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Simone's OncOpinion: An Analysis of the Effects and Causes of the High Cost of Health Care

Simone, Joseph V. MD

doi: 10.1097/01.COT.0000407167.47952.d6


We have been talking about the high cost of health care for years. And it is still escalating more than inflation. When experts tell us this is not sustainable, we all nod our heads. But what do we know about its cause and effects?

Many of us in the great middle zone of providers say, “I understand that this is a serious problem, but I am powerless to do anything about it, even if I knew what to do.” Another group might say, “It is not my fault and I am not making an exorbitant amount of money, so the problem lies elsewhere.” A third group, hopefully small, might say, “Yeah, health economics is a mess, but I am going to get mine before health care reform or some other measure cuts my income,” or “I just won't take any Medicare and Medicaid patients.”

I believe that these scenarios represent a fair number of providers, individual and institutional. What you may notice is that all three focus on “I,” what the problem means to me. That is understandable, but it is a narrow view of a complex issue that, like it or not, we all are drawn into. We have already seen some effects of cuts in reimbursement—small practices closing, physicians giving up practice ownership for the presumed security of employment. But that is, once again, a focus on oneself.

I believe a broader understanding of the issue would be helpful. For example, studies of the effects on our patients could lead to a deeper understanding of what action might be possible to mitigate potential negative side effects of these costs.

The theme of the September 2011 issue of Health Affairs is, “The New Urgency to Lower Costs.” I shall summarize four studies in the issue that may help us understand more clearly what is at stake for patients as well as providers.

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First Article

“A Decade of Health Care Cost Growth Has Wiped Out Real Income Gains for an Average U.S. Family,” is the title of the first article, and it summarizes the findings of David Auerbach and Arthur Kellerman, who work at RAND.

The average income of families with employee health insurance rose from $76,000 in 1999 to $99,000 in 2009 (in current dollars), but increased spending on health care largely offset this gain.

Families' health insurance premiums rose from $490 to $1,115, and out-of- pocket health care spending almost doubled. Families had $95 more in income at the end of that decade for non-health care spending; if the growth of health care costs had not exceeded the rate of inflation, they would have had $545 per month instead of $95, or nearly $5,400 per year.

The authors conclude, “The burdens imposed on all payers by steadily rising health care spending can no longer be ignored.” I doubt that middle- and lower-income families have ignored this problem.

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Second Article

“Lower Income Families Pay a Higher Share of Income Toward National Health Care Spending Than Higher Income Families Do.” That is the title of an article by Patricia Ketsche, E. Katherine Adams, Sally Wallace, Viji Diane Kannan, and Harini Kannan from Georgia State University and Emory's Rollins School of Public Health in Atlanta, the University of Rochester, and the Jameel Poverty Action Lab in New Delhi.

The first sentence of the abstract struck me, though it is obvious: “All health care spending from public and private sources, such as governments and businesses, is ultimately paid by individuals and families.” That means our patients as well as you and me.

The authors sought to measure the financial impact of health care costs from all sources, including direct out-of-pocket payments for insurance premiums and other medical payments, taxes for health care, reduced earnings from their capital assets (mutual funds, 401k plans, stocks), and lower cash compensation for labor in cases where employer premium contributions replace wages.

There are a couple of take-home conclusions from this large and complex analysis. The average national family spent 15.5% of income on health care. The average family in the bottom quintile of income spent a higher percentage of their income for health care (22.7%) than families in the other four quintiles (14.8-16%).

This makes sense, because even if the actual dollar amount spent on health care were the same, a larger fraction goes to health care in lower-income families. The conclusion is that the burden of health care costs is greater for those with the least resources, which may affect how soon or how often they seek medical care.

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Third Article

The next two papers address physicians and other providers.

