Home > Fighting for Health, Universal Healthcare > {NYT} Health Care Spending Disparities Stir a Fight.

{NYT} Health Care Spending Disparities Stir a Fight.

[Jose's note:]

I will be in Washington, DC from June 17th until the 21st. Let me know if you will be in the area and we can get together then.

I’ll attend the 19th VistA Community Meeting. http://worldvista.org/Conferences/19th-vista-community-meeting

This meeting will be held at the National Library of Medicine (NLM), and the agenda is packed with fantastic speakers and topics.

This meeting is well worth your time and money if you are interested in Open Source EMRs. Regards.


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[Jose's Note: The comments below were authored by a dear colleague of mine in Miami:
Santiago Leon, J.D.
ACC Hall Insurance Brokers
1101 Brickell Avenue Suite 702-S
Miami FL 33131
Telephone 305-577-4270 - Fax 305-577-3502 -
Cellular 305-439-4338
Email sleon@accbrokers.com

I found Santiago's comments very appropriate to the topic at hand.

Obama discovers health care spending disparities- Nelson defends Florida over-treatment

The dirty little secret of American health care costs (one of them, anyway, the other being the enormous overhead incurred by channeling health care expenses through insurance companies) has finally made it to the front page of the New York Times (story below). Here is the gist of it:

“Dr. Elliott S. Fisher, one of the Dartmouth researchers, diagnosed the problem
this way: “Medicare beneficiaries in higher spending regions are hospitalized
more frequently, are referred to specialists more often and have a much smaller
proportion of their visits to primary care physicians.”

In his blog last month, Mr. Orszag wrote, “The higher-cost areas and hospitals
don’t generate better outcomes than the lower-cost ones.”

Sound like Miami? You bet- Miami plays a starring role in the story. Moreover, in Miami, this problem does not affect only the elderly. For “medicare beneficiaries” you can substitute “people with insurance.”

Have local employers, who are paying for Miami’s medical extravagance in their insurance premiums, blown the whistle on this? Have their advisors brought the facts to their attention and suggested that employers work together to rein in local medical profiteering?   Have our two largest employers, Miami-Dade County and the School Board, reacted to our revenue crisis by looking under the hood at what is driving their health care costs?  Have the academic leaders of the local programs that train health care professionals shared the Dartmouth findings with their students and urged them to take action on them?  It does not seem so- but, when you think about it, that should not surprise us.  (To its credit, the Miami Herald has published various articles making reference to the Dartmouth findings, but the response, if any, has been muted.)

Health care looms large in the Miami economy, and generates vast wealth and much employment.  Think of an institution that might focus concern about the excesses of the system, and then think of where its revenues come from.  Hospitals, pharmaceutical companies and other suppliers to the industry, insurers, diagnostic facilities and their owners and executives, as well as physicians and other providers of health care, are major benefactors of political candidates, universities, the media, employer associations and civic and charitable organizations.  Moreover, the Miami value system pays its respects to wealth, from whatever source derived.  Indeed, medical overtreatment is a major profit center for our community, pulling billions of dollars into the local economy- probably more billions than even Medicare fraud.  So much money runs through the health care system that it stills the doubts of all who might question the way it accumulates.

According to the Times story, not everyone in Washington is buying in on the Dartmouth observations.  John Kerry is doughtily defending the teaching hospitals of Massachusetts, and Bill Nelson is defending the Medicare mills of Florida.  However, even if Washington is eventually able to agree on the problem, the solution will not be easy.  The problem is deeply rooted in the incentive structure of American health care.

Today, most health care is provided under fee-for-service contracts.  This is a problem.  Piecework may work reasonably well for sewing shirts, but it definitely does not work well in a situation where the same person bills you for telling you what services you need and then bills you for providing them.  The financial incentive for the provider is obviously to decide that you need a lot of services.  Reducing the price of the services is not a solution- the provider will simply increase the volume.  Having someone looking over the provider’s shoulder is also not effective- a health care provider worth his (her ) salt can always come up with a good reason why you should have a service.  Clearly, then, the solution is to change the incentive system.  One way that has been tried is to pay the provider whether he/she treats you or not.  Problem:  now the incentive is to provide as little treatment as possible.

The system that has been demonstrated to work is to pull as many as possible of the people who provide the health care services you need under one clinical and financial roof.   This is the system used by Kaiser Permanente, the Veterans Health Administration, the Mayo Clinic and the Geisinger Health System-  all of which are recognized for providing high-quality, cost-effective care.  In these programs, the health care providers are on salary and are working as part of a team which, as a team, is accountable for both quality and cost.

To create the kind of health care system we need, in order to improve quality and reduce cost, will take a major change in attitude among providers (many of whom are quite comfortable with the present entrepreneurial system) and also among consumers (who like the idea of being able to see the provider they want, when they want).  However, if the incentives are properly set up, it should be possible over a period of time to move in the right direction.

Prediction:  Health care in Miami will change, but we will be among the last to board the train.

/s Santiago



June 9, 2009
Health Care Spending Disparities Stir a Fight

WASHINGTON – President Obama recently summoned aides to the Oval Office to discuss a magazine article investigating why the border town of McAllen, Tex., was the country’s most expensive place for health care. The article became required reading in the White House, with Mr. Obama even citing it at a meeting last week with two dozen Democratic senators.

