Succinct Two Pages on Why American Health Care Costs So Much

Victor Fuchs has summarized the difficult problems in controlling health care costs in two pithy (if ill-titled) pages in this week's Journal of the American Medical Association (JAMA). (Harvard link) (Non-Harvard Link) He points out that cost shifting (like mandating rating health insurance by health status) might make insurance less costly for the sick - but would also make health insurance more costly for those enjoying good health. This cost shifting might be good in terms of equity, but it could also lead to some healthy people dropping out of the health insurance system altogether.


Fuchs' eight root causes for our high health care costs compared to other 'developed' countries:

1) High administrative costs
2) More specialists and fewer primary care physicians
3) More "stand-by" capacity
4) Open-ended funding (no overall budget for health care)
5) Malpractice
6) Less social support for the poor
7) Higher drug prices
8) Higher physician incomes

I can't say I agree with these 100% (I would have listed fee-for-service payment system separately, as well as the lack of integration of the health care delivery system. ) Many economists also list first-dollar coverage, but Fuchs does not and I agree - since most developed countries have much lower patient cost-sharing than the US.

It's rare to read two pages that say so much.

Retail Clinics Save Money (and Don't Overprescribe Antibiotics)

An elegant study in this week's Annals of Internal Medicine shows that in Minneapolis patients who went to retail clinics for ear infections, sore throats, and urinary tract (bladder) infections had lower overall health care costs than those seen in physician offices, urgent care centers, or emergency departments. (Abstract) (Harvard full text)They also did not have lower rates of preventive care visits over the 3 months after the retail clinic visit. The retail clinics are in pharmacies, and there has been concern that they will overprescribe antibiotics. The amount of antibiotic prescriptions in the retail clinics was not substantially different than the rate from physician offices or urgent care centers.

So - here's something that works. Retail clinics are a disruptive innovation, since the retail clinics are not able to perform the full range of services performed by a physician's office. They are designed to be able to do a "good enough" job to meet a limited set of needs. This study suggests they are succeeding. It also does not appear that they are a death knell for continuity.

Even so, retail clinics have not expanded as much as expected, even though insurance plans are increasingly providing full coverage for their services.


Care Management Simulation -- Measure Success at 10 Years or 25?

Yesterday’s Washington Post headline shouted “Study Raises Questions About Cost Savings From Preventive Care.” The article itself captured some of the nuance of this article that the headline did not.


The Post was reporting on a Health Affairs web article that simulated potential savings from improved diabetes management. The improved management would lead to an improvement in hemoglobin AIC (a long-term measure of blood sugar control) and blood pressure – both are agreed to be indicative of better diabetes control. The simulation suggested substantial savings from major complications of diabetes including blindness, kidney failure, amputations, stroke, and coronary artery disease. However, these savings were not enough to pay for the intervention to improve diabetes care.


You read that correctly – the cost of improved management of diabetics would be more – not less -- in the 10 year or the 25 year time horizon.


The authors’ argument – a bit academic – is that the ‘excess’ cost of better management of diabetics is less pronounced at 25 years than at 10 years. Therefore, it’s unfair for the Congressional Budget Office to give thumbs down to an intervention based on a projections of results over ten years. Alas, with this particular simulation, the CBO would still give a thumbs down for results of a program that would increase the federal deficit over 25 years (just not as much per year).


A few other tidbits from this journal article: The intervention model suggested that the highest payoff over 25 years was in the youngest diabetics; there was cost saving in the population of diabetics 24-30. Of course, that’s a pretty small cohort. The simulation also suggested that the cost of diabetes direct care would increase by about $600 per year based on increased testing and more use of medications. This is no surprise, but a blow to the argument that better diabetes care can save money over the short-run.


Most of what we do in the medical field doesn’t save money over a 1, 5, 10 or 20 year time horizon. The medical ‘industry’ delivers better quality (or quantity) of life – and does it in a manner which is (usually) cost effective –not cost saving. No one thinks it saves money to dialyze a patient whose kidneys have failed, or to replace a worn out hip. These interventions yield quality adjusted life years at a reasonable price. So too, more intensive, evidence based care of diabetics can mean a diabetic will have improved vision, won’t have a stroke, and won’t need kidney dialysis. Even if this effort doesn’t save money, it seems like a good idea.


The best idea is to get the benefit of better health care and not spend so much on program costs. How can we do that? We should dramatically decrease the cost of chronic disease management programs using remote monitoring technology. This might also allow for better patient selection – making expensive interventions only for those diabetics who really needed them. We need improved patient engagement, including more effective programs and better incentives that fully employ the lessons of behavioral economics. We also need to improve the care delivery system itself, as interventions to augment the delivery system are by nature expensive and duplicative.