MS. DIANE REHMThanks for joining us. I'm Diane Rehm. U.S. healthcare costs have been climbing for years outpacing inflation and the growth in national income. But the trajectory is unsustainable. Joining me to talk about what's driving healthcare costs and what needs to change, Daniel Callahan, he's president emeritus of The Hastings Center, Karen Ignani of the American Association of Health Plans and Health Insurance Association of America and joining us from a studio in Portland, Maine Dr. John Wennberg of the Dartmouth Institute for Health Policy.

MS. DIANE REHMWe do invite your comments, questions. Join us on 800-433-8850. Send us an email to drshow@wamu.org Join us on Facebook or Twitter. Good morning to all of you.

DR. JOHN WENNBERGGood morning.

MR. DANIEL CALLAHANGood morning.

MS. KAREN IGNANIGood morning.

REHMGood to have you with us. Dr. John Wennberg, if I could start with you. A great deal of capital is expended on the cost of healthcare. What is driving these costs?

WENNBERGWell, looking at it over time, it seems to me that the most important driver is the continual increase in resources devoted to healthcare, the numbers of doctors we train and put into practice, the number of hospital beds we build, particularly intensive care units and the new technologies and indeed the old technologies which keep creeping in and we're using them at greater intervals.

REHMSo both old and new technologies continue to bolster costs involved in healthcare?

WENNBERGRight. But I think understanding the dynamics of the market, we learn an awful lot by looking at the variation that's occurring in a given period of time across different parts of the United States where we see huge differences in the amount of money spent on a per capita basis, striking differences in how much care is actually delivered particularly to patients with chronic illness.

REHMWhy is that? Why should geography have such an impact?

WENNBERGIt has a lot to do with the underlying differences in the supply of resources, particularly when it comes to treating chronically ill patients. Just to give you an example, Medicare now spends upwards of $10,400 a year in Los Angeles, but only $7,200 per year in places like Portland or in Seattle. And most of this money goes for the intensity with which chronically ill patients are treated, how many visits they make, the doctors, how many times they're hospitalized, how many days they spend in an intensive care unit, how many MRIs they get.

WENNBERGAnd this varies to an extraordinary extent between regions and can be traced back to the capacity of the system. Unfortunately, the capacity is generally used in situations where we really don't understand the relative value of, you know, one level of treatment versus another.

REHMKaren Ignani, what do you see as the trends in healthcare costs? What is doing the driving?

IGNANII think the trends are crushing for the economy, Diane. I think it's very important to show here, to talk about the underlying drivers and I think Jack did a great job of starting off the conversation. Just to add to what he said in response to your question, I think we need to step back in our society and migrate from a system that had heretofore been oriented toward catastrophic intervention to much more chronic and preventative care.

IGNANIWe know people are living longer, that's a positive thing. The goal should be to improve their quality of life. That means getting them into the healthcare system at the earliest possible stage, but not through this prism or window of catastrophic delivery. And Jack made an important observation where you see wide variation in care and costs across the country. We're beginning to understand now in Los Angeles. For example, he appropriately mentioned the difference between Los Angeles and Portland.

IGNANIBut we know that there's a deficit in primary care in Los Angeles and that may explain why people are migrating to specialists rather than primary care physicians. So we need to think about supply issues, Jack mentioned that. I think that's exactly right. There are a number of primary care physicians that could use nurses to do a number of things in their offices. They want them to do that. The nurses want to do that, but there are regulations that are barriers to that. So this whole migration is important I think to chronic care and prevention and early intervention.

IGNANII also think that Jack's probably not, I think he should take credit let me put it that way, for the sounding of the alarm on the variation that we have across the country. And what we know from the literature and we see in our health plans, our health plans now are working with physicians and giving them incentives to follow best practices, what the physicians' specialty societies have determined is the right way to think about patients. This isn't one size fits all but how do we take advantage of efficiency and effectiveness to make sure that people get the right care at the right time.

IGNANIAnd I think that more attention needs to be put there. We've seen that in children's cancer, very, very productively because there are relatively few practitioner clinicians treating children with cancer. It's harder when we get to more practitioners. But there's been so much work done on this concept of getting the information in the hands of practicing physicians.

IGNANIWe've been doing a number of things across the country in the health plan community to support physicians with this kind of information.

