Medicare – Fewer Benefits or Less Waste

Posted on October 20, 2009 by Andrew Kurz

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 SUMMARY

If the highest cost 20% of hospitals were to cut in half the differences in price and utilization between them and the distinguished Mayo Foundation, and if all Medicare cost savings were proportional to Medicare cost savings of the last two years of life, annual savings could potentially reach $26 Billion. Over ten years and without cutting benefits, Medicare costs could be reduced by $260 Billion.

No one would complain about Mayo whose Medicare composite quality score ranks among the highest in the nation.  Key to Mayo’s success has less to do with pricing than with utilization.  Length of hospital stays and physician visits are significantly less than average, yet they handle some of the toughest cases in medical care. It is also noted that health care delivery in other countries is closer to the Mayo model than the more typical fee for service provider.

DISCUSSION

What senior would object to having medical coverage by the Mayo Clinic?  The Mayo Foundation manages 20 hospitals in its network, and has a world-wide reputation as a very high quality institution handling the toughest cases.  Less well-known, is that they provide this coverage at below average costs. For Medicare reimbursements within 2 years of death, Mayo costs average $28,000 per patient.  

This sounds expensive, and it is.  However, the national average to cover the last 2 years costs was just over $30,000.  Multiply that by 930,000 average (2001-2005) annual Medicare deaths and Medicare costs for just this segment are about $28 Billion per year.  This is some serious money.  The first question is where is it going?

The following graph consists of two groups of bars. On the left are hospital cost differences from U.S. average for the highest and lowest 10% of hospitals, and the highest and lowest 10% of physicians. The 5th bar in each is Mayo. The bars at right are the same except they show physician cost differences from average.

The highest 10% of hospitals incur nearly $19,000 more hospital costs compared to the U.S. average while the lowest 10% of hospitals incur almost $9,000 less than the average, a high/low difference of $28,000. Physician cost differences are similar, but the magnitude in dollars is smaller.

Costs become even more serious when one considers quality scores.  Hospitals whose costs are in the top 10% of all hospitals had lower average quality scores.  Yet, their costs were more than $50,000 per patient.  Similar results occur for hospitals sorted by Physician costs.  In all cases, higher cost providers had lower average quality scores than lower cost providers.  In short, more may not mean better as shown below

 

So how do providers like Mayo Foundation and other similar quality hospital and physician systems attain such high quality scores while holding the line on costs?  It may help to first show these costs as percent differences between the highest and lowest cost providers. The graph below uses the same data from the 1st graph but presents cost differences as a percent.

Those hospitals and physicians whose costs are in the highest 10% are nearly 75% above average, while those with lowest costs are more than 30% below average.  Mayo’s hospital costs are slightly below average but its physician costs are significantly lower.

Seniors are worried that proposed reforms and reductions in Medicare spending will reduce benefits.  A greater worry should be why there are such large reimbursement disparities now between providers.  Either some are being over-served or others are being under-served. Neither should be acceptable.

Medicare recipients might rightly ask, since all people pay into Medicare at about the same rate, why isn’t the payout more evenly distributed between high and low cost providers.  The difference between the highest and lowest hospitals and physicians almost equals the average cost of $30,000 per patient. Despite the huge cost differences, the result is the same.  The patient died.

Just as showing percents is more meaningful than dollars, the above cost differences can be further broken down into two components. One component is price and the other is volume or utilization.

Remember when gas prices were over $4.00 per gallon? People cut back on driving so their gasoline consumption (volume) went down. Fewer miles driven helped people offset some of the high price per gallon. A similar outcome occurs in healthcare. 

Hospital costs are affected by the cost per day (price) times how many days a patient stayed (volume or utilization).  For physicians, the analogy is the cost per physician patient visit (price) times the number of visits by the physician (volume).  Volume times price equals total cost, and “all in” costs equal total hospital costs plus total physician costs. The graph below shows the four components of price and volume.

Hospital Volume (utilization – length of stay)

The first group of  bars shows differences in hospital days.  Patient stays at the most expensive hospitals were nearly 40% more than average while those at the least expensive hospitals were some 20% less than average. From a utilization view, there is a significant difference in hospital (days) at higher cost hospitals. Higher cost hospitals tend to be larger, more complex and more intensive.  Yet, Mayo hospital days are comparable to the lowest cost hospitals.

Hospital Price (average daily cost)

The second group of bars shows differences in Hospital cost per day, or pricing.  Here both high cost hospitals and Mayo are more than 20% above average reflecting the sophisticated and expensive equipment and procedures performed.  In hospitals where physician costs are high or low, hospital pricing tends closer to the national average.  But Mayo more than not offsets their higher daily hospital costs with shorter length of stays.  The higher cost hospitals compound higher prices with more lengthy stays for a total hospital cost 75% higher than average.

Physician Volume (visits) and Price (cost per visit)

The remaining two groups show differences for physician volume and price.  Visits at high cost hospitals deviate even more from average than length of stays.  Physician visits at low cost hospitals mirror shorter hospital stays.  Physician costs per visit do not vary nearly as much as do hospital costs.

With regard to Mayo, utilization is also below average (fewer visits), but here physician pricing (cost per visit) is also below average.  Combining fewer patient visits AND lower costs per visit, yields a cost difference 30% below average for Mayo.

Medicare Reductions Need not Lower Benefits

What conclusions to draw?  Some legitimate cost differences should be expected.  But data suggests that if the high cost hospitals changed some of the care delivery nearer to Mayo’s performance, significant savings could occur with NO loss in benefits.  The graph below shows the potential savings if these higher cost hospitals had the same price and utilization structure as Mayo.  If the cost structure of the top 50% of all hospitals were the same as Mayo, annual savings would be nearly $4 Billion.

But there is more.  The savings described apply only to the Medicare costs associated with the last 2 years of patient life.  Those costs were noted at some $28 Billion per year.  However, Medicare annually reimbursed over $400 Billion in total. If total savings were comparable to the last two years of life costs, the savings could be 15 times larger than in the above graph. 

The graph below shows a 15X multiplier effect with annual savings for 6 groups of hospitals: the highest 10%, 20% and 50% of hospitals filtered on total hospital costs.  Plus a similar 10%, 20% and 50% of hospitals filtered on total physician costs.  Significant in this graph is that the differences between the highest cost and the more average cost hospitals are fairly extreme.  If one were to focus reform efforts on just these extremes, Billions could be saved.

