HBS's Christensen: Why Universal Health Care Failed in Massachusetts

Of late, Clayton Christensen of the Harvard Business School has applied his views on innovation to the health care arena. His recent book The Innovator's Prescription: A Disruptive Solution for Health Care (co-authored with Dr. Jerome Grossman and Dr. Jason Hwang) has influenced industry executives and government reformers alike. Last week we talked with Christensen about why health care requires a new business model for real reform. This week we look at the failure of Massachusetts's experiment in universal coverage and how generational and technological changes will affect health care policy.

BNET: You emphasize the importance of medical records. When do you think they will be an important part of the U.S. healthcare system? Will confidentiality and security continue to be an issue?

Christensen: I believe the best thinking on the building of an electronic medical records system is that it will need to be built patient by patient, where the patient opts in rather than being forced in. What that means is that for some number of years there will be patients who just don't have any medical records on file--and that's fine--I mean, they're not on file today, either. Little by little, as security issues come to be understood and addressed, more people will opt in. Here's an analogy: Remember a few years ago how concerned we were about the confidentiality of our financial records if they were being used for credit scoring agencies and others? Today, pretty much everyone has a credit score, and we don't have widespread confidentiality concerns that worry people.

BNET: Business schools can be a barometer, as students focus on the next wave of economic opportunities. How much has student interest in the health care sector increased?

Christensen: Boy, many, many more students are interested in careers in healthcare right now. I just think they smell more opportunities for innovation there than in any other sector. I really do think that there's a generational difference at play. The generation Tom Brokaw calls "The Greatest Generation" really did grow up trusting the wisdom and the compassion of their primary care doctors. To that generation, any idea that technology could supplant or improve upon that doctor is not something that they would embrace. But with the next generations coming up, they would actually like more of their medical interactions to be online and they are very comfortable with that.

BNET: Is the increased interest in health care among your students just because the investment banking and hedge fund jobs have dried up?

Christensen: I don't think so -- or at least not just that. Those of our students who really want to jump into operating companies feel there is much more of a social mission than, say, going with automobile companies. The fact that the financial services jobs have dried up has forced more of our students to pursue operating companies, and those jobs don't pay as much -- which throws into question the value proposition that MBA programs offer. We've allowed our costs to keep rising and rising and rising because our students' salaries kept rising and rising and rising -- and they could go deeper and deeper into debt.

BNET: One final question: You've seen up-close health care reforms where you live in the state of Massachusetts. They've tried to get as close to universal coverage as possible with some of the reforms they've made. What positive effects and problems have you seen as someone living within that system?

Christensen: I think it has been a significant failure. I wish people would come here and examine what the result really was. The problem before we had mandated universal coverage was that those who were not insured would show up at emergency rooms, which are the costliest mechanisms for delivering care, and most of them didn't require emergency care. For the hospitals in the urban areas, this mandate that they provide uncompensated care was really an albatross because they had to charge much more for those who could pay, and that load was inequitably distributed among hospitals. By mandating coverage, the state could cut a deal with hospitals telling them they didn't have to provide uncompensated care, since everybody was insured.

Well, in order to make those insurance policies affordable, they have to be very high deductible policies -- sometimes thousands of dollars. For the vast majority of formerly uninsured poor, they don't incur thousands of dollars in the normal year for care, so they effectively are uninsured, since they have to pay thousands before coverage kicks in. But now they are also uncared for, since they are unable to go to the emergency room in the way they used to. We don't have low-cost retail clinics in Massachusetts that would allow these people to get the everyday care they need economically. There's a great shortage of primary care doctors. If you just recently got coverage, you could call around all day trying to find a doctor to meet with you. Then you might find one who could see you several months from now.

What the state government did was to solve one piece, but they haven't put the other pieces of the puzzle into place. What they should have done was open up the gates so we could have accessible retail clinics and then help establish health savings accounts, into which the government would contribute and citizens could contribute on a subsidized basis. Then they should have had some sort of prepaid credit cards that they could swipe when they received care or pharmaceuticals. Those pieces of the system weren't put into place here -- nor are those pieces in the system being contemplated by the folks debating health and insurance reform in Washington.