New Physician — Nov/Dec 2014
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The Systems Doctors
By Luke Messac

William Hsiao may be the most talked-about man in Vermont today. He is interviewed on local radio, speaks before town hall meetings across the state, and his reports are must-read documents for state legislators. Hsiao, a Beijing-born health economist now in his late 70s, was the chief architect of a single-payer law passed by the Vermont legislature in 2011. The plan aims to use state tax revenue to fund universal health insurance coverage while drastically reducing unnecessary costs now spent on insurance claims and marketing.


Progressives across the country point to Hsiao's Vermont plan as a potential template for a national single-payer system, just as a 2006 law signed by Governor Mitt Romney in Massachusetts served as a basis for large parts of the 2010 Affordable Care Act. But Hsiao maintains that his plan was designed to achieve goals set by the state's own elected officials. Hsiao said his role was not only to explain the technical advantages and disadvantages of possible plans, but to understand the implications of local context and values. He met with patients, practitioners, insurers and advocates across the state, studied the political history of the state, and testified before the legislature. The result, he believes, is a bill based on sound economic logic as well as a deep understanding of the politically feasible.

Hsiao calls himself a "systems doctor." His job, he explains, is to diagnose and treat entire health systems rather than individuals. Throughout his career he has advised governments across Europe, Asia, Africa and North America who seek to ensure expanded access to effective preventive and curative care while controlling costs. In his long career, Hsiao has seen some of his efforts lead to lasting large-scale change affecting millions of lives; at other times, years of toil have come to naught.

Hsiao is not alone in this line of work. A group of men and women with training in medicine, economics and sociology have demonstrated that evidence and analysis, when matched with political knowledge and ethical consensus, can transform the way health care is delivered. But by studying contentious issues involving powerful economic interests, they have courted controversy. Their form of science cannot be disconnected from public debate. Still, the policy reforms made possible by their work are changing the lives of patients and doctors in clinics and hospitals around the world.


Perhaps the most surprising thing about Hsiao's work in Vermont is that he is doing it at all. After working for decades to become one the nation's premier health economists, by the mid-1990s Hsiao promised never again to focus his research on the United States. The political system was, he argued, too blinded by ideology and corrupted by special interests to respond to research. But to understand the cause of his frustration we must look to the work for which he is best known, work he believes has been twisted beyond recognition.

After graduating from college, Hsiao spent a few years working for an insurance company before taking a job in the Social Security Administration. After only a few years, Hsiao became the agency's chief actuary. But Hsiao felt like he was missing something; he felt unprepared when testifying on Capitol Hill to answer questions about the broader economic consequences of policy. So after a few years, Hsiao left government to study economics at Harvard.

But Hsiao didn't stay out of public policy for long. Soon after completing his Ph.D. in economics, Hsiao led a group of researchers in a three-year study to determine how much a hypothetically free market would pay for all kinds of medical visits and procedures. The team set the "relative value" of thousands of medical services on the basis of physician effort, expenses, and liability insurance, adjusted for variations in geographic prices. The result, called the Resource-Based Relative Value Scale (RBRVS), was so ground-breaking that the New England Journal of Medicine devoted an entire issue to the group's findings. In 1989, the U.S. Congress passed, and President George H.W. Bush signed, legislation establishing the RBRVS as the basis for Medicare's multi-billion-dollar system of physician reimbursements; many HMOs soon followed suit.

The tool Hsiao and his colleagues devised aimed to contain costs while correcting for existing disparities in payments to procedural and "cognitive" providers. But it has done neither. In 1991, the American Medical Association formed its own group to make updates to the scale, called the Specialty Society Relative Value Scale Update Committee (RUC). The RUC used small and infrequent surveys conducted by specialty groups to recommend updates to the RBRVS. Only 15 percent of the RUC's voting membership is allocated to primary care physicians. Although the RUC has never had any legal power to update the scale on its own, between 1994 and 2010 the federal government's Center for Medicare and Medicaid Services (CMS) adopted its recommendations more than 87 percent of the time. In large part as a result of the RUC's recommendations, specialists have seen far more rapid increases in payments than primary care providers. Between 1995 and 2004, median pretax compensation for primary care ( family practice, internal medicine, and pediatrics) increased 21.4 percent, while specialist compensation increased 37.5 percent.

For Hsiao, the outsized and distorting influence of special interests in a payment system he had spent years designing was profoundly disillusioning. Hsiao had believed from the start that impartial analysts, not medical specialists, should be tasked with making periodic updates to the scale. But, he laments, his warnings were ignored. As he recounted in an August 2014 interview for this story:

"I was even briefed by the White House's top aides that…I should not speak out about whatever arrangements were made for who would carry out the updating of the RBRVS. And subsequently I witnessed how the AMA captured it for its own purposes through the RUC, and kept the whole process secret…They let some specialties present outlandishly inaccurate data….It really taught me a lesson about how politics in America can distort a piece of technical work."

By the 1990s, Hsiao was convinced that good research had little influence on policymaking in Washington. "I gave up on the United States," he explained in a November 2011 interview to the Leonard Davis Institute, "because Washington politics were so driven by ideology, and money played such an important role in policy making that I really couldn't contribute to it any more."

