Matt Yglesias

Health and Health Care Costs

Ezra Klein had an interesting post yesterday taking on the question of whether or not healthier lifestyles reduce health care costs. I think you can probably sum this up by saying: “it depends.”

What it depends on can get very complicated. But I think it’s probably best to oversimplify. You could control cost growth in Medicare by simply imposing a “global budget” on the program. Congress would decide how much Medicare can spend in any given year. Then within that budget constraint, health outcomes could be better or worse. Clearly, if the underlying health condition of the treated population is better, that will lead to better health outcomes. And if the health care spending is more efficient—directed at patients and treatments that are highly cost-effective, less waste, fewer medical errors—that will improve health outcomes. But none of that stuff will reduce health care costs because the costs are determined by the budget.

Alternatively, you could have some kind of target for health outcomes. We could try to maintain a stable “life expectancy at age 65″ across the population. Or we could do something more nuanced with Quality Adjusted Life Years. In that case, healthier lifestyles and more efficient medicine probably wouldn’t improve health outcomes. Instead, they’d reduce costs.

In either case, though, it’s not that healthier lifestyles do or don’t reduce costs, it has to do with how the healthier lifestyles interact with other elements of the system. At the end of the day, though, when you’re thinking about public policy it seems to me that it makes much more sense to make “better health outcomes” a policy goal rather than “less overall health care spending.” What’s upsetting about our current level of health care spending isn’t that it’s high, but that it seems to be incredibly wasteful.

If this chart were a symptom of a growing gap in health outcomes between the United States and the other countries on the list, then I think you’d say that was not such a crazy thing—more health care spending for better health. But that’s not what’s happening. Thus, one obvious way to improve health outcomes is to try to make our health care spending more efficient. And one way to do that is to direct some additional resources toward prevention and lifestyle issues.

13 Responses to “Health and Health Care Costs”

1. steve duncan Says:
   May 5th, 2009 at 2:52 pm

   One simple policy would eventually, over a generation or two, cure our health care problems. Deny insurance and medical care to anyone that smokes, drinks or is clinically/measurably obese. As they died off their reproductive output would wane. Children picking up the same habits would be reduced in numbers. Parents, children, siblings, etc wheezing their way towards death’s door while laying in the back bedrooom would serve as an example of what habits not to take up. Overeating would stop. You want a bypass? You better be a non-smoker. You want that ulcer treated? You better not be a gluttonous tub of goo. No, no one is going to make any of your habits illegal. We just want them to kill you in short order so your drunk, porcine, nicotine stained ass can be loaded into the hearse.

2. Pesto Says:
   May 5th, 2009 at 3:00 pm

   Well, if your “healthy lifestyle” involves working out with a Pilates ball at the top of a cliff, I think your lifetime healthcare costs are likely to be either very, very high, or extremely low.

3. neil wilson Says:
   May 5th, 2009 at 4:27 pm

   First of all, a chart based on PPP is always a little suspect.

   Second of all, a chart like that should be on a logarithmic scale.

   I assume the chart adjusted as above would show the same thing but maybe it would reach a different conclusion.

   Matt: if you have the data, see what it looks like on a log scale. I doubt you have the PPP data needed to keep it in constant exchange rate terms. But I think you would find that interesting too.

4. Doug Says:
   May 5th, 2009 at 5:33 pm

   You cannot prevent old age, nor do I think we can expect that preventative health care will result dependably in a healthy until they dropped dead population. The great cost of medical care in the U.S. is largely a result of the profit motive running free at the insurer and provider levels. Providers have every incentive to get paid for as many and as expensive treatments as possible. Insurers are constrained in covering treatments ordered by doctors. You get an enormous expenditure of resources at hospitals and other providers at actually getting paid by insurers and a large expenditure of resources at insurers trying to minimize the amount paid. Medicare then comes into this system and has to pay at a sufficiently profitable rate for procedures to be appealing to providers.

