The relative value of health care

by on May 27, 2009 at 4:21 am in Medicine | Permalink

Daniel Akst writes to me:

Bottom line is that people’s behaviors cause more than 1 million preventable deaths annually. Universal health insurance, it is estimated, would save 18,000. And the study doesn’t even look at suicide and homicide, which together claim another 50,000 annually.

Here is his blog post on that same topic.

Via Ralph Sisson, here is a very good article on McAllen, Texas, the American town with the most expensive health care.  Excerpt:

Between 2001 and 2005, critically ill Medicare patients received almost fifty per cent more specialist visits in McAllen than in El Paso, and were two-thirds more likely to see ten or more specialists in a six-month period. In 2005 and 2006, patients in McAllen received twenty per cent more abdominal ultrasounds, thirty per cent more bone-density studies, sixty per cent more stress tests with echocardiography, two hundred per cent more nerve-conduction studies to diagnose carpal-tunnel syndrome, and five hundred and fifty per cent more urine-flow studies to diagnose prostate troubles. They received one-fifth to two-thirds more gallbladder operations, knee replacements, breast biopsies, and bladder scopes. They also received two to three times as many pacemakers, implantable defibrillators, cardiac-bypass operations, carotid endarterectomies, and coronary-artery stents. And Medicare paid for five times as many home-nurse visits. The primary cause of McAllen’s extreme costs was, very simply, the across-the-board overuse of medicine.

This is a disturbing and perhaps surprising diagnosis. Americans like to believe that, with most things, more is better. But research suggests that where medicine is concerned it may actually be worse. For example, Rochester, Minnesota, where the Mayo Clinic dominates the scene, has fantastically high levels of technological capability and quality, but its Medicare spending is in the lowest fifteen per cent of the country—$6,688 per enrollee in 2006, which is eight thousand dollars less than the figure for McAllen. Two economists working at Dartmouth, Katherine Baicker and Amitabh Chandra, found that the more money Medicare spent per person in a given state the lower that state’s quality ranking tended to be. 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.

There is more beneath the fold...

In a 2003 study, another Dartmouth team, led by the internist
Elliott Fisher, examined the treatment received by a million elderly
Americans diagnosed with colon or rectal cancer, a hip fracture, or a
heart attack. They found that patients in higher-spending regions
received sixty per cent more care than elsewhere. They got more
frequent tests and procedures, more visits with specialists, and more
frequent admission to hospitals. Yet they did no better than other
patients, whether this was measured in terms of survival, their ability
to function, or satisfaction with the care they received. If anything,
they seemed to do worse.

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 recent
years, we doctors have markedly increased the number of operations we
do, for instance. 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. Are we better
off for it? No one knows for sure, but it seems highly unlikely. After
all, some hundred thousand people die each year from complications of
surgery—far more than die in car crashes.

To make matters worse,
Fisher found that patients in high-cost areas were actually less likely
to receive low-cost preventive services, such as flu and pneumonia
vaccines, 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.

1 TomG May 27, 2009 at 5:23 am

Am I missing something? It’s not the spending level causing the outcome, is it? The cities with the highest level of Welfare spending don’t therefore become the best off – in fact one would expect the same correlation to Medicare use. And where Medicare is most needed would have the lowest level of qualitative health care too. The McAllen folk in general obviously don’t need much supplemental Medicare coverage – thus the better outcomes.

2 Tyler Cowen May 27, 2009 at 6:11 am

Read the whole article, there are controls in place (as there are in other, similar comparisons).

3 steve May 27, 2009 at 7:48 am

Thanks for posting this. This article is very well done IMHO. It illustrates a lot of what I see as a physician. As you note, it is important to read the whole article. McAllen does not have sicker patients and they do not have better outcomes. What they have is heavy, heavy utilization.

If physicians follow their own self interests, they will provide more services, increasing their incomes. There is an inherent bias in our system that more care is better. Existing data do not support that assertion. Places like the Mayo Clinic have removed physician incentives, to a large degree, and spend less while having better outcomes.

Physician incentive do not line up well with patient incentives when it comes to costs. I think much of this is the distortion provided by insurance. Yet, do not see how we can have health care without insurance. (Trauma, complicated childbirth when parents are young). While I would prefer a free market resolution to our health care issue, the more I read and look at how we practice medicine, the more skeptical I become that medicine is entirely amenable to reform by market forces.


4 Phil May 27, 2009 at 7:54 am

“Universal health insurance, it is estimated, would save 18,000”

Estimated? Estimated based on what? Wouldn’t “claimed” or
“asserted” or “believed”, (I like believe, because socialized
medicine is a dogma of the religion of statism)

Also, how many lives would be lost due to government
bungling. I can’t wait to have that fusion of the
IRS’ compassion and the USPS efficiency determining my fate.

5 Diversity May 27, 2009 at 8:30 am

What are you interested in?