REHMKaren Ignani, she's president and CEO of the American Association of Health Plans and Health Insurance Association of America. John Wennberg is the author of a new book. It's titled "Tracking Medicine: A Researcher's Quest To Understand Health Care". John Wennberg is both an M.D. and an MPH. He's professor emeritus at Dartmouth Atlas of Health Care. And turning to you now, Dr. Callahan, how do you see the growth in the cost of medical care?

CALLAHANWell, I -- first of all, let me say I agree with Dr. Wennberg. He certainly has got the major features of American healthcare, at least the way we deliver healthcare. Karen certainly points out the importance of making moves toward prevention in that direction.

CALLAHANBut I have a somewhat different angle. I believe behind our problems ultimately is our belief in medical progress and constant innovation. American medicine basically has declared war on death. The National Institutes of Health does not say we're out for immortality, but if something kills you, they're after it and they say give us more money and we'll cure it.

CALLAHANWell, the fact of the matter is we're not finding cures for the major chronic diseases. What we're finding is very expensive ways to keep chronically ill people alive for a longer period of time. That's why there are such heavy costs at the end there. And secondly, I would add, I spent a lot of time in Europe in recent years and as messed up as our healthcare system is, there's no country in the world, developed country that you go to that does not have, you know, healthcare costs of one kind or another.

CALLAHANA lesser problem because they manage it virtue of universal healthcare, but basically they have the same undying pressures, namely aging populations, technological innovation and very high expectations so I see this as a fundamental problem of the way we conceptualize the whole goals of medicine. So when we talk about prevention and the like, we really have to say prevention will only really work if we stop some of the expensive stuff at the end of life otherwise we'll have a wonderful healthy life and then we'll spend a zillion dollars in the last few days.

REHMIt's interesting to me that as we're doing this program the drug Avastin has been taken off the market. Talk about that drug.

CALLAHANWell this is, once a week there seems to be an announcement of a brand new, quote "breakthrough drug," exciting, so forth and so on which turns out to be enormously expensive. Avastin is the last case and this is a classic example of how one of the important developments in recent years has been really trying to, how do we find what is effective medicine? What works and does not work? The FDA, basically their committee has decided that this is not a good drug to use. It's got bad side effects, but nonetheless you have a public backlash, at least many patients have backlash. And people hate the idea of rationing, but the point is it's very expensive for a very short term of life and that's exactly the kind of thing we can't stand in the long run.

REHMDr. Wennberg, do you see Avastin as an example of rationing?

WENNBERGWell, it actually isn't perhaps the best case we have because it looks like it doesn't work. So if we define rationing as withholding something that's of value, in this case, I don't think it applies. The problem of rationing is always underlying the question about practice variations, but the thing that I would like to point out is that some of our most prestigious academic medical centers practice a very conservative brand of medicine that is compatible with a gross national product investment of much less than we're now doing.

WENNBERGI'm talking here about the Mayo Clinic, for example, and the University of Wisconsin. If you compare their practice patterns to, say, NYU or UCLA, which are also very, well, high prestige academic medical centers, we see that in NYU 35 percent of patients and 38 percent of patients at UCLA actually die in the intensive care compared to only 16 percent, 20 percent at the Mayo Clinic and the University of Wisconsin. So big differences in the way end of life care is managed from one place to another in the United States by highly-prestigious institutions.

WENNBERGI think this underscores the weaknesses in the scientific basis of medicine that here are these very famous academic medical centers that should practice medicine so differently. And that, I think, Dan Callahan's point is really, really right on.

REHMDr. John Wennberg, he is a founding director of the Dartmouth Institute for Health Policy and Clinical Practice. He's author of the book titled "Tracking Medicine: A Researcher's Quest To Understand Health Care". Of course, I'll look forward to hearing your calls, questions, stay with us.

REHMAnd as we talk about rising healthcare costs in this country, but not only in this country, around the world, one of the issues that you, Karen Ignani, want to raise is malpractice.

IGNANIRight. I think it's -- I think one could step back and say it's really an example of a failure to move forward and resolve an issue that needs to be resolved. And from a physician perspective and a hospital perspective, I think, rather than focusing on the issue of tort reform, which has been the subject of most of the discussion around malpractice, we should step back and talk about what each of the guests are talking about here, which is if you want to incentivize best practice, then protect physicians and hospitals if they're practicing best practice.

