Demystifying U.S. Health Care Spending--Some Surprising Information

Paul Ginsburg, of the Center for Studying Health System Change, has just authored a new report, "High and Rising Health Care Costs: Demystifying U.S. Health Care Spending." The report is part of the Robert Wood Johnson Foundation's Synthesis Project.

This paper reviews existing literature in search of a more clear understanding of U.S. health care costs, the drivers, and the trends.

It is an encyclopedia of the research on U.S health care costs and required reading for any health policy wonk!

I found the following notable:

• Technology is the key driver in health care spending accounting for an estimated 38% to 65% of spending growth.
• "Obesity is a significant factor driving health spending, accounting for an estimated 12% of the growth in recent years." However, any gains from reducing obesity would be concentrated in the short and intermediate period "because some of the savings will be offset by increased longevity and the cost of disease that are most prevalent during old age." The irony is that obese people die sooner thereby avoiding the high medical costs associated with living longer.
• If we insure more people our health care system will cost more not less. "The increase in the percentage of people with health insurance accounted for approximately 10% to 13% of the historical growth in spending." The uninsured has not contributed to the recent growth in health spending in the aggregate and will not be a driver in the future unless we find a way to insure more people.
• Aging will not be a major factor in driving health care spending, and will not become one, despite aging baby boomers.
• Medical malpractice is not a major driver of spending trends. Medmal does contribute to health spending at any moment in time, but is not a large factor nor a significant factor in overall growth of health care spending.
  
• "Productivity gains in the health care sector have probably been lower than in other industries."
• U.S. health care cost increases continue to outstrip those in other industrialized nations by a large margin. Excess health care growth in the OECD nations was 0.6% between 1985 and 2002 compared to 2% in the U.S. for that period.
• When compared to the health systems of other industrialized nations, "prices, efficiency, and insurance administration are the most important differences."
• Drug prices are 70% higher in the U.S., physician compensation is 6.6 times per capita GDP for specialists and 4.2 times for primary care compared to 4 and 3.2 in OECD nations, the U.S spends 54% more for the top five inpatient medical devices, and the U.S. spends six times more for administration than the OECD nations.
  
• "Overall our understanding of high and rising costs is fairly solid. Our most pressing needs are not as much on the research side as on the development side, that is, all of the technical work needed to pursue many of the reforms..."

Aging and medical malpractice costs are not major contributors to the cost of health care in America? If we solve our obesity epidemic we will just increase longevity, more people will make it to old age, and we'll have all sorts of other high costs? Covering everyone will cost us more in the aggregate not less--getting them all in the system won't be a money saver?

Are these the "inconvenient truths" in health care reform?

The data would seem to say they are.

So does this mean we should back off on tackling obesity, forget medical malpractice reform, and scrap plans to reduce the uninsured?

No. I'd respond it's fair to say that is not what the author has in mind.

There is a moral imperative to deal with the uninsured. Being obese may save the system some money in the long-term because the person dies a lot earlier--hardly a desirable policy objective. That obese person still costs us a lot more in the near term and typically suffers from chronic disease in the meantime. Our medical liability system needs reform if only to reduce the rate of medial errors and the human toll those take.

But when it comes to health care costs, the real target needs to be productivity--or said another way cost containment.

One finding from this report really struck me: "If the efficiency of the delivery of services could by increased by 20% over 10 years, this would roughly close the gap between health care spending and GDP over that period." The bottom line is that if we want to contain our health care costs we need to find productivity improvement in things like technology use, treatment patterns, and administrative overhead.

Today, most health care reform plans focus on things like expanding the number of the insured and wellness initiatives. Those are good objectives.

But covering more people will cost more not less. Improvements in lifestyle--particularly obesity--can help.

But we cannot afford to stop there. Literally.

The big-ticket play is in productivity--the more discriminate use of medical technology, consistently practicing outcomes-based medicine, and reductions in system overhead particularly in the insurance system.

The problem with the health care productivity issues is that you have to step on some very powerful toes amongst the stakeholders to make any big gains--it's a lot easier to talk about insuring everyone and promoting wellness.

If we only increase access and don't hit the health care productivity issues head-on we will simply craft a system we will never be able to sustain.