If you sincerely want people to live longer, better quality lives, give them more and better education. The statistics have been saying that for decades.

If you want better value for public spending at the margin, see Uwe Reitzinger on the wild unevenness of health costs now,and a raft of studies that tell you pouring in extra money does not improve educational outcomes.

If you are interested in health care that produces better outcomes, the paper discussed is just additional evidence that more procedures and higher spending do not do the trick.

If you are interested in reducing the number of people that do not get effective health care, start by finding out what actually happens, not who seems to have insurance.

If you want to get the economic incentives right in a market for medical services, reflect on the reasoning behind the reputed old Chinese custom of paying your doctor when you are well. It suggests a system wherein the rewards to the medical system as a whole from caring for you should correlate positively and strongly with the total of Quality Adjusted Life Years you obtain. Maybe the ideal system would be one where you pay your primary physician a retainer regularly on a lifetime contract, and your primary physician supplies all the other medical services you need?

6 TW May 27, 2009 at 10:55 am

Great post, and a fascinating article you linked to. I work in child welfare & child protection, and there’s a similar phenomenon: the evidence we have is that putting a child in foster care harms them in measurable ways (probably having to do with the trauma of removal and dislocation, although the causal mechanism isn’t well-researched) and that the marginal benefits of foster care outweigh those harms only in a minority of cases (i.e. the worst instances of abuse and pathological neglect). Yet we overuse foster care in most states and communities, and part of the reason is that there’s more Federal money available to pay for foster care than to pay for other types of services that help kids to stay safely with their families.

That’s a political choice we’ve made, just as we’ve made a political choice to generously fund acute medical care. And in both cases, we too often respond to the resulting cost pressure with misguided attempts at cost control: trying to squeeze the unit costs we pay for the same old services, narrowing eligibility criteria to shift some of the costs to someone else, setting up prior authorization hurdles that add delays & administrative cost without providing any incentive to change the services that are offered.

President Obama has signaled very clearly & strongly that he wants health care reform to change the basis of payment for medical care, in a way that gets at the root cause of excessive health care spending. (and from that perspective, the main reasons we need universal care are that it takes away many of the opportunities for cost shifting that would otherwise enable many medical providers to avoid changing the way they do business & that it provides a larger span of influence over which a new, smarter basis of payment could be applied.) Whether he’ll be able to get that through Congress, and whether his administration will subsequently be able to implement it, are open questions. But i don’t think there’s any question that it’s the right & necessary direction we need to go in.

I should add, i don’t mean to impugn anybody’s motives or sincerity when it comes to foster care. Foster parents & caregivers are some of the best people i know – they’re doing God’s work, and their sincerity & good will are unimpeachable. I also recognize that the evidence base for effective alternatives to foster care needs to be stronger. But i also think that the evidence that we overuse foster care is abundant and clear. We need everyone of good will to apply their energies to developing alternatives to it.

7 Mr. Econotarian May 27, 2009 at 2:17 pm

Last time I was on Reynosa (over the border from McAllen) I noticed plenty of cheap Mexican clinics – I wonder if they drain off the low-cost out-of-pocket care leaving only expensive Medicare paid card on the US side.

8 Michael Foody May 27, 2009 at 3:18 pm

Gravy Juice, where do you live? Transit workers and garbage collectors are both probably public sector jobs. What sort of state pays highly skilled public sector workers less than unskilled public sector workers? I mean even if doctors were competing with less skilled private sector employment you argument would smack of dishonesty but as is it sees lunacy is a more likely culprit.

9 PQuincy May 27, 2009 at 3:44 pm

If Gravy Juice is from Canada, he also lives in a country with demonstrably superior health care outcomes and much lower health care spending than the US. And, evidently, practicing medicine there is enough fun that 9 of 10 doctors choose to stay.

On the usage issue: don’t studies like these make the Republican’s faux outrage about effectiveness studies even more insane? What’s the logic behind “Utilization rates vary widely without corresponding variation in outcomes, and therefore it is essential that every patient be allowed to choose their doctor and demand every cockamamie treatment they saw in a TV ad”?

I’m curious though: do studies of privately insured Americans show comparable variation in utilization by region, or is it only a feature of publicly insured patients? This would seem to be an elementary control to run, no?

