Don't Mess With McAllen

We are prepared to make one bold prediction about health care reform in 2009: Whatever else happens, the health care system in the city of McAllen, Texas is going to experience big changes.

These are heady days for that hitherto little talked-about Texas city, which suddenly finds itself as the unlikely poster child for why we need health care reform in the US. McAllen can thank Atul Gawande, who focused on the city in an article in the June 1 New Yorker. If you haven't read the article, you should. It sure seems like everyone else has.

And we do mean everyone, starting with (apparently) President Obama and heading on down from there through the entire list of key figures in driving health care reform 2009.

Gawande got quite a shout-out for his article during a comparative effectiveness research conference hosted by Brookings June 9. Sen. Max Baucus mentioned it during his opening keynote, saying he was pleased to learn that President Obama himself also read it. He paused to ask if Gawande was in the room so that he could compliment him in person. (He wasn't).

Then Peter Orszag, head of the Office of Management & Budget and perhaps the single most important person shaping the health care reform agenda at the outset of the Obama Administration, delivered his opening keynote—and basically presented the Gawande article in Powerpoint form (and, much as we love the New Yorker, there is nothing like the White House seal next to an excerpt to make it seem that much more authoritative.)

Why is everyone talking about this article? Well, it probably helps that Gawande is himself part of the policymaking circle, at least as an "emeritus" member. He was on the Clinton health care reform task force in 1993, so he's hardly the typical ink-stained wretch (or is it pixel-dimmed?) when it comes to how his journalistic endeavors are perceived.

We've already mentioned him in the context of teeing up the health care reform debate, where an earlier New Yorker article offered some intellectual underpinnings for the notion that US health care reform will have to build on the US system, rather than import ideas from other nations. No US politician would dare suggest that there are any valuable models for health care to import from Europe; apart from Vermont's Bernie Sanders, most legislators in the US don't like being called "socialists. So that article helps make it okay that Orszag's omnibus overview of health care reform options (prepared while he was the head of the Congressional Budget Office) includes just one reference to an international model (and that is from Canada, which doesn't really count does it?).

But even without those connections, you can appreciate why everyone is talking about the latest article. In it, Gawande does the impossible—taking the hopelessly abstract ideas of regional treatment variations and overall health spending trends, and turning them into a specific, concrete, real-world case study: McAllen, Texas.

The article starts with the notion that McAllen is an outlier, generating much higher per capita health spending than the nearby city of El Paso. And yet, there are no obvious demographic differences between the two communities. Moreover, there are also no apparent improvement in health outcomes. (Indeed, by all indications, the community of McAllen ends up getting, if anything, worse care than El Paso, despite all the spending.)

The genius of the article, though, is how Gawande demolishes—one by one—the various possible explanations for the difference. (Our favorite: where he deals with the reflexive answer—also raised during the Brookings event—that overutilization is driven by fear of liability. After all, doctors in McAllen have no reason to fear liability any more than doctors in El Paso. Its not that liability isn’t a problem, just that it can’t explain the difference--which even the doctors Gawande interviews end up admitting.)

By the end of the article, the only conclusion left is that McAllen has fallen into a culture of overutilization, one that is at the very least enabled by a payment system that rewards entrepreneurial physicians who come up with ever-more instensive (and expensive) interventions for patients.

Is that in fact the reason for soaring health care costs (without commensurate improvements in outcomes) across the US? We have no idea.

There are certainly alternate explanations, including one possibility raised in a Wall Steet Journal editorial June 8, which suggests that apparent variations in health care costs are an artifact of the data: federal Medicare spending may vary considerable from locale to locale, but—the editorial argues—high Medicare rates may be matched by lower spending from other sources, meaning net costs overall do not in fact vary as much as Orszag and others suggest. You can see where the Journal editorial board is taking this argument: Medicare spending takes over markets and drives out more efficient private competition.

A reporter at the Brookings event asked Orszag about that hypothesis, and Orszag almost lept off the podium to respond. Cost patterns vary no matter who the payor is, Orszag said, citing large employers and Medicaid databases for further evidence that it is not just a Medicare phenomenon. He promised that he would have a "longer response" to the editorial soon.

Which brings us to our final point about McAllen, Texas. Again, we have no idea what the real cause of variation in health spending is, but this we do know: the people driving the health care reform debate are much more inclined to believe Atul Gawande than they are the Wall Street Journal's editorial board. Biopharma industry executives should bear that in mind as they plan their summer reading.