IGNANISo in a malpractice situation, give them legal protection if they're following guidelines that have been established by the physician practice associations, the cardiologists, for example, the orthopedists, et cetera. That seems to me a possible breakthrough here that would align a strategy and with what we know to be the problem.

REHMDr. Callahan, how do you see that?

CALLAHANWell, I think that's very important. My own sense is malpractice's problem certainly hovers over the head of many physicians and I think it's probably true. Some of them worry about it and alter their practice accordingly. At the same time I think it's important to keep in mind that that's -- they're trained to worry about -- trained to use technologies. Patients want the technologies. Companies make lots of money off of it. You have all sorts of things working together. So I think the question's to empower physicians, first of all, would help an awful lot. On the other hand, you've got to change the way physicians think about -- at least many think about the delivery of healthcare and what they're up to.

REHMDr. Wennberg, is it true that the more physicians there are in a particular region the more likely people are to see a doctor and undergo a procedure or a test?

WENNBERGWell, for sure. Physicians, you know, generally work fulltime. And if you have twice as many physicians in one region on a per capita basis than in another, you get twice as much medical work done. And it turns out that the kind of medical work you get depends on the kind of physicians that are in that region. So if you have more medical specialists, you get more hospitalizations and more diagnostic tests. If you have more surgeons, you tend to get more surgery.

WENNBERGAlthough interestingly enough, the type of surgery you'll get is not predicted by the supply of, say, orthopedic surgeons. That's another complication of the problem that probably you should maybe take up on another occasion. But the supply factor is very interesting. It actually operates on sort of a subliminal level. People are not aware of it.

WENNBERGFor example, the physician visits are highly correlated on a capita basis with a number of physicians who do those visits, like cardiologists and so forth. And the way they basically -- the way the market works, the behavior that we're under covering is that it's simply the interval between revisits. It accounts for where that extra capacity goes. So in other words, it's not even recognized by the physician that they're doing this and certainly there's no evidence -- you know, objective evidence in clinical science that ever tells you what the appropriate interval between revisits is.

WENNBERGSo this supply effect tends to work its way through without basically understanding what the implications are.

REHMAnd for you, Karen, as president and CEO of America's Insurance Plans, tell me what the cost differences are between government programs like Medicare, Medicaid and private insurers.

IGNANIIt depends on the patient because what you have on both sides both in public and private you have about 3 percent of the patients consuming 50 percent of the resources. And I think that's why, Diane, just stepping back thinking about a need to reorient the system, that means creating and attending to the supply deficiencies we have in terms of preventive care of physicians that are practicing preventive care, internists and family physicians. We need to be encouraging the development of more and the training of more of those. We need to be rethinking how we're using nurses because if people are going from specialist to specialist they don't have a guide, a navigator through the system.

IGNANIThat's this whole concept of coordinated care which is now -- it was used in the '90s, it's now coming back in terms of thinking about what are the resources, what's our role in the health plan community? How can we encourage physicians to practice primary care, reward them for doing so? So we have developed medical homes and a range of new strategies and then incent and encourage patients to be compliant with their disease regiments and to get their prescriptions filled so that those who have chronic conditions aren't, you know, waiting to the point where they have a catastrophe on their hands.

REHMAnd the problem right now, Dr. Callahan, seems to be that more and more medical students want to go into those specialties because they come out of medical school with huge debts and want to pay it off with those specialties.

CALLAHANThat's -- there's a lot of evidence that that's the case. But I'm also struck by the fact that there's a new generation coming along that does not want to live the kind of hectic life that earlier generation of primary care physicians lives. I had a recent student intern from the Yale medical school who's just graduating and he said -- also he added, he said, you know, a lot of my colleagues think it's basically boring medicine too. The specialties are more intellectually interesting and stimulating. And I found -- so you've got a lot of things working there.

CALLAHANThe money will certainly help matters an awful lot. On the other hand it is a very hard life. The physicians -- the really good primary care physician is on call around the clock and a lot of young people don't wanna live that way anymore.

REHMWell, how can we provide incentives, Dr. Wennberg, to develop those kinds of primary care physicians?

