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A public policy blog from AEI
A core idea at the heart of President Obama’s healthcare reform law is the notion that while expanding coverage is expensive, there are huge offsetting savings to be had from reforming how medicine is practiced by doctors and hospitals. Who knows, maybe a third of the $2.7 trillion spent on healthcare is wasted.
Now this notion is based mostly on the research of the Dartmouth Institute for Health Policy & Clinical Practice. It shows Medicare spending in some regions of the country is significantly higher than others. Kaiser Health News: “This geographic variation in spending, which the government has also examined, was a motivating force behind a number of government initiatives including changes in Medicare payment to reward hospitals and doctors who provide good care efficiently.”
And if that research is wrong? Well, then we have a problem. And a paper from a Federal Reserve economist suggests just that (via KHN):
[T]he variation in Medicare spending across states is attributable to factors that affect health and health behaviors, rather than practice styles. … It is not surprising that states in the South spend more on Medicare and have worse outcomes. These states perform significantly worse in numerous areas, including high school graduation rates, test scores, insurance, unemployment, violent crime, and teenage pregnancy. There are many ways that such differences can affect health utilization and outcomes, including differences in underlying health, social supports and social stressors, patient self-care and advocacy, ease of access to services, capabilities and quality of hospital and physician nurses and technicians, and cultural differences in attitudes toward care. A comparison of health spending in Mississippi with health spending in Minnesota is not likely to provide a usual metric of the ‘inefficiencies’ of the health system, nor is likely to provide a useful guide to improve the quality of care in places where it is lacking.
Certainly this is still an open issue, as the KHN article makes clear. But the fact that it is — and that we still rejiggered a fifth of the economy partly based on this research — should give policymakers pause — and perhaps a new found sense of humility.
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