West Virginia Health Report Identifies Possible Savings

By December 31, 2009Commentary

Like most states, West Virgina has struggled with the impact of rising health costs on its budget and the state has a large number of residents without consistent access to health care coverage.  The state’s health care authority hired an actuary to examine what the state could do to address both issues.  The actuary examined claims data relating to covered persons in West Virgina, reviewed a number of proposed reforms and issued a report.  (WVa. Report) The report somewhat sensationally claimed that West Virginia could save $1.1 billion, primarily through use of electronic prescribing, global use of health information technology and implementation of the medical home concept.

The report is not credible because it makes exaggerated assumptions regarding system-wide savings based on scattered pilot programs and ignores the complexities of implementing the suggested cost-saving measures.  In particular, most careful research finds that potential savings from health information technology are greatly overstated and that significant costs are typically incurred during the implementation phase of these systems.  The medical home model, projected to save West Virginia over $650 million by 2014, has not been studied in a wide-scale multi-year randomized trial.  We simply don’t know whether it will save on costs or by how much.  The medical home model likely provides better health outcomes for patients, but it costs more to have physicians manage care in a more detailed fashion and in doing so they often uncover missing necessary care.  The payoff is supposedly reduced costs in future years because patients’ will have a lower disease burden, but that has yet to be clearly proven.

This report is largely an exercise in wishful thinking.  If we are to improve the health system without disappointing heightened expectations of patients and providers, we need to be more careful to rely only on clearly proven strategies to reduce cost while maintaining quality.  It would be much better at this point to dampen expectations, while expanding the research into what will work.

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