Poll: The biggest obstacle to cutting health care spending

Health economists estimate that 30 percent of annual health care spending is wasted money. That 30 percent translates to 700 billion dollars.

Why is cutting health care costs such a challenge?

Both Congress and the public are unwilling to admit that reducing health care is the only meaningful way to cut spending. Patients bristle at the suggestion of reduced access to an available test. This is partly due to the pervading belief that more care equals better care—when in fact, that’s not the case. Data shows that people with lavish insurance, or “Cadillac plans,” often are no healthier than those with less comprehensive insurance.

Similarly, Congress shows little appetite for cutting health care, evidenced by their response to the recent changes in the breast cancer screening guidelines. The Senate recently passed an amendment to specifically ignore recommendations from the non-partisan United States Preventive Services Task Force, which questioned the usefulness of mammograms in women younger than 50 years old.

This does not bode well for reformers who want to control costs by encouraging medical practices to adhere to the best available data.

Controlling health spending requires sacrifice from everybody: doctors, who need to divorce themselves from a lucrative fee for service payment system; patients, who have to give up the idea that more testing is better medicine; and politicians, who must not be afraid to make unpopular decisions to control health spending.

I encourage you to listen and vote in this week’s poll, located both below, and in the upper right column of the blog.


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  • Jay W. Lee MD MPH

    I believe that eliminating corporate profit from health care would significantly reduce costs. The insurance industry term used to describe the percentage of health care dollars actually used towards the actual care of actual patients who need actual health care services, i.e. “medical loss ratio”, comes to mind. Not surprisingly, legislation proposed to set standards for MLRs in CA and elsewhere, i.e. 85%, have died primarily under the weight (decibel level) of insurance industry lobbying. The current Senate bill has some language on MLRs so we’ll see if that survives conference committee.
    I think setting MLRs to 85% (or higher) could win support of a simple majority of Ameri-cans and has the promise of bending the cost curve since corporate profit is an unfortunate part of the cost of delivering health care in the US.

  • Sarahw

    You begin with faulty premises. Again.

    Cutting health care expenses is not the profession of a physician. To the extent that government interferes in your true role, you should object.

    HSA’s, high deductible INDIVIDUALLY OWNED plans ( with same tax benefits extended to employer-based plans) and complete cost transparency are the cure. Government or “welfare” plans should be limited to those unable to work, who have exhausted their own resources or prudential measures to cover catastropy of illness and injury.

  • anonymous

    what is the definition of a cadillac plan? i’m not sure why someone on a cadillac plan would be healthier? i would think a cadillac plan would cover more contingencies, allow for more choice, less out of pocket payment when something goes wrong, not necessarily be designed to ensure average health of the policyholders is better.

  • Anonymous

    My answer is all of them (for the reasons given in the blog post), but patients are ahead of the doctors and politicians because (a) many of the patients live unhealthy lifestyles that get them sick (heart disease, diabetes, cancer, etc. from poor diet, lack of exercise, smoking, excessive alcohol, etc.), and (b) patients vote for politicians who pander them with more government spending that is not paid for and punish those politicians who want to cut government spending (other than claiming to want to do so in vague non-specific terms) or raise taxes to pay for government spending.

  • jsmith

    To a great extent our overspending on HC in this country is cultural. Look at the beautiful new hospitals. The lobby is the hospital in my bohunk town has a grand piano. The hospital rooms are lavish. And of course, as a generalist, I am shocked and amazed by the well-appointed suites of my specialist colleagues. Not what I would spend money on if I were health care dictator. I know our hospital has to compete with the next one down the road, so the business imperative trumps the clinical imperative. What a waste.
    That said, incentives matter. Dump fee-for-service, put docs on salary, and HC inflation will go down. Of course that will open a different can of worms, others will argue, and they will be correct in this. But economics is about choices in a world of scarcity.

  • Doc99

    You left out Trial Lawyers.

  • Classof65

    Patient goes to appointment with doctor. Patient describes symptoms. Doctor decides what is wrong or, if not entirely sure, orders tests to diagnose problem. Once diagnosed, doctor prescribes medication or treatment to cure problem.

    First of all, the patient does not know the cost of the visit. Doctor’s staff is reluctant to quote price over the phone since different insurance companies pay different rates for the visit. Patients do not know the cost of any of the tests performed at the doctor’s office, nor does the doctor or his staff. So the patient cannot make an informed decision about whether or not to have the test or procedure. If the doctor prescribes medication he cannot quote you a price for the medication. Sometimes he will prescribe a generic drug to help you save money. Other times he will not prescribe a generic, possibly because there is no generic equivalent. The only one who seems to know what anything costs is the pharmacist who will warn you prior to filling the prescription if the medication costs more than $100. But, what can you do? If you’re sick or in pain, you need the medication — if you decide not to get the prescription filled, you’ve wasted the money you spent on the doctor visit and the test(s) — and you still have the problem. You’d have to start all over again with a second visit to the doctor to get an alternative treatment. Or, you can just grit your teeth and hope your body will mend itself.

