[There is a] a positive and statistically significant relationship between medical spending and better health: 10 percent greater medical spending over the prior 3 years (mean = U.S. $2,709) is associated with a 1.9 percent larger [Health and Activity Limitation Index] value (p=.045; range 1.2–2.2 percent depending on medical spending measure) and a 1.5 percent greater survival probability (p=.039; range 1.2–1.7 percent).
Here is what researchers have found both useless and harmful, according to leading medical journals:
More from the New York Times.
From The Wall Street Journal by Sara Murray:
Means-tested programs, designed to help the needy, accounted for the largest share of recipients last year. Some 34.2% of Americans lived in a household that received benefits such as food stamps, subsidized housing, cash welfare or Medicaid (the federal-state health care program for the poor). Another 14.5% lived in homes where someone was on Medicare (the health care program for the elderly). Nearly 16% lived in households receiving Social Security.
See article at The New York Times.
Nearly half of U.S. households are receiving government benefits:
Means-tested programs, designed to help the needy, accounted for the largest share of recipients last year. Some 34.2% of Americans lived in a household that received benefits such as food stamps, subsidized housing, cash welfare or Medicaid (the federal-state health care program for the poor). Another 14.5% lived in homes where someone was on Medicare (the health care program for the elderly). Nearly 16% lived in households receiving Social Security.
All the ideas are “eat-your-spinach” benefit cuts, unlike the NCPA’s “win-win” approach.
Source: Congressional Budget Office
The main message of those involved with the Dartmouth Atlas is the claim that high costs are generated by wasteful physician practices that drive up costs by encouraging procedures of little value to health. This view has spawned an entire policy industry devoted to rooting out variations in health care expenditures and controlling them by unilaterally cutting reimbursements for high cost areas.
In fact, after ObamaCare was passed, the Institute of Medicine, was directed to address “unnecessary variation in Medicare spending,” especially for “high-volume, high-cost, conditions,” and to develop a value index based on measures of quality and cost that could be used to promote “high-value services by health care providers.”
But what if they are wrong?
James D. Rechovsky et al. examine a national sample of fee-for-service Medicare spending for 1.6 million beneficiaries in “Following the Money: Factors Associated with the Cost of Treating High-Cost Medicare Beneficiaries.” They conclude that the assertion that “much of the variation in cost of treating Medicare beneficiaries is driven by supply-induced demand,” “cannot be supported when one comprehensively controls for health status and conducts analysis at the beneficiary level.”
More than nine million seniors are also eligible for Medicaid. So-called dual eligibles consume more than $20,000 in care annually — accounting for 36% of Medicare spending and 39% of Medicaid spending. America’s Health Insurance Plans released a study by Emory University professor Kenneth Thorpe, on the cost savings of better care coordination for seniors who are also eligible for Medicaid benefits. Dual eligible seniors would benefit from a variety of team-based care interventions: These include:
According to Thorpe:
Assuming States enrolled all dual eligibles into team-based care models, federal savings over the next ten years would total $125 billion—clearly an upper estimate. States would save approximately $34 billion in Medicaid spending over the same ten year period.
Diane Archer has a post at the Health Affairs blog arguing that Medicare is more efficient than private insurance. One can only reach such a conclusion through such sleights of hand as conflating spending with cost, and by ignoring most of Medicare’s administrative costs.
As a pre-buttal, I offer this excerpt from a paper I wrote about a “public option” (emphases generally added and citations omitted):
Is Government More Efficient?
Supporters of a new government program note that private insurers spend resources on a wide range of administrative costs that government programs do not. These include marketing, underwriting, reviewing claims for legitimacy, and profits. The fact that government avoids these expenditures, however, does not necessarily make it more efficient. Many of the administrative activities that private insurers undertake serve to increase the insurers’ efficiency. Avoiding those activities would therefore make a health plan less efficient. Existing government health programs also incur administrative costs that are purely wasteful. In the final analysis, private insurance is more efficient than government insurance.
Administrative Costs
Time magazine’s Joe Klein argues that “the profits made by insurance companies are a good part of what makes health care so expensive in theU.S.and that a public option is needed to keep the insurers honest.” All else being equal, the fact that a government program would not need to turn a profit suggests that it might enjoy a price advantage over for-profit insurers. If so, that price advantage would be slight. According to the Congressional Budget Office, profits account for less than 3 percent of private health insurance premiums. Furthermore, government’s lack of a profit motive may not be an advantage at all. Profits are an important market signal that increase efficiency by encouraging producers to find lower-cost ways of meeting consumers’ needs. The lack of a profit motive could lead a government program to be less efficient than private insurance, not more.