The graph shows total theoretical savings. A more reasonable assumption would be to halve the theoretical savings. Thus, if the highest cost 20% of hospitals were to cut in half the differences in cost and utilization between them and the distinguished Mayo Foundation, and if all Medicare cost savings were proportional to Medicare cost savings of the last two years of life, then the annual savings could potentially reach $26 Billion. Over ten years and without cutting benefits, Medicare costs could be reduced by $260 Billion.  Actually achieving this level of savings would be a challenge. But Billions of dollars in waste, fraud and abuse could be safely removed without affecting real benefits. 

Why will those levels of savings not likely occur?  It would require hospitals, physicians and insurers to change their “business model” to achieve significant savings and that is a very broad challenge.  There needs to be a major shift from the “fee for service” model where every procedure, item and encounter are tracked and billed, to a more managed care model.

Insurers are familiar with managed care in the form of HMO policies. In HMO’s, the risk is on the insurer that premiums that are fixed per enrollee are sufficient to cover the health care costs of enrollees.  Some insurers are also providers so they would carry the insurance risk as well as the provider risk.

For health care providers, the risk of managed care is similar. For any specific encounter, like an appendectomy, the provider is paid a fixed amount from the insurer, and the hospitals and physicians are responsible for dividing up the payment and are at risk to deliver quality patient care for that amount.

While much focus has been on insurance reform to make it available to more people, attention must also be paid to wringing waste and abuse out of the system. Some of the currently proposed Medicare reforms include pilot programs to gradually shift the heavily “fee for service” orientation towards manage care.  In fact, of the 1,000 pages in House bill 3200, half are devoted to reducing waste in Medicare and Medicaid and pushing towards less skewed reimbursements than exists in the current environment.

Notes

Sources

Dartmouth 2005 Atlas of Health Care    DAP_Hosp_HRR_ST_01_05.xls

Table 1. Hospital information (2001-05) – Number of deaths among chronically ill patients assigned to hospital

Table 2. Medicare spending per decedent by site of care during the last two years of life (deaths occurring 2001-05)   (HOSPITAL)

Table 3. Medicare Part B spending by type of service (BETOS category) per decedent during the last two years of life (deaths occurring 2001-05)  (PHYSICIAN)

Table 4. The Medical Care Cost Equation: Disaggregation of hospital (facility) reimbursements per decedent into contributions of volume (patient days per decedent) and price (average reimbursements per day in hospital) during the last two years of life (deaths occurring 2001-05)

Table 5. The Medical Care Cost Equation: Disaggregation of payments for physician visits per decedent into contributions of volume (physician visits per decedent) and price (average payments per physician visit) during the last two years of life (deaths occurring 2001-05)

Table 6. Resource inputs per 1,000 decedents during the last two years of life (deaths occurring 2001-05)

Table 8. CMS Hospital Compare technical process quality measures (all patients, 2005)   (QUALITY COMPOSITE SCORE)

Centers for Disease Control:  Table 128. Personal health care expenditures, by source of funds and type of expenditure:  United States, selected years 1960-2006

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Medicare Trends

Posted on September 23, 2009 by Andrew Kurz

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SUMMARY

Medicare became law only in 1965 in part to mitigate the adverse effect of rising health care costs on seniors’ income. Those costs were driving many millions of seniors below the poverty line. In the pre Medicare environment, nearly 30% of seniors had fallen below the poverty level. In the intervening years, the percent of seniors with income below poverty level has dropped nearly three times.

While the benefits to seniors have dramatically improved their lot, the cost to society is the elephant in the room that needs to be addressed in Congress.  This report looks at the components that are driving up Medicare costs as well as increasing seniors’ out-of-pocket expenses.

 Overall population is increasing demands for care

As expected, growing populations result in growing health care costs. What is evident from the graph below is that in addition to overall growth, the percent of people 65 years and old is increasing.

Two factors are contributing. One is that the baby boomers as a group are beginning to move into the senior group. They are followed by a drop off (percent wise), in younger people.  Projections refer to the increasing mix of older people with fewer people working to pay into Medicare. But this trend is not permanent, and once the baby boomer “bubble” works its way through the population, the mix of retirees to workers stabilizes.  But that is out past the year 2040, beyond the range of most forecasts.

In short, solve the Medicare problem expected for the next 30 years and only minor changes will likely be needed after that.

Source: Center for Disease Control – Health, United States 2008 Figure 01

Greater life expectancy adds to aging population

The second factor contributing to the growth of seniors is their increasing life expectancy.  The graph below  shows that all major groups of seniors have benefited from better health care. Life expectancy at birth show lower increases.

The question is whether these significant increases will continue into the future.  If they continue, then the percent of seniors will continue to increase.  If trends tend to slow, then the population age mix may stabilize.

On the other end of the age scale, if birth rates rise, this will create a greater percentage of younger people.  And there is some evidence of this occurring, though not equally among different races. 

Source: Center for Disease Control – Health, United States 2008 Figure 14 

It may be 30 years before age group % stabilizes

On the assumption that the mix of aged people stabilizes in the 2040-2050 range, this still represents a significant change from today where less than 15% of population is 65 and over.  By the time it stabilizes, seniors will represent over 20% of population and may for some time to come beyond that.

Current Medicare premiums assessed on workers is not enough to cover those future costs. Two events clearly need to happen. One is to increase the “premiums” paid into the system.  Options include raising all rates uniformly or raising the wage ceiling on which premiums are based. The other is to take costs out of Medicare.

Another analysis has shown huge discrepancies being paid in Medicare indicating excess care being provided to some and not others that needs to be addressed.

Source: Center for Disease Control – Health, United States 2008 Figure 01

As people get older, their health demands increase

It is common knowledge that seniors slow down as they age.  The graph below shows the five most common reasons seniors reduce their activity level.  As they age, each factor grows in significance.

 Nearly 3 in 10 seniors over 85 will become limited by arthritis or musculoskeletal conditions.  2 in 10 seniors over 85 will be limited by heart or circulatory conditions.  Though climbing with age, vision, hearing and senility are factors in less than 1 in 10 seniors 85 and older.

While the graph shows the number of medical conditions increasing with aging, it does not indicate severity.  But on volume alone, seniors require more health care. This can be mitigated somewhat by more exercise and healthier diets, the two largest slowdown factors. Less can be done about vision, hearing, senility or dementia.

Source: Center for Disease Control – Health, United States 2008 Figure 13 

Medicare a major factor in improving poverty levels

Medicare came law only in 1965 in part to mitigate the adverse effect of rising health care costs on seniors’ income. Those costs were driving many millions of seniors below the poverty line. The success of Medicare was dramatic as shown in the graph below. With pre Medicare environment, nearly 30% of seniors had family income below the poverty level. In the short span of 7 years, the percent of seniors with family income below poverty level dropped to 15%, roughly in half. Gradual reductions since have lowered that threshold to about 10%.  This could partially explain why older seniors are often very protective of their benefits. They remember when there was no safety net.