Obesity and Smoking--One Step Forward and Two Steps Back

Young Americans risk being the first generation whose health status will be worse off then the last.

I have repeated that prediction many times but today it looks like tomorrow is here.

A study by the Harvard School of Public Health and the University of Washington and published in the journal PLoS Medicine now tells us that the overall of life expectancy of many Americans has actually been in decline for almost two decades. At the heart of it all are the lifestyles of these people--particularly smoking and obesity.

Women were impacted far more than men. For 20% of women the increase in rising life expectancy that occurred from 1980 to 1999 leveled out or reversed. The deterioration is most pronounced in a swath of America from Appalachia to Texas. Geography aside, the deterioration is most pronounced among women who smoke and are obese. Diabetes is a big part of the problem complicated, or driven, by smoking and being overweight.

The health care industry has made enormous strides in improving the management of the cost and quality of health care. Insurers, hospitals, docs, all participate in a health care system more adept at controlling costs and managing toward a better quality of care then we did 20 years ago. Yet, costs continue to soar and health care outcomes deteriorate.

Is the health care system/business blameless? No.

But so much of what is pushing costs up are the poor lifestyle choices too many Americans make. As professionals in the health care system make progress on cost and quality too many citizens undermine all of that with foolish behavior. We then look to presidential policy proposals or the next generation of managed care to bail us out. But we keep sliding backward anyway. It's like the health care system takes a step forward and dumb lifestyle decisions by people cause us to take two steps back.

This from a recent post: "The obesity epidemic has caused a tenfold increase in the nation's private health insurance bill for conditions related to being overweight, according to a self-funded study by researchers with the Emory University Rollins School of Public Health published in the online version of the journal Health Affairs. According to the study, the cost of treating conditions linked to obesity increased from $3.6 billion to $36.5 billion between 1987 and 2002. The study concludes that the best way to lower health care spending is to target the rise in population risk factors -- especially obesity."

"Current approaches to controlling health care costs are not working because they ignore the true drivers of those costs. Increases in the number of people getting treatment for serious health problems like diabetes, heart disease, high cholesterol, and mental disorders are directly linked to population increases in obesity. If insurers and employers are serious about reining in health care spending, then obesity prevention should be at the top of their agenda."

It looks like things such as smoking cessation and obesity also need to be at the top of the agenda for these many people who are killing themselves.

It is also time for the rest of us to stop pussyfooting around the problem of unhealthy lifestyles and to label smoking and obesity for what they are--really stupid.

Everything we try from health information technology to presidential proposals to reform health care will continue to make only a modest difference unless we start to call a spade a spade and change some behaviors by making these choices socially unacceptable.

Lifetime Health Care Costs For the Obese and Smokers Lower Because They're Dead Sooner

This was the impressive conclusion of a study published by the Public Library of Science Medicine. The study was sponsored by the Dutch Ministry of Health Welfare and Sport.

Obese people had the highest health care costs between the ages of 20 and 56. Obese folks and smokers were found to have a higher rate of heart disease than others.

However, the authors found that the obese and those who smoke had lower lifetime health care costs than the healthy because they died sooner.

Makes me think the Dutch Parliament must also have a pork barrel spending problem.

"Strategies To Overcome and Prevent Obesity"--Important Policy Proposals

Taking the point in the effort to deal with obesity in America is the, "Strategies to Overcome and Prevent Obesity Alliannce." It is a broad-based coalition doing good works on this front.

They recently sent me the following update on their activities and links to their work:

As you know, America’s struggle with its weight is affecting much more than just the shape of the union…it’s actually affecting the state of the union. Whether it’s healthcare spending for weight-related health problems like diabetes, our economic productivity, or the readiness of our military, obesity is taking a drastic toll on the nation.

