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Code Red

Code Red: An Economist Explains How to Revive the Healthcare System without Destroying It

David Dranove
Copyright Date: 2008
Pages: 281
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  • Book Info
    Code Red
    Book Description:

    The U.S. healthcare system is in critical condition--but this should come as a surprise to no one. Yet until now the solutions proposed have been unworkable, pie-in-the-sky plans that have had little chance of becoming law and even less of succeeding. InCode Red, David Dranove, one of the nation's leading experts on the economics of healthcare, proposes a set of feasible solutions that address access, efficiency, and quality.

    Dranove offers pragmatic remedies, some of them controversial, all of them crucially needed to restore the system to vitality. He pays special attention to the plight of the uninsured, and proposes a new direction that promises to make premier healthcare for all Americans a national reality. Setting his story against the backdrop of healthcare in the United States from the early twentieth century to the present day, he reveals why a century of private and public sector efforts to reform the ailing system have largely failed. He draws on insights from economics to diagnose the root causes of rising costs and diminishing access to quality care, such as inadequate information, perverse incentives, and malfunctioning insurance markets. Dranove describes the ongoing efforts to revive the system--including the rise of consumerism, the quality movement, and initiatives to expand access--and argues that these efforts are doomed to fail without more fundamental, systemic, market-based reforms.Code Redlays the foundation for a thriving healthcare system and is indispensable for anyone trying to make sense of the thorny issues of healthcare reform.

    eISBN: 978-1-4008-2962-0
    Subjects: Business, Health Sciences, Political Science

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
    (pp. vii-viii)

      (pp. 3-7)

      Envy of the world or not, no one seriously believes that the U.S. healthcare system has fully achieved the three main goals that any nation aspires to: access, efficiency and quality. For the better part of the past one hundred years, the story of healthcare reform has been one of trying to achieve these goals. For all of our efforts, they remain as elusive as ever.

      For much of the twentieth century, quality and efficiency took a back seat to access. Private sector health insurance in the United States began in fits and starts prior to the 1930s, expanded to...

    • ONE The Accidental Healthcare System
      (pp. 8-29)

      In the late nineteenth century, the average American spent less than $4 per year on healthcare (less than $100 in today’s dollars.) Americans spent so little mainly because providers could do little to heal them. Ether had been available as an anesthetic since 1847, but the risk of infection ruled out surgery in all but the direst of cases. Medicinal drug use was widespread, but it was difficult to distinguish efficacious drugs from snake oil. (One of the most popular medications of the late nineteenth century was mercury!) Most patients received their drugs at home; hospitals were for the poor...

    • TWO Paging Doctor Welby
      (pp. 30-57)

      Most Americans in 1970 thought that the healthcare system was working well.² Americans had especially high regard for physicians, as reflected in the top-rated television program of that year,Marcus Welby, MD. The fictional Marcus Welby had a private office in Santa Monica, California. He also saw patients at Lang Memorial Hospital, a nonprofit hospital. Dr. Welby and the specialists at Lang had unquestioned decision making authority; no hospital administrators looked over their shoulders as they made life and death decisions. If patients could not make it into the office or the hospital emergency room, Dr. Welby paid them a...

    • THREE Therapy for an Ailing Health Economy
      (pp. 58-82)

      Marcus Welby, MDdepicted a vibrant American healthcare system. Most Americans bought into the mythology, and why not? The system seemed to work, at least for those with insurance. Mainstream America was largely unconcerned about cost or quality, even if a growing number of academics were raising red flags.

      The signs of trouble were easy to spot, if anyone bothered to look. Spurred on by the Medicare and Medicaid expansions of insurance coverage, per capita spending in the United States increased from $126 in 1960 to more than $300 by 1970. (See table 3.1.) At the same time, about 12...

    • FOUR The Managed Care Prescription
      (pp. 83-118)

      In the 1990s, employers turned toward managed care to control costs. Managed care enrollments soared—from under 30 percent of the population in the late 1980s to over 90 percent a decade later. Americans enjoyed a respite from runaway medical cost inflation, but many worried that managed care was placing profits above lives. As more Americans heard stories such as that of Massachusetts teenager Janet Thieriot, these worries intensified into an all-out backlash.

      A diabetic, Thieriot began experiencing pain in her thigh in 1988 that sometimes left her unable to walk. Doctors and nurses attributed the pain to her diabetes....


    • FIVE Self-Help
      (pp. 121-146)

      It is difficult to be a good healthcare consumer. We must make decisions with very limited information and often under considerable stress. We want to be protected against financial risk, but insurance insulates us from considerations of costs. These are universal concerns and the resulting problems that I have described in earlier chapters cannot be wished away with a magic wand. The evolution of our healthcare system can be seen as a series of efforts to solve these problems.

      For most of our lifetimes, the most comforting solution has been “Marcus Welby medicine.” But health services researchers showed that this...

    • SIX The Quality Revolution
      (pp. 147-175)

      Robert Brook may rightly be considered the “father” of the healthcare quality movement.² After receiving his M.D. and Sc.D. degrees from Johns Hopkins, Brook joined the RAND Corporation in the 1970s where he was a key member of the Health Insurance Experiment research team. He showed that the RAND enrollees who received free care did not experience any systematic improvement in health relative to those facing large copayments, despite the marked difference in utilization.³ Brook continued to make profound contributions to the research literature on quality measurement and in 2005, the Institutes of Medicine awarded Brook the Lienhard Award, citing...

    • SEVEN Mending the Safety Net
      (pp. 176-204)

      When it comes to health insurance, the United States has about forty-seven million “have-nots.” This is not for a lack of ideas about how to cover the uninsured. Politicians and policy analysts from across the political spectrum have offered numerous proposals. The liberal Physicians for Responsible National Health Insurance recommends a Canadian-style system in which the federal government takes over the financing of healthcare while leaving the provision of care largely in the private sector. Conservatives object that this would lead to more inefficiency, rationing, and the end of innovation. The conservative Heritage Foundation recommends that the government provides tax...

    • EIGHT Reviving the American Healthcare System
      (pp. 205-234)

      Americans spend far more on healthcare than anyone else in the world. Yet there is unacceptable variation in the quality of care and millions of Americans face financial catastrophe should illness strike. If the healthcare system were a patient, we might say it was in critical condition.

      This is not for want of remedies. Ever since the report of the Committee on the Cost of Medical Care, ideas for improving access while lowering cost and raising quality have emanated from the private and public sectors. Every candidate in the ongoing presidential campaign has offered their prescription. We do not need...

  6. APPENDIX An Alphabet Soup of Healthcare Acronyms
    (pp. 235-238)
  7. NOTES
    (pp. 239-254)
    (pp. 255-268)
  9. INDEX
    (pp. 269-281)