Source: Center for Disease Control – Health, United States 2008 Figure 04 

 Price inflation creates higher bills for seniors

The graph below highlights cost trends for four groups of people from 1996 to 1996. Except for a slight break around, 1998 – 2000, costs have trended upward every year for every age group. Within each age group there is another consistent trend. Seniors 65-74 years incur only about half the expense that seniors 85 and over do, while those 75-84 years incur more than half again as much as seniors 65-74. This confirms the comments above that as people age, their health demands increase.

Now these data are per enrollee. So price inflation is causing costs for all seniors to rise. As seniors age, their costs continue to rise. And finally, as the baby boomer bubble moves into the senior ranks, the total number of seniors increases dramatically. It is sort of a “perfect storm” where all factors are pointing towards Medicare costs consuming more and more of the nation’s economic output.

Source: Center for Disease Control – Health, United States 2008 Table 143 

Cost sharing of Medical Expense Also Rising

In nearly all cases where medical expense is incurred, insurance picks up a large share of the costs, but not all. Amounts paid by individuals is called “cost sharing” or deductibles and co-payments, or out-of-pocket expense. Below are 6 age groups that incurred over $2,000 in out-of-pocket expense. This threshold allows a focus on the more expensive medical encounters. Cost sharing for all seniors has consistently risen over the entire period.  Any solutions to rising Medicare costs that reduce benefits, shifting more costs to seniors should at least take into account that seniors have for years, been paying higher out-of-pocket costs for health care. 

Source: Center for Disease Control – Health, United States 2008 Table 133

 One Good Example of Government Run Medicare

While overall Medicare costs have continued to rise, there is one component that is trending favorable – Administrative Expense. Early on, there were inefficiencies in Medicare part B as these tended to be smaller dollar claims but the same amount of manual effort to record claims into the system.  As automation and standardization increased, these costs came down such that since 2000, the administrative costs per claim dollar for both hospitals and doctors are roughly equal.

What is far mor telling is that since 2000, these administrative costs have (a) stayed level and (b) averaged just two (2%) of total costs.  In the 1980’s private insurers, primarily non-profit, had administrative costs of about 5%. Today, insurers are frequently incurring administrative costs of more than 20% on large blocks of their businesses.  In at least one area, government appears to have done better.

Source: Center for Disease Control – Health, United States 2008 Table 142

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Who Should Help Pay for Healthcare Reform

Posted on August 22, 2009 by Andrew Kurz

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 Summary

Health care is expensive and is getting more so.  Further, the government is taking on a greater share as people age and move into the Medicare system.  Attempts that tweak the current system will likely fail to lower costs.  What is needed is a new model that would be phased in.

While the US does enjoy a quality system, it is not the top in comparison to many other industrialized countries.  However, the US does pay 50% or more of its GDP than do these same countries. And with its transaction based model, future cost increases will squeeze our productive sector.

Looking at several other countries, there is a clear difference in the health payment model.  In the U.S. the model has been relatively unchanged over decades.

One goes to a doctor or hospital, is billed for the encounter and the bill is paid by him, a health insurer or both.  It matters less whether the treatment resolved the health issue.

Other countries rely more on outcomes, where “bonus” payments are made to providers who solve the health issue.  Of course, it is risky to completely switch to this method overnight.  Rather it should be phased in over years.

Short term, however, increased costs are expected. And the fairest way to pay is to tax those who benefited more in the past.  Those who did benefit are a small group – the top 5%.

Some will argue that taxing the wealthy will cost jobs. But jobs are created not from income but from net worth, and gains there suggest that other factors weigh more heavily than marginal tax rates in job loss or creation.

Who is paying for healthcare today in the U.S.

The graph below shows 2006 funding of healthcare. With the aging of the population, Medicare creates increased government spending. Close to half of all health care is paid for by government.  For those worried about government getting involved, they are a little late. It’s already involved.

Private insurance is a major funds source, and most of that is provided through employers. Consumers with insurance through work see only out-of-pocket expenses. Even with costs rising, and with insured seeing higher cost sharing, they are still somewhat shielded from total health costs.

Conversely, those without insurance are exposed to the full brunt of higher health care costs.  Combining all people, the costs are not only a heavy burden, but that burden falls heavily on those who lose and do not have insurance.

Source: Center for Disease Control – Health, United States 2008 Figure 19

 What are others paying for healthcare today 

Some believe that the US costs are worth it.  We have high quality care and we pay for it.  But while quality is high, it is by no means the highest in the world.  And as the graph on the right shows, the US stands alone in how much it spends – some 50% more than other highest countries and almost doubles that of Japan.  These other countries must be doing something different and they are.

One factor is the payment business model. The US is primarily a transaction based system.  Higher rates, more revenue. More procedures, more revenues. The combined effect is healthcare costs that are not only more expensive, but rising faster than in the rest of the world.

As for tomorrow, we can learn by looking at components of growth in US health care spend, and how those trends portend future expenditures.

Source: OECD Health Data 2009, June 09

What healthcare increases may look like tomorrow

Aside from any current inequities in who pays for health care, these expenditures are not only rising but at an ever-increasing rate. The graph below shows the growth in costs from 1965. The spike in 1965-1970 was Medicare.

Population and general inflation are reasonably expected factors.  In addition, however, there is medical (price) inflation and intensity (more procedures) driving up costs.

Unless there is a major change in these trends, healthcare costs will consume an ever greater portion of GDP, and squeeze out productive output.

To bring this under control requires more than tweaking around the edges of the current healthcare model.  Other countries spend less on healthcare so how do other countries cover costs for less.

Source: Center for Disease Control – Health, United States 2008 Table 126

U.S. insurers & Medicare are very Transaction based

For decades, the U.S. has had a primarily transaction based model like figure 1 below.  You get treatment from a physician or hospital and pay for their time and expenses.

When Medicare began, it used this traditional model but quickly learned that costs were rising out of control. So they changed to a fixed price model like figure 2 below. But when Medicare squeezed down prices, some providers increased their volume to recoup part of their losses.

Managed care or HMO’s (not shown) had limited success in freezing total payments. But healthier groups can often select traditional coverage at lower cost, leaving HMO’s with more of the higher cost people. In short, reform with only a transaction based model will not likely succeed.

