it going to cost us to reform the healthcare system? Apparently no one truly knows, but a good guess is that it will generate more than an additional $1 trillion of expenses during the next decade. The Senate’s estimate is $780 billion in their accounting and the House bill sets aside $1.26 trillion or so just to expand insurance coverage.

Clearly the most costly aspect of reform as it is currently proposed has to do with making health insurance available to the uninsured. This is, again, somewhat controversial because nobody exactly agrees on how many “uninsured” there are or on which should be included in the legislation. There is much debate on whether we should also address the underinsured, and the question of covering illegal immigrants is extremely sensitive.

It seems that whatever we come up with, it will cost us a pretty penny. The great political satirist P. J. O'Rourke, recently remarked, "If you think healthcare is expensive now, wait until you see what it costs when it's free."

How can the country afford this? No one is exactly sure, but there are different general schools of thought. The Administration optimistically believes that by throwing a substantial amount of investment into electronic patient records, there will be enough rationalization, standardization and savings to close the spending gap. Conservative opponents of the bill think that it will just happen by rationing healthcare – in other words, some people will not be able to receive the treatment either at all or in a timely manner.

And the numbers and options in the draft bills are like quicksand since they shift and change the landscape every other day. This happens because the major stakeholders all have powerful lobbies in Washington. The American Hospital Association and the Pharmaceutical Research and Manufacturers of America already seem to have extracted some compromises from Congress; and the AARP, with its grassroots clout, is pushing their membership’s interests not to have any Medicare cuts included in the legislation. The American Medical Association, as we could surmise, is also very active in the debate.

So what is the reality? How do we go about trying to get answers to these truly important but vexing questions? The response has to be by obtaining better business intelligence.

Analysis has already started to parse the problem into smaller chunks. At the macro level, we can begin to focus our analytics in order to better understand and hone in on supporting plans of action. We know that:
  1. The sickest 5% of Americans account for 48% of total spending. (R. J. Samuelson: Washington Post, 12/7/09)

  2. 10% to 15% of healthcare spending is on prescription medicines. (http://finance.yahoo.com/news/10-To-15-Of-Spending-In-twst-192663726.html?x=0&.v=1)

  3. 75% of Americans don’t take their medicines as directed…adding up to $177 billion per year. (Ten Ways to Cut Healthcare Right Now, Business Week, 11/23/09)

  4. Obesity is associated with a 36 percent increase in inpatient and outpatient spending and a 77 percent increase in medications (R. Sturm, Health Affairs, 3/2002)

  5. Smoking generates $96 billion of public and private healthcare expenditures per year. (Toll of Tobacco in the United States of America, http://www.tobaccofreekids.org/research/factsheets/pdf/0072.pdf)

  6. Approximately $700 billion per year is wasted in unnecessary treatments, fraud, errors and redundant tests. (Ten Ways to Cut Healthcare Right Now, Business Week, 11/23/09)

  7. 25% of Medicare dollars are spent in the last year of patients’ lives. (Ten Ways to Cut Healthcare Right Now, Business Week, 11/23/09)
How can business intelligence (BI) help? Let’s just say, to pick one example, that we considered that sickest 5% as customers, developed a CRM approach and integrated and exploited all the business intelligence we had on them. This should start to show some progress in how to bring healthcare costs down similarly in other specific areas.

Electronic patient records will also go a long way in terms of clarifying what works based on outcomes. This will allow us to apply business intelligence to a greater depth in coupling clinical knowledge with statistical analysis for the benefit of us all.

Ultimately, decision making in health reform as in so many other areas will depend on how we can inform ourselves and our lawmakers about the facts. Not that there won’t be controversy even when faced with good business intelligence; but since the devil is always in the details, we need the brightest BI practitioners to delve into this matter with the best tools and techniques available…very soon.

  • Dr. Ramon BarquinDr. Ramon Barquin

    Dr. Barquin is the President of Barquin International, a consulting firm, since 1994. He specializes in developing information systems strategies, particularly data warehousing, customer relationship management, business intelligence and knowledge management, for public and private sector enterprises. He has consulted for the U.S. Military, many government agencies and international governments and corporations.

    He had a long career in IBM with over 20 years covering both technical assignments and corporate management, including overseas postings and responsibilities. Afterwards he served as president of the Washington Consulting Group, where he had direct oversight for major U.S. Federal Government contracts.

    Dr. Barquin was elected a National Academy of Public Administration (NAPA) Fellow in 2012. He serves on the Cybersecurity Subcommittee of the Department of Homeland Security’s Data Privacy and Integrity Advisory Committee; is a Board Member of the Center for Internet Security and a member of the Steering Committee for the American Council for Technology-Industry Advisory Council’s (ACT-IAC) Quadrennial Government Technology Review Committee. He was also the co-founder and first president of The Data Warehousing Institute, and president of the Computer Ethics Institute. His PhD is from MIT. 

    Dr. Barquin can be reached at rbarquin@barquin.com.

    Editor's note: More articles from Dr. Barquin are available in the BeyeNETWORK's Government Channel


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