More money, worse care?

Post lifted from Daniel Weintraub

This study that came out last month should be required reading for anyone who thinks competition can't lower the cost of medicine and improve care. The authors not only found wide variations in the cost of treating the same conditions in California hospitals but concluded that the biggest cost driver was the availability of resources. In other words, more doctors or more hospital beds lead to higher costs, but not better care. An excerpt from the California Health Care Foundation:

The study finds significant variation in Medicare spending for chronically ill patients in California. For example (as shown in Figure 1), hospitals in Los Angeles received an average of 60 percent more for inpatient reimbursement for Medicare patients during the last two years of life than Sacramento-area hospitals. In fact, Medicare paid some hospitals in the state as much as four times more than other hospitals to care for patients with similar conditions.

Yet the additional care provided did not improve medical outcomes or patient satisfaction. Rather, as the volume of care increased, the quality of care and patient satisfaction actually declined.

The comparisons suggest that savings could be achieved by improving efficiency with no impact on quality. For example, Medicare could have saved $1.7 billion in the Los Angeles area alone if medical practice patterns there, the most expensive region, resembled those of Sacramento, the least expensive.

And this:

The study found that the higher use in California reflected a delivery system in which services were driven not by patient need, but by the supply of medical resources. In regions that have more hospitals, more ICU beds, more physicians, and more specialists, patients receive significantly more services at greater cost, but with no improvement in outcomes.

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For greatest efficiency, lowest cost and maximum choice, ALL hospitals and health insurance schemes should be privately owned and run -- with government-paid vouchers for the very poor and minimal regulation. Both Australia and Sweden have large private sector health systems with government reimbursement for privately-provided services so can a purely private system with some level of government reimbursement or insurance for the poor be so hard to do?

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