Is High Health Care Spending Good for Us?

Does all the money we spend on health care actually make us healthier? One group of researchers says definitely yes.

Their study looked at Medicare costs for over 17,000 beneficiaries and compared it with their health status and survival after three years. Those with higher bills showed better health and a greater chance of surviving. (Follow this link for a summary.)

Now you may think, of course higher spending makes us healthier. The more health services we get, the better will be our chances of staying in good shape. But it isn’t that simple.

Medicare spends about half a trillion dollars a year, and a lot of it is wasted. Some is lost to fraud, some to overtreatment, and some to ineffective care. More spending can often mean less efficiency, which does nothing to make us better off.

Past studies seemed to bear this out. Researchers at Dartmouth found that overall health is no better in regions where Medicare spends the most than in regions where it spends the least. This raised hopes that wasteful practices in the high spending areas would be easy to identify and root out.

In finding that better health goes with higher spending, the new study seems to bring discouraging news. Medicare costs are exploding, and we’d like to trim them without causing harm.

So, can we tame Medicare spending and still give grandma (and the rest of us, sooner or later) the care that is needed?

There is no question that we can.

First of all, the new study found the health benefits of higher spending to be quite small. Every 10% in added costs brought only a 1.9% improvement in health status and only a 1.5% greater chance of survival. This meager rate of return suggests that inefficiency abounds in the system.

Second, the report lumped all spending together. It didn’t analyze different kinds of costs to see which were helping and which weren’t. We might be able to get the same health improvements while spending less on things we don’t need.

The lesson is that not all spending is alike. The way to cut costs without harming our health is to zero in on those services that are wasteful. And we know a few places to start. Expensive and ineffective treatments, unnecessary care, and fraud are all padding the bill.

In contrast, the new study suggests that wholesale cuts that don’t differentiate between useful and worthless care could risk causing harm.

We can translate this lesson into current political debates. Comparative effectiveness analysis conducted by top medical experts can help identify which treatments work and which just add costs. This is the path followed in the new health reform law. Blanket cuts, like those we would get under a Medicare voucher program, could sacrifice needed care.

Targeted cutting is certainly harder than wholesale reductions. It requires careful research and analysis. But isn’t our health worth it?

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