The Politics of Healthcare
According to a study from Standard & Poor’s, “No other force is likely to shape the future of national economic health, public finances, and national policies as the irreversible rate at which the world’s population is growing older.”  Indeed, people are living longer—but not necessarily healthier—lives in almost every single corner of the globe, and costly-to-treat chronic diseases are rising rapidly alongside existing infectious disease burdens, placing increasing financial pressure on already strained health systems. NBR asked Tadataka Yamada (Takeda Pharmaceuticals) to address the political and economic complexities of maintaining functional health systems as demographics shift and costs rise. Dr. Yamada offers a unique perspective on rethinking the role of hospitals and physicians, drawing on examples from the United States, United Kingdom, Japan, and Ethiopia.
What are some of the major global healthcare policy challenges that exist today?
The population is aging all over the world and, as a result, over time every country in the world is going to face an increase in the percentage of GDP spent on healthcare. Governments have not been willing to make the hard decisions that would lead to more efficient and affordable healthcare. They have tended to focus on specific groups, for example, lowering doctors’ salaries and reducing pharmaceutical company profits and hospital fees. We can do all those sorts of things, but that doesn’t address the core problem of how to provide healthcare in a more efficient way.
Take, for example, the United States. In the current fee-for-service structure, every new patient and doctor added to the system increases costs. That’s not sustainable, obviously. The focus up until now has been to extract price concessions or to offset increasing costs by increasing out-of-pocket payments by patients. In other words—a cost shift. And that, to me, is an abrogation of the responsibility of those who are in government and in charge of public policy. At some point, somebody has to say, “Maybe we can’t keep doing this. We have to figure out a better way to do this. How do we do it?”
Politics and healthcare are intimately intertwined, and I believe politics and some politicians—in the United States, in Asia, and globally—are enablers for the continued rise of healthcare costs, as opposed to levers by which healthcare costs can be made more efficient.
What prevents policymakers from being the levers of cost-effectiveness you describe, rather than the enablers of inefficiency?
Everybody is trapped in a different conundrum. One conundrum that is very clear is that hospitals are big employers, and every congressional representative in the United States has a big hospital in their district. Are politicians prepared to close that hospital even if it is terribly inefficient and unnecessarily costly to the system and to patients? Never. As a result, hospitals—often the most inefficient elements of healthcare—are going to survive. And those who want to find ways to keep people out of the hospital, which would reduce healthcare costs, have a difficult challenge to scale.
I’m not saying we should close every hospital. Rather, we have to think differently about hospitals: what are they for? They are for acute care for limited periods of time, in which the intense application of expensive resources can help people, and then those people can move on. In the United States, there is pressure on many underperforming hospitals to stay alive. But in the UK National Health System, it’s very difficult to close a hospital, no matter what. A hospital closure would mean that all of the nurses, all of the infrastructure, and everything else that has to be maintained, even if the number of patients requiring those services goes down, would disappear. That is unacceptable to an elected official. That is the big challenge that we are locked into—an inefficient system of care.
In an efficient, ideal system, hospital visits would be extremely rare. People would take appropriate medicines and vaccines and see their doctors occasionally. Now even in a highly efficient system, there will still be trauma, surgeries, and severe acute illnesses that require hospitalization. But the intensity of economic demand for that acute care setting should be limited to the shortest amount of time possible. And the hospital system should be allowed to expand and contract based on need. But that is not the case.
In addition to thinking differently about hospitals, in what other ways could healthcare be more efficient?
I may not be completely objective because I work in the pharmaceutical industry, but it is very clear to me that the most cost-effective solutions are medicines and vaccines. When I was at the Gates Foundation, that’s what we worked on because it was impossible to build expensive healthcare systems in very poor countries. In that context, if we have one vaccine—the measles vaccine, for example, which costs a nickel a dose and can help save hundreds of thousands of lives—that’s the most cost-effective solution of all.