WENNBERGWell, I think we might want to begin by looking at some of our -- some parts of the country where that kind of medicine is not practiced. Mayo Clinic, for example, is a paragon of organized care where primary care is practiced in teams and where the individual cowboy doc out taking care of everything all the time, that model's basically no longer around.

WENNBERGAnd so a lot of it's how do we actually deploy the physicians that we have and how do we train them? One of the abiding problems, and I think this is along the same lines that Dan Callahan was just mentioning, is that it's essentially up to the academic medical center about, first of all, how many physicians and what specialty they're going to be trained. And in what environment are they going to be trained in?

WENNBERGFor example, the intensity of care at NYU and UCLA is so much greater than it is at the Mayo Clinic that physicians training in those systems are going to come up with very different models of how healthcare should be practiced. And my belief is that we need to look carefully at our workforce policy 'cause remember fundamentally the subsidies that are going into postgraduate training and medical physicians is coming directly from the federal government. So how they pay for and what they buy in terms of the workforce, has long term consequences for costs in the United States.

REHMDr. Callahan, you wrote recently about what you see as the misguided approach to end-of-life care. What are some of your concerns about that?

CALLAHANWell, I'm not sure of misguided. Let's put it this way. I think end-of life is care -- for some of the reasons I've already mentioned. Namely, we have a healthcare system which does not want people to die, trains physicians not to let them die. And the industry and the media train patients not to want to die so -- not to mention human nature, same thing. So the question is, how do you deal with this complexity at the same time? And I think it's enormously difficult for physicians and families even if they have living wills. First of all, to get more people to have living wills, but still complications arise in great part.

CALLAHANWhen do you invoke the living will? The physician says, yes, we know you have a living will, but we think there's still one more round of chemotherapy that's worth a try. There's a lot of that borderline stuff that goes on. I think the problem has to be moved back a little more to not when people are dying, but when they're in critical illnesses which will -- are leaning downhill. They're likely to die, but not necessarily going to die.

REHMChronic illnesses.

CALLAHANIt's chronic illness but back a few steps. That's where we've got to start rethinking this. Not just wait 'til the last (word?) ...

REHMInteresting.

CALLAHAN...and then suddenly switch to hospice. The problem now, people go in hospice much too late, average of seven days before. They should be a month or two but doctors don't like to tell patients about hospice because (unintelligible) to die.

REHMThen there is nothing further they can do.

CALLAHANAnd then families don't want to hear the message. A lot of patients don't want to hear the message so you've got a lot of things. And this denial of death is very powerful in our society and partly that's what we have to overcome. Plus, we have to have different physicians who are quite prepared to tell patients how lousy life is going to be if we give you that extra round of chemotherapy. And that a lot aren't willing to do that. And then, we've got to educate the public, too. The public...

REHMWell...

CALLAHAN...the public puts pressure on physicians to do -- again and again I hear physicians say, I get talked into it by my patients. I don't want to do it but I can't say no and they're so unhappy and it's not worth the struggle...

REHMInteresting.

CALLAHAN...and so forth and so on.

REHMAnd, Dr. Wennberg, you talked earlier about procedures. And I wonder how much the increase in healthcare costs are linked to those new procedures without measures in place to actually gauge their cost effectiveness.

WENNBERGI think that to really get at the fuller intent of your question here I think we have to look at all procedures, not just new ones. Because what we see, for example, is, as I remember right, 40 percent increase over the last ten years in the rate of knee replacements, although knee replacements have been around for a long time. So this secular trend in care intensity is costing a lot of money.

WENNBERGNow new procedures are also adding the additional complexity of being novel, often not really well evaluated. And sometimes become spectacularly kind of exposed like some of the problems that we've seen recently. With knee replacements or with hip replacements technology's changing that actually end up hurting patients.

WENNBERGBut I want to say that the dynamics that determine the variation in surgical procedure rates are different than the dynamics that cover the use of chronic -- care for chronically-ill patients. They have much more to do with seeking an improvement in quality of life and making a decision for which there are significant tradeoffs. Treatment -- surgical treatment is not without problems, without risks. And many other treatments are much more -- more conservative treatments are preferred by patients when they're actually involved in the decision process.

