Ezekiel Emanuel and Health Care Costs

Today’s Managing Health Care Cost Indicator is $26 billion

Ezekial Emanuel, noted oncologist, ethicist, recent presidential advisor and brother of Rahm, finished a four-part article in the Times Sunday Review about health care cost control.  It’s well worth reading.

Post One: Spending more doesn’t make us healthier reviews the fact that we aren’t getting better health or health care for the extra dollars we spend in the US -  and these health care dollars crowd out other meaningful uses for those dollars

Post Two: Less than $26 billion – don’t bother makes the point health care costs go up over $100 billion a year. He reasons that if a potential intervention wouldn’t save at least 1% of costs – we should put our efforts into other initiatives.  This threshold is important in terms of setting priorities.

Post Three: Billions wasted on billing points out that the administrative costs of our complex and fragmented system are enormous, and he uses his own experience with minor surgery as an illustrative example.   He doesn’t suggest fixing the fragmented and complex system – merely standardizing transactions.

Post Four: Saving by the Bundle suggests that there are huge potential savings associated with better coordination of care of the sick – and they’re the ones whose medical expenses are driving cost increases. 

I recommend the series – it’s thoughtful and provocative

It’s also missing an important element of our health care cost crisis.

There is no acknowledgement that the underlying reason why our system costs dramatically more than Canada or the European countries is not even administrative costs or poor coordination.  It’s that we have very high prices compared to these other countries.    Here are some charts from Massachusetts about this topic, here’s a reference to a September Health Affairs article on the issue of unit cost, and here is a post that gives links to International Federation of Health Plan data and the original 1993 Anderson/Reinhardt article “It’s the Prices, Stupid?

There are plenty of reasons why stakeholders don’t want to talk about the unit price issue.

  • Providers are being paid these high unit prices. It’s easier to talk about someone else’s utilization than one’s own price!
  • Pharmaceutical companies like high unit prices just fine
  • Health plans are a bit embarrassed that they’ve been unsuccessful at controlling unit costs
  • Health plans and other parties have a profitable business in lowering utilization
  • Government wants continued growth in health care sector jobs 

Movements toward narrow networks and reference pricing will be future counterbalances to high prices (and high variation in prices from facility to facility).  If we can better control unit prices, we can lessen medical inflation substantially.