With this in mind, the Strategies to Overcome and Prevent (STOP) Obesity Alliance issued policy recommendations today to help bring new urgency to combating adult obesity. Designed through multi-organizational collaboration, the recommendations address four key areas where the public and private sectors can impact the nation’s battle of the bulge:

• Redefining Success - There is no agreement between the medical, policy and research communities as to what constitutes successful weight loss. The Alliance recommends promoting the use of a sustained loss of five to 10 percent of current weight as a key measure to judge the effectiveness of weight-reduction interventions.
• Encouraging Innovation and Best Practices in Obesity Treatment -- Some people do not get the same benefit from traditional nutrition and exercise programs as others. The Alliance encourages the creation and distribution of best practice models that combine multiple intervention approaches.
• Addressing and Reducing Stigma as a Barrier to Obesity Treatment -- The Alliance recommends promoting programs that foster an open-discussion environment to collaborate, rather than isolate.
• Broadening the Research Agenda -- Any chronic health condition requires a foundation of reliable information to create change. The Alliance recommends a broadened research agenda that examines all important contributors to the obesity epidemic and how they interact with each other.

Their full press release

Their policy recommendations

Reforming Our Health Care Financing System Won't Mean Anything if Americans Don't Start Taking Better Care of Themselves

Ken Thorpe, along with associates David Howard and Katya Galactionova, of Emory University has expanded on his earlier work on chronic disease in the U.S. and its impact on our health care costs in a web article for the journal Health Affairs. He compares chronic disease in the U.S. and Europe and looks at the difference as a means to help explain our higher health care costs.

As all of the Republican and Democratic presidential candidates, and the rest of us, debate how to get everyone access to health insurance the alarming decline in America's overall health, and its impact on our inability to afford health insurance, seldom gets more than lip service.

It's going to take a lot more than passing references to wellness and prevention. We've been talking about, and implementing soft programs in that space, for almost 30 years and Americans have just gotten more sloppy about their personal health. As I have posted before, we need to hit this problem, particularly America's obesity epidemic, head-on. The notion that younger adults and children may be the first generation in our history to have poorer health than the last should scare all of us--and make us understand health care isn't just an access and price issue.

This from the article's abstract:

"The United States spends more on health care than any European country. Previous studies have sought to explain these differences in terms of system capacity, access to technologies, gross domestic product, and prices. We examine differences in disease prevalence and treatment rates for ten of the most costly conditions between the United States and ten European countries using surveys of the noninstitutionalized population age fifty and older. Disease prevalence and rates of medication treatment are much higher in the United States than in these European countries. Efforts to reduce the U.S. prevalence of chronic illness should remain a key policy goal.

"The United States spends far more on health care than any European country. U.S. per capita spending in 2004 was $6,037, compared with $3,094 in the Netherlands, $3,169 in Germany, and $3,191 in France. Even Switzerland, which has the highest per capita health spending of any European country, spends only two-thirds as much per capita as the United States spend.

"Previous studies have sought to explain these differences in terms of system capacity (that is, physicians, nurses, and hospital beds per capita), access to advanced technologies such as magnetic resonance imaging (MRI), gross domestic product (GDP) (that is, the "income effect"), and prices. Neither system capacity nor access to technology appears to account for the higher level of spending in the United States compared with these European countries. However, GDP is strongly related to health care spending. A 1 percent increase in GDP per capita is associated with (at least) a 1.2 percent rise in per capita health care spending, and cross-national variation in per capita GDP explains nearly 90 percent of the variation in this spending. However, even when the relationship between GDP and health spending is taken into account, the United States remains a substantial outlier: Per capita spending is 42 percent higher than predicted.

"More recent U.S.-European comparisons have attributed the unexplained residual spending in the United States to higher health care prices--a component of spending per treated case. Because prices cannot be observed directly for most services, the conclusion is based on Organization for Economic Cooperation and Development (OECD) data showing little difference in capacity--physicians, nurses, and hospital beds per capita and hospital days per capita--between the United States and OECD countries. Thus, the residual (and unmeasured) differences in spending are thought to reflect higher payments for services in the United States.

"Higher U.S. spending may also reflect greater disease burden and higher rates of disease treatment. Differences in diagnosed and treated disease prevalence have received less attention in the literature on spending in the United States and Europe, except as measures of system performance. However, within the United States, increases in chronic disease rates have contributed to the growth of health care spending.

