A review of health care costs: deck chairs and the Titanic, part 1


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This article is Part I of a two-part series on the cost of health care and its component parts. Part I explores the recent growth of health care costs in the United States as well as the utilization inputs in the cost equation.

Part II will break down the pricing component of cost, determined by market leverage and the cost of delivering services. 


If you ask policymakers, industry leaders, and health care consumers, many will tell you that their number one concern with health care today is the cost.

For the most part, as a society we’ve moved past the days when access or quality were of primary concern to stakeholders. I would wager it’s not because those issues aren’t important.  Everyone knows we have wild challenges still with access and quality.

Rather, the acuity of the cost problem has risen so much, so quickly, that cost as an issue overshadows everything else.

This is a big topic, but it’s not really that hard to understand. Health care costs are actually a simple story.

There are only two categories of health care costs in America today. There are the deck chairs, and there is the Titanic.

Context matters, so let’s start there

Here’s one data point, but it’s largely the same point everywhere you look in health care.

These are average annual premiums for single and family coverage in the employer-based market. Those costs have doubled in the last 14 years, reflecting an average annual growth rate of roughly 5 percent since 2004.



Here’s another data point. According to CMS in an article in Health Affairs, “health care spending growth averaged 4.3 percent per year during 2008–17, compared to an average annual rate of 7.3 percent over the 1998–2007 period.” That might seem like costs are slowing, but it’s not the whole story.

Remember the “Great Recession?” It was the period of time when the economy almost fell apart. So, measuring health care spending growth should be done within some context of the overall economy.

For this, we can use a standard inflation calculator of the overall economy to compare its growth to the growth of health care costs. When viewed this way, health care inflation grew at a multiple of 2.7x the broader economy’s inflation rate between 1998-2007 and a multiple of 3.0x during 2008-2017.

So, not only are costs high in health care today, but they are growing faster than ever compared to overall inflation in the US economy.


Moving around the Titanic’s deck chairs

Let’s explore this metaphor a bit.

The Titanic is a big ship with a big deck. And so there are lots and lots of deck chairs to move around. And moving them around can cause authentic improvement to the quality of the experience.

A view out over the bow at a setting sun is a much better view than the one provided by a chair facing the steam funnel. Sometimes, chairs facing other chairs can foster comity and community through conversation. Sometimes, having alone time to ponder the stars in the night sky from the ship deck is nice.

How the chairs are deployed has a meaningful impact on the user’s experience of sailing on the Titanic.

I run with this analogy because there are a lot of things we do in health care today that meaningfully improve the experience, outcome and cost of health care.

You can probably name 10 such efforts without blinking an eye: improved care coordination, tele-health, community health workers, shared risk payment methods, integration of behavioral health, access to oral health, strong vaccination standards, online forums for shared patient experiences, good bedside manners, etc., etc.

All of these initiatives, as well as others, improve care and the user experience. They all can address cost in various ways, too. They can reduce hospital utilization, allow patients to access care remotely, reduce re-admissions or complications from drug interactions. There is a lot to like here that is meaningful and worth our time as a society to implement.

Put differently, in the cost equation where total health care cost equals utilization times prices (THC = U x P), I would categorize these initiatives as part of the utilization input of the cost equation. All of these initiatives address how we access and use health care in our system today.

But, at the end of the day, these are deck chairs.



Health Gap Widens Between Appalachia And Rest Of The U.S.

Health Gap Widens Between Appalachia And Rest Of The U.S.


Sandy Willhite doesn’t mind driving 45 minutes to the nearest shopping center. But living in Hillsboro, W.Va., became problematic when she had to travel nearly six hours for proper foot treatment.

“There just aren’t any quality surgeons or specialists in our area,” Willhite said, when explaining why she went to a doctor in Laurel, Md.

Getting health care is a common problem for the residents of Hillsboro, a tiny hamlet in the middle of Appalachia with a population of just under 250 residents.

And the Appalachian region is in dire need of health care. This section of the U.S., long acknowledged to be among the most economically disadvantaged in the country, is showing a growing gap in health outcomes with the rest of the United States.

study released Monday in the journal Health Affairs found disparities widening sharply between Appalachia and the rest of the country, driven by higher rates of infant mortality, smoking, obesity and early deaths from motor vehicle accidents and drug overdoses.

“Although life expectancy increased everywhere in the United States between 1990 and 2013, less rapid declines in mortality and slower gains in life expectancy among people in Appalachia have led to a widening health gap,” the study said.

The study focused on the 428 counties within the 13 states that constitute Appalachia. Gopal Singh, an author of the study and a senior health equity adviser at the Health Resources and Services Administration, found that counties with high rates of poverty have the highest infant mortality rate and lowest life expectancy. These areas are seen mostly in central and southern Appalachia.

The researchers found Appalachia lagged behind the rest of the country on health measures in the early 1990s — but only slightly. Infant mortality rates were not statistically different. And life expectancy was about 75 years — just 0.6 years shorter than that outside of the region.

But when the researchers analyzed data from 2009 to 2013, they found the infant mortality rate for Appalachia to be 16 percent higher than the rest of the country and the difference in life expectancy was 2.4 years.

When researchers examined specific demographic groups, some of the disparities were much greater. For instance, they noted a 13-year gap in life expectancy between black men in high-poverty areas of Appalachia (age 70.4) and white women in low-poverty areas elsewhere in the country (83).

According to the study, the association between poverty and life expectancy was stronger in Appalachia than the rest of the country.

“You do see a more rapid improvement in the rest of the country compared to Appalachia, but there are specific reasons why Appalachia I guess continues to fall behind,” said Singh, the lead author.