    So, whose fault is it that healthcare is expensive?

  • David Allen, MD

    Kevin,
    Sarahw has it right. The reason this is a problem is that there are many assumptions built into your question. You assume a third party (and often government) role in controlling costs. Perhaps if I asked “Who is responsible for controlling your grocery costs?” it would surprise you and make you question these assumptions.

    The government, and other third partys, by injecting massive amounts of money into the system for years, have inflated the price of health care.

    To the degree we can have individuals pay for their own health care, we will reverse this trend. Patients will care what comes out of their pockets for services. They will demand price transparency and they will decide how much to spend on what things. If they have millions at their disposal, what is it to you if they want to spend it on health care that you consider outside the “guidelines”? It will be their own money. Those more frugal will avoid extra costs and ask their doctor about the relative benefits and costs of various options.

    True emergencies will of course not be handled in this way – that is what insurance IS for!

    Medicare and Medicaid should be slowly phased out. Tax laws that favor employer-provided health care should be changed. Health savings accounts, with their attendant tax advantages, should be allowed and promoted. The buying and selling of insurance across state-lines should be allowed. State mandates with respect to insurance regulation should be outlawed. These are just some of the things that will benefit the entire system.

  • Scott Kozicki

    I think it’s interesting that we all see our own values in the health care debate (“socialism”, corporate profits, etc) but the reality is that we don’t need less care. We need re-organized care – focused on delivering a tangible outcome and therefore value – not “less” or “more”. If we re-organize around tangible value, then the discussion about who pays becomes less emotional. In the end, we’ll all pay, both directly, indirectly, and societally. If we’re all getting the best value for our money, then the size of those slices of pie become a lot easier to deal with.

    Unfortunately, I don’t believe this will actually happen. What’s in the way of positive change in our country’s health is the health care industry itself, and ultimately our lack of resolve. You do touch on one thing that’s very true: no one wants to give up what they perceive as their “right”. And that goes to the companies that benefit from keeping things status quo. It’s hard to tell Grandma Jones that she’s going to have to face up to the tumor in her lung instead of having surgery that will ultimately cost hundreds of thousands of taxpayer dollars without meaningfully extending her life, less her quality of life. But no one speaks for Grandma Jones. You can bet that there are plenty of people speaking on behalf of the companies that get paid for Grandma Jones’ poor choices.

  • David Allen, MD

    Scott Kozicki,

    I think you are analyzing things along the same lines as Kevin. One big (government?) system – this time, organized around ‘tangible value’ – whatever that means.

    Capitalism is self-organizing, effective, and inventive – if allowed to function. Under the current system, it is being crippled by innumerable government intrusions, mandates, and market distorting govenment money. The answer already exists, and has existed – but it is simply not being allowed to emerge.

  • BobBapaso

    It seems there is a lot of sentiment for free market forces. Health Care Savings Accounts for everyone, from birth, could solve the problem. Insurance companies want to stamp them out, but if we can keep a small program going, that can grow, we might prevail.

  • proteus21

    David Allen and Sarahw are quite correct. The problem is lack of a functioning free market. We ration everything else, including food, this way. The public is astute enough to reward a good value proposition. While we in this country debate endlessly, there is a quiet and growing free enterprise solution emerging. Foreign countries are developing low cost high quality surgical facilities for medical tourism. They are the best “demonstration project” going. The problem is that such market solutions are anathema to the socialist entitlement mentality. We need fewer regulations, not 2000 pages more. Medicare needs to quit price fixing and set a simple fee schedule and allow billing over that amount. Aggressive price competition would follow and I am confident the savvy American consumer will find a way to demand value (price/quality) on their own terms. If this system built the greatest economy and society in history, why do we mistrust it now?

  • http://www.privatepractice.md RBMD

    I agree with many of the comments stated above by David Allen and Sarahw and proteus21. Two major forces are going to correct our healthcare delivery and cost problems: patient responsibility (both in being incentivized to take better care of themselves and also being responsible for how their medical dollars are spent) and market competition (quality, cost and access issues). Insurance should be for catastrophic illnesses and trauma. It should not be restricted by state boundries and not only available through employment (But employers could offer to pay for it as a perk). That said, to be a civilized nation we need to find a way to provide for those with no means to pay their healthcare bills, but making hospitals and doctors give their services away for free is not the answer. We want hospitals and doctors to stay in business, and be rewarded for good service and care, otherwise we’ll be on our own when ill anyway.

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