America, Heal Thyself

What other countries can’t teach us about controlling health care costs.

By Shannon Brownlee

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The Healing of AmericaThe Healing of America:
A Global Quest for Better, Cheaper, and Fairer Health Care

by T. R. Reid
Penguin Press, 288 pp.

It’s no secret that the United States has the most expensive health care system in the world. We spend nearly twice as much per person as do other developed countries for health outcomes that are no better and in some cases much worse. Moreover, the citizens of most other countries, including Canada and the U.K., who are routinely reviled by opponents of "socialized" medicine, express greater satisfaction with their health care systems than we do with ours.

All of which adds up to an obvious conclusion to author T. R. Reid: we have a lot to learn from these foreigners. "We can bring about fundamental change [in our system] by borrowing ideas from foreign models of health care," he writes. Part analysis, part amusing travelogue, The Healing of America represents an admirable mission, as Reid travels the globe in an effort to understand why our care is so much more expensive—and less effective—compared to that of other countries. Along the way, he takes his bum shoulder, the result of an injury sustained while serving in the military in the 1970s, to a series of doctors and healers in far-flung cities, to illustrate how different caregivers approach the treatment of joint stiffness and pain. Reid may be right that there are lessons to be learned from other systems that could inform the debate we’re now having about the quality and cost of our own health care, but they are not the lessons that are put forth in this book.

In trying to explain the root causes of our astronomically expensive system, Reid falls back on two widely held but inadequate assumptions about what’s driving American health care spending. The first is the price we pay for each medical service compared with prices for the same service in other countries. At each stop in his tour of foreign health care systems, Reid hammers this point home. We learn that an MRI of the head costs $105 in Japan versus anywhere from $1,000 to $1,400 in the U.S. A visit to the orthopedist to look at his shoulder in France costs $34, versus three to four times that in the United States.

Reid is right that we pay more for many individual treatments than do citizens of other countries. But in his relentless litany of price differentials he fails to convey the simple but vital point that costs in medicine, as in any industry, are a function of both price and volume. What also distinguishes us from other countries is the amount of health care we consume, especially of the most expensive kinds of care. We undergo three times more MRI scans than the OECD average. Our doctors prescribe more brand-name
drugs and fewer generics. We undergo more elective surgeries than citizens of France, Switzerland, and Germany. We run to the specialist at the drop of a hat, partly because we have more specialists and fewer primary care physicians. That specialist is often quick to recommend an expensive procedure or surgery when physical therapy, painkillers, or some other, less invasive form of treatment will work just as well or better. Reid’s own story about his aching shoulder illustrates this point. His American doctor immediately recommended a complete shoulder replacement, while every other doctor he saw in other countries suggested he try less draconian remedies first.

Reid’s second explanation for high American health care costs is the mammoth overhead built into our private health insurance market. "[I]nsurance firms … soak up a significant share of the premium dollar to cover the costs of marketing, underwriting, and administration, as well as their profit," he writes. "Economists agree that this is about the most expensive possible way to pay for a nation’s health care."

Again, Reid’s critique is right, as far as it goes. It just doesn’t go very far. Let’s do the math. While a majority of Americans are covered by private insurance, mostly through their employers (and some of it through not-for-profit Blue Cross and Blue Shield companies), government pays for nearly half of the total we spend on health care. About 46 percent of the $2.4 trillion we spent last year came through Medicare, Medicaid, the Veterans Administration, and other military payers. Another 12 percent came directly out of patients’ pockets. That leaves 42 percent of the total funneling through private insurers.

How much gets eaten up by paper pushing and profits within private insurance companies? Reid says it’s 20 percent. Okay, then: 20 percent of 42 percent of $2.4 trillion comes to $202 billion. That’s a lot of money, to be sure, so let’s calculate how much we could realistically save if the health care fairy were to wave her magic wand and slash insurance company overhead to, say, the level of France’s system, which like ours is quasi-private, and which, according to Reid, spends 5 percent on administration. We would save about $151 billion a year.

I’m underwhelmed. Even if we could slash $151 billion off our expenditures, our health care bill would still be vastly higher on a per capita basis than that of any other developed nation. More to the point, cutting private insurance administrative costs would have no effect on the underlying factors driving the accelerating rate of growth in health care spending. Even with a rock-bottom overhead of 5 percent, Medicare spending is going up almost as fast as that in the private sector. Reducing that rate of cost increase is what everybody in Washington is talking about when they say we need to "bend the curve." Cutting administrative waste would move the starting costs downward without changing the curve’s slope.

