This column was originally published in AMA eVoice on Feb. 1, 2008. Dr. Davis is president of the American Medical Association.
Health care costs in the United States hit a new mark in 2006, increasing 6.7 percent to $2.1 trillion, or $7,026 per person, according to the most recent issue of Health Affairs. That’s more than 16 percent of the nation’s gross domestic product (GDP), highest among developed countries. And it’s nearly double the median average of GDP that the Organisation for Economic Cooperation and Development, which includes 30 countries (including the U.S.), reported in 2004.
It’s easy to see how the money adds up. According to the Agency for Healthcare Research and Quality’s Medical Expenditure Panel Survey, the nation’s 10 most expensive medical conditions cost about $500 billion to treat in 2005. That includes visits to doctors’ offices, clinics, and emergency departments; hospital stays; home health care; and prescription medications. Heart conditions top the list at an estimated $76 billion, followed by trauma disorders at $72 billion and cancer at $70 billion. It’s important to note that spending on physician and clinical services accounted for only about 21 percent of total health care costs in the U.S. in 2006.
Increases in chronic disease and unhealthy behaviors are partly to blame for these skyrocketing costs. For example, the prevalence of obesity and diabetes has doubled during the past 25 years, and more than a quarter of health care spending growth in recent years is attributable to the rise in obesity and related growth of diabetes, high cholesterol, and heart disease. Modifiable lifestyle behaviors such as unhealthy nutrition, physical inactivity, smoking, and alcohol abuse, as well as motor-vehicle collisions, gun violence, domestic violence, and other forms of trauma, are contributing to the problem.
Meanwhile, inefficiencies in the nation’s health care system continue to drive up costs. One study found that unnecessary medical tests are costing the U.S. health care system millions—and potentially billions—of dollars annually. According to the study, the estimated annual costs of unwarranted use of just three low-cost tests alone—urinalysis, electrocardiograms, and X-rays—cost $50 million to $200 million a year.
Overuse of medical services also occurs because of the high risk of medical liability lawsuits. A March 2003 report from the U.S. Department of Health and Human Services estimated that defensive medicine cost the nation between $70 and $126 billion in 2001.
End-of-life care has been cited as a source of significant overuse. A quarter of the cost of Medicare services is for patients in the last year of life, but reducing these costs is challenging.
Other research suggests that services known to yield savings aren’t being used enough. One particular study found that patients only receive 55 percent of services recommended by clinical guidelines, including preventive services and care for chronic conditions such as hypertension, high cholesterol, and diabetes.
Fragmentation of care is an issue, causing repeated medical histories and duplicative diagnostic tests because patient records are not readily available. In addition, administrative costs, profits, marketing, and other nonclinical spending often add to health system costs without contributing demonstrable value to patient care.
These are some of the root causes. Now what are the solutions? The AMA has pinpointed several broad strategies (PDF, 58KB) that would address these rising costs and generate better value for what the nation spends on health care.
First, we must reduce the burden of preventable disease. To accomplish this, we can lessen risk factors for illness and injury and prevent the onset of chronic disease, by improving patient compliance with medications and preventive care recommendations; by helping patients avoid tobacco use and alcohol abuse; by encouraging patients to eat better and exercise more; and by preventing intentional and unintentional injuries. Public health programs and policies can go a long way toward getting the message across on this front.
Second, health care delivery must be more efficient. Better efficiency will result from improving the coordination of care, using unnecessary services less often, and increasing our use of services that are proven to have a positive return on investment in terms of reducing future disease and costs. We also need to better manage chronic illnesses, reduce medical errors, and shift care to cost-effective sites of service.
Third, we must reduce nonclinical health system costs that do not contribute to patient care by eliminating excessive spending on administration, profits, and marketing (PDF, 67KB).
Fourth, we should promote value-based decision-making at all levels. That means improving the processes by which decisions are made so that they take into consideration both cost and benefit, particularly clinical outcomes. Examples of value-based decision-making include physicians and patients choosing among drug therapies, insurers designing health plan cost-sharing features, and legislators determining public health budgets and considering mandated insurance coverage of particular benefits. The AMA Council on Medical Service is developing a report on this subject that should be ready for the 2008 Annual Meeting of the AMA House of Delegates in June.
The AMA also has identified a list of specific actions to put these four strategies into effect. Among them are promoting patient lifestyle counseling and treatment, supporting cost-effectiveness research, and using clinical performance measurement, as we’re doing through the Physician Consortium for Performance Improvement, to improve efficiency. More details on the AMA’s broad strategies and a complete list of these specific actions can be found in a report from the AMA Council on Medical Service (Word, 171KB) issued last year.
That’s the AMA’s stance on how to limit the nation’s health care spending; now I’d like to hear what you think. What are your views on these broad strategies and specific actions?
The lighter side
One of my hobbies is to collect cartoons with a health theme. I have digital images of more than 1,000 cartoons in my collection. Below are links to three cartoons on the topic of health care costs. If you have others, I’d love to see them!
Scary Halloween costume (insert the date 10/18/05 and click on “Get Image”)
Terrifying campfire tale (scroll down to the 14th cartoon)
Please send comments, questions, and replies to amaprez@ama-assn.org.
Content provided by: Dr. Ronald M. Davis