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Studies Look at Health Care in the U.S.
By Jeff Madrick, The New York Times
July 8, 2004
There are no easy answers in reforming health care, but some economists in the field increasingly believe there may indeed be viable solutions to at least some of the nation's health problems.
The seemingly intractable issues are well known. Americans spend some 14 percent of gross domestic product on health care, while other advanced nations spend an average of 8 percent. In the United States, the proportion may rise to 18 percent by 2013.
Yet in general, judging by life span and infant mortality, most developed nations are healthier than the United States. More detailed studies find similar results.
For example, a study recently published by the Commonwealth Fund measured quality of care in specific areas of medicine in five nations. It showed that America was superior in only a few. For example, this country topped the list in survival rates for breast cancer but was at the bottom for kidney transplants. It was typically in the middle in most other areas measured.
What may surprise readers, and certainly surprised this writer, is that Americans, by paying so much more, do not have many more services. In fact, according to recent research, they typically have fewer. Consider the number of doctors. In 2001, the United States had 2.7 doctors per 1,000 people, compared with a median of 3.1 in the countries in the Organization for Economic Cooperation and Development. France, accused of having a doctor shortage in last summer's heat wave, had 3.3 per 1,000.
Also, consider the number of hospital beds. The United States has only 2.9 hospital beds per 1,000 people, compared with the O.E.C.D. median of 3.9. Germany has 6.3. The United States is also behind in the actual days spent in a hospital and hospital admissions per capita. These are not necessarily bad in themselves, but the question is why we spend so much.
The reason for the high level of American spending, argue the researchers - Uwe E. Reinhardt of Princeton and Peter S. Hussey and Gerard F. Anderson of Johns Hopkins - is that American doctors and hospitals charge much more. Americans also usually pay significantly more for drugs, they say, and administration expenses are exorbitant.
The researchers argue that there is an imbalance in bargaining power between the providers of medical services, which are usually large hospitals and hospital chains, and the buyers, which are fragmented into thousands of insurance companies and health maintenance organizations. Thus, the providers can get away with unusually high prices. In some countries, insurers are sometimes allowed to bargain for better prices collectively. In others, the government itself does the bargaining.
Such research provides a stronger argument than in the past for tougher bargaining by government for services and drugs, Mr. Reinhardt said, adding that Medicare and the Veterans Administration could lead the way.
There is also renewed optimism in academia about how to improve the quality of care for every dollar spent. Economists like Joseph Newhouse of Harvard University argue that costs may be higher at American hospitals partly because they use so much high technology - not only up-to-date machinery but also the latest fancy procedures and drugs.
The question is whether high tech is worth the higher price. Despite plenty of skepticism, a growing number of economists believe that a large part of it is.
David M. Cutler, a health care economist at Harvard, summarizes what is becoming a standard conclusion among professional economists in a book, "Your Money or Your Life" (Oxford University Press, 2003). Mr. Cutler finds that new technologies and procedures in areas like heart disease and low-weight newborns have extended lives so greatly that their benefits far outweigh what America spends on them. In fact, he finds the benefits from just such procedures alone so large that they justify increased spending in all other areas.
Still, Mr. Cutler and others argue that reforms are needed because a lot of waste remains. One study concludes, for example, that Medicare spending could be cut by 20 percent without affecting care.
Also important, effective procedures are badly underused. A standout example are beta-blockers, drugs that can reduce by 25 percent the probability of a follow-up heart attack. Only half of patients who have a beta-blocker prescription now take the drug.
These economists want both the public and private sectors to adopt a market solution of sorts that calls for getting the financial incentives right. In the past, traditional fee-for-service insurance and managed care often provided reimbursement schedules that encouraged waste and ineffective care.
But recent advances in information technology are providing sophisticated ways to measure performance. These make it possible to tailor financial incentives to discourage unnecessary procedures, encourage procedures known to be useful, and reward doctors and hospitals financially for both saving lives and improving the quality of life of the unhealthy.
Several pay-for-performance programs have been adopted recently. Mr. Cutler, in particular, is optimistic about some of them. But there are also clearly obstacles. One is that paying for performance might encourage doctors and hospitals to treat only patients likely to do well.
Another is that any kind of standardization may limit doctors and hospitals too much, just as teachers complain that standardized tests limit them. "We have been paying for results in education, but we haven't been successful," Mr. Newhouse of Harvard cautions. Still, even Mr. Newhouse is in favor of experimenting with paying for performance.
To give it a chance, however, many observers, like Mr. Reinhardt, say a strong nudge from government will again be required. A group of 15 researchers, for example, recently wrote an open letter calling for Medicare reimbursements to reward performance. These health care professionals are not calling for Medicare to supersede private care, but believe the private sector will follow suit only if Medicare paves the way.
Pay for performance may not bring down costs. Any savings that result from eliminating waste will probably be offset by more intensive use of neglected procedures. But at least with pay for performance, Americans will have a better chance of getting the best care for their money. Then, the United States can decide just how much more it wants to spend, and whether further reforms are necessary.
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