CBO's Director, Peter Orszag gave an extremely interesting talk at the New America Foundation (NAF) a couple of weeks ago. After accepting seven Diet Cokes in honor of the late hours he and his staff have been working, he went on to present the following, very interesting conclusions.
The above graph was the crown jewel of his presentation and is so counter-intuitive to the prevailing wisdom that it currently graces the CBO's graphic sparse home-page. Most of the budget worries in the current discourse are over paying for the retirement and increasing health costs of the Baby Boomers. From this view, saving Social Security and Medicare are a matter of either depriving the Boomers of promised benefits, or squeezing more taxes from a shrinking working-age population.
But these new projections only attribute ten percent of health cost increases to the Boomers. Orszag posits that our biggest problem is that we spend too much on techniques with low rates of success. He believes that 30% of medical spending could be removed without adverse effects.
To support this conclusion he produced another two charts (of which I sadly do not have digital versions). The first showed how regionally, medical outcomes were not correlated with spending. The second showed how even at famous research hospitals such as UCLA and the Mayo Clinic (an admittedly small sample), spending was in no way correlated with outcomes. He attributed the difference to interventionist versus non-interventionist professional norms, which in the absence of solid evidence on best practices, play a very strong role in guiding doctors' decisions.
The simple solution would seem to make patients more accountable for health spending. That is, make sure they feel the financial bite of each extra dollar they want to spend on tests and treatments which they might otherwise forego. Unfortunately, a small portion of patients absorb the lion's share of health care spending and it is very hard to restrict care to these individuals. Doing so would mean doing away with catastrophic coverage which our nation is very unlikely to do.
So what are we left to work with? We need to do a lot of research. No one has good information on best practices and we have very few resources devoted to discovering or promoting them. Orszag believes that we should have started our research into best practices 15 to 30 years ago. Perhaps we can blame the Boomers for not starting earlier?
2 comments:
Interesting blog, Chris. I raises a question I have been considering for sometime. Although I would like to think that good economic analysis can identify the solutions to big problems like healthcare, and the solutions will sell themselves, it seems to me that many of the solutions are out there, but we lack the political will or ability to implement. Hence, the 'breakthroughs' tend to be political rather than from a nifty economic analysis. RE health care: are we willing to cut off $ for the chronically ill and deny experimental procedures to the well off and willing to pay? What is the word from the Beltway?
Hi Jesse. Sorry to be so slow to get back to you, I’m still trying to get my blogging rythym down.
My take is the importance of the political and technical/economic drivers of policy shift over time but the political is definitely more important right now. I would point to SCHIP as an example of this. From a purely pragmatic perspective it is in our nation’s interest to make sure that our future workers are healthy and productive. Seems like investing in our children’s health would be a pretty good investment but it appears that the Administration is choosing to try to establish a fiscally conservative image instead.
No one is going get any health care legislation through the Senate until we are able to build some kind of bi-partisan consensus.
But I wouldn’t completely write off the nifty economic analysis. Orszag is pointing to potentially massive cost cutting (30-50%!) without reducing (and probably improving) health outcomes. That’s a pretty powerful statistic that can cut through political arguments pushed by groups that benefit from the status quo. So, the nifty economic research becomes political power.
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