 

Other countries are more Outcomes based

What other countries did was adopt normal profit-making business models like figure 3 below where the goal is to offer rewards for greater productivity and improved quality, in a word — outcomes. 

It is the basis for most bonuses.  Also many contracts are include a bonus if a project comes in under budget and ahead of time. Healthcare payments in other countries rely far more on outcomes than the does the U.S. And it works.

Medicare is piloting this concept, paying small bonuses to providers who show better outcomes. As data is obtained, base amounts can be reduced and the outcome gradually increased bringing the U.S. closer to the world model.

Will private insurers adopt this model? Unless all insurers are required to do so, it is doubtful.  Alternately, a public option using this model would cause private insurers to voluntarily adopt as a way to remain competitive.

Can the U.S. afford more income taxes

Other industrialized countries are clearly providing quality health care at significantly lower costs than in the U.S.  But what about other taxes or more specifically, total taxes.

How does the U.S. compare in total taxes with these other countries?  The graph below shows tax components. Despite complaints about corporate rates, U.S. take is lower than most countries. Sales taxes are high but discretionary (no buy, no tax) as states rely heavily on this source.

Social Security and income taxes are two mandatory taxes affecting individuals and here the U.S. ranks near the bottom.  Without becoming just like Europe, some increase in mandatory taxes should let the U.S. remain competitive with the rest of the world.  And if real reform does come, higher initial costs can be expected to result in savings down the road as the U.S. costs approach other countries.

Source OECD in Figures 2008 – OECD © 2008 – ISBN 9789264055636

Looking at income tax as a source of new funds

Where does one look for new taxes. While there are several options, one key is to see who is earning what today.  The graph below displays the average after tax income for selected percentile groups.  The small blip at the furthest left is the average income of 60% of the U.S. Those in the 61% to 95% range average somewhat better.  Also noted is the greater number of households in these groups’ results in their paying the majority of income taxes.

But look at the highest 5% earners, and especially the top 1%.  That 1% averages over $1 million per household.  So if there is a tax increase, should all taxpayers contribute the same percent increase?  Or should increases be progressive as is the basic income tax structure.

One way to answer this is to see how income for these same households changed over time.

Source: Congressional Budget Office-Historical Effective Federal Tax Rates: 1979 -2005

Who benefited from income gains over 25 years

The graph below employs the same groups as above.  For several reasons, there has been a substantial income shift with enormous increases in income for the top 1%, with modest increase for the 95%-99% group.  ALL the rest of the percentile groups actually lost ground, and the lower the income bracket, the greater the loss.

Over the past 28 years, there has been a very sharp drop in marginal tax rates leading to two results.  First, high income earners keep more of their income.  But with high marginal rates, companies did not pay extremely high salaries and bonuses as most of it went towards taxes.  With lower marginal rates, executive compensation began an upward spiral that far exceeds their counterparts in other countries.

The combined effect of near runaway compensation and lower taxes is primarily responsible for the shift to the rich.

Source: Congressional Budget Office-Historical Effective Federal Tax Rates: 1979 -2005

Why are so many people afraid of higher tax rates

Some note that total revenues rose when Kennedy cut taxes and apply that logic to every tax change since.  But as the graph below shows, the marginal rate at that time was 90%.  Had the IRS run amuck? Actually, the U.S. raised taxes to pay down war debts, a good habit missing today. 

From the prior graph, one could assume that a fair way to apply new taxes to individuals is to tax those who gained the most relative to others from tax cuts in the past.

Today we have low marginal rates, major gains by the very rich, and a national debt that has been almost ignored. Not to increase taxes but to add to the national debt is to put a heavier burden on the next generations.

In conclusion, a logical and fair place to look for new sources of tax revenue is the top 5% of households.

Source: IRS – SOI Tax Stats – Historical Table 23

Net worth – the job generating engine

Some complain that taxing the income of the rich will cause a loss of jobs.  But income is not the prime determinant in job creation.  To start a business, one in fact, may have to give up current income. 

Businesses are started by those with net worth.  And if they are lucky, they can leverage that net worth with loans to fund their new enterprise.

The graph below shows the growth in net worth from 1989 for four selected percentile groups.  As one would expect, those less well off tend to work for others and their net worth (lower 50%) makes barely a blip on the scale.

Even the net worth of the 50%-90% groups is modest.  The greatest concentration of accumulated wealth is in the top 10%. And that group not only grew more in absolute dollars, but also as a percent gain over prior periods.

Source: Federal Reserve Board, 2007 Survey of Consumer Finance (March 9, 2009)

New worth grew more when tax rates were higher

The graph below details the increase in net worth over the prior period.  The lower 50% experienced inconsistent gains up and down.  Higher groups fared better but all were impacted by recessions.  Of note is that the two 3-year periods ending in 1998 and 2001 occurred during Clinton’s term where he had actually raised marginal tax rates.

One should skip the recession period of 2004. By 2007, the tax cuts of Bush’s term resulted in net worth increases, but they were significantly less than those of the Clinton period.

Obviously, there are additional factors at play, but to simply argue that any increase in marginal rates, and especially raises in the top brackets will result in loss of jobs is a tenuous argument not supported by this data.

Source: Federal Reserve Board, 2007 Survey of Consumer Finance (March 9, 2009)

 

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Cost and Access to Healthcare

Posted on August 22, 2009 by Andrew Kurz

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Summary

Health care reform is one of the most serious issues facing the United States today.  Past efforts at reform have been met with opposition from insurers, hospitals, doctors, business groups and political parties, and that opposition has stymied reform while the problems continued to worsen.

Today, there is more general acceptance of the need for reform but the level has not occurred uniformly across all stakeholders.  Insurers are recognizing the need to drop the most onerous “pre-condition exclusions” and providers are recognizing the need to get more efficient themselves.  Consumers of healthcare are a more divided lot.

Those who have health insurance coverage through work and who have never suffered a significant illness or injury may think this problem applies more to other people.

Conversely, those who have experienced medical problems or have lost jobs and health insurance are more aware of what has gone wrong with the system and are looking for better access to health care and better control of costs.

What the following shows is that health care problems cut across virtually all characteristics with adverse trends occurring in all areas except Medicare Prescription Drugs.

Insurance through the workplace is down, premiums as a percent of compensation are up, out-of-pocket costs are rising, insurance coverage by age group, marital status, race and region are all declining, and more people are not getting needed medical care or drugs because of costs. Finally, all this is aggravated by the rise in unemployment that has put at risk health insurance coverage for millions more Americans.

Health insurance through work is declining

The graph below shows the percent of employees obtaining insurance through their workplace by 4 regions and the USA as a whole.  The trend is almost consistently downward beginning around the year 2000.  The Midwest which once had the highest percent of employees insured, has dropped some 8% in just 6 years.

