Do consumers demand shiny new things in health care?

In an important paper highlighting one of the key drivers of health care costs, Harvard researchers discuss patients’ preferences for high-cost health care versus plain old aspirin and flu shots. Aspirin, Angioplasty, and Proton Beam Therapy: The Economics of Smarter Health Care Spending addresses what it will take to bend the cost curve by changing incentives and infrastructure for health providers on the supply side, and consumers on the demand side.

Katherine Baicker and Amitabh Chandra, the authors, presented the paper at the Jackson Hole Economic Policy Symposium on behalf of the Federal Reserve Bank of Kansas City in August 2011. It is right that the Fed was the host of this meeting, featuring Ben Bernanke, Chairman of the Fed: health care costs are a key driver of the U.S. long-term deficit projections, with the public sector poised to pay for over one-half of health costs.

Two factors are troubling with this scenario: as health spending continues to increase, it will consume a larger share of the Federal budget which would replace spending on other needed programs from transportation to energy and education. Second, it is well-recognized that health spending today is inefficient and wasteful: the more we spend, the more resources we waste that could be used to, say, cover the uninsured, allocate dollars to medical research, and provide community health workers where they’re undersupplied. Inefficiencies are created, in part, by the way health care is financed in the U.S. in piecemeal fashion, leading to siloed care and incentives focused on individual segments of care — not in the continuity of care that drives a patient’s whole health, or outcomes.

One aspect of efficiency deals with the factors of production: inputs into health utilization. In the U.S., providers too-often use expensive treatments, forgoing cheaper alternatives that have been proven to be at least as effective, compared to other countries. Baicker and Chandra argue the case to foster the use of lower-cost but highly effective technologies in health care to move the production function toward a lower cost, higher-value frontier.

To do this would require changing incentives for providers in terms of payment; for consumers in terms of health benefit design; and, for health plans in how they’re regulated and compete.

Aligning these incentives, the authors conclude, would lead the U.S. toward a higher-performing, higher-value health system and conserve costs.

Health Populi’s Hot Points: The name of this paper perfectly frames the discussion. American health consumers have shared a mentality that newer tech equals better tech, that more CT scanners and MRIs on Pill Hill portend better health for their communities. But we’ve known for some time that “more” in health care doesn’t equate to “better” health outcomes. Shannon Brownlee succinctly presented the argument against “more” consumption in health care in her book, Overtreated, five years ago — this is required reading for anyone interested in making sense out of the nonsensical U.S. health system. The tagline tells the story: “why too much medicine is making us sicker and poorer.”

U.S. health consumers need to understand this logic trail that Baicker and Chandra impeccably document. This is a dot-connecting I try to do here in Health Populi; please spread the word to family, friends and colleagues. Aspirin and taking a walk around the block can go a long way to healing the inexorable increase of high costs in the American health system and long-term health of the nation’s economy.

3 Responses to Do consumers demand shiny new things in health care?

  1. TRacy McManamon September 7, 2011 at 8:37 pm #

    Let’s also understand who indeed owns a great deal of the technology today. I want what is best and works the most effective. Since I have a HSA plan I appreciate the fact that I am reminded to speak out about costs and expected outcomes of procedures and medicines. Numerous times physicians have recommend something else after a brief and respectful discussion about outcomes or cost.

    We need to be informed about our health care.

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