Less expensive, lower-quality innovations abound in every economic sector—except medicine
Lowering Health Costs: Buy Less Stuff
Even by the standards of political rhetoric, it strains credulity when politicians suggest that the declared goals of health-care reform—increasing access, improving quality and controlling costs—are somehow mutually reinforcing. I’m no Peter Orszag, the über-wonk overseeing President Obama’s Office of Management and Budget, but if my father taught me anything it was that saving money rarely involves buying more and better stuff. Plain talk about ways to cut costs are buried in rhetoric about rooting out inefficiencies and various prevarications about savings from investing in (that is, spending on) more preventative medicine, health information technology, and comparative effectiveness research about what therapies work best for which patients. While these goals may all be worthwhile, and there is much of little or no value in the current system (including the immense amount of money spent to maintain our Byzantine for-profit insurance system), ultimately we simply do not have the resources to give away an expensive commodity like health care in quantities that people want, subject to no budgetary constraints.
It is beyond dispute that some mechanisms for the controlled distribution of these expensive goods and services are required. In most markets, prices play this role, and many feel that the fundamental problem in health care is that many consumers are shielded from the costs of their care. A system based largely on prices (that is, price rationing) may control costs better than our current system, but it would of course mean that those with the most money have first dibs on scarce health-care resources, and there might be little left over for those without means. (There are other reasons too why most consumers can’t be expected to comparison shop for emergency coronary angioplasty or for charged-particle radiosurgery for their glioblastoma the same way they might for gasoline, underwear and cling peaches). It is a fantasy to believe that price rationing alone can provide an acceptable mechanism for the controlled distribution of medical services, and some other means are thus also needed. Perhaps we should take it as a sign of the robustness of our democracy that this rather technical issue of the proper mix and variety of price and non-price rationing has somehow managed to plunge our national conversation about health-care reform into a Jerry Springer–style shouting match, except without the civility.
But regardless of the mix, expanding coverage to the uninsured, caring for our aging baby boomers, and accommodating new, effective technologies—while still feeding, clothing, housing, and educating ourselves, and catching an occasional movie—will require our system of distribution of health services to be more cost- sensitive, and will almost certainly mean the adoption of some decrementally cost-effective strategies for saving money. For example, Canadian-style delays for expensive diagnostic or surgical procedures certainly pose real, albeit small, medical risks, and would fall into this southwest category. Getting insured Americans to accept such new risks may be difficult, but slightly quality-reducing (that is, risk-increasing) cost-saving strategies have already been widely adopted within the American system, even if not studied or widely acknowledged. The gradual increase in the “hassle factor” in accessing medical care is one covert way that the industry has found to limit the distribution of services. More overt examples of rationing already adopted include aggressively shortening hospital stays and limiting formulary options (which sometimes require patients to change from a medicine they have been tolerating well to another in the same class). Despite the fact that doctors regularly (although sometimes disingenuously) deploy patter informing patients that the hospital is a dangerous place to stay and that the formulary medication is “just as good” as the one they’ve been taking, these strategies are certainly associated with small but real risks. Even a preadolescent quickly learns the true meaning of “just as good”; perhaps a more mature citizenry can also come to appreciate some of the upside of having “just as good” alternatives.
- Orszag, P. R., and P. Ellis. 2007. The challenge of rising health care costs—a view from the Congressional Budget Office. New England Journal of Medicine 357:1793–1795.
- Cohen, J. T., P. J. Neumann and M. C. Weinstein. 2008. Does preventive care save money? Health economics and the presidential candidates. New England Journal of Medicine 358:661–663.
- Kent, D. M., A. M. Fendrick, and K. M. Langa. 2004. New and dis-improved: On the evaluation and use of less effective, less expensive medical interventions. Medical Decision Making 24:281–286.
- O’Brien, B. J., K. Gertsen, A. R. Willan and L. A. Faulkner. 2002. Is there a kink in consumers’ threshold value for cost-effectiveness in health care? Health Economics 11:175–180.
- Nelson, A. L., J. T. Cohen, D. Greenberg and D. M. Kent. 2009. “Much Cheaper, Almost as Good”: Decrementally Cost Effective Medical Innovation, Annals of Internal Medicine 151:662–667.