FP: Regina Herzlinger, welcome to Frontpage Interview.

Herzlinger: So glad to be here.

FP: What motivated you to write this book?

Herzlinger: We are at the tipping point in our health care system .We cannot stay where we are. Our health and economic well being are in jeopardy.

Our health care system’s $2 trillion in costs –as big as the economy of China –is killing U.S. competitiveness. And yes we have great doctors but if you are poor and uninsured, hospitals are likely to drive you into bankruptcy   and hundreds of thousands of people die from hospitals’ errors. Cost pressure and the injustice of the uninsured are the pincers forcing convulsive change in health care.

So, we will either have a government controlled health care system, as in the UK, or a consumer driven one, as in Switzerland.

A single payer system would kill our health.

We have to move elsewhere, to ourselves. You and I need to control health care: not our employers, not our insurers, not our Congress, but us.

The next president of the U.S. can enable this consumer-driven system by passing a law that would make it possible for us to buy health care with the money we earn, rather than with our after-tax income.

He or she also needs to make transparency mandatory .I know more about my Raisin Bran cereal than about the guy who delivered my children and the hospital in which he practices. As FDR did to corporations, the next president must require that data about the quality of the care of hospitals and doctors are readily available to us

FP: What do you think of Michael Moore's "Sicko"?

Herzlinger: The single-payer, government controlled health care system he advocates is great, except if you are sick.

Moore uses Cuba as a model of a great health care system. Get serious: when it comes to health care, this isn’t just propaganda; people’s lives are at stake.

In Britain, tens of thousands have died from cancer who would have survived under U.S. health care and many are placed on years long waiting lists, enduring excruciating pain from arthritic joints or blocked arteries while they wait for their operation. Sometimes they are placed on waiting lists for the waiting lists. While they wait, their problem gets worse making the operation they may finally receive all the more dangerous.

France, which he also lauds, is not a single payer system: much of the money is paid by the citizens for health care. Moore illustrates a Mother who can get her baby taken care of for a few hours a week for “free” in France; but ignores the fact that those doing the laundry are rioting in the streets and the French are drowning in taxes.

Well, at least this paean to France, erroneous as it is, earned him a Cannes film prize.

On the diagnosis of U.S. health care problems, however, he is right on. In fact, he almost exactly mimics some of the items in my book: insurance firms that have lost their souls, empire-building hospitals that cloak themselves in sanctity while tossing uninsured out in the street or charging them sky high rates and paying their executives millions, and a U.S. Congress that uses our money t oration our care and to tell Doctors how to practice medicine.

But the solution is not to let the government take over the system. The solution is to take back our money, the whole $2 trillion is money we pay in taxes or foregone income, and put us in charge in a consumer-driven health care system. This is how they do it in Switzerland which spends 40% less than us, insures everyone, and has excellent quality of care.

FP: What do you think Moore’s real motives are in terms of his film? Does he really care about health care or is this about something else?

Herzlinger: I cannot look inside another person’s heart to reveal their motives. I can judge them only from their actions.

Moore is clearly an excellent business man; nevertheless, his meandering off the subject of health care into the many “free” benefits given by the government in France, makes me think that he fundamentally believes that government should play a the sole role in providing health care, college education, and day care, among other needs He supports his view of the excellence of government monopolies by citing the police and fire departments. But these are classic public goods where a monopoly is warranted. We cannot have rival police or fire companies compete at a fire or crime scene. He also cites public education and libraries as examples of the excellence of government monopolies; but, both are public activities which, like health care, have effective private sector competitors who do not rely on taxes for their funding.

FP: What are your thoughts on the Canadian health-care system?

Herzlinger: It is falling apart. Waits are lengthening and the Canadians ruefully acknowledge that the litigious or well-connected go to the head of the line. Canada is filled with illegal, for-profit health service centers that provide the services that Canadians cannot obtain from the publicly-supported ones. Their acceptance is indicated by the fact that the president of the Canadian Medical Association heads one of these illegal enterprises. And when it comes to private health insurance, also long illegal in Canada, a Provincial Supreme Court ruling found that “access to waiting lists” is not equivalent to access to health care in making them legal.

When one evaluates a government-run health care system, the opinions of sick people are key .After all, the system is for them. The Canadian premier who went to the U.S. for treatment of his melanoma says it all, no?

FP: Kindly expand a bit for us on your thoughts on the Swiss health care system.

Herzlinger: It is the model we should emulate: universal health insurance, 40% lower costs, excellent health care. What’s not to like?

Here is how they make it happen: everyone is required to buy health insurance, the poor are subsidized, so they can buy insurance just like everybody else, the sick pay the same prices as the well. The key is that is the Swiss people who buy the insurance, not employers or governments. The people make sure they get the insurance they want at a price they are willing to pay.

The insurers risk-adjust each other so nobody makes money solely by picking only healthy people to insure. And there is a lot of transparency about insurance prices.

But the system is not perfect. The Swiss government micromanages the prices paid to hospitals and doctors, which deter innovation. And it subsidizes inefficient public hospitals which needlessly inflates the budget.

FP: Can you discuss a few entrepreneurial ideas for making health care better and cheaper?

Herzlinger: Typically when you and I buy something, companies compete for our business by making it cheaper and better. Along the way, we get information so we can be smart shoppers Think about cell phones or computers which got cheaper and better because of competition for our business. Competition spurs innovation.

But we have very little innovation in health services which account for the bulk of health care costs. The reason is that we are not doing the buying. And also the insurers put the suppliers in a straightjacket which punishes innovation.

The most important innovation is in the management of chronic diseases which account for 80% of health care costs. These diseases typically cause lots of different problems which are treated by different doctors. A person with this kind of disease has to run all over town to get complete treatment. This fragmentation imposes costs on the patient and our economy .It is enormously wasteful.

The insurers cause it because they pay providers for procedures—doctor visits or hospital stays and not for the complete bundle of care. So the healthier doctors make the patient, the less money they earn.

Duke Medical Center innovated in the treatment of heart failure by having patients see the doctors more often. This made them healthier so they went to the hospital less often and spent less time in it. The program saved 40% in one year—an amazing innovation. If we had it nationwide, we would have saved $20 billion.

But the insurers caused Duke to lose every cent it saved. Medical centers get paid for treating patients --the less they use the hospital, the more money it loses.

In a consumer-driven system, we will reward doctors who give us a fixed price for the care of our disease or disability, rather than forcing us to pay piecemeal for every visit or test or aspirin. It is like buying a car: we don’t want to pay for an axle, a wheel, a battery –we want to buy a car.

This pricing will inspire the important service innovations that will make health care better and cheaper. I call them focused factories, in recognition of the focused manufacturing facilities which replaced huge, inefficient, everything-for-everybody factories. When focused, specialized steel manufacturing replaced everything for everybody steel plants, our manufacturing sector was revived. Similarly, health care facilities which are focused on the patients’ needs for care for diabetes, breast cancer etc will make health care better and cheaper. But they can exist only in a consumer-driven health car system.

FP: Regina Herzlinger, thank you for joining Frontpage Interview.

Herzlinger: I enjoyed it.