5. joe Says:
   May 5th, 2009 at 5:42 pm

6. Joe Says:
   May 5th, 2009 at 5:43 pm

   Sorry: International comparison of life expectancy, similar time scale: http://www.phac-aspc.gc.ca/publicat/2008/cphorsphc-respcacsp/gfx/Figure_3-2.gif

7. Glen Tomkins Says:
   May 5th, 2009 at 6:27 pm

   Premature considerations

   One of the reasons to at least universalize health care, and at best get to single payer, is that only that will allow us to even begin to be able to tote up the costs of different health care approaches. Our present non-system, and the hash we will get if we shrink from true reform and leave the private insurers in the mix, systematically hides and shifts costs. That’s a feature, not a bug, and will remain as long as we tolerate the idea that one of the goals of the system is to allow private insurers who add nothing to health care to continue to profit by diddling in the middle between patients and providers. They need opacity because they need hiding places.

   What is important now, as we transition to some form of paying for health care in systematic fashion, is that we make the goal maximizing quality and not, directly, minimizing cost. The latter is too obscured and twisted by the maladaptive contours of the present non-system to be a reliable guide, even if we thought it either wise or ethical to value saving money over providing quality care. It is safe, we can be confident that we won’t run the health care budget off the rails, to pursue quality as the goal, because we have ample evidence in the success at providing quality care, more cheaply than we do, of just about every other system in the industrialized world. Even if the details cannot be quantified exactly, the overall contours of the American Paradox are fairly clear, that we get merely mediocre to downright lousy quality precisely because we spend too much on subspecialist, highly invasive interventions.

   High quality and low cost are not, fundamentally and normally, at odds — they go together. Medical interventions cost a lot of money in almost exact proportion to their cost to the patient in terms of pain, discomfort, risk of death and other personal costs. Expensive equals invasive, and the patient has every incentive, incentives much stronger than the incentive to economize on money costs that would exist if all medical interventions were paid for out of pocket, to avoid all but the most strictly necessary interventions that even the most parsimonious budgeteer of mere money would impose.

   What happens in the US is that, especially in the health crises that we tend to let mark last few weeks of life, the patient doesn’t get the parsimonious treatment that he or she wants, but instead gets overtreated with interventions that add to both the human and monetary costs with little or no benefit to the patient. And this happens, in general, because we systematically leave patients to develope their medical problems unsupervised by primary care, as sudden crises, and then force them to deal directly, without the guidance of primary care, with the subspecialist dispensers of highly invasive interventions. And this happens because primary care, never highly valued by our non-system, has been the chief victim of the ill advised cost-cutting spree our non-system has been on for a generation.

   We will get good quality care, and control costs, only by having the courage to abandon cost-cutting as a goal, at least so far as to give primary care a huge raise. But it will only work if we also have the courage to put the patients in charge of handing out the bonanza, by distributing the increased fees to primary care as bonuses when patients choose to continue in the care of one primary caregiver. Patients will distribute these huge bonuses to primary care providers who take care of them, and that means referring them for the interventions they need from subspecialists, but only the interventions they really need, and most importantly, helping them tell the difference.

8. Just Dropping By Says:
   May 5th, 2009 at 8:37 pm

   Was there a post? I stopped to look at the picture and didn’t notice any text.

9. Echidne of the snakes Says:
   May 5th, 2009 at 9:24 pm

   Keeping Up With The Joneses. That’s my post on some of the complications inherent in discussing this particular topic.

10. ChrisB Says:
    May 5th, 2009 at 10:12 pm

    As an ex-health promotion worker, I can’t see that much prospect that “additional resources [for] prevention and lifestyle issues” is going to do that much. Once smoking’s taken out of the picture the stats are iffy and the challenges extreme. Remember the MRFIT study: as Len Syme says,

    “…the Multiple Risk Factor Intervention Trial – MRFIT. That study involved men in the top 10% risk category for developing coronary heart disease because of their hypertension, cigarette smoking and high serum cholesterol. Our plan was to get these men to lower their risk and demonstrate the lower disease rates that would eventuate.

    Unfortunately, to do this, we were told by the statisticians that we would need to enroll 12,000 men in the study, 1/2 to work with us in the clinic and 1/2 to work with their own doctors as a control group. To find these 12,000 men, we had to screen almost 1/2 million men in 22 cities across the country. That was a lot of work and it was very expensive: about $200,000,000 (in 1980 dollars) but we thought it would be worth it because we had done a good job in identifying these risk factors and because coronary heart disease was the largest cause of death in the country.

