How About Some Health Care for a Changeup?

As the world’s leaders and experts once more demonstrate that they haven’t learned anything about responding to the epidemic, how about a couple of uplifting health care research stories for a change.  Okay, maybe not so uplifting.

One area that fascinates me is how much variation we see in how physicians and other clinicians practice medicine.  This difference exists despite all the work on “evidence-based” medicine and care guidelines.  It results in large differences in costs and utilization.  And generally it isn’t associated with better or worse quality outcomes.  A number of interventions have been tested to attempt to reduce variation and increase adherence to guidelines.  There is an extensive research literature on this geographic variation and its potential causes and these interventions.  The variation exists not just between states or metropolitan area, but within them, so whatever factors drive different practice patterns isn’t purely geographic.  This study looked at differences in use of common procedure for chronic venous insufficiency and whether showing physicians benchmarking data on how they compared to peers would reduce it.  There was very wide variation across the country, and the intervention reduced it significantly.  So at least physicians will respond if shown that their practice pattern may be an outlier.  (JAMA Article)

On to a more depressing topic, national health spending.  The US spends a lot of money on health care, primarily because we have very high unit prices–for medical products like drugs and for medical services.  We pay our physicans a ton, we pay our hospital executives a fortune, so our services cost a lot.  We actually do a pretty good job of controlling utilization, despite a lot of unhealthy behavior and people.  Every year, the Office of the Actuary at Medicare releases data on national health spending and trends in that spending, and the current report covering 2020 is out.  As you might expect, 2020 was a bit of an unusual year.  (HA Article) (You can find the data as well at the HHS website, go to CMS and the Office of the Actuary links.)

In 2019, health spending rose 4.3% year-over-year, which is in excess of inflation.  But in 2020, it rose 9.7% to $4.1 trillion.  Federal spending rose 36% largely due to CV-19.  Although there was a lot of CV-19 spending (much of it wasted), there was reduced spending in some other areas.  2021 is going to be another weird year and it will take several years for everything to sort out.  We are spending almost 20% of our GDP on health care.

The report contains data for several years and if you want a primer on who pays for health care and where the dollars go over time, it is very useful for that purpose.  In recent years, businesses and consumers have paid for about 55% of health care and governments for most of the remainder, but the reality is that individuals pay for 100% of it in taxes, premiums, health benefits in lieu of wages, higher prices for non-health care goods and services, etc.  So don’t delude yourself that someone else is paying for your health care.  In 2020, due to all that great federal spending, government’s share of spending rose to about 50%, while that of businesses and consumers fell to the same level.

Where does all this money go?  Hospitals get about $1.27 trillion of it for inpatient and outpatient services, or well over 25%.  Physicians and other clinicians get about $1.07 trillion, also around 25%.  Drugs and devices are about $490 billion.  Home health care is $124 billion.  Nursing home care is $197 billion.  Now here is some real waste–the costs for governments to administer their inefficient health care programs–$301 billion.  That is administrative cost, not the cost of the services paid for by programs like Medicare and Medicaid.  Private health insurers add another $224 billion in administrative costs and profits.  The cost of administering both government and private health care went up greatly in 2020, and private insurers made a lot of money.  And about $192 billion was spent on research and buildings.

You would justified in wondering what we get for all this spending and if there isn’t a better way to finance it.