Its a book I highly recommend anyone interested in the system to read–and it takes more of a sociological/ historical approach reminiscent of the best parts of Demanding Medical Excellence and The Social Transformation of American Medicine. Where Porter’s Redefining Health Care and Herzlinger’s Who Killed HealthCare? highlight what a more consumer-focused system might look like and why the current system is a mess, Dr. Rich gives us a very clear understanding of why the current players have very little incentive to make that consumer-centered dream a reality.

At the heart of his argument is the Grand Unification theory of Healthcare. It is represented by a deceptively simple 2×2 matrix (seen to left) presenting decision-maker against decision quality. Dr. Rich’s assertion is that we are currently in the realm of Low quality, individually-driven decisions (Quadrant IV). Making decisions more standardized by creating better efficiency through centralized decision-making would bring us to Quadrant III– which still doesn’t take us very far, as the decisions made by the centralized power would be of extremely low quality and limited by a centralized budget– creating a situation where covert rationing is the only way to keep the budgets in check.

He aligns the players into the Wonkonians and the Gekkonians based on their preferences for government-driven vs. market driven solutions. Unfortunately, with a system based on centralized payment for health services, any “solution” brought forth by either side will require rationing because both require centralized collection of taxes or premiums that then are used to pay for services. Neither work to improve the fundamental decision-making quality that would allow individuals to really understand what they’re purchasing. In this way, Dr Rich argues that the “free-market” solution is working, but its incentives are fundamentally not aligned with providing any more care than necessary to generate premiums, as high a premium as possible. The following passage is enlightening:

Optimizing the cost of health insurance premiums is pretty simple. Gekko must lower his premiums enough to induce employers to switch to [his HMO], but not a penny lower. Because high-priced indemnity insurance plans are still active in all the cities where [he] operates, all he has to do is beat their prices by a little bit…Gekko understands that the reason everyone’s pushing HMOs in the first place is that they are supposed to reduce the cost of healthcare. And most people assume that what HMOs charge for their premiums is tied somehow to that lower cost of delivering care. Gekko just shakes his head. Why would people assume that? Why would anyone expect Gekko, a businessperson, to pass his savings on to the consumer (unless doing so results in a competitive advantage)? Businesses are supposed to make as much profit as they can. Thats how it works. To do anything else would be unfair to [his HMO's] shareholders and fatal to Gekko’s career.

Dr Rich weaves together an entertaining and informative narrative– putting together one of the most readable and enjoyable treatises on health care and why it works (or doesn’t work) the way it does. And his message is a sound one– healthcare is like any other sector of the economy and rationing is going to happen, so making it overt will allow us as a society to discuss how this should work, while leaving it covert will continue to create anxiety, dissatisfaction, and high amounts of variability due to unclear criteria for making decisions. I highly recommend both the book, Fixing American Healthcare and his blog.

You can also read the reviews of others who’ve reviewed the book: Dr Wes, Health Business Blog, and SmartMoney.