“He came into the meeting with that article having affected his thinking dramatically,” said Senator Ron Wyden, Democrat of Oregon. “He, in effect, took that article and put it in front of a big group of senators and said, ‘This is what we’ve got to fix.’ ”

As part of the larger effort to overhaul health care, lawmakers are trying to address the problem that intrigues Mr. Obama so much – the huge geographic variations in Medicare spending per beneficiary. Two decades of research suggests that the higher spending does not produce better results for patients but may be evidence of inefficiency.

Members of Congress are seriously considering proposals to rein in the growth of health spending by taking tens of billions of dollars of Medicare money away from doctors and hospitals in high-cost areas and using it to help cover the uninsured or treat patients in lower-cost regions.

Those proposals have alarmed lawmakers from higher-cost states like Florida, Massachusetts, New Jersey and New York. But they have won tentative support among some lawmakers from Iowa, Minnesota, Montana, North Dakota, Oregon and Washington, who say their states have long been shortchanged by Medicare.

Nationally, according to the Dartmouth Atlas of Health Care, Medicare spent an average of $8,304 per beneficiary in 2006. Among states, New York was tops, at $9,564, and Hawaii was lowest, at $5,311.

Researchers at Dartmouth Medical School have also found wide variations within states and among cities. Medicare spent $16,351 per beneficiary in Miami in 2006, almost twice the average of $8,331 in San Francisco, they said.

The Senate Finance Committee recently suggested that one way to pay for health care overhaul would be to reduce geographic variations by cutting or capping Medicare payments in “areas where per-beneficiary spending is above a certain threshold, compared with the national average.”

Another proposal would spare health care providers in low-spending, efficient areas from across-the-board cuts in Medicare payments.

The committee chairman, Senator Max Baucus, Democrat of Montana, and the panel’s senior Republican, Senator Charles E. Grassley of Iowa, are from lower-spending states.

But the proposals are not just pork-barrel politics. They are based on the research by Dartmouth experts who have documented wide geographic variations in health spending. The research has become phenomenally influential on Capitol Hill since it was popularized by Peter R. Orszag, as director of the Congressional Budget Office and then as President Obama’s budget director.

Aides said Mr. Obama had been intrigued by regional variations in health spending since before his inauguration. The topic came up at a meeting with Mr. Orszag in Chicago late last year.

The magazine article, by Dr. Atul Gawande in the June 1 issue of The New Yorker, said a major cause of the high costs in McAllen was “overuse of medical care.”

Dr. Elliott S. Fisher, one of the Dartmouth researchers, diagnosed the problem this way: “Medicare beneficiaries in higher spending regions are hospitalized more frequently, are referred to specialists more often and have a much smaller proportion of their visits to primary care physicians.”

In his blog last month, Mr. Orszag wrote, “The higher-cost areas and hospitals don’t generate better outcomes than the lower-cost ones.”

But other researchers and politicians are not so sure. They say it would be a mistake to cut or cap Medicare payments without knowing why spending in some places far exceeds the national average.

“There is too much uncertainty about the Dartmouth study to use it as a basis for public policy,” said Senator John Kerry, Democrat of Massachusetts. “Researchers can’t explain why some areas of the country spend more on health care than others. There are many reasons spending could vary: higher costs of living, sicker people or more teaching hospitals.”

“States like Massachusetts are concentrated centers of medical innovation where cutting-edge treatments are tested and some of the nation’s finest doctors are trained,” Mr. Kerry added. “This work might cost a little more, but it benefits the entire country.”

Madeline H. Otto, an aide to Senator Bill Nelson, Democrat of Florida, said he was “adamantly opposed” to the proposed cuts in higher-spending areas because the cuts did not distinguish between necessary and unnecessary care.

Mr. Orszag says health spending could be reduced by as much as 30 percent, or $700 billion a year, without compromising the quality of care, if more doctors and hospitals practiced like those in low-cost areas. The supply of hospitals, medical specialists and high-tech equipment “appears to generate its own demand,” Mr. Orszag has said.

A Democrat from a low-spending state said critics were trying to “blow holes in the Dartmouth analysis.”

Dr. Michael L. Langberg, senior vice president of Cedars-Sinai Medical Center in Los Angeles, is among the critics.

“The statement that Medicare costs can be cut by 30 percent has been repeated so many times that it has come to be viewed as a proven fact by some,” Dr. Langberg said in a recent letter to the Senate Finance Committee. “It is not a fact. It is a gross oversimplification of an untested theory.”

Dr. Langberg endorsed the goal of covering the uninsured, but said, “We do not believe that rushing to make large cuts in Medicare payments to hospitals is the right way to fund that coverage.” The Dartmouth team has cited Cedars-Sinai as having very high Medicare spending per beneficiary.

Research by Dr. Robert A. Berenson and Jack Hadley of the Urban Institute suggests that much of the geographic variation in health spending can be explained by differences in “individual characteristics, especially patients’ underlying health status and a range of socio-economic factors, including income.”

“Some patients may benefit from higher spending,” said Mr. Hadley, who is also a professor at George Mason University in Virginia. “They could be adversely affected if they live in geographic areas where payments are cut.”

Dr. Berenson, who was a Medicare official in the Clinton administration, said, “There remains too much uncertainty about the Dartmouth findings to ground public policy on them.”

Sheryl Gay Stolberg contributed reporting.

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