How to Tame Health Care Spending? Here’s a One-Percent Solution
Maybe the answer isn’t something big, a group of economists is suggesting, but rather many small tweaks, such as reining in long-term care hospitals.
The health care system in the United States costs nearly double that of its peer countries, without much better outcomes. Many scholars and policymakers have looked at this state of affairs and dreamed big. Maybe there’s some broad fix — high deductibles, improvements in end-of-life care, a single-payer system — that can make United States health care less expensive.
But what if the most workable answer isn’t something big, but hosts of small tweaks? A group of about a dozen health economists has begun trying to identify policy adjustments, sometimes in tiny slices of the health care system, that could produce savings worth around 1 percent of the country’s $3.3 trillion annual health spending. If you put together enough such fixes, the group points out, they could add up to something more substantial.
This is a shift from the kind of research that is typically rewarded by big journal editors and tenure committees, but it could turn out to have a crucial role in understanding why our health care system is so expensive, and so unusual.
“I think focusing on the forest misses the fact that there are trees encroaching out of the forest,” said Fiona Scott Morton, a health economist at the Yale School of Management. “And we need to start cutting them down.”
A working paper published Monday proposes a possible 1 percent fix. In the 1980s, Congress carved out a small group of hospitals from its normal rules for payment. These “long-term care hospitals,” which treated patients with tuberculosis and chronic diseases, could earn far more money than traditional hospitals and nursing homes if they cared for patients who stayed with them for an average of 25 days. Since then, the number of these hospitals has mushroomed, from a few dozen to more than 400, most run by two for-profit chains.
For years, analysts and policymakers have wondered about the value of these hospitals, which tend to treat very sick patients who need a lot of care, such as mechanical ventilation or dialysis. Several analyses have suggested that Medicare may be overpaying for their services. And Congress has made some small changes to limit the number of patients who are eligible for such care.