WENNBERGSo this whole idea of getting the patient involved actively in the decision process is critical to rationalizing first of all the variations. But secondly what the real demand is for care. And the studies that I know of that have looked at the question of what proportion of patients who meet objective evidence based criteria of need actually want the procedure that they're offered when they're in -- when they're allowed to make a shared decision making. We see, for example, only about 22 percent of patients with certain forms of prostate disease actually wanted active surgery once they knew what the tradeoffs were...

REHMInteresting.

WENNBERG...between sexual function and urinary tract function.

REHMDr. John Wennberg. He's founding director of the Dartmouth Institute for Health Policy and Clinical Practice and author of "Tracking Medicine: A Researcher's Quest to Understand Health Care." And you're listening to "The Diane Rehm Show." Karen Ignani, I know you wanted to add to that.

IGNANII wanted to add the point, Diane, that I think we're talking quite a lot about the use side of the challenge. We haven't really talked that much about the pricing side. And the latest data indicate that two-thirds of the year over year increase in healthcare costs is now attributable to unit cost increased pricing. What are the charges for services? I think there's a triangle of opportunity here. I think creating incentives on the pricing side and on the use side to practice efficiently and effectively for providers...

REHMBut how do you create that...

IGNANII'm going to talk about that.

REHM...on the price side?

IGNANIThat's one side of the triangle. The second is the point about creating incentives for individuals to do what they need to do as early as possible on the use side as well. And then on our side in the health plan side creating these reimbursement incentives to do that. Now, in the area of prevention we've pioneered medical homes with practitioners, primary care practitioners to encourage them to do care management and really focus on chronic illness where we're spending the bulk of our money and our resources. That will reorient the system.

IGNANIAt the same time Martha Coakley the Attorney General of Massachusetts just issued her second report, second year looking at Massachusetts as a great example of wide variation and pricing in Massachusetts, no attributable value in terms of quality associated with the higher pricing. And we need to -- and that's largely because facilities in Massachusetts are -- have merged, have consolidated and are charging higher prices...

REHMInteresting.

IGNANI...because they can. So we need to look at that part of the equation as well. And that's why I think the reimbursement systems and opportunities here coupled with the, how do you think about clinicians, how do you think about hospitals, how do you reward them for best practice? How do we get more integrated healthcare? And how do we encourage patients to do what they need to do but within their power? We shouldn't be penalizing them for things they cannot do.

REHMAll right. I want to open the phones now. First to Rich in South Bend, Ind. Good morning, you're on the air.

RICHGood morning. My question is, you were talking about -- your guests are talking about pricing and one of your panelists earlier was speaking about when medical industry saw a problem that they'd go after it full board and try to find a resolution to it. My question is why can't we set up a system where the pricing from the insurance companies and the pricing from the medical industry is locked in with the rate of inflation so that way people can still afford this stuff instead of having their 20, 30, 40 and 50 percent increases year after year?

REHMIt's an interesting point, Dr. Callahan.

CALLAHANThe answer is because this is the United States of America. We don't like price controls. We hate price controls. The European countries use it very effectively and successfully and manage to get away with it with industry. And I'm sure the industry mutters a lot over there, but we (sic) get away with it. But here we've resisted it and it seems to be -- one way or the other we have to eventually have price controls. I see no other way to manage costs. I think all of the incentives would be sort of the long term way to go around the problem but -- and it may work. But on the other hand we may eventually be forced to have price controls openly. But that's going to take a huge political and cultural shift.

REHMDaniel Callahan. He's senior research scholar, president emeritus of the Hasting Center, author of "Taming the Beloved Beast: How Medical Technology Costs Are Destroying our Health Care System." Short break, we'll be right back.

REHMAnd we're back talking about the increases in health care costs, where they're coming from, why they are occurring. The last point that Dr. Callahan made was in regard to price controls, which in this country we seem to have avoided rather successfully. Let's go to Skaneateles, N.Y., Marguerite, you're on the air.

MARGUERITEGood morning. My comment is my son is a nurse in Syracuse and he tells me his hospital is full of patients that weigh 300 pounds or more.

REHMAnd, of course, that creates a huge problem for costs, I would think, Marguerite.

MARGUERITEWell, they have all kinds of health related issues related to obesity. And we only see this obesity epidemic growing.

REHMExactly. Karen Ignani.

