Paul Ellwood, MD: Only Government Has the Clout To Fix Broken Health Care System

His concepts have been enormously influential in the evolution of the health care system, but the results aren't what he expected. Now he has a new program for saving the system from itself.

Paul Ellwood is losing his patience. The man who coined the term health maintenance organization and helped craft the market-based managed competition approach to health care reform has had a change of heart. Financial incentives designed to transform the health delivery system haven't worked, and Ellwood has concluded that they never will. In their place, he and other public and private health leaders from across the industry who make up the Jackson Hole Group, are proposing a new approach.

Dubbed Pathways to Healthy Outcomes, or PATHOS (an acronym that Ellwood wryly observes reflects how many people, especially patients, feel about the health system), the proposal calls for greater federal participation in setting standards and acting as a referee of the health system. PATHOS (known as Heroic Pathways in an earlier incarnation) would exploit the potential of the Internet to link patients and doctors, and clarify the responsibilities of each.

Ellwood, a pediatric neurologist by training, has been at the center of health policy from time to time since the 1960s. The Jackson Hole Group rose to prominence in the early 1990s when candidate Bill Clinton embraced its proposal for managed competition, and withdrew after the collapse of President Clinton's reform plan in 1994. Ellwood spent some of the years since then recovering from a neck fracture caused by a spill from a horse, an experience that revealed flaws in the health system from the patient's perspective.

Ellwood, 76, received his bachelor's and medical degrees from Stanford University, trained in pediatrics and neurology at the University of Minnesota and completed his physical medicine and rehabilitation training at the University of Washington. He proposed the HMO approach to health care, relying on competition and market forces, in 1970. Ellwood spoke recently with Senior Contributing Editor Patrick Mullen.

MANAGED CARE: You've written that you have lost faith in the ability of financial incentives to change the health care system. Why?

PAUL ELLWOOD, MD: For two reasons: They're only really elastic when you're purchasing health insurance. That's when people are sensitive to price. Once you get sick, they're very weak because of the other big factor, the asymmetry of knowledge between doctors and patients. Once you're sick, you're not the knowledgeable party who can determine whether something's worth doing. The person who is proposing to provide you the care is in charge. We propose to rectify that asymmetry by giving patients authoritative, personalized health information all the time, rather than only when they're buying health insurance.

MC: How has that changed your thinking about how the health care system should be reformed?

ELLWOOD: In revising the Jackson Hole Group's recommendations for restructuring the health system, we're taking a far stronger political position than before, certainly far stronger than we did during the formulation of managed care policy in 1970, when the Nixon administration's HMO policy relied on economic market forces. After a promising start, the health delivery system regressed to its former state. In 2003, the same policies prevail: The Bush administration's Medicare drug proposal assumes that patients, health plans, and providers will provide the stimulus for a health system that will wisely and economically provide drugs. Our 35 years of health care reform experience have led us to conclude that lasting and sustainable health care reforms are beyond the capabilities of classic economic forces that shape the rest of the economy. No business could survive if it had to accept such erratic performance from its suppliers.

MC: If market forces won't do it, how do you propose to change the health care system?

ELLWOOD: Rather than stand aside and rely on economic forces, the federal government must directly confront the way the health system works. Two years have passed since the Institute of Medicine issued the “Crossing the Health Quality Chasm” report, and no legislation has resulted. We urge the federal government to cross the health policy chasm by directly overhauling the health delivery system and the way in which people contract with providers.

MC: What specific federal actions do you propose?

ELLWOOD: We have four proposals. First, we propose a bipartisan congressional resolution that calls for deployment of electronic medical records and evidence-based clinical guidelines to all consumers, probably by 2007. Now I know that Congress passes resolutions all the time and they don't necessarily have any impact, but it's important to at least establish this as a bipartisan effort. Second, the Drugs for Seniors Act should be written in such a way that it anticipates the changes that are outlined in Pathways to Healthy Outcomes. All seniors obtaining drugs under this act should have available a secure open-source electronic drug record with computerized order-entry systems, which would avoid a lot of drug errors. That would put in place the first piece of an open-source electronic medical record system. Also, drugs prescribed under this act should be based on clinical evidence-based guidelines. That lets the managed care companies off the hook on having an unenforceable kind of formulary that doctors can fight.

MC: What are the other two proposals?

ELLWOOD: Third is passage of legislation to establish an Institute for Medical Practice and Consumer Technology [IMPACT], which would assure the availability and timely revision of evidence-based clinical guidelines. I see IMPACT as a quasi-governmental body that would set standards for the transferability of electronic health records. The fourth recommendation, the most powerful, would condition Medicare payment in a few years on doctors and patients having electronic medical records and pathways and following evidence-based guidelines.

MC: Where's the political will to insert the federal government more aggressively in health care?

