Healthcare Efficiency

http://content.healthaffairs.org/cgi/reprint/22/6/27  

There is considerable angst about rising healthcare costs in this country as our population ages--particularly as baby-boomers are added to the Medicare population.  Healthcare expenditures do rise by decades, particularly after age 75.  As the chinks in our armor begin to show, we realize we are no longer invincible and consider visiting the doctor.  It’s natural to suppose that costs would rise as Medicare Man gets joints replaced and a pacemaker installed.  CQ Healthbeat News reviewed a study by CMS showing that in 2004, those over 65 spend $14,797 on healthcare--three times as much as those in the 19 to 64 age group.  However, this had a negligible effect on overall healthcare spending.  The primary drivers were technology and an increased volume of services.

A similar note was sounded by Peter Orszag, Director of the Congressional Budget Office.  Healthcare expenses for the average individual are growing faster than the GDP, and this factor accounts for 90% of the increase in healthcare spending, leaving the remaining 10% for aging.  Currently, our HC expenses are expected to be about 17% of GDP in 2007, but that may grow to 31% by 2035.  I say “may,” because the further out in time you predict, the greater uncertainty of your estimate.  Give the alarm generated by the current spending, it seems unlikely that HC spending would ever be allowed to go above 20% of GDP.  

The trick, of course, is to maintain the health of the population without spending so much money.  It’s popular to point to other countries that spend less and seem to have better results.  However, as pointed out here too many times, the “results” cited frequently have little or nothing to do with healthcare.  Longevity, for example, is more related to pollution than to healthcare.  Want to sell life insurance in Beijing?  Anyone want to name the capital city with the worst air pollution?

So, what levers do you pull to reduce spending?  Efficiency, as described here would help, but more is needed.  The HMO approach was to limit access, but that was not popular with patients.  Prevention is one aspect of Demand Management, and we have had fair success with smoking cessation programs in the US.  Now, about obesity . . . .  Some companies use a carrot and stick approach--preventive care is free, but illness related to personal habits costs extra.  Suppose you got on a scale before picking up your paycheck, and every extra pound deducted $10 from your pay.  

The other efficiency that is more commonly talked about--efficient management of chronic conditions could help also.  Protocols for disease management.  Eliminating the extra procedures and studies that fall into the category of unnecessary care.

Technology is touted as a magic bullet--mostly by those who know nothing about it.  Computers are not free, and represent a tool to facilitate prevention or disease management rather than an independent strategy.  

Finally, we’re left with the conclusion that stuff just costs too much.  There’s got to be a better way.  Why does it cost so much to see a doctor or get a hernia fixed?  I can schedule a rental car or a plane ticket on line.   Why must I talk to a receptionist to see my doctor?   Why does it take two clerks to tell me to go to the second floor of the hospital?  Where is the Toyota Production System when you need it.  

There is enormous potential for efficiency and cost reduction in healthcare.  The only thing missing is the will to do it.  And that won’t come without pressure on prices.