Over the next two decades, Hsiao would advise national governments around the world on health systems reform. In Taiwan, his greatest triumph, Hsiao devised a package of reforms that ushered in a national health insurance system based in large part on Canada's single-payer model. Within a year of its implementation in 1995, the reforms increased rates of insurance coverage in Taiwan from less than 60 percent to 95 percent. When Hsiao finally returned to work on health care in the United States at the request of Vermont's governor, he brought with him decades of experience reforming health systems on multiple continents.


During Hsiao's decades in self-imposed academic exile as an advisor to governments around the globe, a husband-wife team was working to reform the health system in their native Mexico. Dr. Julio Frenk, a medical doctor and sociologist, and Felicia Knaul, an economist, produced some of the most detailed analyses to date of health spending in Mexico. Their research highlighted the prevalence of catastrophic out-of-pocket spending on health. A study led by Knaul found that every year between 2 million and 4 million Mexican households paid health expenditures that pushed them below the poverty line. There were also vast disparities in per-capita health spending; federal expenditures on health in the state with the highest level were five times that of the state with the lowest level. Frenk believes these findings helped moved policymakers to act. In 2000 Mexico's newly elected president, Vicente Fox, asked

Frenk to serve as his minister of health. "I didn't belong to his party or to any party…But he had made a commitment that for parts of the Cabinet that had a very strong technical core he would recruit experts…I made a proposal which he liked, and that's why he offered me the job."

Over the next three years, Frenk worked to convince not only the president, but also his fellow cabinet members, majorities in the two houses of the federal legislature, and the governors of the 32 states to institute a new system of public health insurance. The system, called Seguro Popular, aimed to reach universal access by covering the 50 million Mexicans–half of the total population–without any form of prepaid health insurance. According to a randomized trial published in Lancet, within 10 months of implementation of Seguro Popular in 2004, catastrophic health expenditures among those newly covered had fallen by 55 percent. By the close of 2011, nearly 98 percent of Mexican residents were registered with a health insurance entity.

While Hsiao's experience led him to doubt the relevance of research for policy in the United States, Frenk believes information was fundamental to reform in Mexico. "Evidence was very helpful to persuade policymakers about the need for action. Because no one had realized, until we uncovered this evidence, that there were 4 million people that were becoming impoverished every year because they were paying for health care or medicines. People just didn't realize that." Money may frustrate many worthwhile and well-informed efforts, but research can still shed light on urgent problems previously unknown to policymakers.


Today Hsiao, Knaul, and Frenk all work at Harvard; Hsiao is a tenured professor, Knaul is the director of Global Equity Initiative, and Frenk is dean of the School of Public Health. Harvard's faculty also includes an influential systems doctor who remains much earlier in his career. Dr. Ben Sommers, a physician-economist who is one of the nation's leading experts on Medicaid, has already published studies that have taken center stage in public policy debates. For instance, a number of Republican governors have refused to accept federal dollars to expand Medicaid eligibility, a cornerstone of the Affordable Care Act. In the words of Texas Governor Rick Perry, this was a sound decision because "Medicaid is broken." But a study by Sommers, published in the New England Journal of Medicine in 2012, used data from state-led expansions of Medicaid eligibility in the 1990s to discern the effect of Medicaid coverage on mortality. The results revealed a statistically significant reduction in mortality corresponding to 2,840 deaths prevented per year for every 500,000 adults gaining Medicaid coverage. Sommers' findings demonstrate that Medicaid, while imperfect, saves lives.

Other questions animating recent debates over health care have motivated Sommers' work. Does Medicaid affect poverty levels? According to a 2013 publication by Sommers in the Journal of Health Economics, Medicaid kept approximately 3 million people out of poverty in 2010, making it "the U.S.'s third largest anti-poverty program." Why are many Americans who are eligible for Medicaid not enrolled in the program? Sommers was lead author on a paper published in Health Affairs in 2012 which found that the states with the greatest Medicaid participation rates had lower out-of-pocket spending requirements for beneficiaries, more generous benefits, and greater use of managed care programs.

Unlike the economists Hsiao and Knaul, or even the physician Frenk (who treated patients only briefly after medical school before turning to health systems full time), Sommers continues to see patients. He explains that his practice in Boston reveals the problems that remain unaddressed. "I see patients who have various barriers to access. My clinical work is in a community health center. My patient population is heavily immigrant and largely non-English-speaking, and a lot of them–even in a place like Massachusetts, which has near-universal health insurance–suffer from cost-related barriers. They have difficulty getting covered or staying covered; they are not always eligible for public programs; some…don't know where to begin in terms of getting affordable coverage." Even in the wake of historic legislation, with life-saving effects that Sommers has documented, clinical practice and policy research reveal there is still a long way to go to universal access to quality, affordable care.

To Sommers, Frenk, Knaul and Hsiao, these persistent challenges point to the need for something greater than technical knowledge. All of these "systems doctors" share a belief that even sound economic analysis, deep historical knowledge and political savvy are not enough to build a health system that meets our needs as a society. Policy, they insist, must also be informed by shared understandings about moral commitments. We must decide, they say, whether health care is a privilege made for some or a right guaranteed to all. We must decide whether care should be accessible to adults as well as children, immigrants as well as the native-born, and wealthy as well as poor. Until we as Americans settle these questions, universal access will exist only in brilliantly conceived but unrealized plans.

Luke Messac, TNP's student editor, is an M.D./Ph.D. student at the University of Pennsylvania.