The Northeast and Midwest do, however, continue to lead the South and West in terms of percent of employees covered, and all regions experienced a coverage downturn in the late 1980’s and early 1990’s, a period of both slow growth and a recession.

If coverage declines in the current recession anything like that of 1991, there may be continued steep declines in workplace provided health insurance beyond the scope of this graph.

Source: Center for Disease Control – Health, United States 2008 Table 138

Health insurance is taking a bigger bite of income

The graph below shows the percent of total compensation going towards health insurance.  Since 2000, the trend in all regions is uniformly upward.  What the graph does not show is the percent of total compensation going towards co-pay and deductibles which are also rising.

The Midwest pays the highest percent of compensation, both currently and in the past.  The West and South, which at one time lagged behind the Northeast, are now tied.

With insurance a percent of compensation, the average compensation for these regions affects insurance. The South continues to lag due to low average compensation.  The Midwest insurance cost is mitigated somewhat as its compensation is lower versus the Northeast or the West.

From any viewpoint, health care costs are rising faster than compensation and putting a heavier burden on all.

Source: Center for Disease Control – Health, United States 2008 Table 135

More costly claims are becoming more common

Not only are insurance premiums taking a growing percent of compensation, but out-of-pocket costs are compounding the problem.  The graph below shows the percent of those having medical and drug claims whose out-of-pocket cost exceeded $2,000.

The trend is upward for all but children under the age of 18, and it is climbing most steeply for seniors 65 and older.  These steep increases for seniors has been mitigated by the Medicare Part D drug program whose effects are not yet evident in the time periods shown.

The message is that having insurance does not fully protect persons who are struck by illness or injury.  There are still risks of significant expenses.  And those who have never incurred serious illness or injury tend to be less aware of the out-of-pocket costs that they may incur.

Source: Center for Disease Control – Health, United States 2008 Table 133

Declining private health insurance favors no group

A graph above showed the decline in insurance coverage obtained through the workplace.  Although that is where most get their health insurance, the graphs below are for all persons under 65 and for all sources of insurance. Those with health insurance coverage have been on a downward trend for all classifications.

As expected, when a person gets older, health insurance becomes more important and that is born out in the upper right graph. Possibly a more disturbing trend is the lower graph where single, divorced or widowed people lag significantly behind married people. One conclusion is that families are very conscious of their children’s health care and covering them nearly always includes covering themselves … because that is how most insurance is sold.

Source: Center for Disease Control – Health, United States 2008 Table 137

People not getting needed costly medical care

The graph below shows the percent of people under the age of 65 who did not get needed medical care due to costs. More importantly, it only includes persons whose income exceeds 200 % of poverty level or about $44,000/year income for a family of four.

It is understandable that people with no medical insurance are less likely to get medical care due to costs. However, even some with insurance do not get that care because of co-pay and other out of pocket expense.  And roughly the same trend exists for those who lose health insurance for less than a year as for those who lose insurance for more than a year.

The graph shows an upward trend of 20% over a 10 year period and suggests little sign of change.  The decline in insurance coverage is aggravating the situation even more.

Source: Center for Disease Control – Health, United States 2008 Table 80

Those not getting needed medical care varies by age

The graph below is similar to prior but includes people over 65. As above, it only includes persons whose income is greater than 200 % of poverty level.

Those not getting needed medical care also varies by age, whether or not insured.  Both older people and children are less likely to skip needed medical care due to costs while the two middle age groups appear willing to risk skipping needed care.  Still, the trend for middle age groups is up.

Not getting needed medical attention can lead to more serious consequences if not treated promptly.  This is a risk that affects all people, not just the less well off.

Since these graphs end in 2006, they do not reflect the 2009 increase in unemployment that often leads to short periods of no health insurance for those who lost jobs.  And for many, those job losses extend for more than a year

Source: Center for Disease Control – Health, United States 2008 Table 80

People not getting needed costly medicines

The graph below shows the percent of people under the age of 65 who did not get prescription drugs due to costs. This graph also only includes persons whose income exceeds 200 % of poverty level or about $44,000/year income for a family of four.

Similar to the medical care graph, the trend is upward with more people forgoing needed drugs over the last 10 years.  However, there is a recent and measurable change in access by longer term uninsured as they appear to be getting some form of help with their prescriptions.

For those uninsured less than a year, the graph shows more skipping drugs, and the upward trend is worse than appears for basic medical care.

And like medical care, the steady decline in insurance coverage is aggravating the access to drugs even more.

Source: Center for Disease Control – Health, United States 2008 Table 80

Those not getting needed medicines varies by age

The graph below is similar to above but includes people over 65. As above, it only includes persons whose income is greater than 200 % of poverty level.

Those not getting prescription drugs also vary by age, whether or not insured.  A significant drop in not getting drugs among those over 65 was significantly affected by the introduction of Medicare Part D prescription drug program that lowered costs for seniors.

Though that program is not inexpensive, costs are lower, and so more are able to stay current on their medications.

Children are being adversely affected as drug costs continue to eat away at parents’ ability to buy drugs for them. Fortunately, this lack of access is at low overall levels but a potentially serious problem for those who are affected.

Source: Center for Disease Control – Health, United States 2008 Table 80

Download PDF Report >>> Cost and Access to Healthcare

Filed under: Analyses, Centers for Disease Control (CDC), Health Costs, Healthcare Reform | Tagged: , , , , , , , , , | 1 Comment »

Government Bureaucracy?

Posted on August 19, 2009 by Andrew Kurz

Download PDF Report >>> Government Bureaucracy

Some people say any Government health plan is a huge bureaucracy. Below are two application forms for personal health insurance. The first is representative of private insurers. The second is from the Government.  Help me out here.  Which one is the bureaucracy?

Private insurer Personal Health Insurance Application Form

8 pages of questions


Government Medicare Personal Health Insurance Application Form

8 questions

Date of Birth:  
Marital Status:  
Type of Medicare Coverage:  
Do you have Medicaid:  
Are you living outside of the U.S.:  
Household Income Range:  
Are you receiving health benefits from employer:  
Retirement type:  

Download PDF Report >>> Government Bureaucracy

Filed under: Commentary, Health Insurers, Healthcare Reform, Medicare & Medicaid | Tagged: , , | Leave a comment »

McAllen & El Paso Texas – The Cost Conundrum

Posted on August 13, 2009 by Andrew Kurz

Download PDF Report >>>McAllen and El Paso Texas

Download New Yorker article PDF >>> New Yorker Mag – McAllen Tx

Atul Gawande wrote a long article for the June 1, 2009 New Yorker Magazine titled “The Cost Conundrum – What a Texas town can teach us about health care.  This document condenses some of the highlights from that article.

