COVID-19 is clearly the topic of the moment, and we hope that you and your loved ones remain safe and healthy during this challenging time. Our monthly rundown of health spending research is unlikely to fully meet your informational need on that subject, but we applaud the many news organizations that are offering free access to their COVID-19 coverage, along with the universities that have created online hubs to explain the science and public health implications (see Johns Hopkins and the University of Minnesota). For data visualization (and the source behind many of these interactive sites), check out ESRI’s resources.

In the health spending space, we’re tracking a series of research papers in The Journal of the American Medical Association that analyzed health spending, including a study about segmented health spending and an editorial in response to the JAMA series.

Digging Deeper

JAMA Breaks Down Health Spending by Payer, Condition; Considers Solutions 

A new study by Dieleman, et. al. analyzed total U.S. health spending between 1996 and 2016 broken down by payers and disease conditions, providing a granular look at the question of where our money is being spent. Unsurprisingly, the findings show that spending is not distributed equally among public insurance, private insurance and out-of-pocket payments, nor are all conditions created equal when it comes to the U.S. total cost burden.

According to the researchers, total spending more than doubled between 1996 and 2016, and public payers saw a greater increase in spending than commercial plans. Lower back and neck pain management accounted for the highest amount of spending in 2016, totaling $135.5 billion, followed by other musculoskeletal disorders that added up to $129.8 billion. Private insurers contributed to the majority of this spending. Diabetes management also was a significant cost driver, accounting for $111.2 billion, which was predominately spent by public payers.

The study was one of several about trends in biopharmaceutical R&D, drug pricing and industry profitability published in the March issue of JAMA. The articles came with a healthy debate from Merck CEO Kenneth Frazier, who argued in an editorial that the methodologies required further examination, highlighting – for example – that the JAMA analysis of net and list prices failed to reflect “the most critical pricing issue”: out-of-pocket costs for patients.

Frazier also suggested five solutions that the biopharmaceutical industry should adopt, including a focus on patient affordability, reforms to the drug-rebate system, an end to “inappropriate gaming the system” around intellectual property, and a move to value-based contracts. But it was Frazier’s fifth proposal that most caught our eye: the need for “collaborating across system stakeholders to reduce the cost and complexity of health care.”

Why it Matters:
Health spending is often viewed in the aggregate, but the Dieleman research demonstrates that the challenges with health spending are not evenly distributed, suggesting that solutions, too, must be tailored. The Dieleman work highlights some of the areas that deserve further analysis, though recent studies (see What We’re Reading, below) have underscored the need to fully vet even narrowly focused approaches that appear to be – but are not always – slam dunks.

Additionally, tackling health system changes will require all stakeholders to do two things: identify the places where they can make an impact individually and commit to finding ways to work collaboratively. Frazier’s article raised important questions about how the pharmaceutical industry can act differently – through the prevention of price-gouging or by enabling value-based health care – while also suggesting policy solutions and a willingness to partner.

What We’re Reading

 Many of us who follow health care policy developments are hoping to find that silver bullet – the one program that will significantly reduce costs and unnecessary spending. While many programs show promise, they often have limitations or require further study. The articles below highlight promising approaches, but with noted limitations. They’re still worth a read.

  • Tollen L, Keating E, Weil A. How Administrative Spending Contributes to Excess US Health Spending. Feb. 20, 2020, Health Affairs Blog
    Administrative spending – defined as billing and insurance-related costs, as well as other program and practice overhead — is substantial. This spending has some benefits by allowing for greater choice among physicians, health plans and hospital networks and enabling patient care coordination. Yet this spending is also driven by the lack of standardized payment mechanisms and costs associated with redundant quality and pay-for-performance systems.
  • Powers BW, et al. Impact of Complex Care Management on Spending and Utilization for High-Need, High-Cost Medicaid Patients. Feb. 10, 2020, The American Journal of Managed Care 
    In carefully selected patients, this randomized study found that complex care management reduced spending and hospital admissions. While the study suggested promising results, the researchers recognized the study’s limitations and the need to dig deeper into which “program attributes were most responsible for the observed spending and utilization reductions.”
  • Dubois RW, Westrich K, Buelt L. Are Value-Based Arrangements the Answer We’ve Been Waiting for?
    Feb. 28, 2020,
    Value in Health 
    There’s a lot of interest in using value-based arrangements (VBAs) as a way to address higher drug prices and reduce spending. Taking a closer look, most of VBAs are used for a small subset of conditions, medicines and patients. This may lessen the impact of VBAs as a way to reduce health spending.

Dialogues on Health Spending

Here are a few health spending-related activities to check out that don’t require virtual fist bumps or close contact with other people to enjoy. And that also applies to dropping us a line or tweeting using #GoingBelowTheSurface if you have health spending news or events you’d like us to share.

  • Webinar on Apr. 8 – Reducing Low-Value Care Roadmap: How AMGA Is Charting a Course to Change Health Care. Low-value or unnecessary health care is a pervasive problem in the United States, wasting as much as $340 billion each year in treatments and services that don’t offer real value for patients. Hear how AMGA members are taking steps to reduce low-value care throughout their organizations. Presenters also will unveil a roadmap for addressing low-value care developed in partnership with Going Below The Surface. Register online.
  • Health Affairs’ Considering Health Spending Series. Recent articles and blogs tackle spending on out-of-network primary care in Medicare ACOs, hospital price transparency, putting pricing into context, and expanding sick leave to fight contagious diseases.
  • Tradeoffs Podcast. Recent episodes have us asking about the health care supply chain and how health care concerns are shaping the 2020 elections.
  • The Underutilization of Prevention. The Healthcare Leadership Council’s blog features a guest post that takes a closer look at preventive interventions and their benefits and costs for society.
  • Webinar on Demand – What’s Been the Bang for the Buck. How do medical advances in cardiovascular disease impact the health care spending picture? Watch this on-demand webinar with health policy experts from Harvard, Brigham and Women’s Hospital, RTI Health Solutions and the National Pharmaceutical Council.