Below, a very welcome contribution from Shannon Brownlee, author of Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer (2007), an outstanding report on why ‘more care’ often is not ‘better care’. An award-winning journalist and Schwartz Senior Fellow at the New America Foundation, Brownlee has written extensively about health care for the many publications including the Atlantic Monthly, the New York Times, and the Washington Post.
As I’ve suggested in the past, Medicare reform could be a stepping stone to national health reform. Ideally, we would do both simultaneously. In this post, Brownlee puts her finger on what is wrong with the way Medicare has traditionally tried to cut costs. In future HealthBeat posts, we’ll talk more about specific proposals for cutting Medicare waste.
While Barack, Hillary, and Paul Krugman slug it out over the individual mandate, it’s worth pausing for a second to wonder why nobody is saying much about controlling health care costs. Yes, covering everybody is the right thing to do, it’s the moral thing to do, but it isn’t the only thing to do. Theoretically, it shouldn’t even be the hardest thing to do, because at its core, covering everybody is mostly a matter of being willing to come up with the money. In reality, of course, coming up with the money is a political nightmare.
Controlling costs, on the other hand, is a much deeper problem, but oddly enough it may be easier to achieve politically at the federal level than universal coverage. That’s because cost containment can begin with Medicare, which has been instituting cost control measures under the radar for years. Its efforts have resulted in a lot of bitching and moaning from the hospital industry and doctors, but not a lot of political fallout.
So why aren’t Medicare’s cost control measures working? Because CMS has focused most of its efforts to limit spending on controlling prices. This strategy arises out of the mistaken belief that if they could just rein in the price per unit of care, the price of each CT scan and each office visit, they could control spending overall. This would be a dandy strategy in any other industry, but in health care it hasn’t worked out. And it hasn’t worked out because in health care, the real driver of cost is volume. Costs go up when the amount of care doctors and hospitals deliver to each patient goes up. And because the amount of care delivered doesn’t have all that much to do with the amount of care that patients actually need, whenever Medicare slashes the price it will pay, hospitals and individual physicians can always find ways to deliver more stuff in order to maintain their revenue stream.
They do so in a variety of ways. When Medicare and other payers cut
physician reimbursements, the docs turn to ancillary services – MRI
scanners, in-office blood tests, EKGs, you name it. Physician business
magazines are filled with how-to articles telling doctors about all the
ways they can boost their incomes, and ancillary services are now a
huge driver of Medicare spending. On the hospital side, when Medicare
reduces payments for one set of services, hospitals try to attract
patients to the services with higher margins – which these days are
imaging tests like CT scans, cardiac catheterization, and DaVinci
surgical robots. That’s why every hospital in the country wants a
64-slice volumizing CT scanner and a stable of interventional
cardiologists. And that means that patients are getting a lot of care
that has nothing to do with what they actually need – or might want if
they knew how useless, not to mention potentially harmful, much of it
Medicare has begun to understand that it needs to start rewarding
efficiency. And by efficiency I don’t mean how many patients a
hospital’s radiology department can run through that 64-slice CT
scanner per hour, or how few envelopes the billing department uses to
get the bills mailed out. I mean the true measure of efficiency, which
is health outcomes and patient satisfaction for the lowest cost. This
is what “pay for value” really means in health care. In a world where
payers reward this sort of efficiency, the volume of useless, wasteful,
harmful care goes down and the value to the patient goes up. Medicare
has already begun to figure this out, and it is already implementing
pilot programs that reward group practices that can demonstrate the
delivery of high quality care with lower volume. Amazingly enough,
nobody is running around screaming about socialized medicine, and even
Rudy Giuliani would be hard pressed to argue against rewarding