February 01, 2014
4 min read

If we use evidence-based medicine, why not evidence-based policy?

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One day in the fifth grade, I was challenged with the following problem: Draw a diagram showing how to connect the utility lines from the water, gas and electric companies to three houses without allowing the lines to cross one another. Simple enough, I thought. But in the next few days, no matter how hard I tried, no matter whether I used straight lines or curved ones, or moved one house here or another utility company there, I could not do it. I could almost do it. But, invariably, there was at least one house that couldn’t be connected to at least one utility. Often, I was so tantalizingly close I could almost taste victory, but didn’t.

I ultimately realized this problem could never be solved on a 2-D piece of paper but required a 3-D construct. Without that third dimension, you couldn’t do it.

Richard O. Dolinar

Richard O. Dolinar

A free market

It seems we’re doing the same thing in health care today. In economics class, I was taught that nothing provides goods and services as cheaply and as efficiently as a free market. This free market is not a place but rather a process whereby two parties voluntarily exchange goods and services to the mutual benefit of both. A buys from B; A pays. Both A and B benefit.

But this process is not allowed to take place in health care. For example, direct contracting with Medicare patients is not permitted. Instead, in the health care counterpart of the above problem involving utility companies and houses, the following model is being used: A (the patient) buys from B (the doctor, pharmacy or hospital). C (the government) pays. A buys from B, but C pays. A benefits. B may or may not benefit. C loses (or rather the taxpayer, who provided the money to C, loses).

Adding C to the system has been counterproductive. HMOs have tried and failed, and now we are being told that accountable care organizations (ACOs) will do the trick. But that’s just another name for the same top-down HMO approach that failed earlier. One well-known speaker at a national conference extolled the virtues of ACOs, claiming they’d solve the health care crisis. But when asked to compare and contrast ACOs with HMOs, he couldn’t do so, “because ACOs could be anything that you wanted them to be,” he said, and they are still a “work in progress.” And this was the founder of a private company whose business was telling other groups around the nation how to set up and operate ACOs. A “work in progress” is certainly nothing on which to base massive changes in our health care system.

As physicians, we are being told we must practice “evidence-based medicine.” But shouldn’t policymakers practice “evidence-based policy”? What evidence, if any, is there to support using such models in health care? Have these models been tried in other sectors of our economy? If so, what can we learn from them?

Our examples

Examining the economic literature, I found two examples of where such an approach was used by major American companies known to all of us. The first could be called a TMO, or travel maintenance organization, and the second an FMO, or financial maintenance organization.

First the TMO: Allegis. United Airlines was the airline component. The intent was to care for all of the needs of each traveler, much like HMOs and ACOs attempt to care for all of the patient’s needs. Aegis would book the flights, hotels, rental cars, cruises, etc, all within its network. The idea was that limiting the traveler’s choices to network providers would give the TMO the power to control prices and quality while meeting all of the traveler’s needs. So, how well did it work? Do you recognize the name Allegis? Enough said.


Now the FMO: Sears Financial Network. It brought together well-known major US companies under one roof: Allstate Insurance, mortgage lending from Coldwell Banker, Dean Witter brokerage, the Discover credit card, and all the Sears stores nationwide to meet all of the financial needs of the customers in their network. They planned to profit by limiting choice and applying controls to the network. For example, the only credit card that could be used in its stores was the network’s Discover card. One could either take valuable time to fill out an application for a Discover card and make the purchase with that card, or pay cash. This proved to be successful in driving customers to its competitors’ stores to make their purchases with other credit cards they already possessed.

In both of these examples, the denial of customer choice ultimately brought about the demise of the consolidation schemes. Such situations are not tolerated in the marketplace. If customers have any alternative, people “vote with their feet” and go elsewhere. And if they can’t go elsewhere, prices rise and quality declines.

Patient choice

Now consider the many ways patient choice is restricted in health care. The patient doesn’t usually choose his health plan. His employer or government does so, and this choice is limited to in-state plans. These plans, in turn, limit the physicians who can be seen, the therapies that can be used, and the drugs that can be taken. The patient is not sovereign.

HMOs do not owe their existence to the marketplace but rather an act of Congress, the HMO Act of 1973. This legislation initiated a top-down, price-controlled approach to health care, which has eliminated patient sovereignty. Since 1973, there have been various unsuccessful attempts to make this approach work. ACOs are just the latest. Without patient sovereignty, no such plans will ever work. The evidence makes that clear.

Unfortunately, many policymakers still seem to think that they can connect, on a piece of paper, every utility company to every house without crossing any lines. How come some people just never learn?

Richard O. Dolinar, MD, is a senior fellow with The Heartland Institute and a clinical endocrinologist specializing in diabetes in Phoenix. He can be reached at rdolinar@heartland.org. Dolinar reports no relevant financial disclosures.