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Is health care spending more about price or waste?

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If you ask a health care expert, “Why is health care spending in America so high?” the answer will tend to fall in one of two camps – either prices for health care services are too high or we receive too much unnecessary care.

As medical overuse has become a more salient topic, doctors and policymakers see waste reduction as a promising strategy for controlling health care spending. In USA Today, cardiologist Arthur Garson, Jr. writes that the savings from putting doctors on salaries “could provide significantly more funding than we spend on Obamacare’s insurance subsidies and Medicaid expansion.” From cancer drugs to eyedrops, researchers are discovering unnecessary care in every area of health care they look.

Which is the problem, too much waste or exorbitant prices? Short answer: It’s both.

On the other hand, in a recent Vox article, health care journalist Sarah Kliff claims, “The real culprit [of health care spending] in the United States is not that we go to the doctor too much. The culprit is that whenever we do go to the doctor, we pay an extraordinary amount.” In a 2003 Health Affairs piece, health economists blame prices almost entirely for our country’s high health care spending, bluntly declaring, “It’s the Prices, Stupid!”

So which is the problem, too much waste or exorbitant prices? Short answer: It’s both.

Longer answer: It isn’t simply that all prices are too high or that all health care services are being overused. It’s that prices of many tests, drugs, procedures, and physician services are often disconnected from their value, and that leads to patients getting more of the wrong care and not enough of the care they need.

For example, putting in a stent for a patient with stable coronary disease has not been shown to lessen the risk of heart attack, and likely does not reduce chest pain more than medical management alone. But cardiologists are reimbursed thousands for performing the procedure, whereas giving the patient guidance on lifestyle changes to improve heart health is compensated much less.

Prices of health care services are often totally disconnected from their clinical value.

The same goes for doing a CT scan instead of taking a medical history to diagnose a headache, performing sinus surgery on patients rather than medication therapy, or giving a patient steroid injections instead of noninvasive treatment for low back pain – all cases in which the pricier procedure provides little to no clinical benefit.

The disconnect between clinical value and the price of a drug, test, or physician’s time occurs across specialties and in all clinical settings, from the hospital ICU to the neighborhood clinic. In a perfect world, financial incentives would not impact clinicians’ treatment decisions. But even doctors with the best of intentions are more likely to choose the wrong treatment when they are rewarded for it, especially if the case is a clinical “gray area” or if the doctor is under pressure to do more.   

In Kliff’s Vox article, she cites data from the Commonwealth Fund finding that Americans visit the doctor less than in other high-income countries, to argue that overutilization isn’t the real problem. However, in the same report, researchers found that Americans use expensive technology such as CT and PET scanners more than most other developed countries. The same goes for robotic surgeries and use of the ICU. Commonwealth researchers conclude that both overuse of medical technology and prices are to blame for our health spending.

Our underuse of basic, inexpensive, preventive care and overuse of expensive, often unnecessary services has helped create the paradoxical system we have now, in which we spend far more on health care than other countries and underspend on addressing community determinants of health, leading to worse health outcomes.

It’s time to end this dichotomy of price versus waste. The two together lead to high health care spending, and tackling one without addressing the other is not likely to bring rates of spending down significantly. We all want the same thing, access to the health care we need at an affordable price.