Our Ineffective and Bloated Health Care System

We have incredible waste in our health care system. Up to one third of the two trillion dollars that we spend on it is wasted on overpriced drugs and devices that replace older drugs and devices that work fine and on overused and ineffective procedures that do not actually increase the health quality of American lives.

Elliott Fisher and Jack Wennberg of The Dartmouth Atlas of Health Care have studied the data for three decades, proving how much waste there is in the system. They’ve mapped out health care across the country, discovering that in high treatment states, like New York, California, Florida, and New Jersey, Medicare spends 20% more per patient than the average. And in low treatment states, like Iowa, Utah, or North Dakota, Medicare spends 25% less than average.

As Maggie Mahar reports, what the Dartmouth studies reveal is “that in Manhattan and Miami, chronically ill Medicare patients receive far more aggressive care than very similar patients in places like Salt Lake City, Utah, and Rochester, Minn. Their research reveals that Medicare beneficiaries in high-cost states are likely to spend twice as many days in the hospital as patients in low-cost states and are far more likely to die in an intensive care unit. The odds are higher that patients in high-spending regions will see 10 or more specialists during their final six months of life. These facts alone aren't terribly surprising. But here's the stunner: Chronically ill patients who receive the most intensive, aggressive, and expensive treatments fare no better than those who receive more conservative care. In fact, their outcomes are often worse.”

In the 1990s, the insurance industry tried to stop paying for exorbitant procedures. HMOs based these decisions not on medical efficiencies and quality of procedure but merely based on cost. There was a major backlash against this, so by the turn of the century, HMOs stopped managing care and instead agreed to pay for anything that Medicare approves. The higher costs for paying for all these procedures was just passed onto employers in the form of higher premiums. That’s why health care is the mess it is today. The cost for health care as a percentage of our nation's Gross Domestic Product is unsustainably increasing each year. It has not always been this way; there was a time when we were more in line with the rest of the world.

Why does the United States spend so much on its health care? Elliot Fisher and Jack Wennberg of Dartmouth have shown that we have overbuilt our health care industrial complex to the point that it needs to be used – there’s too much profit to be lost if we don’t. We have what Harvard’s Donald Berwick calls “supply-driven care.”


PamBG said...

Good article.

Now, what puzzles me is that all this happened under the capitalist system, so I don't really get the idea that capitalism will make it all better?

European countries, which all involve the government to a greater or lesser degree, have lower market prices for pharmaceuticals, lower market prices for surgery, lower market prices for doctors visits and, I believe, lower market prices for running hospitals.

(I'm using the term term "market price" to mean the actual economic cost or price as opposed to any subsidized price. E.g. in the UK, all prescriptions cost about GBP7 but that includes a generic antibiotic whose market price is 50p and an advanced cancer drug whose market price is GBP 200.)

I did look up Newt Gingrich and I couldn't find any concrete suggestions. My view is that capitalism has got the US and the Western world into a whole range of messes to the point that health, education and housing all look like getting increasingly unaffordable.

Ted M. Gossard said...

What a mess. My wife who worked in a hospital in the past noted how the one who ran her department was driven by profit. When the department was low on number of patients they were unhappy. Seems to go along with what I read here.

I do think the president is right in saying that change will only come incrementally. I wonder if the president has given much thought to what you post here. I would guess he has, and would wonder how he would address it. Or what ideas are out there. Seems like this may be a case for a beginning in which salaries go down and preventative care up, but I'm only thinking out loud.

Bob Robinson said...

The Dartmouth studies are identifying waste in Medicare as it interacts with the profits of hospitals. So, it is that strange mix of a problem - Medicare (our version of socialized medicine) is wasteful in its spending because it is not being wise on how it pays for wasteful medical treatments that profitable hospitals are urging patients to undergo. Hmmm....

Bob Robinson said...

I think that Obama is very aware of the Dartmouth studies because he is constantly saying (and the Republicans are constantly skeptical of it) that much of the health care plan will be paid for by eliminating waste in Medicare spending.

In the speech last night, Obama said, "The only thing this plan would eliminate is the hundreds of billions of dollars in waste and fraud, as well as unwarranted subsidies in Medicare that go to insurance companies – subsidies that do everything to pad their profits and nothing to improve your care. And we will also create an independent commission of doctors and medical experts charged with identifying more waste in the years ahead."