McAllen versus El Paso Texas

  • McAllen Texas is one of the most expensive health-care markets in the country.  In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average.
  • El Paso County, eight hundred miles up the border, has essentially the same demographics.  Yet in 2006 Medicare expenditures in El Paso were $7,504 per enrollee half as much as in McAllen.
  • And yet there’s no evidence that the treatments and technologies available at McAllen are better than those found elsewhere in the country.
  • The annual reports that hospitals file with Medicare show that those in McAllen and El Paso offer comparable technologies.
  • Public statistics show no difference in the supply of doctors.  Hidalgo County actually has fewer specialists than the national average.
  • Nor does the care given in McAllen stand out for its quality.  Medicare ranks hospitals on twenty-five metrics of care.  On all but two of these, McAllen’s five largest hospitals performed worse, on average, than El Paso’s.
  • Something fundamental had changed since the days when health-care costs in McAllen were the same as those in El Paso and elsewhere.

McAllen overuse of medicine

  • Compared with patients in El Paso and nationwide, patients in McAllen got more of pretty much everything more diagnostic testing, more hospital treatment, more surgery, more home care.
  • Between 2001 and 2005, critically ill Medicare patients received almost fifty per cent more specialist visits in McAllen than in El Paso.
  • In 2005 and 2006, patients in McAllen received  
    • 20% more abdominal ultrasounds,
    • 30%  more bone-density studies,
    • 60%  more stress tests
    • 200% more nerve-conduction studies
    • 550% more urine-flow studies
    • And Medicare paid for five times as many home-nurses visits. 
  • The primary cause of McAllen’s extreme costs was, very simply, the across-the-board overuse of medicine.

More Quantity does not mean more Quality

  • Americans like to believe that, with most things, more is better.  But research suggests that where medicine is concerned it may actually be worse.
  • In fact, the four states with the highest levels of spending Louisiana, Texas, California, and Florida were near the bottom of the national rankings on the quality of patient care.
  • That’s because nothing in medicine is without risks.  Complications can arise from hospital stays, medications, procedures, and tests, and when these things are of marginal value the harm can be greater than the benefits.
  • In 2006, doctors performed at least sixty million surgical procedures, one for every five Americans. No other country does anything like as many operations on its citizens.
  • Some hundred thousand people die each year from complications of surgery far more than die in car crashes.
  • Patients in high-cost areas were actually less likely to receive low-cost preventive services, faced longer waits at doctor and emergency-room visits, and were less likely to have a primary-care physician.
  • They got more of the stuff that cost more, but not more of what they needed.

Some places get it right

  • Most Americans would be delighted to have the quality of care found in places like Rochester, Minnesota, or Seattle, Washington, or Durham, North Carolina all of which have world-class hospitals and costs that fall below the national average.
  • If we brought the cost curve in the expensive places down to their level, Medicare’s problems (for the next fifty years) would be solved.
  • Health-care costs ultimately arise from the accumulation of individual decisions doctors make about which services and treatments to write an order for.
  • The most expensive piece of medical equipment, as the saying goes, is a doctor’s pen. As a rule, hospital executives don’t own the pen caps.  Doctors do.
  • Why do [doctors respond] so differently from one place to another?
  • It turned out that differences in decision-making emerged in only some kinds of cases.  In situations in which the right thing to do was well established made the same decisions.
  • But, in cases in which the science was unclear, some physicians pursued the maximum possible amount of testing and procedures; some pursued the minimum. And which kind of doctor they were depended on where they came from.
  • In case after uncertain case, more was not necessarily better.  But physicians from the most expensive cities did the most expensive things.

Medical Schools are not Business Schools

  • No one teaches you how to think about money in medical school or residency.  Yet, from the moment you start practicing, you must think about it.
  • Beyond the basics, however, many physicians are remarkably oblivious to the financial implications of their decisions.  They see their patients.  They make their recommendations.  They send out the bills.
  • Others think of the money as a means of improving what they do.
  • Then there are the physicians who see their practice primarily as a revenue stream.  They figure out ways to increase their high-margin work and decrease their low-margin work.  This is a business, after all.
  • In every community, you’ll find a mixture of these views among physicians, but one or another tends to predominate.
  • The anchor tenants [at shopping centers] that set norms encouraging the free flow of ideas and collaboration, even with competitors, produced enduringly successful communities, while those that mainly sought to dominate did not.
  • [Possibly] anchor tenants play a similarly powerful community role in other areas of economics, too, and health care may be no exception.
  • About fifteen years ago, it seems, something began to change in McAllen.  A few leaders of local institutions took profit growth to be a legitimate ethic in the practice of medicine. Not all the doctors accepted this.  But they failed to discourage those who did.

Medicine first, team approach

  • Mayo Clinic is among the highest-quality, lowest-cost health-care systems in the country.  Among the things that stand out was how much time the doctors spent with patients.
  • There was no churn no shuttling patients in and out of rooms while the doctor bounces from one to the other.  Most of the patients, required about twenty minutes.
  • The core tenet of the Mayo Clinic is The needs of the patient come first not the convenience of the doctors, not their revenues.
  • But decades ago Mayo recognized that the first thing it needed to do was eliminate the financial barriers.
  • It pooled all the money the doctors and the hospital system received and began paying everyone a salary, so that the doctors goal in patient care couldn’t be increasing their income.
  • Mayo promoted leaders who focused first on what was best for patients, and then on how to make this financially possible.
  • The aim is to raise quality and to help doctors and other staff members work as a team. But, almost by happenstance, the result has been lower costs.
  • The Mayo Clinic is not an aberration.  One of the lowest-cost markets in the country is Grand Junction, Colorado, that nonetheless has achieved some of Medicare’s highest quality-of-care scores.
  • Years ago the doctors agreed among themselves to a system that paid them a similar fee whether they saw Medicare, Medicaid, or private-insurance patients, so that there would be little incentive to cherry-pick patients.
  • They also agreed, to meet regularly on small peer-review committees to go over their patient charts together.  They focused on rooting out problems like poor prevention practices, unnecessary back operations, and unusual hospital-complication rates.  Problems went down.  Quality went up.
  • The leading doctors and the hospital system adopted measures to blunt harmful financial incentives, and they took collective responsibility for improving the sum total of patient care.