This is a problem other developed countries are also facing, though Reid doesn’t dwell on this fact. Between 1990 and 2003, according to a Kaiser Family Foundation report, American health care costs grew at an annual rate that was 3.3 percent faster than our GDP. During that same period, health care spending in Switzerland, the country whose system is favored by many conservatives, grew at almost exactly the same rate, 3.2 percent faster than GDP. France’s went up 2 percent, Japan, 2.1 percent, Belgium, 2.9. Canada’s spending
grew at a mere 0.9 percent, a rate that would make most American health care analysts do backflips if we could bring our spending growth down to that level. But there’s not much chance of that happening. Canada has a true single-
payer system in which the government sets annual budgets for health care and providers have to find ways to care for patients within those bounds. France, Switzerland, Germany, and most of the other countries Reid describes all pay for health care more like we do, with a combination of public and private insurance.

And yet even in Canada, health care costs are rising faster than GDP. That leads to an obvious question: What is driving everybody’s health care spending up? The aging of populations plays a roll, but it looms considerably smaller than most people assume. A bigger factor is medical innovation: new drugs, surgical techniques, screening tests, implantable devices, imaging machines, and so on. In many industries, innovation brings prices down. But in health care, medical innovation nearly always costs more than whatever it was doctors were doing before.

Some medical innovations have been well worth the costs. Death rates among people who suffer heart attacks, for instance, have dropped dramatically in recent decades, thanks to the development of new clot-busting drugs, the ability to open coronary arteries with angioplasty and stents, and drugs that can prevent damage to the heart muscle. Unfortunately, not all medical innovations have actually led to better health outcomes. Some have proven to be more harmful, while many others are no better than existing treatment, they’re just more expensive.

For example, doctors used to respond to patients suffering from syncopy, or fainting spells, by simply measuring their blood pressure. Now physicians use several tests, including an electroencephalogram, which measures electrical signals in the brain, a CT scan of the head, and a blood test to detect enzymes that might signal a heart attack. In a study published this summer in the Archives of Internal Medicine, a group of researchers at Yale looked at the records of 2,100 patients with syncopy. About 95 percent of them were given an electroencephalogram and the enzyme test. Another
63 percent got a CT scan. Only 38 percent of the time did physicians take the patient’s blood pressure when he was lying down and then again when he was sitting or standing. Guess which one yielded the most accurate diagnosis and led to the right treatment most often? The good old blood pressure cuff. Meanwhile, those other tests often just added to the bill.


ow much of the new technologies and treatments that we throw at patients actually helps them, and how much is unnecessary waste, or in fact puts them at greater risk of injury or death? No one can really say, because we devote the equivalent of one-tenth of 1 percent of our health care spending to studies like the one conducted at Yale—studies that actually compare new treatments and technologies to old ones.

Another factor driving the rise in health care costs is the increase in chronic illnesses like diabetes, heart disease, and autoimmune disorders. These conditions are expensive to treat, because patients have them from the time they are diagnosed until death. It’s estimated that chronic conditions account for 75 percent of health care spending in the U.S. Chronic illnesses also tend to require more complex treatment regimes, with numerous specialists having to coordinate their care—something the fractured American system doesn’t do very well, to put it mildly. The complexity only grows as new (and unproved) treatments and techniques are added to the mix. The results are soaring costs as well as high rates of medical errors.

All of these issues and other factors driving health care costs are now part of the health care reform conversation in Washington. At least some of them are likely to be addressed in whatever legislation emerges—presuming a bill does emerge. Reid, however, gets into almost none of this. He glosses right over the need for better medical evidence. He has little to say about why all countries, not just the U.S., must do a better job of coordinating care. He is silent on the need for incentives to encourage the creation of "accountable care organizations"—health systems like the Mayo Clinic, Kaiser Permanente, and the Cleveland Clinic, which have a better record of keeping costs down while effectively managing the care of the sickest, and most expensive, patients, and which President Obama and others have held up as models.

A distinguished and highly accomplished foreign correspondent, Reid appears not to know what he doesn’t know about the scientific and economic complexity of health care. He also gets his medical facts wrong, stating there are "millions of deaths each year" in the developing world from smallpox (smallpox was eradicated from the planet more than thirty years ago), that polio is a "bone-twisting" disease (it destroys nerves and can lead to muscle wasting), and that the U.K.’s National Health Service won’t give him a prostate-specific antigen, or PSA, test, because it’s not cost-effective (the NHS, in fact, does pay for PSA testing, but doctors in the U.K. don’t encourage it, having figured out long before we did that the test hasn’t been shown to reduce mortality, while leading to unnecessary and potentially harmful surgery). Health care reform is going to take a lot more than cutting the insurance industry’s overhead and slashing the prices of medical services. It’s also going to require profound and sustained changes in the way care is delivered. But you wouldn’t know any of that from reading The Healing of America.


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Shannon Brownlee is a senior research fellow at the New America Foundation and author of Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer.

 
 
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