Wednesday, November 4, 2009

Regional Variation: The Democratic Health Reform Dilemma

According to many in the Obama administration, given equal outcomes, having high spending regions lower health costs to the same level as costs in low spending regions is the most effective way to achieve “savings” for the entire health system.

So goes a central Democrat talking point. It is the based of an off-repeated platitude that one-third of U.S. health spending is “waste.” In other words, $830 billion of the $2.5 billion we spend on health care could be saved because it stems from profligate overspending in certain regions of the country.

Dartmouth Institute wonks, such as John Wennberg and Elliot Fisher, using Medicare data to highlight regional differences, have fostered this rhetoric.

But certain political realities are causing the rhetorical chicken to come home to roost.

• Most of the high spending occurs in big cities dominated by the Democrats.

• Many of patients causing high spending are the urban poor, an important Democratic constituency, who tend to have multiple chronic diseases.

• The big spending often occurs in academic medical centers, which tend to be concentrated in major metropolitan areas, like Chicago, New York, and Los Angeles.

• These centers are often the biggest economic players in town and the largest employers.

Don’t take my word for it. The New York Times and the New England Journal of Medicine say so too. As Will Rogers remarked, “All I know is what I read in the papers.” In this case the papers include the most widely read medical journal on the planet.

• The Times observes,

“As Congress struggles to rein in health costs as part of its sweeping reform efforts, hospitals in New York City and other urban areas that provide some of the most expensive care are among the primary targets…Through greater efficiency, Medicare spending could be cut by 15 to 30 percent, cite researchers at Dartmouth Medical School, who contend that Medicare could save $1.42 trillion by 2023, and eliminate a looming deficit.”

The Times goes on to observe that at NYU Medicare spending was $105,000 for the last two years of life, that patients spent an average of 31 days in the hospitals, and were visited by 77 doctors. Meanwhile in Davenport, Iowa, during the last 2 years of life, Medicare spent $40,000 per patient, patients spent 14 days in the hospital, and each patient saw 20 doctors.

Source: “Hospitals Cite Worry on Fees in Health Bill,” NYT, November 3, 2009

• To explain these two to four fold differences, three Boston Medical Center and Boston University School of Medicine physicians, say in “Payment Reform for Safety-Net Institutions – Improving Quality and Outcomes, “ November 5, 2009,

“Low –income patients are more likely than high-income patients to have multiple co-existing conditions, and hospitals serving a high proportion of low-income high-patients may therefore have to do more than other hospitals to achieve the same outcomes. We believe that given the same level of quality, safety-net hospitals should therefore be reimbursed more per patient under any pay-for-quality scheme that is implemented.”

“Even when they have health insurance, people with low income often have more difficulty gaining access to the care they need. They may be faced with such challenges as disconnected telephones, transportation difficulties, multiple or inflexible jobs, unaffordable copayments for medicine and often cultural and language barriers as well.”

In short, for these and related reasons, it is impractical and unrealistic to expect high-spending regions, particularly in inner cities, to reduce their costs of doing business and providing services to the same level as those in low-spending regions, where patients are healthier and costs of doing business are lower. Socioeconomic and culture differences and sickness levels are often profound and cannot be reduced to leveling the payment field. People are sicker in high spending areas. Indded, The "hospital care intensity index" developed at Dartmouth is in the 98.6 percentile in Manhattan compared to less than 20 in the Pacific Northwest and upper Midwest and 40 to 60 in much of rural America.


JohnLloydScharf said...

If health care is the problem, insurance is not the cause and government is not the answer.
Of those "50 million," that lack insurance there were 45,000 who died without health care.
WITH health care, 98,000 died FROM health care because of malpractice.
The question is do we want to trust that largest corporation in the world, the U.S. Government. Do not expect house calls anytime soon.
We have seen how well the government delivers on its promises and its bureaucracies pursue the money without giving us benefits on so many levels.
Imagine another 111 bureacracies that only ultimately must listen to the Secretary of the Treasury - another "service" of which is the IRS.
That blog of mine above has several .pdf connections (HR. 3962 and two summaries, a few videos, and page references for new taxes and other mandates).
If you cannot use the link, google "Progressive Capitalist H.R. 3962."
If you believe the promises of this bill, you have to deal with the lie that it fosters competition with a government option called the "Public Option" and establishes the government as a monopoly making its own rules. Don't worry. You'll run out of "rich" soon enough.
We have at least a $12 trillion economy of which at least $1.8 trillion is spent on health care.
If you read the bill, there are plenty of opportunities to soak the middle class, if you do not mind the 1.6 million made jobless.
REPUBLICAN Affordable Health Care For America Act
MAKING HEALTH Care Affordable For EVERY AmeriCAN

Richard L. Reece, MD said...

Dear John:

John Goodman, the conservative health economist who founded at the National Center for Policy Analysis, wrote a blog last week debunking the oft-repeated myth that Americans are dropping dead from lack of insurance. Reports of their deaths ala Mark Twain, are greatly exaggerted.

The 98,000 figure, from the 10 year old IOM "To Err is Human" ahs been slammed by many as deeplly flawed.

Poeple die in hospitals from multiple things - respiratory pneumonias, drug reactions, pulmonary emboli, strokes, heart attacks, old age, infections . To ascribe all, or even most of these deaths, to "malpractice" is a stretch only a lawyer could believe.

JohnLloydScharf said...

Doctor Reece, both of the studies I mentioned are flawed from my perspective. I mention both because we spend billions of dollars based on assumptions that are never proven when the program goes into effect.

In fact, if the program fails, they are like gamblers wanting to double down on a pair of 6s in blackjack. It is almost a sure loser and the stakes are higher.

They are wanting to do that with another "Stimulus Act," where it may be the case that it is actually making things worse. Every time the government borrows, it competes more and more with private credit.

The more private industry has to compete with the government, the higher interest they must pay.

Why borrow in an economy that is going south? If they do not borrow, they do not maintain the means of production, much less expand it.

If you have less and less means of production, you need less and less workers for the labor. That means fewer jobs/more joblessness.