IGNANII think Marguerite is right and nurses have really sounded the alarm here on this problem and, I think, they deserve a great deal of credit for it. I think the research, Diane, indicates that we do -- people do very well with diabetes management prescriptions and so on. We know that that makes a great deal of difference in people's quality of life, but if they reduce their weight it makes so much more difference.

IGNANIAnd what we've tried to do in the health plan community is the alternative to price controls is to negotiate fees with physicians -- primary care physicians -- in the context of medical homes giving them a financial incentive to work with patients to get them to reduce their weight. We've incented them through Weight Watcher programs, which had very, very good results there. On the specialty side, giving people financial incentives to bundle payments for hips, for knees, things of that sort so we're not paying on a piece-rate basis. And that's much more efficient, much more effective.

IGNANIBut Marguerite's right. This is a national emergency we have.

REHMExactly.

IGNANIAnd we have to have a broader conversation about it. And people have to understand what they can do, themselves...

REHMPrecisely.

IGNANI...to improve their health. And that's in a partnership with their physicians and nurses.

REHMAnd, of course, Dr. Wennberg, that obesity problem is expanding, if you will, to children. What is the percentage of childhood obesity at this point?

WENNBERGI simply don't have that statistic, you know, on my fingertip here, but it certainly is increasing. I do want to point out what, I think, is an important point here, though, is that while obesity is increasing, it's not the explanation for the increase in overall hospitalizations. If we look at Syracuse, for example, is a very low-cost area with very low admission rates, even though it may have a lot of people now who are obese. But so, also, are there a lot of people obese in New York City and UCLA and the Mayo Clinic area.

WENNBERGSo -- so the variation itself is not explained by that and the overall growth in chronic illnesses we've got to be careful about that because an awful lot of the so-called epidemic and chronic illness -- and I'm not talking here, specifically, about obesity, but about diabetes and heart failure and other things -- has to do with how many diagnostic tests we're giving to patients, how much we're patrolling and surveying the population. And we clearly see, in our data, the regions that have lots of doctor visits and lots of highly intensive care end up, actually, having more diagnoses, even though the people don't seem to be any different in their fundamental underlying illness.

REHMDr. Callahan.

CALLAHANLet me just add one point. I recently got interested in the problem of stigmatizing the obese. It got interested in great part because we stigmatized smoking very successfully, not only -- we started with laws, but now you can't smoke at many beaches, even though there's no -- you're not going to harm anybody. And we've made it sort of morally disgusting to smoke. Now, the question is -- to me this is a real dilemma -- is it -- would we want to go in that direction with obesity.

CALLAHANPeople that work with the obese know that they're discriminated against. It hurts their job, all sorts of things in their life are hurt by their obesity because people don't like obese people for the most part. So the question is the stigma may work, but it may also, at the same time, be rather horrible for the people, although, in fact, it's effective.

REHMDo you believe that stigma could work?

CALLAHANWell, I think it already has worked with affluent, well-educated people. Most of us are -- do not get obese. It's very simple. We were -- found out early in life that you're not supposed to get exceedingly overweight. You don't find many politicians in New York who weigh 300 pounds or in the Capitol, I would imagine. So it's already effectively -- it's been one of the things you're just not supposed to do. And the question is can we -- I find it a real moral dilemma, actually, because...

REHMInteresting.

CALLAHAN...discrimination comes from stigma and that's not good.

IGNANII think we also need to talk about -- well, if we're talking about obesity, the issue of food and the pricing of food and what people can buy. I think we need to think about food stamps, Diane, and what food stamps are allowed to purchase and not. How do we get fresh foods and fruits into the inner cities? We know we have a problem -- one of the points that Jack always makes is the difference between Oregon and L.A. -- or Portland and L.A. Well, in Los Angeles, we know in the inner city, people don't have primary care. They don't have access to fresh fruits and vegetables and they can't afford fish.

IGNANISo we need to step back and say, well, how do we deal with this broadly? It's not just a health care conversation or question, but we need to think about the farm bill. We need to think about food stamps. We think -- we need to think about access broadly, not only to the medical care system, but to fruits and vegetables so that people can actually afford to purchase the foods that they need to live healthier lives, as well.

REHMAnd one of the plans on the table is that of Congressman Ryan and I wonder whether his plan for Medicare would actually lower health care costs or, in your views, would shift much of the cost from government to the patients, themselves. Karen Ignani.