Someone has to be accountable for total care

  • The question we have to ask is whether the doctor is set up to meet the needs of the patient, first and foremost, or to maximize revenue.
  • There is no insurance system that will make the two aims match perfectly.  But having a system that does so much to misalign them has proved disastrous.  As economists have often pointed out, we pay doctors for quantity, not quality.
  • As they point out less often, we also pay them as individuals, rather than as members of a team working together for their patients.  Both practices have made for serious problems.
  • The lesson of the high-quality, low-cost communities is that someone has to be accountable for the totality of care.  Otherwise, you get a system that has no brakes.  You get McAllen.
  • Expanding public-insurance programs like Medicare and shrinking the role of insurance companies will not make much difference. [Neither will expanding insurance companies role.]
  • The use medical savings accounts and hold high-deductible insurance policies will not work. Who is going to haggle price for a surgery? Any plan that relies on the sheep to negotiate with the wolves is doomed to failure.
  • Providers have to be weaned away from their untenably fragmented, quantity-driven systems of health care, step by step.
  • And that will mean rewarding doctors and hospitals, in which doctors collaborate to increase prevention and the quality of care, while discouraging overtreatment, under treatment, and sheer profiteering.
  • Under one approach, insurers whether public or private would allow clinicians who formed such organizations and met quality goals to keep half the savings they generate.
  • Government could also shift regulatory burdens, and even malpractice liability, from the doctors to the organization.  Other, sterner, approaches would penalize those who don’t form these organizations.
  • Congress has provided vital funding for research that compares the effectiveness of different treatments, and this should help reduce uncertainty about which treatments are best.
  • But we also need to fund research that compares the effectiveness of different systems of care to reduce our uncertainty about which systems work best for communities.  These are empirical, not ideological, questions.
  • And we would do well to form a national institute for health-care delivery, bringing together clinicians, hospitals, insurers, employers, and citizens to assess, regularly, the quality and the cost of our care, review the strategies that produce good results, and make clear recommendations for local systems.
  • Dramatic improvements and savings will take at least a decade. But a choice must be made.
  • Whom do we want in charge of managing the full complexity of medical care? We can turn to insurers (whether public or private), which have proved repeatedly that they can’t do it.
  • Or we can turn to the local medical communities, which have proved that they can.
  • But we have to choose someone because, in much of the country, no one is in charge.  And the result is the most wasteful and the least sustainable health-care system in the world.
  • In the war over the culture of medicine the war over whether our country’s anchor model will be Mayo or McAllen the Mayo model is losing.
  • We face a decision that is more important than whether we have a public-insurance option, more important than whether we will have a single-payer system in the long run or a mixture of public and private insurance, as we do now.
  • The decision is whether we are going to reward the leaders who are trying to build a new generation of Mayos and Grand Junctions.  If we don’t, McAllen … will be our future.

Download PDF Report >>>McAllen and El Paso Texas

Download New Yorker article PDF >>> New Yorker Mag – McAllen Tx

Filed under: Analyses, Healthcare Reform, Medicare & Medicaid | Tagged: , , , , , , , | 32 Comments »

High and Lowdown of Medicare Costs

Posted on August 11, 2009 by Andrew Kurz

Many seniors have become fearful that cutting excess costs means cutting benefits.  Medicare’s own data highlights differences between about 20% of states with the lowest costs and 20% of states with the highest costs.  Cost of living explains some of the differences.  But 71% higher physician and clinical service costs for essentially the same results suggests there are billions of dollars being spent with little or no added benefit.


Filed under: Commentary, Health Costs, Healthcare Reform, Medicare & Medicaid | Leave a comment »

Rationing or Waste in Healthcare

Posted on August 1, 2009 by Andrew Kurz

Download PDF Report >>> Health Rationing or Waste

Summary

Rationing is not getting needed care.  Waste is getting care not needed and causes rationing for those in need. One way to determine if there is waste is to compare large samples of people in areas of highest cost to those in lowest cost.  While some variation will exist because of cost of living factors, larger variations can only be explained by greater use of care in higher areas versus lower areas.

The method used compares selected components of health care.  Each category compares the highest 20% of population with the lowest 20%.  For national data, rankings mean there are two groups of nearly 60 million.  For Medicare and Medicaid, it is over 8 million each.  Age differences among these populations were minimal, though higher cost areas tended to be more urban than the lower cost population.

Differences between the highest and lowest were minor in some cases.  But in a number of categories, differences were huge.  Either millions in the United States are being under-served, or millions are being over-served wasting billions.

For the population as a whole, total health costs in the highest states were nearly 40% higher than the lowest cost states. In hospitals, the spread was slightly over 40%, while physicians were less than 30%.  Highest spreads were nursing home costs that were nearly three times higher.

In Medicare, hospital costs are 30% higher, but physician costs are some 70% higher for similar populations.  With all paying equally into Medicare, rationing already exists.

Despite these higher costs, a number of quality measures suggest that quality is actually better for lower cost states.

Healthcare expenditures for the entire population

In 2006, the U.S. spent over 1.7 trillion dollars on health care. The graph below shows the analysis of expenditures:  37% went to hospitals, 25% to physicians, 7% to nursing homes, 12% to drugs, and 18% to other.

Not only are costs high but they are rising faster than the economy consuming ever more funds that might otherwise go for jobs, education and infrastructure.  The country is also jeopardizing its world competitiveness because other countries are able to offer quality health care at less cost.

The aging of the population is a compounding factor when it comes to Medicare spending.  Here the government plays a greater role at a time when seniors’ health puts greater demands on any healthcare system.  It will be almost 2050 before the baby boomer bubble works its way through and medical costs for seniors stabilize as a % of total spend.

Source: Center for Disease Control – Health, United States 2008 Figure 19.

Cost differences for the entire population

Rather than compare absolute costs, this report focuses on relative costs, high versus low, and for very large samples.  The graph below compares 8 categories comprising over 96% of total health care expenditures. The states included in each group may be different depending on the category.

Total health care spend in the highest states was 38% more than the lowest states. The highest hospitals that comprise 37% of total spend, were 42% above the lowest. Physicians accounting for 25% of spend were 28% higher.

Home health and Nursing home care showed the largest differences, approaching 200% or nearly three times higher than for the lowest cost states. These lowest cost areas may be providing less care than what is considered “enough” and /or have found family sources that help out internally without outside help.

 Source: Centers for Medicare & Medicaid Services, National Health Statistics Group

Medicare, a barometer for the total population

The graph below shows that while government plays an increasing role in the over 65 group, there is still a major portion of costs being paid for by the private sector.  And, after years of steady increase, total costs are accelerating due to the influx of baby boomers into this age group.