Let’s look at overall cost in a healthcare system, taking medicines as an example. Medicines account for about 10% of the overall cost of the U.S. healthcare system.  There has been a lot of attention given to cutting the cost of medicines, but even if you were able to eliminate all the expenses for all medicines completely, you would still be left with 90% of the problem. And yet, if you take your medicines appropriately, you don’t have to go to the hospital, and neither you nor the system has to take on the added costs of hospitalization. For example, if you take your asthma medicine religiously, you don’t need to make an emergency visit for an acute asthmatic decompensation episode. Or if you take your diabetes medicine, you don’t have to go to the hospital for acute diabetic ketoacidosis. And yet, what we are trying to do now is to increase co-pays for medicine—trying to cut out the costs [to the system] for medicine.
Numerous articles and studies point to a growing physician shortage as a crucial problem.  Do you agree this is a problem that needs immediate attention?
Doctors, nurses, midwives, and physician assistants are critical stakeholders in healthcare. But we make a mistake when we focus too much on their numbers and not enough on how we leverage their skills. The United States has seen a rise in the number of new medical schools. Why? Because uneven distribution of physicians and inefficient utilization of their services has resulted in the apparent need for more. Nobody at the political level has questioned whether we already have enough doctors or even more doctors than we need. In the United States, physicians are doing many jobs that technicians, nurses, or other health workers could do. They do these jobs because they are paid to do them, and not paid to reduce strain on the system. And the cost they can charge (and are incentivized to charge) for doing these things themselves is much higher than what a nurse—who is equally qualified to perform certain tasks—can charge.
Primary care physicians who see 50 patients a day work very hard, making many sacrifices in their personal lives to do their job well, and they get paid a decent but certainly not extravagant salary. Can we make that person’s work life easier so that they can be more effective? Can we give this person not 50 patients a day but rather 25 patients a day and give the other 25 patients to a nurse who can take care of most of their needs? That would make the doctor’s life easier, it makes the patients’ lives easier, and result in a less costly staff, that is just as competent, taking care of more people. The overall cost of care for the population of patients could be much lower.
We have a system where people are being paid highly variable amounts of money for what I would call the equivalent amount of intellectual power required to do the work. It is a system that basically rewards the more expensive activity and makes it very tough to do the activity that is in great demand.
What are the politics behind this misalignment?
Politicians are captive to what their voters want. There may be ten thousand jobs in a medical center. That’s ten thousand votes. I do think that policymakers and the whole system—in numerous countries, not just the United States—are geared toward overutilization of the more expensive services and not appropriately supportive of the services that require a huge amount of toil and sweat and where the vast majority of medical needs are.
Are there lessons from outside the United States where the roles of physicians, nurses, and other key personnel are approached more efficiently?
What’s interesting is what’s happening in very poor countries such as African nations, for example, Ethiopia. There are very few physicians in Ethiopia. Instead there is a system where tens of thousands of community health workers are properly educated and trained to work in the communities. These workers are paid a small amount of money; they are not volunteers. There is also a system of what I would call “hierarchical referral.” While this is less efficient because the transportation system doesn’t work well, it basically means that physicians do work that only physicians can do. Everything else is done by people who are not physicians.
The takeaways are that some countries are thinking in a very different way about how to deliver care to the masses and that the most cost-effective solutions often come out of poorer countries that are not locked into an orthodoxy of past-practices. I would say that Ethiopia is one of the most aggressive thinkers and innovators when it comes to healthcare delivery with minimal resources. There is a certain amount of hubris in wealthier countries to say “we’ve got it right, we have nothing to learn from Ethiopia.” But I think we are going to need to take some lessons about how governments in countries with very limited resources have tried to provide for their people to the degree that they can.
Are there lessons about cost-effectiveness that the United States can learn from Japan, which has a highly developed health infrastructure and universal healthcare coverage?
Physicians in Japan are very well paid, and I think the number of doctors per capita in Japan is similar to the United States.  But one thing that is clear is that hospital care is not the same in Japan as it is in the United States. Many Japanese hospitals are privately owned and there is no central control. Big hospitals certainly exist in Japan, but there are also numerous little hospitals—mom-and-pop shops—with one doctor and just a handful of beds. So the similarity in physician density per capita does not have the same implications.
