Posted by: burusi | July 28, 2010

Jim Jaffe – The Three Big Ideas of Alain Enthoven, Paul Ellwood and Jack Wennberg

The Three Big Ideas of Alain Enthoven, Paul Ellwood and Jack Wennberg
By Jim Jaffe – Health Care Editor on January 2, 2010

As negotiators work quietly to come up with a health reform compromise that is either the beginning of the end or the end of the beginning–depending on one’s political perspective, it is worth taking a moment to consider the role of the three men who constituted the beginning of the beginning when they began agitating more than a quarter century ago: Alain Enthoven, Paul Ellwood and Jack Wennberg. The three big ideas that Enthoven, Ellwood and Wennberg started refining and promoting prior to the start of the Reagan presidency are the pillars of the bill that will soon become law. They also provide some insight into the pace of political change in American society.

Enthoven, a professor at the Stanford business school who worked for Defense Secretary Robert McNamara during the Johnson years, like many economists, believes in the power of markets. Enthoven quickly concluded that the medical market was dysfunctional because it wasn’t really a market at all, with transparency and negotiation between buyers and sellers typical of other transactions. He then came up with a series of reforms designed to create a market environment that would, he was convinced, give us greater control over escalating costs, which were then quite modest by today’s standard.

Ellwood, a Minnesota physician who provoked decades of experiments in the Twin Cities area, was dedicated to creating a system where a provider-insurer entity was paid a single flat-fee to care for a patient over time, perhaps via a health maintenance organization, so that providers would have an incentive to consider the cost of care and challenge the traditional relationship where providing more care yielded greater revenue. His thinking had an impact on the government’s continuing effort in promoting capitated plans that began with the Nixon Administration’s commitment to HMOs in the early 1970s.

Wennberg, a physician at Dartmouth, endlessly collected and analyzed data providing that there was a tremendous disparity between the amount of care provided for a given diagnosis from one geographic area that had no impact on outcomes. Wennberg came to believe there were many regions where care could be cut significantly – at one point suggesting that Medicare expenditures could be slashed by 30% — without necessarily impacting care.

All three of these basic insights – each of which has a complexity and density that I’ve failed to do justice to here – are now part of the new conventional wisdom that is contained in the upcoming new law.

Each learned the difficulty of translating theory into practice. Enthoven concluded once again that while transparent markets may yield the best overall results, satisfied players in opaque transactions will resist change.

Ellwood, a doctor, learned the hard way that patients were extremely reluctant to transfer decisions for their care from physicians, who often could earn more by doing more, to HMOs or managed care entities that had greater incentives to perform efficiently.

And Wennberg, who was subjected to recurring challenges even while added research confirmed his basic insight, never inspired as someone whose prescriptive abilities complemented his diagnostic skills.

Each of the three casts a big shadow over the new world now being created.


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