Spooky season is upon us, and if you’re searching for a good scare, look no further. This month we take on the frightening reality of our country’s unsustainable health spending. We explore how we rank in terms of spending compared to economically similar countries, revisit the urgent need to utilize public health efforts as a cost-saving tool, and explore the steps needed to reduce low-value care.

Digging Deeper

Aiming at the Real Health Spending Drivers

New data from the Kaiser Family Foundation (KFF) dug deeper into some of the United States’ primary health expenditures by analyzing 2018 health spending per capita in the United States compared to economically similar countries. The research found inpatient and outpatient and services accounted for the largest share of U.S. health spending – totaling an average of $6,624 per person – while spending in other countries only added up to $2,718 per person. Compared to hospital spending, U.S. drug expenditures were lower, averaging $1,397 per person. Other countries averaged $884 per person on medications during the same time frame. KFF President and CEO Drew Altman’s recent column in Axios reported on the study, noting while drug costs get much of the time and attention in the public debate, it’s hospital spending that mostly explains the difference.

Why it Matters: Even if the United States adopted European drug prices, a popular policy measure among some lawmakers, total savings would only amount to around $500 per person. Real savings can be gained by tackling our enormous inpatient and outpatient expenses, where the difference in spending approaches $4,000 per person. While we need to adequately fund hospitals, especially as we take on the COVID-19 pandemic, the evidence is clear: hospital spending is a key area to address. Despite the political risk or “real pain” Altman noted in his reporting, stakeholders must not shy away from the task of eliminating wasteful spending and focusing on quality over volume.

Public Health at The Center of All Policy Discussions

Researchers at the Institute for Health Metrics and Evaluation at the University of Washington School of Medicine and Vitality Group examined the $2.7 trillion spent in the United States on health care in 2016 and determined that 27% of the spending was attributable to five modifiable risk factors. Obesity accounted for the largest share of the expenditure ($238.5 billion), followed by high blood pressure ($180 billion), high fasting plasma glucose ($172 billion), dietary risks ($143 billion) and tobacco smoke ($130 billion). Per person, health spending on these five risk factors increased with age, with the largest portion of expenditures (44%) attributable to people 65 or older.

Why it Matters: With avoidable diseases driving such a large portion of our spending, we must focus on public health efforts as well as traditional clinical interventions to prevent and control these common, and expensive, health conditions. Additionally, initiatives focused on the social determinants of health may help reign in spending while positively influencing health outcomes. How can decision-makers shape policies that empower the creation and maintenance of healthy-minded communities? Francois Millard, chief actuarial officer at Vitality, emphasized the need for health to “be part of all policy discussions, not just those related to sickness.”

What We’re Reading

Here are two studies to sink your fangs into – one looking at whether new accountable care organizations can generate cost savings, and the other about a three-pronged approach to eliminate low-value care.

  • Verma S. 2019 Medicare Shared Savings Program ACO Performance: Lower Costs and Promising Results Under ‘Pathways To Success.’ Sept. 14, 2020, Health Affairs Blog.
    The “Pathways to Success” rule redesigned the Centers for Medicare and Medicaid Services’ Medicare Shared Savings Program by adding new participation options and incentives for accountable care organizations (ACOs). ACOs performing under this rule showed net per-beneficiary savings of $169, and new ACOs attained net per-beneficiary savings of $150. While these numbers are encouraging, they represent less than 1% of Medicare patient spending. Implementing ACOs may be a promising direction for our health system, but major enhancements are needed for savings to be more impactful to the system.
  • Powers BW, Jain SH, Shrank, WH. De-adopting Low-Value Care: Evidence, Eminence, and Economics. Oct. 2, 2020, JAMA
    Eliminating care that offers little or no value to patients remains a challenging problem in the United States. It will take a framework of “evidence, eminence and economic” incentives to achieve success in “de-adopting” low-value care, according to the study’s authors. They noted that the steps to eliminate specific low-value care services and treatments will differ, but it will likely involve a multifaceted effort across these three principles.

Dialogues on Health Spending

This month, GBTS partners treated us to a few podcasts and activities on health care spending – check out this basket of goodies:

  • Town Hall Focuses on Health Spending: GBTS partner Healthcare Leadership Council hosted a virtual town hall for community health care leaders in the Austin and Dallas-Forth Worth, Texas area. The conversation focused on a variety of health spending issues affecting the area – check out our article on their dialogue.
  • Podcast and “Roadmap for Transforming Care”: GBTS partner Association of Community Health Plans launched a new podcast focused on prevalent health care challenges, such as fee-for-service, social determinants of health and chronic conditions. They also released a “Roadmap for Transforming Care,” which offers a “vision for the next decade of reform promotes a system focused on health and healthier communities.”
  • Mark Your Calendars for Nov. 10: GBTS partner the National Pharmaceutical Council and The American Journal of Managed Care are hosting a webinar on health care spending. You’ll hear from Harvard’s David Cutler and Jason Buxbaum, NPC’s Robert Dubois and Michael Ciarametaro and Blue Cross Blue Shield of Michigan’s Mariam Alboustani. Mark your calendars and check NPC’s website for coming details.