1150 Seventeenth Street, N.W., Washington, D.C. 20036
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For several decades, researchers at Dartmouth College have compiled mounting evidence that notable differences in the levels of health spending and utilization across the United States are not correlated with better health outcomes or increased patient satisfaction. In recent years, some leading health policymakers have recommended using such cost and
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quality measures to reward health providers on the basis of their "relative efficiency."
However, critics such as pulmonary physician Peter B. Bach, M.D., of the Memorial Sloan-Kettering Cancer Center have cautioned that the current approaches used in hospital efficiency rankings are unsound and fail to accurately identify high-performing providers. Other researchers, such as Andrew Rettenmaier of the Private Enterprise Research Center at Texas A&M University, have observed that different indicators of geographic variation in health spending related to types of insurance coverage show less potential for cost savings. On the other hand, Amitabh Chandra of Harvard University has argued that there is tremendous variation in the efficiency of local health delivery systems, and that we could reduce the rate of growth in health spending by rewarding those systems that successfully keep costs in check while delivering quality health care.
This forum examined what we have learned from research on geographic variation in health spending and which health policy reforms are more likely to succeed in strengthening incentives to improve the efficiency of health providers' performance.
| 1:15 p.m. | Registration | |
| 1:30 | Presenters: | Peter B. Bach, M.D., Memorial Sloan-Kettering Cancer Center |
| Amitabh Chandra, Harvard University | ||
| Andrew J. Rettenmaier, Texas A&M University | ||
| Moderator: | Thomas P. Miller, AEI | |
| 3:30 | Adjournment |
American Enterprise Institute
1150 Seventeenth Street, N.W.
Washington, DC 20036
Phone: 202-862-5920
American Enterprise Institute
1150 Seventeenth Street, N.W.
Washington, DC 20036
Phone: 202-862-5806
E-mail: hampton.foushee@aei.org
WASHINGTON, MAY 18, 2010--The Dartmouth Atlas's measures of geographic variation in health spending have changed the way analysts approach discussions of spending and utilization in the health care system. How such research can be applied to policy reforms is less clear.
"Where the disagreements arise is really in our ability to take what the Atlas has in it and translate it into public policy," Harvard economist Amitabh Chandra said at this AEI event.
Researchers at the Dartmouth Institute for Health Policy and Clinical Practice were the first to discover that substantial geographic variations in health spending are not correlated with health outcomes. These findings have been used to justify policy provisions to adjust payments to providers on the basis of their "efficiency" in spending and utilization.
Expanding upon his February 2010 commentary in the New England Journal of Medicine, pulmonary physician Peter B. Bach, M.D., questioned whether the observed regional variations in health spending truly represent the "degree of inappropriate utilization" of health care. He argued that spending is not an appropriate measure of utilization because there are substantial differences between regions in patient need and price. More troubling, though, was Dartmouth's implicit methodological assumption that patient and spending characteristics within each Hospital Referral Region (HRR) are homogenous. Using Dartmouth's maps and findings, Bach countered that there is too much heterogeneity within each HRR for Dartmouth's evidence on spending to have meaningful explanatory power for utilization. In his view, the waste in health care is located in many different places, but it cannot be neatly separated into regions.
"[The waste] is probably in the individual decisions that I and other doctors make every day--poor decisions that maybe overuse resources. It doesn't happen at the macro geographic level that the Atlas assumes, and to manage it probably takes an on-the-ground view and on-the-ground tactics," Bach said.
Texas A&M economist Andrew J. Rettenmaier took a further look into the dynamics of spending between states and different types of patients. He displayed rankings of states along a variety of metrics to demonstrate how spending patterns are not always consistent across time, regions, or types of health insurance. For instance, although Louisiana and Maryland spent the most per Medicare enrollee in 2004, their per capita health care spending rankings were seventeenth and thirty-fifth, respectively, for the same year. Moreover, although state rankings remain relatively consistent for Medicare in 1991 and 2004, the spending rankings for patients enrolled in Medicaid and patients who did not receive health care benefits through either public program were far less closely correlated. Rettenmaier predicted that, even after adjusting for state differences, the potential savings from reducing regional health care spending across the entire health system would be less than expected from the Medicare data alone.
"Bottom line--and this is really the bottom line of this work--is that any policy prescriptions, if we apply them nationwide, must be more nuanced than just prescriptions based on Medicare alone," Rettenmaier said.
Chandra's presentation aimed at reconciling Bach's and Rettenmaier's concerns with the Dartmouth research. He agreed with Bach that HRR units are too coarse to account for the nuances in health spending, and stated he was "deeply influenced' by Rettenmaier's findings that spending in Medicare is not always correlated--and can sometimes be negatively correlated--with spending in other sectors. Chandra rejected the "flat of the curve medicine" notion that cutting provider payments broadly at the margin in high-spending health markets could create incentives for proper utilization of resources. He noted instead that because different areas specialize in certain treatments or illnesses, each region's cost savings will follow a distinct production function.
