A graphic making the rounds on social media has people talking—plots health spending per capita against the average life expectancy for two dozen countries. The chart has renewed the important conversation around why the United States’ experience is such an outlier, spending more than any other country by a wide margin, effectively proving the adage that “more is not better.”
The question of why the
U.S. generates so little value for its healthcare dollar is a persistent source
of study and debate. While dramatic changes are underway in how care is
financed and delivered, two major structural impediments to moving the U.S.
“closer to the curve” are rarely discussed.
The Inverted
Pyramid
The
U.S. spent less than $300 per person on public health in 2014 (the most
recent year for which data is available) – this compared to $9,523 in
per-capita total healthcare spending. While this figure is not comprehensive
(it does not include things such as corporate wellness programs), the best
estimate is that only 3% of all healthcare spending goes towards
promoting health, response to health emergencies, and the prevention of illness
and injury.
A rational system of
health promotion would invest in wellness, rather than reveling in its ability
to cure disease, yet under traditional fee-for-service compensation models,
prevention has been a business model without profit, and the fractured and
often fractious landscape of federal, state, and local public health spending
has often left public health agencies without adequate resources and direction
to achieve their mission.
The bulk of public
health expenditures have been shifted to the state level, creating an
inefficient patchwork quilt of programs and initiatives. Funding for public
health has been feast or famine, leaving delivering agencies and organizations
unable to plan for or execute long-term projects. Much as the tragic I-35
bridge collapse in Minneapolis brought the issue of infrastructure
under-investment to the public’s attention, Congressional inaction on salient
threats to public well-being such as the Zika virus have left Americans in
undue danger.
Dependency on
the Healthcare Jobs Machine
Growth
in the healthcare sector has been a bright spot in the preceding dismal
economic decade. The sector has been a consistent source of jobs growth ,
but there is reason to believe that economic gains created by healthcare
spending are not analogous to growth driven by other sectors of the economy.
When healthcare jobs do
not increase productivity, the increased real price of healthcare is
transmitted, via increased costs of production, to nearly all goods and
services throughout the broader economy – a vast “ripple effect” not seen with
inefficiency in other jobs sectors.
Unwinding this system
quickly would be catastrophic. The U.S. has made a Faustian bargain: a
healthcare system that generates fantastic profits for shareholders and delivers
well-paying jobs, while straining governments at every level and households
across the nation.
While excessive profits
are often cited as the cause of runaway spending, it is more important to
examine the rampant excesses – the accumulated inefficiencies, myriad
costs, large and small – of the system. Healthcare transactions in the U.S. are
defined by a complex and unenviable process, during which information and money
are transferred between a number of entities, accruing cost and complexity at
each step. Each step is marked by administrative duplication.
In the health insurance
market, for example, a number of companies offer a similar set of services
(charitably, these would include handling claims, answering customer inquiries,
and negotiating discounts with facilities and health care providers), yet each
organization generates a unique set of transactional and profit totaling in the
tens of billions of dollars. With a simplified payment system, insurance – and
insurers – would be less complex. Less complex organizations may be run more
efficiently, and with a lower managerial burden.
Inefficiency also
manifests itself on the provider side. From 1990
to 2012 healthcare jobs grew by 75% -- far faster than patient volumes.
Worse, the growth of healthcare administrators far outpaces the rise of the
healthcare labor force as a whole; more than
60% of all physician jobs are now purely administrative.
What Lies
Ahead
Physicians, for their
part, have begun to push back against administrative waste and excess, moving
in large numbers to service delivery models like Direct Primary Care – saving
themselves and patients the time, frustration, and costs associated with third
party payment.
New reimbursement
structures, like shared savings and ACOs, will draw provider and payer
incentives closer to one another – and it is within these highly aligned
arrangements that the efforts of physician stewardship organizations, such as
Costs of Care and Choosing Wisely. will likely be most effective.
But with
53% of physician reimbursement tied to fee-for-service, the majority of
dollars saved through these efforts are still subject to recapture by insurers,
administrators, or other entities, rather than making their way back to
patients in the form of lower out-of-pocket costs.
As Holman W.
Jenkins pointed out in a recent, devastating, satire of the Mylan
Pharmaceuticals Epi-Pen scandal, many of the incentives in the current
healthcare system are aligned only with growing the total scale of healthcare
expenditures, not shrinking them.
Until we create a system
that rewards investment in wellness and healthcare dollars not spent,
there is reason to fear that the negative effects of healthcare excesses will
continue to be borne by households, businesses, and governments.
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