Measuring Health Care Costs

Pressure to reduce the growth of health care spending is at an all-time high as policymakers seek ways to reduce government spending and health care expenses strain household budgets. However, there is a concern that cuts to health care spending will reduce access to high-quality medical treatment.

On the other hand, some have argued that expensive health care is not only not better than less-expensive care, it can even be harmful. According to this argument, cutting back on wasteful, expensive care would both reduce health care spending and improve quality.

It's clear that the seemingly relentless increase in health care costs is one of America's most vexing and most critical domestic policy problems. Victor Fuchs, considered by many to be the father of health economics, was recently quoted as saying, “If we solve our health care spending, practically all of our fiscal problems go away.”

It's not that the problem has gone unnoticed. But for decades, the health policy process has been in a state of perpetual gridlock. This is, in part, due to the fact that many sweeping proposed policy changes—tort reform, pay-for-performance, changing Medicare and/or Medicaid eligibility requirements, etc.—threaten the economic interests of one or more key stakeholders.

For a long time, spending on medical care has been increasing at a rate faster than the gross domestic product. Between 1999 and 2009, health care expenditures for the average family nearly doubled. As a result, controlling health care costs figures prominently in budgetary debates. Programs designed to reduce health care costs typically focus on cuts, such as reductions in payment levels, benefit structures, and eligibility. However, reducing waste in the system could be a less harmful strategy, as such an approach would not threaten value-added care.

According to a recent commentary by Robert H. Brook that received the ABIM Foundation's Professionalism Article Prize, physicians are in an ideal position to identify and eliminate waste by designating all medical services as one of four types of care: inappropriate, equivocal, appropriate, or necessary.

This commentary appeared in The Journal of the American Medical Association on February 22, 2012.

Electronic medical records are being implemented throughout the US health care system. Incentives for implementation are being partially paid for by the US taxpayer. To receive implementation incentives, clinicians must demonstrate meaningful use—that is, the electronic medical record must be used to improve quality and must satisfy certain indicators. What is missing from the definition of meaningful use is any direct measure of either value or cost. It is likely that introducing electronic medical records will improve quality on such dimensions as whether a vaccine is administered, measurement of blood pressure is taken, diabetes is better controlled, and admissions for poorly controlled diabetes are reduced. However, in most systems there are no measures built into electronic medical records to help physicians control cost or even to know the cost of the care that they are providing.

In less than 2 years, all US citizens and legal US residents will have health insurance—except individuals who are willing to pay a penalty for not buying insurance. The United States is on the verge of joining the civilized world.1 Of course, this outcome will occur only if, among other things, the US Supreme Court does not rule that the Patient Protection and Affordable Care Act is unconstitutional, if US and state governments can enact the necessary policies and regulations, and if the health insurance exchanges required to implement the law will work. Whether a proponent or a critic of this law, most will agree with the undeniable fact that a new era in US medicine and US health care begins in less than 2 years.

The key question is what potential measures should be monitored to determine both anticipated and unanticipated effects of the new law on the health of the US population....

This commentary appeared in The Journal of the American Medical Association on November 9, 2011.

One result of health care reform legislation was establishment of the Patient-Centered Outcomes Research Institute (PCORI). This relatively generously funded institute is intended to provide support for research that "helps people make informed healthcare decisions and allows their voice to be heard in assessing the value of healthcare options." This kind of research "assesses the benefits and harms of preventive, diagnostic, therapeutic, or healthcare delivery system interventions to inform decision-making, highlighting comparisons and outcomes that matter to people."