Are Our Health Costs High?

Two primary concerns underlying the current health reform push are people without insurance, who are presumed to have difficulty obtaining needed care because they cannot pay for it, and the ever-increasing portion of our economy taken up by health-related spending.  The Dartmouth Atlas researchers have postulated that the results of their research on geographic variation in spending strongly indicates that much of our spending is inappropriate and unnecessary.  If the costs of that unnecessary care were avoided, enough would be saved to pay for expanding access and we would  have lower cost growth.  Other researchers have begun to peck away at the Dartmouth Atlas results, so some of the Dartmouth staff have reinforced their views in a New England Journal of Medicine Perspective  (NEJM Perspective).   The Dartmouth researchers point out again that health status and demographic factors appear to account for only about 30% of the geographic variation in spending, after adjusting for price differences.  The remaining 70%, they believe, is accounted for by physician preferences.   And they again refer to their findings that it does not appear that there are better health outcomes in higher-spending areas or that patients feel deprived of care in lower-spending ones.  Based on these conclusions, the Dartmouth researchers feel the obvious solution is to figure out how to change the practice patterns in the high-spending areas to be like the ones in the low-spending areas.

There are legitimate questions about this line of research.  It relies on a somewhat limited set of data, only half of spending even on Medicare beneficiaries.  It does not probe deeply into individual beneficiary characteristics that might account for much of the difference, particularly since half of all Medicare spending is on just 5% of beneficiaries.  Characteristics of those beneficiaries should be looked at closely, as should the practice patterns of individual physicians.  But the Dartmouth research appears solid enough to indicate that there is a significant amount of inappropriate or unnecessary care.  The biggest problem is that the suggested solution is very difficult to implement.  Appropriate care really has to be looked at patient-by-patient.  Fortunately, the concentration of spending in a relatively small number of beneficiaries may make managing the care of those patients intensively a better route to obtaining savings than trying to change doctors’ practice patterns through some more general reimbursement policy change.  Health plans have been very successful at managing costs patient-by-patient while often improving outcomes and quality.  Medicare would perhaps be best-advised to implement an intensive care-management program for high-cost beneficiaries.  There are many private companies who have the experience and expertise to assist with that program.