    After the first screening, we did two additional, very intensive screenings totaling about 3 hours. We told the men as they were going through these screenings that if they were
    eligible for the Trial, they would be randomly assigned to work either with us or their own doctor and that they should not volunteer for the study if this was not acceptable. If
    they were assigned to work with us in the clinic, we would ask them to change their diet,
    to take pills for their high blood pressure and to stop smoking. Further, they would be asked to come to the clinic very frequently at the beginning, oftentimes with their family, and that the Trial would go on for 6 years. They should not volunteer if they had any reservations. And we also gave them a big stack of questionnaires to fill out. And we had a psychologist in every clinic who recommended that certain men be rejected because they did not seem to be good prospects for the long haul.

    In the end, we selected a highly informed and highly motivated group of men. And we involved them in a superb intervention program. For example, we invited the men and
    their families to the Clinic to demonstrate low-fat cooking. We took them to the supermarket to show them how to read labels. We went to their homes to cook with them. And so on. We did the study about as well as it could be done.

    And the Trial failed. After 6 years, there was no statistically significant difference in heart disease rates between the Special Care group and the control group.”

    The field these days is much more oriented to the insights of Marmot and the Whitehall Study; health comes from your position in the pecking order. Which is much harder to address.

11. low-tech cyclist Says:
    May 6th, 2009 at 9:28 am

    ChrisB says, “As an ex-health promotion worker, I can’t see that much prospect that “additional resources [for] prevention and lifestyle issues” is going to do that much. Once smoking’s taken out of the picture the stats are iffy and the challenges extreme.”

    Then for starters, why don’t we take smoking out of the picture? Because while the prevalence of smoking’s been reduced, it’s still definitely around, and being actively marketed.

    One of the reasons to favor single-payer is that it would allow for a cost-benefit study on, say, nationalizing the tobacco industry. Seriously, someone should look at what the net costs would be if we paid fair-market value for every tobacco product manufacturer, importer, and distributor in the country, then let them carry on as before, except that [and this is the key] we’d cut their advertising/PR/promotional budgets to zero.

    The net costs of such an action should be pretty small, since we’d continue to operate the tobacco business as a going concern, but cut one of its significant costs. And with NO money spent on tobacco promotion, tobacco use should take another significant drop. In particular, you’d expect the number of kids initially picking up the habit to drop, which would be a very good thing, long-term.

12. serial catowner Says:
    May 6th, 2009 at 11:22 am

    This whole idea that people living longer are going to cost more in healthcare services is directly tied to the idea that “the last three months are always the most expensive”.

    But, you know what, there will always be a “last three months”. And up until that time, healthcare is not very expensive for people who stay healthy.

    People get diabetes and heart disease and wear out their load-bearing knee joints by being sedentary and overweight. People who drive everywhere are quite a bit more likely to be in an auto wreck, as are people who drink to excess.

    And right now a large part of healthcare costs involve the idea that life can be perfect- you don’t need to scratch when a mosquito bites you, you can avoid wrinkles and folds of aging, you can be happy all the time and never be depressed, you can regrow thinning hair, keep perfect vision forever, etc etc etc.

    Anyone with any self-respect will avoid this “live forever” crap because life is so much more satisfying if you don’t spend it worrying all the time about what could go wrong.

    And this is one reason people still smoke and drink and overeat- they know they won’t live forever, and at age 50 life won’t be the shiny promise it was at age 20. Poor people have worse health behaviors because there’s no pot of gold at the end of their healthcare rainbow. They can’t afford the suck-up “nurses” and “doctors” who kiss the feet of the rich. They don’t get collagen treatments on the deck of a cruiseliner.

    In between, there are lots of healthy older people who see a doctor regularly to have one or two problems treated by taking a few pills each day. These people aren’t a big expense to the system and won’t be. Yes, they will eventually reach their last three months. We all will.

13. The Enlightened Despot » Blog Archive » The Costs of Healthcare Says:
    May 8th, 2009 at 5:52 pm

    [...] that rapid acceleration and alleged inefficiency are problems at all. So this chart – which got a lot of play from the left – isn’t very [...]