“Higher Fees Paid to U.S. Physicians Drive Higher Spending for Physician Services Compared to Other Countries,” is authored by Miriam Laugesen and Sherry Glied of Columbia University. They compared physicians' fees paid by private and public payers for primary care office visits and hip replacements in Australia, Canada, France, Germany, the United Kingdom, and the United States. They also compared physicians' incomes, net of practice expenses and differences in financing the cost of medical education, and national spending on physician services.

Compared with the foreign countries, public and private payers paid somewhat higher fees to U.S. primary care physicians for office visits: 27% more by public and 70% more by private payers.

The numbers for hip replacements were 70% more by public payers and 120% more by private payers. The average income of primary care physicians in the U.S. ($186,582) and orthopedists ($442,450) was also higher than their foreign counterparts. Furthermore, the differential spending on physicians is greater than the overall difference in total health care spending between the U.S. and the other nations.

The authors conclude that higher fees, rather than factors such as higher practice costs, volume of services, or tuition expenses, were the main driver of higher spending in the U.S., particularly in orthopedics. One could argue with these conclusions, but other studies with slightly different approaches have reached the same conclusion.

Does this apply to medical, radiation, and surgical oncologists? These specialties were not a part of the study, but one can assume that the findings would be similar based on the following data. In 2008 the average per capita spending on physician services in the U.S. was $1,599 compared with $310 per capita in the 33-member countries of the Organisation for Economic Cooperation and Development (all in current U.S. dollars).

Most member countries are in Europe, North America, Asia, and Australasia, and all are economically developed countries. The U.S. is the 34th member, so the collected data for this analysis were addressed comparably.

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Fourth Article

“The Growth In Cost Per Case Explains Far More of U.S. Health Spending Increases Than Rising Disease Prevalence,” by Charles Roehrig of the Center for Sustainable Health Spending at the Altarum Institute, and David Rousseau of the Kaiser Foundation, is the final article. Their study was in response to the proposition that increased health care spending for many diseases has been driven more by increases in the number of people receiving treatment for a given condition.

The authors examined the clinical prevalence (number of people with a disease, treated or not) and the cost per case across all medical conditions between 1996 and 2006. They found that three-fourths of the increase in real per capita health spending was attributed to growth in cost per case, while increases in treated prevalence (number of people receiving treatment for a given disease) accounted for one-fourth of spending growth. They concluded that efforts to reduce the cost of health care in the U.S. should focus more on reining in the cost per case.

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Read the Full Articles

We can argue about these results and if one wishes to do so, I recommend that the articles be read first because they include even more data and references.

In effect, these articles are making diagnoses of contributing causes of the feverish increase in health care costs. The first two focus on the public, our patients, and the burden of escalating costs. They do not address whether these people avoid timely and, at times necessary, visits to doctors so intervention is delayed. But others have found this to be the case. Seeking care or buying insurance is not affordable for many, not a new or surprising finding.

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And What of the Physicians?

And what of the physicians? The diagnoses are two-fold. First, that the per capita costs of health care has increased, with the unspoken subtext being that since we physicians order tests and treatments, the escalation of cost is due to our fee structure and, by implication, ordering “excessive” diagnostic tests or treating patients well beyond any reasonable expectation of success. One could justly argue that the extremely high costs of new pharmaceuticals and technologies are partly to blame, but that does not mitigate the fee schedule or the common tendency for overtreatment.

And the final diagnosis is that we physicians are grossly overpaid compared with physicians in the rest of the developed world. By most measures, the overall health in the U.S. is not better than in the other developed countries, and in some cases it is embarrassingly poor. So what are we paying for?

My own take on this data is not to blame physicians or anyone for the current state of health care economics (there are many factors), but that we must understand and take seriously its contributing factors and effects so that we may intelligently deal with the problems.

Railing against politicians and the pharmaceutical and medical device industries may make us feel better, but also may fool us into thinking that we have it all figured out and conclude that this is someone else's problem to fix. It is our problem but, more important, it is our patients' problem, and as their physicians, their problem becomes our problem.

© 2011 Lippincott Williams & Wilkins, Inc.
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