Thursday, April 2, 2015

The Health Care World is Looking for a Hero

Everyone is familiar with the basic problems of health care in the United States. It costs a lot, it is inefficient, and quality is highly variable. With these problems, virtually everyone in the field, liberals and conservatives, agree on the so-called “Triple Aim” of health care reform: decrease the rate of change of the cost increase (bend the cost curve) if not actually decrease the cost; improve the consistent quality of care; and improve the health status of the population at large. In theory, this should be doable with better organization.

There are a few programs in place trying to achieve cost reduction, hopefully while also achieving the other two objectives. Accountable Care Organizations are one such program. Another is an attempt to change the fee for service mode of payment and replacing it with so-called Value Based Insurance Plans, which would generally pay a set amount for various conditions, and so put the onus on practitioner organizations to make their services cost-effective. But the most advanced and widespread program of cost reduction is health insurance called High Deductible Health Plan (HDHP). I have explained my opposition to HDHPs before on this blog with some passion. I was also lead author of the American Academy of Pediatrics policy paper criticizing HDHPs – These plans accounted for over 20% of employer-sponsored health insurance policies in 2013, and that percentage has doubtless markedly increased under the ACA (Obamacare).

The key result of HDHPs is to decrease the volume of health services at the lower level of care – primary care especially, but lots of other basic services as well. In other words, its effect is to cut utilization and thereby to cut costs. The most prominent pro-HDHP article I'm aware of appeared a couple of years ago in the journal Health Affairs; written by Amelia Haviland et al., its title was “Growth Of Consumer-Directed Health Plans To One-Half Of All Employer-Sponsored Insurance Could Save $57 Billion Annually.” Pretty assertive. Now a followup article has appeared: “Do consumer-directed' Health Plans Bend the Cost Curve Over Time? “ The conclusion is yes, they do. Amazing. If you raise the price of a service people consume less of it. Bring on the Nobel Prize. And try to ignore the other two elements of the Triple Aim, quality and health of the community, because with HDHPs quality and equity have to decline.

But health care costs do need to decrease, and the HDHP advocates are doing the research necessary to show that, whatever the defects of HDHPs (and I think they are severe), at least costs are reduced, or so it seems at present.

The is this: yes, HDHPs are poor policy, but where is a better substitute? We don't have compelling alternatives, for many reasons. So, to try to fix the problems responsibly, we have to take preliminary steps to help these alternatives to appear.

So, here is my suggestion for the research someone should undertake. It would be easy research, it would be significant research, and it would be great for someone's career. Here's my suggestion:

We have good evidence that a major problem with the US health care system is not over-utilization, but over-pricing.  See  Here is an example: in 2012, the average hospital day in the US cost over $4,287.  The next highest hospital day cost in international perspective -- not the average international hospital day cost, but the next highest -- was Australia, where the cost per day was $1,472.  That's not a small difference.

This shows just one item of comparison, the cost of a hospital day. This same report shows many, many items wit the same order of difference. The average price for an angiogram in the US was $2,430.  In Chile, the next highest country, it was $378. Given these differences, how can one think anything else besides, what would happen to US health costs if the prices of medical goods and services were in line with the rest of the world?

So, that's the research project. Do the same thing the first Haviland article did. Take about 20 of the common and overpriced services. Compare the cost of all these services together and see how much they cost now, and how much they would cost if they had international prices. Here's the matrix:


annual frequency average US price x times y = total cost

Service 1 x $y $z

Service 2 x’ $y’ $z’

Service 20 x’’ $y’’ $z’’



average intl. Price x times i = total revised cost
REVISED Service 1 x $i $m

Service 2 x' $i’ $m’

Service 20 x’' $i’’ $m’’




Then publish the paper in the mode of the first Haviland article: “Curtailing the Price of 20 Common Medical Services to International Norms Would Save $100 Billion in the US.”

Say the Amount Saved turned out to be really significant, as I think it would be. Then, although we wouldn't have a program that would be competitive with HDHPs, we would have a target. Find a program that would reduce the prices of key overpriced services, and there it would be, a program that decreased costs without interfering with quality of care. Yes, it would be hard to find that program, but at least the target would be clear and present.

That's my proposal. The medical cost world is looking for a hero. Somewhere out there, that hero is waiting. Hey, read my blog!

Budd Shenkin

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