The Out-of-Control Spendthift

11/17/2011 09:02 am ET
  • Deane Waldman Physician, systems theorist and award-winning author

Imagine (like above) the "real housewives of some obscenely expensive place to live." They exist solely to buy things with fancy labels and spend huge sums of money on the credit card. Got the image in your mind? That is how most people view our healthcare system: the spendthrift, the profligate. The logic goes: to fix healthcare, all we need to do is curb this out-of-control mindless spending machine.

Simple cost is all we seem to see, immediate outlay, the expense of: a visit to the doctor; prescription drugs we need; our hip replacement; medical malpractice premiums; the CEO's compensation; the lawyer's fee when we are injured; and especially the amount our nation is spending on healthcare. A litany of our national healthcare financial woes could, as George Will wrote, "make you sick."

Nobody talks about the following: avoided cost; realized benefit; lost benefit; cost/benefit; and most important, net long-term value. As I wrote recently in "If you were the CEO of Corporation USA," we need to start thinking in these terms because healthcare is (or should be) an investment in our primary asset - the basis of competitive advantage in the modern world - people.

Avoided cost: how much less would you have to expend over the lifetime of your asset (called a person) if you spend a small amount of money now? How much money would you not have to spend in 2020 by funding diabetes prevention programs now? How many fewer hospital admissions for acute asthma would you have to pay for if asthma attacks could be prevented by allergen-free home environments?

Realized benefit: what precisely do we get for the money we spend? Do not measure the things we do not want such as days-in-hospital; mortality; complications; or lawsuits. Tell us about the things we do want, like living a long time and restored function after surgery. How many more days-on-the-job (with the consequent productivity) do we get by paying for preventative medicine?

Lost benefit: what benefits - outcomes we want - will be lost if we don't spend money now. We could save money, lots of money, by not operating on children with congenital heart disease and not putting people on kidney dialysis. They would die and we would save all that "cost" now but lose whatever they would have contributed to our country and our society in the future. If asthmatics cannot stay in school or cannot work (because they are sick), we lose their productivity.

Cost/benefit: what positive outcomes do we get for what we spend, proven by evidence not someone's opinion? We want numbers, quantification of what we spend versus what we get.

Net long-term value: over the lifetime of your asset - for healthcare, that is an average person's lifespan - what do we get for what we spend? If we do not use a long-term value analysis, we are paying now but not finding out if we got value - longevity with good function - for our dollar.

If we start talking that way, healthcare financing would begin to make sense and would start to work for us instead of against us. As it now stands, short-term bottom line thinking dominates and we all suffer, medically and financially, the "all" referring both to us as individuals and us as a nation.

Let's use investment terms when talking about healthcare.