6/16/2015

Patient Health Doesn't Explain Cost Differences - Bloomberg View

H E A LTH C A RE R EF OR M

PatientHealthDoesn'tExplain
CostDifferences

SEPT30,20148:48AMEDT

ByPeterR.Orszag

aA

TheWashingtonPostStylesectionrecentlydeclaredthatanewBrookingsInstitutionreporthas
upendedhealthcareresearch.Therealityismorecomplex,andthenewpaperhasnot
fundamentallychangedanything.
Thereport,byLouiseSheiner,aseniorfellowatBrookings,hasdrawnlotsofattentionbecauseit
bringsintoquestiondecadesofresearchbytheDartmouthAtlasofHealthCare.TheDartmouth
team'scorefindingshavebeenthatsubstantialvariationexistsinhowhealthcareispracticedin
theU.S.,andthat,onaverage,highercostdoesnotcorrelatewithhigherquality.Together,these
suggestitshouldbepossibletoreducehealthcarecostswithoutharmingpeople'smedical
outcomes.(Ihavepubliclyembracedthisperspective,andIcontinuetoholdit.)
EnterMs.Sheiner.SheacceptsthatcostsvaryfromstatetostateintheU.S.,butfinds"little
support"forthenotionthatdifferencesinmedicalpracticearetoblame.Whatdoesexplainthe
variation,sheclaims,istheunderlyinghealthofpatients:Thestateswithhighercostssimplyhave
sickerpeople.
ThisclaimissomethingtheDartmouthresearchersthemselveshavetriedtoincorporateintotheir
analyses.Sheiner,however,saystheyhavedoneitwrong.Evenafteradjustingforabeneficiary's
healthinthemannerembracedbytheDartmouthteam,sheshows,thereisapositivecorrelation
betweenastate'saveragecostforhealthcareanditsshareofdiabetics.
Now,intheory,theDartmouthnumbersshouldalreadyaccountfortheimpactofdiabeteson
spending,sothisfindingisapuzzle.AndkudostoSheinerforhighlightingit.
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6/16/2015

Patient Health Doesn't Explain Cost Differences - Bloomberg View

Thequestionis,isthecorrelationastatisticalartifactoranindicationthatthepeopleinastatewith
higheraveragediabetesratesareactuallysickerthantheymightinitiallyappear?Thepresumption
inSheinersargumenthotlycontestedbytheDartmouthresearchersisthatadiabeticpatient
inastatewitharelativelyhighaverageincidenceofdiabetesislesshealthythananostensibly
similardiabeticpatientinastatewithaloweraverageincidenceofdiabetes.(Sheactuallyclaimsit
isntevenhelpfultoknowwhetheranindividualpatientisdiabetic,onlywhetherthestatethe
personlivesintendstohavemorediabetics.)
IfyoubuytheSheinerargument,thenthevariationinMedicarecostsacrossstatesisexplained
mostlybytheunderlyinghealthofthepopulation,andnothowdifferentlydoctorspractice.
Onepromisingwaytoevaluatethecompetingviewsistoexaminewhathappenswhenpeople
movefromonestatetoanother.(Ideally,wewouldrandomlyassignpeopletomovetoone
locationoranother,butthatsnotfeasible.)
UndertheDartmouththeory,becausemedicalpracticesandcostsarelinked,whenpeoplemove
weshouldseeachangeinhowmuchisspentonhealthcare.UndertheSheinertheory,becausethe
patientshealthisthekeydeterminantofspending,people'smovingshouldn'taffectit.
Arecentstudyexaminedthisquestionandconcludedthatspendingchangesnoticeablywhen
Medicarebeneficiariesmovefromoneplacetoanother.Thepaper,byAmyFinkelsteinandHeidi
WilliamsoftheMassachusettsInstituteofTechnologyandMatthewGentzkowoftheUniversity
ofChicago,showsthatspendingchangesalmostimmediatelyafterabeneficiarymoves,butnot
before.Thechangeoccurs,furthermore,regardlessofwhethersomeonemovesfromalow
spendingareatoahighspendingone(inwhichcasethespendingonthemoverincreases)orfrom
ahighspendingareatoalowspendingone(thespendingdeclines).
Theconclusion?Howillpeopleareexplains,atmost,halfofthevariationinMedicarecostsacross
theU.S.That'sonlyslightlymorethanthesharetheDartmouthteamitselfattributestohealth
differences.Tomyreading,scoreonefortheDartmouthteam.
Then,there'sthefactthatifyouhappentobetakeninanambulancetoonehospitalratherthan
another,yourtotalmedicalcostsintheepisodearesubstantiallydifferent,eventhoughtheoverall
qualityofcareisn't.Therearethedifferencesinthewaydoctorsdescribehowtheywouldtreat
hypotheticalpatients.Andtherearethenoticeableimprovementsinvalueofcarethatplaceslike
CrystalRunHealthcareinNewYorkhavebeenabletoachievebyreducingclinicalvariation
withintheirpractices.
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Patient Health Doesn't Explain Cost Differences - Bloomberg View

Allthisevidencesuggeststhathealthcarespendingvariessignificantly,thatpatients'healthcant
explainthemajorityofit,andthatthepotentialthereforeexiststorestraincostswithoutharming
outcomes.
Tocontacttheauthoronthisstory:
PeterROrszagatporszag3@bloomberg.net
Tocontacttheeditoronthisstory:
MaryDuenwaldatmduenwald@bloomberg.net

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