Why all our current efforts to cut waste won’t save money after all

By  |  February 11, 2020 | 

I am feeling discouraged. Actually, I am pretty frustrated.

I truly believed that if we could “choose wisely” and cut out the nearly $1 trillion of waste in health care that we would make a real dent in costs in health care. Not only that, I even thought that decreasing these total costs of care would eventually result in better affordability for our patients.

This is not what seems to have happened.

And in fact, seeing this graph (from the Health Care Costs Institute) really puts it all in perspective:

Look at inpatient utilization (the dashed orange-ish line on the left) – it is down about 5% since 2013! That is incredible. But the average price inexorably trucks upward, now 15.6% higher than in 2013 (even after they adjusted for changes in the type or intensity of services used). The net result is that spending (which equals average price x utilization) keeps on climbing, and climbing, and climbing.

Just to be clear, these data show hospital utilization and negotiated rates from major payer claims, so it does not actually say anything specific about overuse, underuse or choosing wisely. However, it shows to me that even if we decrease utilization at a meaningful scale, those gains can be (and almost certainly will be) immediately erased by higher rates and charges.

And, as those costs go up, we are also all spending more than ever on health care, and the affordability crisis deepens. These numbers are not a national abstraction, they are a kitchen table reality for American families.

Deductibles are rising quickly, so even if overall spending and the rate of out-of-pocket cost growth slows at a national level, we need to help figure out how to better manage patients’ dollars. Increasingly point-of-care decisions have a direct effect on patients’ out-of-pocket costs.

Cutting out unnecessary care is still critical. It leads to improved patient safety by avoiding undue risks and harms. It also can make a real impact on individual costs in certain circumstances, and it can improve patient experience by avoiding unnecessary procedures, tests, and the potential cascades of care that can follow and further increase risks for harm and out-of-pocket costs. Initiatives like Choosing Wisely® remain critical. Please keep seeking areas to cut out all those “Things We Do for No Reason™.”

But, let’s stop pretending that this is going to create real savings for our society or that money saved by avoiding, say, unnecessary inpatient CT scans is going to “trickle down” to our patients rather than just fattening our health systems’ margins.

Also, let’s not forget that often care is both necessary and expensive, and it is important for health systems to not ignore patients who need necessary care and can’t afford it. There need to be creative ways to get them care without bankrupting their family.

What this means is that we need different solutions to address affordability. We need innovative ways to get patients into programs, reduce usage, triage patients more appropriately to lower-cost settings, etc.

In December 2019, our non-profit Costs of Care launched our Affordability Moonshot campaign, declaring that we “envision a world in which nobody has to choose between their life and their life-savings.” This campaign encourages others to join us in setting our goals for the future of healthcare, as it relates directly to improving patient affordability (#CoCMoonshot). We hope it sets the stage for our Affordability Accelerator, in which we will convene influential experts and stakeholders to work together on developing, testing, and implementing the most promising high-impact and sustainable interventions to improve patient affordability at the point-of-care.

Since we continue to see rising prices, lower utilization, and higher deductible amounts, there is a lot of room to better understand what does and does not work. The Costs of Care Affordability Accelerator aims to fast track ideas that may have traction in reducing spend for patients and getting the right solutions faster.

 

Thank you to Jordan Harmon and September Wallingford from Costs of Care, who provided insights and input on this blog post.

One Comment

  1. Bradley Flansbaum
    Bradley Flansbaum February 12, 2020 at 11:00 am - Reply

    Chris
    An important point for hospitalists. As inpatients, insured folks don’t bear the cost burden of “overutilization,” (assuming no cascade effects occur from false (+) findings) as the DRG absorbs the piecemeal burden of individual test ordering. One can quibble as hospitals may raise their rates as volume and FTE time increase for more ordering, but its the outpatient impact patients feel the most from a pocketbook perspective. Copays and OOP costs hit people hardest when their dime goes through Part B for Medicare or commercial payers for ambi studies or labs.
    Brad

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About the Author: Chris Moriates

Chris Moriates
Christopher Moriates, MD is a hospitalist, the assistant Dean for Healthcare Value and an Associate Professor of Internal Medicine at Dell Medical School at University of Texas, Austin. He is also Director of Implementation Initiatives at Costs of Care. He co-authored the book Understanding Value-Based Healthcare (McGraw-Hill, 2015), which Atul Gawande has called “a masterful primer for all clinicians,” and Bob Wachter said is “essential reading for everyone who care about making our system better.”

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