Poverty or health care waste – which do we tackle first?

When it comes to addressing the problem of health care spending, we have been going about it all wrong, argues Dr. Richard Cooper in his new book, Poverty and the Myths of Health Care Reform. Instead of focusing on waste and overuse to reduce spending, he writes, we should start with the larger root cause of health care utilization – poverty.

Social spending and health

Cooper maps health outcomes and poverty rates by neighborhood, finding a strong link between poverty and illness. He estimates that health care spending would fall by 30% if all Americans were as healthy as wealthy Americans.

While Cooper is right that poverty and other socioeconomic factors are powerful determinants of health outcomes, there is less evidence for his claim that a healthier country would necessarily lead to lower health care spending.

There’s a growing body of evidence that social spending is related to health outcomes. Countries that spend more on social services (such as pensions, job training, and food assistance) relative to health care spending have higher life expectancy and lower infant mortality rates. This effect holds when looking at long-term health outcomes, comparing the US to other high-income democratic countries, and even comparing states within the US.

Health spending and waste

But the converse is not necessarily true: that higher social spending will automatically lead to lower health care spending. This relationship is especially tenuous in the US health care system, where much of the care that is delivered is unnecessary and driven more by the supply of resources (such as hospital beds and physicians) and less by the needs of patients. Harmful and unnecessary care is rampant, and perhaps surprisingly, it afflicts low-income as well as high-income patients.



To reduce spending we need to take a multi-pronged approach, working to reduce overuse in health care while fighting for more investments in social services. We spend at least $200 billion each year on unnecessary and harmful care. Imagine if we could extract that waste out of the health care system and spend the money on public goods that can help all Americans have an opportunity to live a healthier life.