"That's the real challenge for the Dartmouth Atlas," Chandra said. "You can identify these regions of the country and you can also sometimes find markers or correlates of what makes them efficient, but we actually have no idea whether what makes them exceptional can actually be replicated."
Chandra noted that market competition, with risk-adjusted vouchers, may eventually promote cost containment by allowing buyers, purchasers, and large employers to "figure out what is valuable and what is not valuable." At the same time, Bach recommended bundled payments as a more effective way of providing incentives for proper utilization.
"Currently, the major issues we have are fragmentation, redundancy, and competition, and we don't really have a wrapper of evidence-based guidance or quality parameters for health care," Bach said. "The appeal of a bundled payment, which essentially creates a fiscal entity much like a hospital that can conserve resources and use them rationally, is to at least reduce, to some extent, the fragmentation . . . and hopefully have frameworks where the backbone is at least in the area where we know where the best things to do are based on evidence. Those things are qualifying elements of the payment itself."
--ROHIT PARULKAR
Speaker biographies
Peter B. Bach, M.D., is a pulmonary and critical care physician and member of the Health Outcomes Research Group at Memorial Sloan-Kettering Cancer Center. He focuses on improving the quality of cancer care for disadvantaged patients with Medicare, on epidemiological and statistical methods that can be used to assess the quality and organization of health care systems, on developing approaches to creating new clinical evidence of effectiveness for therapies and devices in typical clinical care settings, and on the assessment of cancer prevention and screening strategies. His work has been continuously funded by the National Institutes of Health for the last decade, during which time he has published more than seventy-five scientific papers, including multiple articles in the New England Journal of Medicine, the Journal of the American Medical Association, and the Annals of Internal Medicine. He is also a frequent contributor to the opinion, editorial, and perspective sections of both medical journals and the lay media, including the New York Times, the Wall Street Journal, and National Public Radio.
Amitabh Chandra is an economist and a professor of public policy at the Harvard Kennedy School of Government. He is a research fellow at the IZA Institute in Bonn, Germany, and at the National Bureau of Economic Research (NBER). His research focuses on productivity and cost growth in health care and racial disparities in health care, and his work has been published in the American Economic Review, the Journal of Political Economy, the New England Journal of Medicine, and Health Affairs. Professor Chandra has testified before the U.S. Senate, the National Academy of Science, the Institute of Medicine, and the U.S. Commission on Civil Rights. His research has been featured in the New York Times, the Washington Post, CNN, Newsweek, and on National Public Radio. He has received a number of awards, including an Outstanding Teacher Award, first-prize for the Upjohn Institute's International Dissertation Research Award, the Kenneth Arrow Award for best paper in health economics, and the Eugene Garfield Award for the impact of medical research.
Thomas P. Miller is a resident fellow at AEI, where he focuses on health policy with a particular emphasis on information transparency, health insurance regulation, and consumer-driven health care. He was a member of the National Advisory Council for the Agency for Healthcare Research and Quality from 2007 to 2009. Before joining AEI, Mr. Miller served for three years as a senior health economist for the Joint Economic Committee, where he organized a series of hearings focusing on promising reforms in private health care markets. He also has been director of health policy studies at the Cato Institute and director of economic policy studies at the Competitive Enterprise Institute. Mr. Miller's writing has appeared in publications such as Health Affairs, the Wall Street Journal, the New York Times, the Washington Post, the Los Angeles Times, Reader's Digest, National Review, the Journal of Law and Contemporary Problems, Regulation, and Cato Journal. Before coming to Washington to work on public policy, he was a trial attorney, a journalist, and a radio broadcaster.
Andrew J. Rettenmaier is the executive associate director of the Private Enterprise Research Center at Texas A&M University. He is also a senior fellow at the National Center for Policy Analysis. Mr. Rettenmaier, along with Thomas R. Saving, has testified about Medicare reform before U.S. Senate subcommittees and to the National Bipartisan Commission on the Future of Medicare. Their proposals have been featured in the Wall Street Journal, the New England Journal of Medicine, the Houston Chronicle, and the Dallas Morning News. He and Mr. Saving, have published two books on Medicare reform: The Economics of Medicare Reform (W. E. Upjohn Institute for Employment Research, 2000), and The Diagnosis and Treatment of Medicare (AEI Press, 2007). Mr. Rettenmaier and Mr. Saving also coedited Medicare Reform: Issues and Answers (University of Chicago Press, 1999). Mr. Rettenmaier has published numerous public-policy monographs and academic articles appearing in economics and health economics journals.
