Sunday, August 16, 2009

30% Waste in American Health Care?

According to a leader of Dartmouth’s Health Policy group, “if we sent 30% of the doctors in this country to Africa, we might raise the level of health on both continents.” Sadly, the notion that 30% of health care resources are wasted underlies current thinking about health care and serves as a beacon for Peter Orszag (Director of the Office of Management and Budget) and his health care reform team.

Richard “Buz” Cooper, MD,, The 30% Solution : A Trecherous Prescription, April 5, 2009

In the health reform debate, you hear a lot of figures bandied about without serious probing about the source. Perhaps the most common is these figures is this one: as a nation we waste 30% of health care dollars.

Supporters of health reform – including Donald Berwick of the Health Improvement Institute, Peter Orszag of the Office of Management and Budget, and the President himself – often cite this statistic.

The source of this statistic is the Dartmouth Health Policy Group. In its studies over the last 36 years of regional practice variations based on Medicare data, the Group has determined high spending regions spend 30% more than low spending regions. The Group concludes high spending regions, due to overconcentration of hospitals and specialists, overuse resources by 30%. To correct the health system’s overspending, therefore, it logically follows all one has to do lower spending is to reduce costs of high spending regions to the level to low spending regions. The money saved, it is said, could easily cover the costs of insuring the uninsured.

Dr. Cooper, a professor of medicine and a senior fellow at the Leonard Davis of Health Economics at the University of Pennsylvania, says the Dartmouth argument is flawed.

- One, it relies on Medicare data, which does not represent practices of the system as a whole.

- Two, it ignores the fact that specialist-rich areas have a higher quality of care.

- Three, it overlooks factors such as the costs of doing business and costs of providing services to uninsured populations such as immigrants, who tend to be sicker and have higher costs of care (one of five Americans is a recent immigrant and they tend to be concentrated in certain regions).

- Four, it skips around the reality that high spending regions tend to be in metropolitan areas with a heavy concentration of the rich and the poor, both of whom consume more in resources than middle-class Americans.

On the latter point, Cooper notes the former confederate states, which have much higher levels of poverty and twice the concentration of blacks , have considerably higher Medicare spending than the middle west. He also observes that university towns – like Columbia, Missouri, or Madison Wisconsin – spend much less than metropolitan Los Angeles, Chicago, Miami, or New York City.


In a vast continental nation like the U.S. it may be misleading and even dangerous to think one can minimize or end health care waste by homogenizing and standardizing care through health reform regulations. To rely on government, the health costs of which is rising 1/3 faster than the private sector, to decrease waste is questionable.

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