Former health care CEO argues America's medical system rewards bad outcomes

Judy Woodruff talks to George Halvorson, former CEO of Kaiser Permanente and author of "Don't Let Health Care Bankrupt America," who argues we spend too much money on care that doesn't deliver optimal benefits. How can the U.S. alter its approach to serve all Americans more cost-effectively and with better outcomes?


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HARI SREENIVASAN: The Obama administration announced earlier this week that enrollment in the insurance exchanges picked up last month after a troubled rollout. More than 2.2 million Americans picked an insurance plan by the end of December.

But, even as many are watching how that effort is faring, the American health system is just starting to grapple with the difficult questions of costs and quality.

Judy Woodruff has a conversation on that issue taped earlier this week.

JUDY WOODRUFF: No matter how you feel about the health care law known as the Affordable Care Act, many experts agree we are entering a critical time that will test ideas about what may or may not work when it comes to changing the health care system.

While much of the debate surrounding Obamacare centers on coverage and penalties, parts of the law are designed to see if costs can be reduced and spending slowed down further.

One large insurer, Kaiser Permanente, has already incorporated into its model some of these ideas, including an emphasis on prevention, a greater use of electronic records, and changing how doctors are paid, including coordinating how patients are treated through team care. Kaiser employs 17,000 doctors, owns more than 35 hospitals and has annual revenues of $50 billion.

Its record has been the subject of both praise and criticism.

And its just-departed CEO, George Halvorson, has had a distinct voice in all of these issues. He is out with a new book titled "Don't Let Health Care Bankrupt America." And he joins me now.

Welcome to the NewsHour.

GEORGE HALVORSON, former CEO of Kaiser Permanente: Thank you for having me.

JUDY WOODRUFF: So, this new health care law has rolled out. And you have a unique perspective on it. Unlike most Americans, you have been involved in health care management your entire career. You just, as we said, stepped down from running the nation's biggest nonprofit health care and hospital system.

What does it look like to you?

GEORGE HALVORSON: Well, we are the only industrialized country that hasn't covered everyone. Everything else has universal insurance.

And we are way overdue. This is the right thing for us to do. We need to cover everyone. We are now in the process of rolling out an attempt to do that, and there have been a few challenges in the process. It hasn't been entirely supported and it hasn't been done perfectly, but it is directionally very correct. This is the right thing to do.

We do need to cover everyone. And we need to get this right.

JUDY WOODRUFF: And you have said that you think, eventually, it will be better for Americans. But you have also said not enough has been done to address the costs on it.

GEORGE HALVORSON: Well...

JUDY WOODRUFF: What do you mean by that?

GEORGE HALVORSON: If we cover everyone, and it's still unaffordable, then that's still going to be a major problem for the country.

So we need to bring down the cost of care. We need to make care more affordable. We need to make care better. We need to have better care outcomes. We need to have the health care business system focus on improving care. And right now, the way the system is set up, it basically rewards bad outcomes. It rewards infections.

The system is set up in a very perverse way. And, as a result of that, we spend way too much money on care, and we don't get the outcomes we deserve.

JUDY WOODRUFF: What is an example that people could identify what you just said, that too much is spent on the wrong thing?

GEORGE HALVORSON: Well, we -- right now, 1.7 million Americans go to the hospital every year and get an infection that they did not have the day they went to the hospital.

That shouldn't happen. And those infections are very profitable for most of the care delivery system. Right now, patients get pressure ulcers in hospitals. Those pressure ulcers shouldn't happen. If we are focusing on the best care for the patients and doing it in a systematic way, we can cut pressure ulcers down to almost zero. But we don't do it because there is no reward in the system for doing that.

JUDY WOODRUFF: I think you yourself have acknowledged some of the steps that have been taken with regard to prevention haven't always ended up in bringing the cost down as much as -- as much as you had expected it would.

GEORGE HALVORSON: Sometimes, the prevention doesn't bring the costs down, but what it does do is it prevents an illness. And that is all by itself a good thing.

If we can cut the number of diabetics in half, that's a huge benefit to everyone who isn't diabetic. And if we do the right things, we can cut the number of diabetics in half and we can bring down the cost of care. So, we need to focus on doing systematic things to identify people at high risk, and then we need to support those people in minimizing their risk.

And that can be done, but, right now, what we do is, we reward the opposite. When someone has a congestive heart failure, we pay a lot of money to the care system for that. But if that same organization prevents the failure by intervening with the patient, helping the patient, making sure they get the right medication, they don't get paid for it.

And so we have a very perverse set of incentives, and we need to change the incentives around. And when we change the incentives, care delivery will follow the incentives.

JUDY WOODRUFF: The coordinated -- the kind of coordinated care that Kaiser Permanente has in many ways pioneered in this country has been praised, as we said, by many.

It's also -- you also hear from patients, well, I don't want to be having to work within just a specific network of doctors and hospitals. I want to be able to choose whoever I go to.

How do you deal with that?

GEORGE HALVORSON: Well, a couple of things.

One is, the patient satisfaction levels at Kaiser Permanente are very high. K.P. wins all of the Medicare standards, all the ratings on care quality and also satisfaction. J.D. Power rated K.P. as the highest satisfaction level.

So, part -- one way you deal with it is by making sure that if you have a limited number of caregivers, that they are doing a really good job meeting patient needs. But patients do want choice. And it's fine for patients to have choice. That's a good thing, as long as the caregivers they choose have information and have data and have best practice.

And if the caregivers they choose have all of that, then you're going to have a better outcome. Right now, the death rate for cancer can be three or four times higher if you go to wrong care system, and patients don't know that. We need that information to be available to the patients.

And that is what the book says. The book says, we need data for the patients to make meaningful choices. And if we put the data out there, the caregivers get better as well.

JUDY WOODRUFF: Finally, a question about what the country has been through in terms of watching the rollout of this new health care law.

Concern -- do you have concern that people are, many people are now so soured on this whole experience that it's going to be very hard for them to accept the idea of any more substantive changes in our health care system?

GEORGE HALVORSON: Well, we need to get this one right. We need to finish the job, and we need to get the exchanges working.

And we need to get this particular set of reform working. And I think then, when that happens, people will regain confidence. But you're right. Right now, there have been so many errors, that the people -- confidence is confidence is shaken. And the only way to restore that is by getting it right.

JUDY WOODRUFF: Well, we're going to continue this conversation online.

For now, George Halvorson, thank you very much.

GEORGE HALVORSON: Thank you.