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A Couple of Health Care Notes

By March 24, 2023Commentary

This was originally a health care business and research blog.  So every now and then I return to my roots. Health care is a huge part of the overall US economy.  The cost of health care, and consequently health insurance, has strained consumer pocketbooks and driven government spending up rapidly.  So for over three decades there has been one “innovation” after another in a vain attempt to stem spending growth.  One of the primary efforts now is something called “value-based purchasing”, which basically is an attempt to ensure that you only pay for getting good outcomes from the care delivered.  A main characteristic of most VBP initiatives is paying primary care doctors more to be cautious in referrals and to keep patients in good health and chronic diseases under control.  As far as I can tell it isn’t making a whole lot of difference in regard to spending.  That is supported in this research from the Kaiser company.

The study compared patients in a value-based arrangement with those who were not.  For the VBP group there was higher spending on primary care services and immunizations.  There was lower inpatient hospital spending and fewer surgical procedures.  But overall spending per patient was basically the same.  The improvements in use of primary care and reduction of expensive, potentially unneccessary services is good and likely reflects better health among the patients, but it isn’t going to solve the spending problem.  (JAMA Article)

I have understood for several decades that our spending problem is high unit costs.  And those high unit costs largely exist because of provider consolidation–allowing hospitals to merge and to buy up physician practices and other types of health care providers.  The resulting market power leaves commercial health plans with little leverage, which they often aren’t inclined to use in any event, since high provider prices mean higher premiums for them.  But it also affects other types of health care payers, such as workers’ compensation insurers.  This study details how prices paid in states with highly concentrated provider markets have risen faster than prices in less concentrated markets.  (WCRI Report)

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