ELLWOOD: We're working on creating the political will. We're also going to identify reasons for the reluctance to reform the system, and show that there are policies that can overcome that reluctance. The reluctance stems from the presumption that the bond of trust between doctors and patients is stronger than any outside force, especially the government. Second, the government is reluctant to act because so much is at stake. The federal government controls almost $700 billion, or 50 percent, of annual health expenditures. The largest private buyer, General Motors, spent $4.2 billion in 2001. Third, there is a lack of institutional memory or responsibility for policies that were tried during previous health crises. That can be seen in the current Medicare proposal. We can come up with a reform proposal where the government defines and referees health delivery reforms without directly participating in their applications. They can do it without actually delivering any more care than they do at present and without taking anything away from the private sector.

MC: How would the doctor-patient relationship be affected?

ELLWOOD: The federal government has to strengthen the doctor-patient relationship by contractually defining the responsibility of each party. Doctors and patients would sign an Agreement on Responsibility that would link guidelines to reimbursement. The doctor agrees to be responsible for a health information pathway, an Internet information pathway through which the physician provides consultation alerts, new prescriptions, and appointment scheduling, and agrees to abide by evidence-based guidelines where they apply. The patient agrees to accept that health care that follows evidence-based guidelines is appropriate care, and agrees to supply information about outcomes to help facilitate developing new evidence-based guidelines. Any doctor who appropriately follows official clinical guidelines would be protected from liability. This represents a whole different approach to liability from the current standard, which is whatever a lawyer can get an expert witness to testify to that will convince a jury. It seems to be a more powerful and tangible kind of malpractice reform than simply putting limits on settlements.

MC: What would be an example of what information an individual would have and how it could be used?

ELLWOOD: The patient would have an electronic medical record and an Internet connection with the doctor. Say the patient has symptoms in the middle of the night. He would go to the computer and indicate the symptoms and get an immediate response to the inquiry. The response might be automated, using decision-support systems that know the prior history of this patient and the nature of the symptoms. Or the patient might be told to meet the doctor at the emergency room. It's conceivable that a doctor in Australia would answer the query, because we envision a communication system between doctors and patients that's always in play. Patients also need continuous access to a source of medical advice to alert them to new knowledge based on genetics. They'll need to know when their genetic makeup is such that they have a very high probability of getting a certain disease, so they can talk to their doctors about prevention and treatment options. The casual way in which we approach medical care now is completely out of sync with an age of genomics. It may sound far out to suggest these more aggressive approaches to dealing with the health system, but I don't believe that it's excusable to be laissez faire.

MC: What would be the function of managed are companies in this, if any?

ELLWOOD: I think that they could take advantage of it. They could do what we wish they had done in the first place; seek out providers that are most willing and able to comply with this set of changes. Practicing medicine over the Internet could reduce doctor visits by about 50 percent. Certainly doctors ought to be compensated for that. Managed care plans should draw up contracts that compensate such care, and pay doctors for having an agreement of responsibility in place. Plans should then market those providers. The bigger issue that people in managed care or health insurance ought to be concerned about is genomics. Bill Brody, who is president of Johns Hopkins and a radiologist, has written that an age of genetic testing is incompatible with experience-rated insurance. If you can predict with increasing accuracy who will get sick, it would be like being able to identify the houses that an arsonist has chosen to burn down. You could also argue that genetic testing and genomics are incompatible with employer-based health insurance, because self-insured employers would be in a position to find out more than most employees would want them to know about their future health. Knowing about their future health is not only important to their getting health insurance but to their job security. It gets down to who has the right to know these things, if they are going to base health insurance premiums or employment on that knowledge.

MC: What happens to people who don't have or can't afford Internet access?

ELLWOOD: Two things will happen. First, we'll reach a tipping point just as we have with other forms of technology like DVDs or the Internet itself, so the number of people with Internet access will continue to climb. Second, there will always be some patients with whom we'll have to communicate in other ways, such as telephone.

MC: How strong is the appetite for reform among payers, given the current resurgence in health care inflation?

ELLWOOD: The appetite for reform among payers is very strong. I've always felt that inflationary periods are the best opportunity to do something. We had a presentation of our Jackson Hole Group meeting in September by Marilyn Carlson Nelson, chairman and CEO of the Carlson Companies, which employs 38,000 people in the United States and 100,000 overseas. I've never heard a CEO as blunt about this. She said, “We're not about to have health care become one of our core competencies.” Employers are getting fed up to the point that they'll start bringing substantial pressure to bear on the federal government to take over. We're trying to come up with recommendations that are tangible enough to avoid that possibility.

MC: How receptive are people in the managed care and insurance business to your proposals?

ELLWOOD: I'd say that we're not getting any meaningful feedback one way or another. They're intent on running their businesses and improving their bottom line. The kinds of things that I'm talking about are not on their radar screens.

MC: What's your take on what health plans are calling consumer-based health plans?

ELLWOOD: It's another attempt to manipulate the health system's performance by making people sensitive to cost differences. It focuses on individual providers rather than sets of providers. Still, it only makes a difference when you purchase health insurance. If it's really going to be consumer driven, the consumer's got to have a chance to switch providers after the initial contract if the provider isn't performing. I see the negative reaction to managed care as a form of regression, as just returning to the way the health system used to be.

MC: You're still fighting this fight after 35 years. Are you essentially optimistic or discouraged about the prospects for change?

ELLWOOD: I wouldn't do it if I weren't optimistic.

MC: Thank you.