Japan spends about half as much on healthcare as a percentage of GDP as the United States.  But, paradoxically, the Japanese health system spends about twice as much on drugs as a total of healthcare costs as the United States. There is much more reliance on medicines in Japan and less reliance on more costly interventions. In terms of costs to the system, hospital costs are much lower in Japan than in the United States. On physician costs, Japan is likely similar to the United States but the administrative costs of healthcare are probably much, much lower.
What recommendations would you make to policymakers in any country who are interested in improving healthcare efficiency and reducing costs?
I think this is a global problem, and no one policymaker can change an entire system right away. Change will require integrated, collective action between physicians, payers, governments, patients, and regulators.
In the United States, more and more costs are being shifted from employers to individuals, i.e., patients. There will be a point when patients won’t take it anymore. They’ll say, “Hey, wait a minute! I’m not getting the care I need and yet I am paying more. I want something to be done about this.” When that happens, I think change will occur. But right now, most people in the developed world don’t worry about where their care is coming from. Somehow it’s magically paid for. The government pays, the insurance company pays, but, ironically, the individuals are not paying. Increasingly, however, they are now co-paying. And as co-pays get higher and individuals suffer from the costs of care, we are going to confront a situation demanding change.
I don’t know where you start, until you get to the point of saying you can’t keep going the way you have been. Otherwise, there is such an unwillingness to make the changes people, governments, regulators, etc., need to make. The Affordable Care Act in the United States is meant to provide extended basic healthcare to millions of people, but it still uses a system of fee for service. So as you increase the number of people accessing healthcare, you are actually increasing the costs of healthcare, collectively as a nation, unless each episode of healthcare is somehow reduced in cost.
Do all countries face an impending tipping point? What about countries with universal coverage?
The UK National Health System is in great financial risk, and there is a concern about inadequate services being consistently provided. Basically, the national, socialist approach to healthcare that exists in Europe is an outgrowth of World War II. Many of these systems, including Japan’s as well, were put into place at that time, based on the idea that the nation should pay for everybody’s health. And now it is becoming clear that nations unfortunately aren’t going to be able to continue paying the way they have. In the poorer parts of the world, the majority of healthcare costs are paid for by patients. In many of those countries the system isn’t doing what it is meant to: infant mortality is high and internal mortality is high. The systems are inefficient.
In Europe, 90% of the healthcare costs are covered by the public sector. In Asia, 60%–70% of the healthcare costs are covered by individuals out of pocket. So there could be reform coming from the Asian side that will be very different from the reform coming from the European side. But there might also be a convergence with the optimal model, which is driven by people simply not being able to pay more out of pocket.
 “Global Aging 2010: An Irreversible Truth,” Standard & Poor’s, October 7, 2010, http://www.ebrd.com/downloads/research/news/Session_II_Mrsnik.pdf.
 “FastStats: Health Expenditures in the U.S.,” Center for Disease Control and Prevention, May 30, 2013, http://www.cdc.gov/nchs/fastats/hexpense.htm.
 See, for example, “Fixing the Doctor Shortage,” Association of American Medical Colleges, https://www.aamc.org/advocacy/campaigns_and_coalitions/fixdocshortage/; http://online.wsj.com/article/SB10001424052702304506904575180331528424238.html; and Evan Albright, “Time Running Out to Solve Growing Doctor Shortage,” Forbes, September 11, 2013, http://www.forbes.com/sites/insidepatientfinance/2013/09/11/time-running-out-to-solve-growing-doctor-shortage/.
 According to 2010 World Bank estimates, Japan has 2.1 physicians per 1,000 people and the United States has 2.4. See “Physicians (Per 1000 People),” World Bank, http://data.worldbank.org/indicator/SH.MED.PHYS.ZS.
 According to 2012 OECD health data, health spending is 17.6% of the GDP in the United States and 9.5% in Japan for the year 2010. “OECD Health Data 2012: U.S. Health Care System from an International Perspective,” Organization for Economic Co-operation and Development, June 28, 2012, http://www.oecd.org/unitedstates/HealthSpendingInUSA_HealthData2012.pdf.
This interview was conducted by Claire Topal, Senior Advisor for International Health at NBR.