You can tell a system is broken when a prominent children’s hospital devises a system that reduces local asthma cases by 87%, but then has to cancel the program due to the lack of revenue from new and recurring patients. Can the current healthcare reform bill end this ridiculous approach?

Question: Is there enough room for medical experimentation in the current health reform bill?

Atul Gawande: Yes and no. So if this health reform bill goes through, and I think it's looking like every sign will, it is about health reform, but not reforming health care, which is what we really need; meaning redesigning health care to be better quality, better safety, lower cost, getting rid of wasted, unnecessary steps and moves and the harmful components of care. It has the experiments in it to be able to start having us try to innovate on that systems level. So when we've talked about innovation in medicine, what we've usually meant is, will there be a new drug? Will we have a cure for cancer? And we are on our way, with or without reform, to spending 18, 19, perhaps even 20 percent of our whole economy on health care. There's no shortage of money for those kinds of innovations, and I think those fields will prosper. But to take advantage of them and be sure we're using them in every community in the right way, at the right time, we have not been innovating. I think if health reform doesn't pass that we will be very slow to innovate.

But there are components in the health reform package that include innovations both at that front end, trying to design, say, the checklists for the right kind of care, and also on the incentives end. That is, one of the reasons we don't come up with these kinds of checklists is that hospitals and doctors don't do better financially when they put in these kinds of tools. For example, Children's Hospital in Boston came up with a checklist for asthma patients, children who are severely asthmatic enough to end up admitted to the hospital. And they recognized that a couple of components were key: making phone calls to the families to make sure the children were taking their inhalers, and having a look at their apartments to make sure that -- or homes -- to make sure that dust and mites were not a problem in the homes. By tackling just those two things, they reduced admissions for kids with asthma by 87 percent. But asthma was their number one admission to Children's Hospital. And the found this experiment lost them millions of dollars. And so they suddenly were face to face with, well, maybe we need to shut down this program in order to survive as a hospital. That's when you know there's just something wrong with the way we are designing our system.

And the reform bill -- we don't know what is the best way to pay that hospital so that it does the right thing, but we have some good ideas about the experiments to try. One is, for example, paying the doctors and hospital together, whether that kid is admitted to the hospital or not, so that they're on the same page about taking care of this kid with asthma. The kid with asthma might get -- I don't know; I'm pulling a number out of the hat -- $5,000 for that diagnosis and care in that year. And so let's simply give that money and then have them work to try to make the best of that financial situation, which I think leads -- can lead -- to better care.

Question: Is the Massachusetts health care system working?

Atul Gawande: What's right about the Massachusetts system is coverage. We went from 12 percent uninsured to 2 percent uninsured, and that's very impressive. European countries are at 98 to 99 percent coverage of their populations, and Massachusetts did it without -- with most of the people in the population not even noticing. It was through private coverage; basically, if you are uninsured or can't afford insurance coverage, you can go on the Web and get subsidized insurance policies that limit your costs to about 8 percent of your income. Not everybody's happy about that. If you're only earning $30,000 a year and have $2400 -- that's 8 percent -- to have to pay, that seems like a lot. But insurance premiums are typically 15 or 16 percent of people's income, so it's heavily subsidized.

The down side: cost. There was nothing in the Massachusetts plan to deal with costs. Now, the costs have not -- contrary to many of the news reports -- have not outstripped the budget. The Massachusetts health care costs have continued to rise about 8 percent or so per year, which is right in the middle of where the country's costs have been rising. And the program for the uninsured actually came in under budget. If the recession hadn't dropped the bottom out of tax revenues, then this would have gone on as if there were no issues at all. But the pressure of the loss of that tax revenue led the hospitals and doctors and insurers to actually be serious about cost controls. And I'd say in the state we're a couple years ahead of other places in starting to try innovations, paying doctors and hospitals differently. Instead of fee-for-service, just being paid for every time you do an operation, for example, there's a shift towards saying, let's pay for results, and let's figure out how to do it. So that kind of pay-for-results system is now being tested and experimented with, though it's still not easy to figure out.

Question: What are the biggest advantages being proposed in the current healthcare reform package?

Atul Gawande: The national reform package actually looks a lot like the Massachusetts package. It has coverage through private insurers that people would get to choose from -- go on the Web and sign up for a health plan if you don't have coverage or can't afford it. There's more in the bill to do with trying to control the costs, and that is also a plus. There's more in there than we see in Massachusetts by far. Some of it is to try to really drive insurance competition by, for example, having insurers pay a premium tax if their insurance plans comes to cost more than $23,000 a year. Most plans are far from costing that much right now, but they're on their way to doing it if they don't figure out how to organize better.

Second, though, is whether it's private insurance or federal programs like Medicare, there are very interesting experiments, pilot programs, to test out paying doctors in different ways from the way we've done it; for example, paying a hospital system that actually encompasses both hospital care and outpatient care -- what they call gain sharing. If they bring their costs down, the Medicare program would let them keep half of the reduction in costs, to try to provide an incentive for controlling costs, as long as they meet basic quality control measures and have good access to primary care. Can hospitals actually learn to do this? Can we organize to get our act together? I think the answer is going to depend on their adopting things like checklists for the most costly and harmful conditions, where we see a lot of mistakes and waste. But this is tough stuff. Doctors and hospitals are quite fragmented, very disorganized, and learning how to really work as a system of people is going to take us -- it's not going to be a matter of two or three years; this is going to be a generational effort. But I think the clear signs are, we can first end up reducing just the rate of inflation, but then over time if we are able to learn and use the lessons, we could even bring the cost down, which has been feasible in other lines of work.