Hidden Success (The Hidden Krugman)

While Tom Friedman evangelizes about being an energy independent GeoGreen, Paul Krugman sermonizes on the other 500 pound gorilla in the living room (and there are definitely more than one)--health care. And he notes in Friday's Health Care Confidential (full column access for Times Select subscribers) that the government already has found success at running a large, socialized health care system--the Veterans Health Administration. After hitting bottom in the 1980s with inefficiency and mediocre care, it turned itself around with concerted reforms in the 1990s. That's where we pick it up:

Last year customer satisfaction with the veterans' health system, as measured by an annual survey conducted by the National Quality Research Center, exceeded that for private health care for the sixth year in a row. This high level of quality (which is also verified by objective measures of performance) was achieved without big budget increases. In fact, the veterans' system has managed to avoid much of the huge cost surge that has plagued the rest of U.S. medicine.

How does the V.H.A. do it?

The secret of its success is the fact that it's a universal, integrated system. Because it covers all veterans, the system doesn't need to employ legions of administrative staff to check patients' coverage and demand payment from their insurance companies. Because it's integrated, providing all forms of medical care, it has been able to take the lead in electronic record-keeping and other innovations that reduce costs, ensure effective treatment and help prevent medical errors.

Moreover, the V.H.A., as Phillip Longman put it in The Washington Monthly, "has nearly a lifetime relationship with its patients." As a result, it "actually has an incentive to invest in prevention and more effective disease management. When it does so, it isn't just saving money for somebody else. It's maximizing its own resources. ... In short, it can do what the rest of the health care sector can't seem to, which is to pursue quality systematically without threatening its own financial viability."

Oh, and one more thing: the veterans health system bargains hard with medical suppliers, and pays far less for drugs than most private insurers.

[...]

[P]undits and policy makers don't talk about the veterans' system because they can't handle the cognitive dissonance. (One prominent commentator started yelling at me when I tried to describe the system's successes in a private conversation.) For the lesson of the V.H.A.'s success story — that a government agency can deliver better care at lower cost than the private sector — runs completely counter to the pro-privatization, anti-government conventional wisdom that dominates today's Washington.

The dissonance between the dominant ideology and the realities of health care is one reason the Medicare drug legislation looks as if someone went down a checklist of things the veterans' system does right, and in each case did the opposite. For example, the V.H.A. avoids dealing with insurance companies; the drug bill shoehorns insurance companies into the program, even though they serve no real function. The V.H.A. bargains effectively on drug prices; the drug bill forbids Medicare from doing the same.

Still, ideology can't hold out against reality forever. Cries of "socialized medicine" didn't, in the end, succeed in blocking the creation of Medicare. And farsighted thinkers are already suggesting that the Veterans Health Administration, not President Bush's unrealistic vision of a system in which people go "comparative shopping" for medical care the way they do when buying tile, represents the true future of American health care.