"There are several reasons why disease treatment rates might be higher in the United States. First, higher rates of obesity and, up until the 1970s, smoking place Americans at higher risk for a number of chronic conditions. Second, the U.S. medical system might have a greater propensity to screen for disease more aggressively and treat less severe cases of disease.

"Previous studies have shown that disease and treatment rates are higher in the United States than elsewhere. A recent comparison of British and U.S. surveys of the population age fifty and older found that U.S. respondents were more than twice as likely as their British counterparts to report having been diagnosed with diabetes and were also more likely to report having been diagnosed with other conditions. Disease-specific comparisons between the United States and European countries have also found that prevalence and treatment rates are higher in the United States.

"In this paper we examine differences in doctor-diagnosed and medication-treated disease prevalence between the United States and ten of the largest European countries. We find that both diagnosed prevalence and treatment rates are higher in the United States. We cannot directly calculate the link between higher treatment rates and spending, but we show that U.S. health care spending would be lower if treatment rates were reduced to European levels."

Access the entire article: Differences in Disease Prevalence As A Source of the U.S.-European Health Care Spending Gap

Earlier post: The Obesity Epidemic--It's Time to Deal With it the Same Way We Did Smoking

The Obesity Epidemic--It's Time to Deal With it the Same Way We Did Smoking

While we debate just how we will change our health care financing system so that more people can be insured at an affordable cost, we are too often overlooking one of the biggest drivers of health care costs--America's obesity epidemic.

The latest report on obesity in America by the Trust for America's Health found that the problem is growing at an ever larger rate despite recent "wellness" initiatives and attention to the problem.

In the past year, obesity rates have gone up in 31 states, and no state saw an improvement.

The report said that two-thirds of U.S. adults are overweight or obese!

In 32 states, 60% of the population (including children) is overweight or obese! Mississippi leads the nation with 30% of its people obese.

Presidential candidates can talk about covering the uninsured or making the health insurance markets more efficient all they want until we look this national epidemic in the eye.

Ken Thorpe of Emory University is a health care economist I have come to greatly respect over the years. This from an overview of his 2005 study on the impact obesity has on America's health care costs:

"The obesity epidemic has caused a tenfold increase in the nation's private health insurance bill for conditions related to being overweight, according to a self-funded study by researchers with the Emory University Rollins School of Public Health published today in the online version of the journal Health Affairs. According to the study the cost of treating conditions linked to obesity increased from $3.6 billion to $36.5 billion between 1987 and 2002. The study concludes that the best way to lower healthcare spending is to target the rise in population risk factors -- especially obesity."

"Current approaches to controlling healthcare costs are not working because they ignore the true drivers of those costs,' Dr. Thorpe says. 'Increases in the number of people getting treatment for serious health problems like diabetes, heart disease, high cholesterol, and mental disorders are directly linked to population increases in obesity. If insurers and employers are serious about reining in health care spending, then obesity prevention should be at the top of their agenda."

Today, being fat has almost become a protected class. It is not OK to be fat.

Twenty years ago, we began a crusade against smoking that has made a difference and generally made nicotine socially unacceptable and I don't remember any anti-smoking campaign ever making it personal.

We need to do the same thing with obesity--it's killing more Americans and creating chronic disease beyond anything cigarettes ever did!

The youngest generation now looks like it is going to be the first to be less healthy than the one that came before them.

It's also making America's health care bill unaffordable for all of us.

Related Post: United Health Launches a New Health Plan That Rewards Healthy Workers--Immediately Criticized for "Turning Health Care Into a Police State."

"Those Crazy Californians. This Time Its Childhood Obesity."

That's the title of Brian Klepper's recent post over at the Blog, "The Doctor Weighs In."

He mentions my recent post on this and takes it further. It's a good read.

Here's the first part and a link to the rest:

California always seems to be ahead on things that matter. A CNN story this week highlights that state's terrific anti-obesity TV campaign. The ads have cute kids sweetly asking "Dad, could you buy me some diabetes?" and "Can I drink another cup of sugar?" The goal is to shock adults into appreciating that the cheap, tasty foods they shovel down their children's gullets will have real impact. In one of the CNN clips, Adam Sandler says the ads work so well that he and his little girl suddenly dropped their cheeseburgers. I passed along the link to folks in Florida's government, and asked, "Why aren't we doing something like this?"