IGNANIThe $64,000 question is whether or not in the context of the debt limit whether the members of Congress, on a bi-partisan basis, will begin to talk about the future of Medicare. And that's what you're getting to. And as we talk about the future of Medicare, which has been very interesting to look at the various bi-partisan commissions, they have begun to think about the strategies that could be followed, that give people choices, that begin to provide incentives for the health care system and clinicians to integrate health care, to practice best practice.

IGNANISo, I think, Diane, we're at the beginning of this discussion not at the end. And I think that we have no place, necessarily, unfortunately, in the health care system or in the political system to step back and have these broad discussions of how do you make sure we can continue the promise that's been made to individuals, at the same time deal with the affordability crisis and make sure that people have the access they need.

REHMDr. Wennberg, how do you see it?

WENNBERGWell, I think the idea of getting skin in the game, which is kind of what Congressman Ryan's idea is, is a two-fold -- a two-edged kind of problem here. Basically, in situations where patient preferences are really important to making a good decision, having identifiable differences in terms of the cost of care for people who prefer more expensive treatments, say, for example, back surgery as opposed to more conservative management, that there we definitely could consider introducing differential co-payments that would rationalize health care because if people have to share in the cost, they're going to think more about whether it's really useful for them.

WENNBERGBut when it comes down to the management of chronically ill patients, particularly towards the end of life, the last two years -- the two, three years of life where most of the costs are -- getting cost sharing in that situation as a basic driver of promoting efficiency, really means it has to buck the whole supply variation that we're seeing. And it seems to me that it's a very risky strategy. So some combination of regulating the overall size of the market -- or the capacity of the market -- and some market oriented things to help with the variations in discretionary procedures might be worth a debate.

REHMDr. Callahan.

CALLAHANWell, I think Dr. Wennberg might confirm this. I think there's pretty good evidence that if you raise co-payments, for instance, an awful lot of people who cut their drugs in half will not take them as often or will not get prescriptions refilled, things...

REHMEven if they need them?

CALLAHAN...even if they need them. And this will hurt in the long run. So that's -- that to me is part of the two-edged sword. It's good that they have this incentive, but the point is my own belief, as a patient myself, is we're not terribly good judges about what's really good for us or not in the long run, in terms of what we -- when we go to a physician or what kind of care we should want. So that's a real draw back to that.

REHMBut can Medicare survive without...

CALLAHANI -- I...

REHM...go ahead.

CALLAHAN...with -- finish your sentence.

REHMWithout an increase in taxes?

CALLAHANNo, not at all. It seems to me we need -- we need a combination of an increase in taxes and a cut in benefits, not one or the other.

REHMBoth.

CALLAHANAnd I think this country can well afford it. Our tax rates are, actually, at an historical low point compared -- historically speaking.

REHMSo how would you cut Medicare benefits and still be able to deliver the health care needs to, especially, the elderly?

CALLAHANWell, I have in mind a kind of triangle in my head, if you will. At the bottom of the triangle is prevention, the next level up is primary care and emergency care hospital care, all the way to high-tech cost, which is where you get the chronic illness. And my idea is that we, first of all, have to make it harder to get that high-tech cost at the end of life, at the top of the pyramid, and keep pushing things to lower and lower levels. Now, some of this could be done by financial incentives, but a great part of it -- and it might have to be done by policy and saying there are certain things you simply -- you cannot get the $100,000 drug treatment, but only give you a second -- that Medicare will not pay for that sort of thing.

REHMSo what you're saying is that too many of the elderly on Medicare are going for the high-end treatments that they otherwise could not afford if they were paying for it themselves.

CALLAHANNo. I wouldn't put it in terms of going for -- I think they're, more or less, pushed into it.

REHMBy physicians themselves.

CALLAHANBecause they -- well, by physicians, by families, by their own instincts, by the media, the hyping of technology. I mean, we're raised to think we should get a lot of that care at the end of life. That's when we most need it, after all, we're dying, but somehow that's somehow the wrong psychology.

REHMKaren Ignani, that's just that triangle...

WENNBERGYeah, it is.

REHM...you're talking about.