Comparing year to year national averages is too broad to draw actionable conclusions. Comparing a single city to another may be too narrow.  Fortunately, the government has in its favor a wealth of statistics for their programs. 

When comparing selected health components for very large populations, costs can only be explained by differences in volume of care.  Other government statistics show little difference in outcomes despite wide differences in service.

Medicare is the biggest government program, and below are some comparisons of interest.

Source: Center for Disease Control – Health, United States 2008 Table 141.

Cost differences for Medicare enrollees

The graph below compares 6 categories comprising over 96% of Medicare expenditures. The drug program Part D did not start in time to be reflected in these 2004 data. The sample is large with 8 million in each group.  States in each group may be different depending on the category.

When compared to the total population, Medicare‘s spread between physician and other professional service costs is far greater while hospital differences are less.

Home health care and nursing home care show similar large differences though the amount spent in these two areas is limited to 10-11% of all costs.  Medicare imposes more restraints in these extended care areas.  That may explain how, with nearly all nursing home residents being seniors, Medicare home and nursing costs are a relatively low proportion of the total.

Source: Centers for Medicare & Medicaid Services, National Health Statistics Group

Cost differences for Medicaid enrollees

The graph below compares 6 categories comprising 92% of Medicaid expenditures. Here there are differences not only in cost (highest cost more than double the lowest) but in the mix. For Medicaid, hospitals and doctors do not play as large a role.  Instead, costs tend more to drugs, nursing home care and other personal care.

This group covers poorer people of all age groups so their needs are more like the broader population in terms of mix with one exception.  Medicaid offers nursing home help with those costs being 19% of total spend.

There is another key difference from Medicare and that is the states contribute significantly to Medicaid, and states cut back some if funds are not available.  This plays a role in the greater difference between the highest and lowest cost states for all categories.  One can fairly assume that the lowest cost states get fewer services.

Source: Centers for Medicare & Medicaid Services, National Health Statistics Group

Hospitalization rate nearly 50% higher

Tracking discharges also tracks admissions and the graph below shows 45% more total discharges in the highest cost states.  Non ambulatory care sensitive (ACS) events have roughly comparable rates of discharge. On the other hand, ACS discharges are more than 50% higher than the lowest cost states.

The number of beds does not appear to be a factor as many lower cost states actually have more beds per capita.  Data is not available as to acute beds, though in any case, it is a doctor admitting a patient.  While higher cost states may have more doctors per capita, that difference is nowhere as high as the difference in admissions. 

One can conclude that there are major differences in how often doctors admit similar patients, especially when you consider some 16 million people in two sample groups.

Source: Kaiser State Health Facts – 50 State Comparison

While reimbursements more than 50% higher 

Of course, for every admission, there is a cost.  Using a still finer “filter”, the graph below shows wide differences depending on what services are performed.

Inpatient short stays are 50% higher.  But long stays are 200% or 3 times those of the lowest states. Diagnostic, laboratory and X-ray services are more than double the costs in the lowest states. Either the first group is getting excess care, or the second group’s care is being rationed.

The biggest difference was in home health and for once, higher may be better as it compare the highest cost states to the lowest cost states.  Home health is a more efficient use of funds than hospitalization or intermediate care facilities, so more may be better.  Or it can simply be more take advantage of the service because it is available.

Source: Dartmouth Atlas of Healthcare – Medicare reimbursement measures

Higher cost states have more specialists per capita

Aside from complaints that insurers make medical decisions there would be no decision to make without a request. In the graph below, the number of primary physicians is about the same with a slight tilt toward lowest cost states.

There is a measurable difference in the number of other physicians, including specialists.  As shown, primary care physicians are outnumbered by specialists.  And with admissions greater for the high cost group, it is logical to assign a greater share of hospitalizations to specialists.

Some people, especially those who are well insured claim that greater hospitalization and its attendant costs are worth it.  Leaving cost considerations aside, one might expect with all this extra care to have a lower mortality rate.  Alas, this is not the case.  More services do not necessarily yield better quality outcomes.

Source: Kaiser State Health Facts – 50 State Comparison

Mortality rate slightly worse in higher cost states

The basis for high and low states is Medicare’s mortality tables.  The data adjust mortality by age so a state with a greater proportion of very old people is not penalized.

As the graph below shows, mortality is consistently higher in more expensive areas.  What is even more interesting is that those without HMO coverage have a higher mortality rate than the total average.  For that to occur, mortality rates for seniors with HMO coverage must be lower than for those without HMO coverage.

For all the cynics who think HMO’s are “too restrictive”, the results for Medicare folks at least, speak otherwise.  And one factor is working in HMO’s favor.  They have a greater tendency to work in teams, and statistics show that better managed providers do work in teams, with perhaps the most familiar name being the Mayo Clinic.

Source: Dartmouth Atlas of Healthcare – 2005 Medicare Mortality Rates

While final services and costs are more than double 

So, did higher mortality result in lower costs? If a person dies, medical care stops.  The graph below compares cost averages in which the patient died.  It tracks costs of that final stay and also costs in the last six months leading to it.

For the highest states, all 7 categories shown costs are more than double those of the lowest states. Remember, this is a sample of 8 million people in each group, from states north and south, east and west. 

The data show that seniors in high cost states are incurring nearly five times the cost of being in intensive care or coronary care units. This applies not only to the final hospitalization but to repeat admissions to ICU/CCU in the six months preceding death.  And despite all that extra cost and effort in the last six months, it does not appear to lead to better quality or lower mortality.

Source: Dartmouth Atlas of Healthcare – State Performance Report

More doctors leads to more utilization

In the previous graphs, there are numerous examples of huge differences between high and low-cost states without a comparable difference in outcomes. That observation alone suggests that cost cutting will not necessarily reduce benefits.  While the majority of spend occurs in hospitals, it is the physicians who make the treatment decisions.

The graph below shows the total number of physicians per population by region.  Though not homogeneous, the New England and Mid Atlantic states tend to include the highest states using different criteria shown in the above graphs. 

And these areas clearly have significantly higher physician ratios than other areas.  True, there is much research occurring here, but only a portion of the difference would be due to those efforts.  In summary, there are numerous areas when cuts could safely occur without losing quality.

 Source: Center for Disease Control – Health, United States 2008 Table 109

 Download PDF Report >>> Health Rationing or Waste

Filed under: Analyses, Centers for Disease Control (CDC), Dartmouth College, Healthcare Reform, Kaiser Foundation, Medicare & Medicaid | Tagged: , , , , , , , , , , , , | 1 Comment »

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