10 Dan Smith MD May 27, 2009 at 5:04 pm

The purported improvement in health outcomes because of the presence of someone (insurance) to pay the bills is built on speculation that accessibility to medical providers will have enough impact on lifestyles that deaths due to tobacco use, alcohol consumption, obesity and lack of exercise will drop. As a primary care provider who has watched people with health care insurance do pretty much what they chose the last thirty years, I am real skeptical about the assertion. Does coercion work? Prohibition sure didn’t. Taking away trans fats and public smoking make very small dents in the overall mortality. Is Pres. Obama going to stand in front of us all every day and lead the nation in a spinning workout? OK, I’m becoming facetious. My point is that well meaning public health advocates are pretty good at building models that predict what ought to happen, but what about real world results? Life expectancy in Canada, which has universal health care, is about 2 years longer than the US. I’m sure that is statistically significant, but is it meaningful in terms of people’s lives? If you have to wait 18 months for joint replacement surgery, is the trade-off worthwhile? These are questions that should be answered before spending more–yes, you heard me right–in a universal health system. Americans are different from Canadians in the respect that they expect more and those expectations will drive costs up until frank rationing is imposed. And that will be very unpopular. I’m just saying….

11 MD May 27, 2009 at 5:49 pm

I trained at the Mayo Clinic and I’ve worked in AZ, CA, and the East Coast.

In my experience with the patients I’ve referred to Mayo, they get as least as many, and usually more, tests and procedures ordered there to work up any given diagnosis as they would in a typical urban private practice setting.

The typical Mayo patient at either the Rochester or Scottsdale clinics where I worked is just very different from the typical patient seen in private practice elsewhere–more educated, more compliant with following a regimen, able and willing to travel long distances for medical care.

I really loved my time at Mayo but I don’t think it’s realistic to think the low level of medicare spending in Rochester, Minnesota is due mainly to the Mayo model of care.

12 Thanatos Savehn May 27, 2009 at 9:50 pm

McAllen is the medical malpractice capital of Texas. Correlation or causation?

13 mulp May 28, 2009 at 1:11 am

Would someone please explain where I can get cheaper service to anywhere in the US for a letter or up to a 1-2lb parcel than the USPS?

I keep seeing people call the USPS inefficient, but my understanding of efficient suggests that efficient means lower price and inefficient means higher price.

And often efficiency is increased by doing the same thing the same way repeatedly in volume. Who does more volume than the USPS?

Perhaps my confusion about how great US health care is caused by my idea that efficiency implies delivering lots of care cheaply and reliably to everyone.

Is efficiency when care is expensive, delivered unevenly and only on demand with the best care delivered when the highest payments are made?

Perhaps Fedex and UPS are good analogies for US health care – people use Fedex a lot because their employer pays, so you can wait until the last minute and send the signed paper overnight for $9.80 instead of sending it a week earlier for 44 cents by USPS?

I am not in favor of a single payer system a la Britain, but instead a multipayer system of univrsal insurance like in Germany and Switzerland, even though that is more expensive, because choice is good. UPS and Fedex have been good for USPS even though they’ve cherry picked some of the most profitable business because they have driven USPS to be more innovative and risk taking. But like the proposed public plan, USPS is required to serve everyone, while UPS and Fedex aren’t.

Again, where can I get cheaper letter or parcel delivery than USPS?

14 Bernard Yomtov May 28, 2009 at 9:59 am

mulp is correct.

I think Tyler overlooks the central point about McAllen made in the article.

The medical community there has come to regard patients as cash cows to be milked to the maximum extent. The overuse is not a result of unreasonable demands by patients. It stems from the fact that each extra MRI, each extra test, generates income for the doctor who orders or performs it.

If anyone is abusing the system in McAllen, it is the physicians (or most of them) not the patients.

Gawande, the author, describes a dinner with physicians where the subject of costs was discussed. A number of theories were proposed and shot down. Finally, there was this:

“Come on,† the general surgeon finally said. “We all know these arguments are bullshit. There is overutilization here, pure and simple.† Doctors, he said, were racking up charges with extra tests, services, and procedures.

The surgeon came to McAllen in the mid-nineties, and since then, he said, “the way to practice medicine has changed completely. Before, it was about how to do a good job. Now it is about ‘How much will you benefit?’

Read the article.

15 Sbard May 28, 2009 at 2:24 pm

The USPS doesn’t receive a dime of taxpayer money. All the money that goes into the post office comes from the sale of postage and services. Besides, for larger parcels, the cost is actually pretty close between FedEx Ground, UPS Ground, and Parcel Post (though the Parcel Post is by far the slowest) That having been said, the legal monopoly on first class mail doesn’t particularly bother me as even with it, we still have some of the cheapest domestic postage rates in the civilized world, and I can’t see how changing it would make me that much better off. My service is pretty good and I can’t see removing the monopoly of first class mail saving me more than maybe 25-50 cents per month.

16 Charlie Quidnunc June 16, 2009 at 6:06 pm

The real cause of the cost differential is the large number of American expatriates living in Mexico. Look at a map. For the hundreds of thousands of retired Americans living in Mexico, the closest town in the USA is McAllen, TX. They enroll in Medicare in their former home towns and drive to McAllen for expensive treatments they chose not to pay for out of pocket in Mexico. The denominator is wrong in the cost per enrollee equation. Multiply by two or three and you get close to the truth.

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