The U.S.
cannot cure its colossal health care expenses by targeting the wrong disease.
Even as a Sep.
2014 CMS report predicts a further 6% bump in our healthcare costs from 2015
out we have an opportunity to correct our true problem of bloated prices.
Health
experts with industry ties blame over-treatment, waste, fraud, and our lifestyle
choices for healthcare costs. The data tells a different story. In fact, their
impact is minor compared to overpricing, which is the root cause of our inflated
medical bills. Industry apologists bury high prices among other factors to
protect this key source of providers’ extreme earnings and profitability. They tout “anything but price”
solutions that will at best achieve very limited success. Most of these are based
on three somewhat overlapping myths about our health system.
Myth 1: Americans enjoy more care,
while other advanced countries provide skimpier treatment after longer wait
times. But OECD Health Data shows that Americans see their
doctors 40% less and are hospitalized 20% fewer times than in other advanced
countries. While Americans do get more heart bypasses, knee replacements, MRIs and CT
scans, this is
outweighed by less of other care and treatment, explaining the lower
aggregates. Japan even has much higher MRI and CT usage than us, with a third
of our per capita spending.
The
Commonwealth Fund in 2014 shows U.S. ranking fifth in
access (includes wait times) and last overall among the eleven countries
studied. Citizens in other developed
countries use more health resources than we do, with better health outcomes,
comparable wait times, and at about half of our cost.
Myth 2: Our health system is riddled
with waste that can easily be eliminated to realize huge savings. An influential
March 2012 JAMA study has a “midpoint estimate” of
$910 billion wasted annually, roughly a third of our total medical spending. It
divides this into six categories – requiring as many remedies – and says “waste
reduction is the best strategy by far.”
There
are several problems with these assertions. Some waste and leakage is
inevitable in any large and complex system, including health care. Except for
multiple insurers, there’s no evidence that our system is more wasteful than in
peer countries. No one is offering any silver bullet or straightforward, easily
implementable solutions. Strenuous efforts to address those multiple sources of
nebulously defined waste are likely to yield few savings.
For
example, the recently released Medicare payments to individual doctors shows some multimillion dollar
payouts triggering suspicions, but fraud represents only a small fraction of
total expenses. It’s about $80 billion or under 3% according to the FBI.
The JAMA study doubles this estimate on adding fraud detection and
enforcement costs. How do you cut down on fraud AND on anti-fraud measures at
the same time?
Myth 3: Much of our excess expenses are
due to heavy and avoidable treatment benefitting very few people, often in their
final months of life.
A 2012 federal health department study shows that just 1% of Americans
incurred 21.4% of all US health expenses. The top 5% incurred nearly half,
while the lower 50% accounted for only 2.8%. Other studies show Medicare spent 28% of its budget on patients in the last 6 months of their
life.
Heavy
medical users are stereotyped by media stories of fortunes spent to painfully
add a few months to lives of terminally ill patients. But the health department shows only a fifth of the top 10% of
spenders are in poor health, while a majority are in good to excellent health
over two years. So many people requiring intensive medical services in a
particular year or two don’t need much in the preceding and following years.
Think of high hospital bills of young women during childbirth, or the young man
treated after a skiing accident going back to low health spending in later
years. There are of course old or chronically sick patients needing
consistently expensive care, but that’s inevitable in our humane society. Few
support culling such people or “pushing grandma over the cliff.”
Also, many
“unnecessary” treatments are only evident in hindsight. It’s reasonable to try
an expensive therapy offering decent hope though not assured success. Consider
patients suffering from a deadly disease that will kill them in two months,
unless they undergo treatment costing $200,000 apiece with a 70% success rate. 70%
of these people will be cured, but the unlucky ones who fail to respond and die
will feed the data showing 30% of medical spending is on patients in the last
two months of their life. It’s absurd to look back and classify it as “waste.”
The true issue remains US medical
prices that are
two to three times higher than in West Europe and six to nine times those in
top Asian hospitals. The few experts who fully acknowledge this problem only propose
forcing pricing transparency (letting customers know rates in
advance). California has required this
since 2003 to
little effect.
But with
the right legislative and
administrative steps
matching the (still expensive) European price levels should be easy. The
difficulties are primarily political, with the health industry fiercely
opposing anything diminishing their fee nirvana. They spend half a billion dollars
annually on lobbying
according to the Center for Responsive Politics, and that’s just the “official”
money changing hands.
Overcoming
such resistance to lowering prices carries immense rewards. At European rates our
health expense per capita drops from $9,000 to $4,500, yielding $1.5 trillion of
annual savings. Even partial success towards this goal transforms our economic
landscape. Our budget deficit becomes a surplus (removing the major flash point
between Obama and the new Republican Congress) and lower employee labor costs
boost our workforce competitiveness. This realization hopefully triggers a long
overdue drive against pricing excesses.