IGNANIExactly. But -- and I think we could start at the lower end. We know we have a problem in Medicare, Diane. It's been much documented about readmissions, for example. There's no point paying for readmissions, people who are going to the hospital and then have to go back because they have problems based on what happened in the first instance. We know in the Medicare Advantage Program, that's the private sector part of Medicare, where 11 million people are in the program, we're doing a much better job on readmissions because we're investing in discharge planning, making sure people understand what they need to do when they get out of the hospital, who they need to go to.

IGNANIWe’re doing a better job on encouraging infection control and things of that sort. So you can start at the -- at the lower end here. It sounds simple, but it's not simplistic. And these are strategies that can, in fact, make a big difference and mean that beneficiaries don't necessarily have to lose benefits, which is the objective here, not to lose benefits.

REHMOkay. Karen Ignani, she's president and chief executive officer of America's Health Insurance Plans. And you're listening to "The Diane Rehm Show." Let's go now to Lachme in Cleveland, Ohio. Good morning, you're on the air.

LACHMEGood morning, Diane, love your show.

REHMThank you.

LACHMEI have a comment. I'm a fairly healthy person so it was very heartening for me to hear one of your guests tell how much they would love for the patients to be engaged in the decision-making process because I am very much engaged in every decision I take with my doctor. Now, for example, I've been very healthy, no issues, went to my doctor three months ago with muscular pain in my right arm. I have a three-year-old toddler and the doctor immediately said -- I was hoping for a muscular relaxant or tell me something else. Instead, I was made to go for a chest C-D and then it went on from there to specialist to another and nobody was looking at my arm pain.

LACHMEInstead, like, one of your speakers said, if you were to run diagnostic tests you come up with something. You see a shadow on the echogram. You run an MRI. Then they say, oh, there is nothing there. Let's go on from there. So it went on and we have run up a bill for the insurance about $8,000.

LACHMEAnd my out-of-pocket is about $800. So I am pretty much, at this point, very frustrated because they came up with nothing, except that I'm very healthy and I don't need to do anything. And as we got to my pain in the arm, he just told me you have to live with it. I am so flabbergasted...

REHMAnd -- and, of course...

LACHME... (unintelligible) third-world country where they just tell you, okay, pray that your arm pain goes away on its own.

REHMJohn Wennberg, do you want to comment?

WENNBERGWell, I really much agree with this caller. It's terribly frustrating and this cascade of things that happen when you go in with an ordinary problem, particularly in some parts of the country, just lead to this expanding the diseases that people have, expanding the cost, obviously, and, basically, leads us to a blind alley. And that is kind of the micro system examples of what we've been talking about. All of this belief in technology, all of this idea that we've got to find disease down to the last jot and tiddle because if we don't find it maybe something's going to happen in the long run that we missed.

WENNBERGSo these are the problems that we face directly. Again, let me come back to say that according to the data that we've looked, particularly the practice patterns among organized systems of care like the Mayo Clinic and the University of Wisconsin, we just don't see that happening. We don't see this turning of visits. We don't see people getting, you know, referred to many, many different specialists. The primary care docs take care of most of this and they do it through the common sense dialogue with patients about, you know, well, what is this pain in the arm anyway. You know, and so we've...

REHM(word?)

WENNBERG…we've got -- we've got to work on that.

REHMYeah, absolutely. And, of course, the Affordable Care Act, Karen Ignani, does include provisions to bring down health care costs generally.

IGNANII think that the Affordable Healthcare Act could have done more in the area of health care costs and, I think, that's one of the reasons that we're still having the conversation, similarly, in Massachusetts. I think politically, Diane, there's -- it's -- I think people had the view that it was easier to focus on the access and then do cost, but the system is being -- individuals and purchasers are being crushed and the economy is being crushed. So we have to come back and really do much more here and have this conversation about how are all the stakeholders going to work together to address this problem, which is the -- the key to the answer.

REHMKaren Ignani, president and CEO of America's Health Insurance Plans. Dr. John Wennberg, he's founding director of the Dartmouth Institute for Health Policy and Clinical Practice, author of "Tracking Medicine." And Daniel Callahan, president emeritus of The Hasting Center, author of "Taming the Beloved Beast." Thank you all so much.

WENNBERGYou're welcome.

REHMThanks for listening. I'm Diane Rehm.