Why We're So Ineffective in Controlling Health Care Costs

Two recent publications show with painful clarity why we are so unable to moderate the cost increase trend.

The New England Healthcare Institute's (NEHI) aptly-titled report on waste ("How Many More Studies Will it Take?")defines waste as "health care spending that can be eliminated without reducing the quality of care." The report summarizes studies suggesting that up to 30% of the $2.3 trillion we spent on medical care in 2007 is waste, and identifies five root causes of waste in clinical care: (1) variation in the intensity of care; (2) lack of compliance with evidence-based guidelines; (3) limited adoption of clinical information technologies; (4) failure of primary care systems to provide timely access; and, (5) underuse of cost-effective diagnostic tests.

"1994 All Over Again? Public Opinion and Health Care" in this week's New England Journal tell us why the 462 articles (1998 - 2006) about waste in NEHI's Compendium have had so little effect. Although 61% believe that individual Americans spend too much on health care (I'm surprised this number isn't higher), 70% believe that the government spends too little! Only 11% think the government spends too much!

In other words, even though it's totally clear to experts that waste is a significant component of high and rapidly rising health care costs, a large majority of the population endorses increased spending!

So what do we do?

Research, like the 462 studies that are in the NEHI Compendium, is crucial.

But as the NEHI report makes so clear - our problem dealing with waste is not from too little information.

The missing ingredient is educative leadership. There are innumerable constituencies for increasing expenditure - manufacturers of drugs and devices, advocacy groups for particular diseases, all those whose earnings come from providing health care services, and more.

The only natural constituency for tackling waste is the payer community. That community, however, is fragmented into public and private insurers, employers who insure their employees, and individuals who pay out of pocket. Those who profit most from the $2.3 trillion expenditure have thus far controlled public understanding. They have succeeded in portraying insurance companies as greedy "bean counters" and the federal government as incompetent and only likely to make things worse.

The two most promising sources of educative leadership are employers who continue to insure their employees and state governments that are required to balance their budgets.

The business community has come nowhere near using its potential to be businesslike about health care waste. As health care costs continue to drive insurance costs upward, there is potential for employers and employees to collaborate in understanding the cost trend better and working to influence it.

States are caught between increasing costs for Medicaid and state employees and declining revenues. As I said in a recent posting on specialty drugs, states are the most promising source for more rationality in health policy.

The NEHI report is a valuable contribution. But unless business leaders and state governments take the ball and run with it, the next 462 research reports on waste won't make any more difference than the 462 NEHI has summarized!