The study points to specific health problems, including lack of access to doctors and other providers, high rates of preterm births and low-weight births, and high rates of smoking-related diseases, such as lung cancer, chronic obstructive pulmonary disease and heart disease.

“Smoking-related diseases accounted for more than half of the life-expectancy gap between Appalachia and the rest of the country,” the study said.

Dr. Joanna Bailey treats some of Appalachia’s patients every day as a family medicine physician in Wyoming County, W.Va. She grew up there and said the lifestyle plays a large role in health outcomes. “I treat a lot of diabetes; I see a lot of high blood pressure; I see a lot of heart disease. I see a lot of obesity, because it is a place where it has been normalized quite a bit.”

“I think that the culture is such that getting those conditions under control is difficult for many reasons,” Bailey said.

The economic issues compound the situation, she said.

“There’s the problem of poverty,” she added. “A lot of people are on disability and they rely on food stamps to get their food for the month.” Many of Bailey’s patients pay someone to drive them to the grocery store. She said it’s difficult to coach them to buy healthful groceries when the food is good only for a few days.

“By the end of the month, they are back to eating cereal and Hamburger Helper,” Bailey said.

She thinks the widening health gap in recent years has accelerated with an increasing number of young people leaving the area for job opportunities.

“We’re left with an older, sicker population who can’t work or don’t work, and those people are notoriously sicker,” Bailey said.

Both Bailey and Singh agree that addressing the health gap requires socioeconomic change. The communities need better higher-education opportunities and infrastructure improvements, such as improved roadways so patients can more easily get to larger towns and cities to access health care.

Until then, Willhite and her family will continue to drive hours for care, such as the foot doctor in Laurel, whom she had consulted when she lived in Maryland.

“There are just absolutely so many (health) issues here in this region, you can’t begin to put your finger on one,” Willhite said. “It’s like a big vicious circle.”

Mirror, Mirror 2017: International Comparison Reflects Flaws and Opportunities for Better U.S. Health Care


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The United States Health System Falls Short

The United States spends far more on health care than other high-income countries, with spending levels that rose continuously over the past three decades (Exhibit 1). Yet the U.S. population has poorer health than other countries. 1 Life expectancy, after improving for several decades, worsened in recent years for some populations, aggravated by the opioid crisis. 2 In addition, as the baby boom population ages, more people in the U.S.—and all over the world—are living with age-related disabilities and chronic disease, placing pressure on health care systems to respond.

Timely and accessible health care could mitigate many of these challenges, but the U.S. health care system falls short, failing to deliver indicated services reliably to all who could benefit. 3 In particular, poor access to primary care has contributed to inadequate prevention and management of chronic diseases, delayed diagnoses, incomplete adherence to treatments, wasteful overuse of drugs and technologies, and coordination and safety problems.

This report uses recent data to compare health care system performance in the U.S. with that of 10 other high-income countries and considers the different approaches to health care organization and delivery that can contribute to top performance. We based our analysis on 72 indicators that measure performance in five domains important to policymakers, providers, patients, and the public: Care Process, Access, Administrative Efficiency, Equity, and Health Care Outcomes.

Our data come from a variety of sources. One is comparative survey research. Since 1998, The Commonwealth Fund, in collaboration with international partners, has supported surveys of patients and primary care physicians in advanced countries, collecting information for a standardized set of metrics on health system performance. Other comparative data are drawn from the most recent reports of the Organization for Economic Cooperation and Development (OECD), the European Observatory on Health Systems and Policies, and the World Health Organization (WHO).


The unexpected political power of dentists


As the cost of dental care rises beyond the reach of millions of Americans, the dental lobby is coming under increasing scrutiny. Critics say the ADA has worked to scuttle competition that could improve access to dental care in underserved areas and make routine checkups and fillings more affordable.

The Federal Trade Commission has battled dentists in state after state over anti-competitive conduct. In 2007, the FTC successfully settled a complaint over a South Carolina dental board requirement that dentists examine children in school clinics before hygienists can clean their teeth, adding greatly to the cost. In 2015, the FTC won a Supreme Court ruling against the North Carolina dental board, which tried to block teeth-whitening businesses from operating in malls.

This year, the FTC publicly commented on a growing campaign to improve access to dental care by creating a category of mid-level practitioners, or “dental therapists,” to provide some routine services. In a letter to the Ohio lawmakers considering such a measure, FTC officials said therapists “could benefit consumers by increasing choice, competition, and access to care, especially for the underserved.”

More than a dozen states are considering similar proposals, despite fierce resistance from the ADA and its state affiliates. During the Maine debate, so many dentists flooded the statehouse in Augusta that besieged lawmakers taped up signs declaring their offices a “Dental Free Zone.”

The dentists had a unique way to get around the blockade: the regular checkup. While the bill was pending, some lawmakers found themselves getting an earful when they stretched out and opened wide for an oral exam.

“I’m certainly a captive audience when I am in the dental chair,” said Brian Langley (R), a Maine state senator who also got calls from four other dentists in his district and ended up siding with them.

The bill establishing a new provider type ultimately passed, but “it was brutal, very brutal,” recalled David Burns, a Republican state senator who retired after supporting the measure. Afterward, Burns said, he got a call from his dentist, who vowed never to treat him again, saying, “This relationship is over.”

Most of the 200,000 dentists in America work solo, in offices that are essentially small businesses. They are known for projecting a remarkably unified voice on issues relating to their livelihood. The ADA says 64 percent of dentists belong to the association. By comparison, only 25 percent of physicians belong to the American Medical Association.