The “New Economics of Healthcare”, an old idea for today…

Let’s own our own history….


On the morning after the U.S. House of Representatives announced its “plan” to replace the Affordable Care Act, it is timely and wonderful that I received the attached article yesterday evening from my colleague, Lincoln Cushing, the brilliant archivist for Kaiser Permanente  who sent me the following brief article:

Please open the link and read it.  The brief article explains the “new economics of medicine” which Dr. Sidney Garfield and his colleagues developed in the 1940’s.

The “new economics of medicine” can briefly be defined as keeping people healthy.

In this particular case, the physicians and nurses of the Kaiser Permanente health plan brought health screening to the docks and union halls of the International Longshoremen and Warehouse Union (ILWU), the dominant union for longshoremen and stevedores  on the West Coast.  The year was 1951.

The purpose of this innovation was to make prevention of injury and illness easily  accessible to the health plan members of the ILWU.  The Union had after World War II asked that Kaiser Permanente be opened to all its members.  The Union leaders understood the benefit of the health plan:  it was designed to keep its members healthy and in so doing would be far less expensive to fund.

Economics is not like the weather!

In the United States of today,  its population’s health ranks 37th in the world according to the World Health Organization.  At the same time, the U.S. spends nearly 20% of its entire economic output in “healthcare”.  This reality is wasteful, and terrible economics.

The U.S. got to this point despite the success of Kaiser Permanente’s 70 year history of providing affordable health care to ever-increasing numbers of families…today nearly 12 million people!

We know that the U.S.  healthcare system itself is only 10% of the contributor to health; the other 90% is  due to social determinants (genetics, personal behaviors, and social and economic conditions.** Journal of the American Medical Association, 1993).  That 10% is where the waste and missed opportunity lies in the $3 trillion annual expenditure on our disaggregated and non-strategic health care delivery.  In large part it is the waste in health care delivery that our nation seems obsessed, but with no strategy to eliminate it.

Dr. Lester Breslow, a leading figure in U.S. Public Health who is cited in the attached article famously said in 1969 that “housing was more important to health than healthcare”.  So how is it that for so many decades and again today, our nation continues to discuss healthcare, and not health?

Because healthcare in the U.S. is largely driven by a misplaced  “free-market” mentality. The Affordable Care Act, however flawed did extend heath care access to 20 million people who did not have access to it before.  The House plan will make it more difficult for those 20 million to keep access, and it is likely that the cost of healthcare will continue to rise for everyone else.  This is because there is no strategic plan to attack the 90% causation of ill-health.

In the attached article, the Permanente physicians make it clear why healthcare is so expensive:  once people are sick, it is less likely that approaches and protocols can be the same.  There is wide variation in the way a patient must be treated, especially when there are co-morbitities, and complex diseases when people enter hospitals for care.

By contrast, biometric screenings and preventative procedures are easily standardized and perfected.  The preventative approach is what stands healthcare economics on its head:  preventative care identifies the inherent impact of social determinants before they cause disease or injury.  Early detection, early treatment, and continuous education of the health plan member is the essence of the “new economics of healthcare”.

It is more than symbolic that in 1951, the Kaiser Permanente team brought their preventative screenings to the docks of San Francisco while today, public policy of the highest order is putting in place barriers to care!  It is the exact opposite of what we as a nation have a moral, ethical, and financial obligation to do!

The “new economics of healthcare” has four major operational components:

  1. Systemic preventative care
  2. Pre-payment:  there are no incentives to perform unnecessary or duplicative tests and procedures:  health must be delivered with one payment PRIOR to health services being delivered
  3. Multi-specialty physician group practice designed as continuous learning organizations to implement best and continuously  better practices
  4. Fully integrated electronic medical records.  Kaiser Permanente leads the world in size and scale and effectiveness in using medical records to easily make decisions about care AND continuously mine data which scientifically indicates how treatment impacts conditions.

I’ll add a fifth component:  partnerships…between the health plan and its physicians; with its communities, and with its workforce.  Partnership is the art of developing and meeting mutual interest…something else our nation must learn to do!

Ask anyone you know if they believe healthcare is a right or a privilege.  With few exceptions, they will answer that it is a right.  To make the right to healthcare a reality, we must fight for…health.  It is like fighting for peace…we won’t have either unless we establish the organizational paradigms to create and sustain such high ideals.

With its more than 600 outpatient clinics, its electronic medical records, and pre-paid business model, Kaiser Permanente’s ease of access is the key to application of its preventative model.

The U.S. must have the debate about health and healthcare and resolve it.  That debate begins with the high-minded notion that health and healthcare is a right, but that right must have a structure that makes that right accessible and affordable.  The economics of such a system must be based on the ability to respond to the 90% of the drivers of health.

Prevent disease and injury in the community in which people live.  Confront poverty; teach and make accessible healthy eating and active living; and commit to preventative care and health education to all.

This system has already been developed and tested on a massive scale…in the workplace and in the community, through Kaiser Permanente

In some sense we are all longshoremen.










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