It's a fair question, but as I tried to point out in my post the other day on food companies' lobbying influence, these ads, powerful as they are, are hardly a match for the food industry's virtually unlimited resources and unrestrained marketing power. A well-intentioned state agency may place a few high profile ads, but the food companies can run theirs unrelentingly and in many different media. They're all over kids’ TV programming, in children’s books, and at schools. They have product placements in the movies, and are on Internet gaming sites. It's difficult to go head-to-head and expect to win against such sophisticated techniques and on so many fronts.

We’re utterly losing the war on obesity. The disease and cost numbers make that abundantly clear. The other day, Bob Laszewski at The Health Care Policy and Marketplace Review reminded us of an important 2005 Emory University study on the topic. The team, led by prominent health services researcher Kenneth Thorpe PhD, analyzed the 20 medical conditions that accounted for most of the growth in health insurance spending between 1987 and 2002.

The conditions, in order of their influence, included:

1. Newborn and Maternity Care
2. Cancer
3. Pulmonary Conditions
4. Arthritis
5. Mental Disorders
6. Hyperlipidemia
7. Hypertension
8. Lupus
9. Back Problems
10. Upper Gasterintestinal
11. Diabetes
12. Kidney Problems
13. Infectious Disease
14. Heart Disease
15. Skin Disorders
16. Bronchitis
17. Endocrine Disorders
18. Other Gasterointestinal Diseases
19. Bone Disorders
20. Cerebrovascular Disease

During that 15-year period, the cost of treating obesity-related conditions rose tenfold, growing to two-thirds of our total health care spending. The number of people who became obese, the percentage of obese people with serious medical conditions, and the cost to treat each obese patient all skyrocketed.

The rest of the Brian's post

United Health Launches a New Health Plan That Rewards Healthy Workers--Immediately Criticized for "Turning Health Care Into a Police State."

Under a new program announced by United Health, health plan participants who take tests and other evaluations to prove they are meeting goals for blood pressure, cholesterol, height/weight ratio, and smoking status would be eligible to receive $500 reductions in their health plan deductible ($1,000 family) for every goal met.

The plan starts out with a $2,000 single/$5,000 family deductible.

In a USA Today article, a "consumer advocate" was quoted as saying, "This is turning health care into a police state."

Over the years, the health insurance industry has been criticized for rating-up, or refusing to cover altogether, those that have preexisting health conditions. I have generally concurred with that criticism especially when consumers were willing to buy insurance when it was first offered to them.

So, I'd like to take this discussion past the usual concern most of us have about a health care system that could discriminate against people over things they don't have any control over.

Ken Thorpe of Emory University is a health care economist I have come to greatly respect over the years. This from an overview of his 2005 study on the impact obesity has on America's health care costs:

"The obesity epidemic has caused a tenfold increase in the nation's private health insurance bill for conditions related to being overweight, according to a self-funded study by researchers with the Emory University Rollins School of Public Health published today in the online version of the journal Health Affairs. According to the study the cost of treating conditions linked to obesity increased from $3.6 billion to $36.5 billion between 1987 and 2002. The study concludes that the best way to lower healthcare spending is to target the rise in population risk factors -- especially obesity."

"Current approaches to controlling healthcare costs are not working because they ignore the true drivers of those costs,' Dr. Thorpe says. 'Increases in the number of people getting treatment for serious health problems like diabetes, heart disease, high cholesterol, and mental disorders are directly linked to population increases in obesity. If insurers and employers are serious about reigning in health care spending, then obesity prevention should be at the top of their agenda."

Let's read that last statement again: "If insurers and employers are serious about reigning in health care spending, then obesity prevention should be at the top of their agenda."

We have made great strides in reducing the impact of tobacco use because as a society we have pretty much come to the conclusion that smoking is a dumb thing to do.

But obesity is killing more of us, and doing more to undermine our quality of life, than is tobacco.

We have got to deal with the obesity epidemic in the United States and we won't do that until we are willing to start talking about this and acting on it.

I really applaud United Health for taking a first step.

They deserve our all taking a deep breath and giving this some serious consideration.