What's Driving Health Care Costs?

Let's Talk Health Care Blog (Charlie Baker, Pres. & CEO, Harvard Pilgrim Health Care)
May 21, 2008

A few weeks ago, I wrote a post about a recent study by the folks at Dartmouth concerning variation in resource utilization at various providers in Massachusetts during the last six months and two years of life. The study showed that the variation in practice patterns and resource utilization in health care, even for fairly standard procedures, during the period of time studied was gigantic — sometimes as much as 300-500%.

Practice pattern variation. It’s like a bad penny. Activists and advocates — and many others — prefer to talk about the money that’s wasted on administrative inefficiencies — and if we could just get everyone covered by one payer, everything would be fine. But then Jack Wennberg and Co. at Dartmouth keeps publishing these studies that show that the biggest opportunity to reduce health care costs and improve quality is linked to reducing the misuse, overuse and underuse of health care services — which has very little to do with who pays. After all, who pays represents about 10-15% of the total health care tab. Health care delivery — that is, the delivery of services — represents the other 85-90%.

The penny appears — again. This time, it’s the New England Healthcare Institute (NEHI), a Cambridge (MA) based non-profit research organization. NEHI just completed a study on waste in health care, analyzing much of the available literature on what could be done to reduce health care costs without reducing quality. Their study lists six primary culprits/opportunities…

1) Unexplained variation in the intensity of medical and surgical services, including but certainly not limited to: end of life care, overuse of CABGs (coronary artery bypass), and overuse of PCIs (percutaneous coronary procedures — more commonly known as “angioplasties”).
2) Misuse of drugs and treatments, resulting in avoidable adverse effects of medical treatment.
3) Overuse of non-urgent emergency department care (this one deserves its own post).
4) Underuse of generic antihypertensives.
5) Underuse of controller medicines in pediatric asthma.
6) Overuse of antibiotics for respiratory infections.

All in, NEHI estimates that improvements in these six areas could be worth as much as $680 billion. $680 billion is a big number. How big? It’s much bigger than the combined administrative expenses — including profits — of all of the private health insurance companies in the U.S. put together. It’s also far larger than the dollar amount required — under any health care reform plan currently on the radar — to fund universal coverage for everyone in the United States.

Truth in advertising — Harvard Pilgrim was one of the organizations that funded this study — but until I saw the final report, I had no idea where it was going or what it would say. But given some of the previous work that’s been done by other academics and researchers on this topic and these issues, I’m not surprised by the results.

The study does, however, confirm something I’ve thought for quite some time. That is, until we get serious about variation — in prices, in practice, in care delivery — we will continue to be frustrated by our inability to make progress on health care cost and quality.

Link to Full Article: http://www.letstalkhealthcare.org/health-care-costs/whats-driving-health-ca…