Monthly Archives: May 2009

We wish to comment on the Committee’s statement that studies of geographic variation consistently show that 30% of Medicare spending is wasted, and on the Committee’s conclusion that policies requiring spending reductions by physicians whose spending is above a certain threshold may be useful.

While the studies cited are consistent, so too are their methodological shortcomings. In particular, Medicare spending cannot serve as a proxy for real resources inputs (labor and capital) (see Mississippi, Alabama and Nevada). When total health care spending is assessed, instead, higher resource inputs are generally associated with better quality, even recognizing that the highest resource use is by patients who are sickest and whose outcomes are the poorest.

The notion of “30% waste” has deeper roots in an invalid thread of logic that begins by characterizing regional differences in Medicare spending as “unexplained,” and because differences are “unexplained,” they must be unwarranted, and because they are unwarranted, they must be wasted. Logic dictates that, when differences are unexplained, explanations must be sought. In fact, when that has occurred, variation has been attribltable to differences in the prevalence of disease, patients’ risk factors, patients’ income, community characteristics and even altitude. Moreover, these pervasive and stubborn variations have been found in other developed countries, where health care financing and delivery systems are very different from the US. 

The belief that broad-scale geographic variation in Medicare spending can offer a path to short-run savings is incorrect. It should not form the basis for incentives or penalties affecting physicians’ practices. Indeed, restrictive policies, including those under consideration, could deprive some patients of beneficial care.

Richard A. Cooper, MD, Professor of Medicine                                                                Mark Pauly, PhD, Bendheim Professor of Health Care Management and Economics                                                                                                                               University of Pennsylvania

In a recent WSJ op-ed, Peter Orszag once again called for the elimination of “unexplained variation” as a means of decreasing health care spending. This time he zeroed in on Milwaukee, which I actually know something about, having not only grown up there but returned to many tears later as dean of the medical school. Orszag cited the fact that knee replacements are much more frequent in Milwaukee than in Manhattan, and he’s right. But a close look at the data (see the accompanying map) shows that Milwaukee’s greater use of knee replacements is not because nefarious doctors are bilking the system and that 30% of health care spending could be saved by stopping such waste, as Orszag would have us believe. The reason is that Milwaukee is within a cluster of states with high rates. They extend from Idaho to Michigan and from Kansas to North Dakota, but they don’t stop there. High rates continue into Saskatchewan, which sits atop North Dakota and has the same high rates, and into Ontario, which sits above Michigan and shares Michigan’s high rates. Knee replacement rates in these states and provinces average 70% higher than in regions with the lowest rates, which are in three clusters: California/Nevada/New Mexico + Hawaii; Kentucky/Tennessee; and New York/New Jersey/New England, and these low rates extend straight up from New England in to Quebec, Newfoundland and Labrador. The rates are as different in Quebec and Saskatchewan as they are in Massachusetts and Montana. How interesting that two neighboring countries with two different health care systems have identical patterns of geographic variation — a phenomenon that knows no borders. (Note that because the rates are lower among blacks, the map only shows rates for whites. These data are available from the CDC and the Canadian Institute of Health Information.)

Although it is difficult to explain this phenomenon, variation in knee replacements doesn’t appear to reflect some wasteful practice patterns. Rather, it’s more likely related to some cultural of environmental factors that span the US and Canada. From a health policy perspective, this is yet one more example of the fact that “unexplained variation” can usually be explained, and the explanations are usually related to the nature of the patients and their diseases and not to the practices of the physician who are caring for them. But where did this misunderstanding of knee surgery come from? Straight from the Dartmouth group. Here’s what John Wennberg (group leader) had to say about the wide geographic variation in knee replacement surgery and its persistence of over time: “What mattered most in predicting the rates in 2000–01 was the rates in 1992–93. In other words, the “surgical signatures” of regions are remarkably stable over time. Left alone, practice variations do not go away. Intervention is needed at the level of the doctor-patient relationship to reduce the role of medical opinion and enhance the role of the patient in choice of treatments.” Why “surgical signatures” rather than the usual “supplier-sensitive services”? Because there’s no correlation between knee surgery and the supply of surgeons, so it’s just that surgeons remember to do too many! Surely someone at Dartmouth must have noticed that the high and persistent rates were all in the plains and upper-Midwest, where Medicare spending is lowest, and it must have occurred to someone to ask if the durability of these rates was related to some durable characteristic of the population rather than to persistently wasteful physicians.

In his column in the NYT the same day as Orszag’s op-ed piece, David Brooks reminded us that health care has become “the bank” out of which President Obama plans to fund the bulk of his agenda. “By squeezing inefficiencies out of the health care system, he could have his New New Deal and also restore the nation to long-term fiscal balance.” The inefficiencies that the President talks about are Orszag’s 30% solution - which is based on getting rid of regional variation in physician practices, like knee replacements in Milwaukee. But durable solutions to health care reform will rest on critical analyses of health care data and reasonable expectations of what can be saved through system modifications. The current misperceptions and exaggerations by OMB are jeopardizing that goal.

In his interview in Sunday’s Times Magazine, President Obama was quick to point out that “most doctors want to do right by their patients.”  But he went on to say, “so if it turns out that doctors in Florida are spending 25 percent more on treating their patients as doctors in Minnesota, and the doctors in Minnesota are getting outcomes that are just as good — then us going down to Florida and pointing out that this is how folks in Minnesota are doing it and they seem to be getting pretty good outcomes, and are there particular reasons why you’re doing what you’re doing? — I think that conversation will ultimately yield some significant savings.” And that’s straight from the Dartmouth playbook, which is never straight. So let’s take a look at what’s really going on.

Yes, President Obama is right. Adjusted for price, Medicare expenditures per enrollee are 25% higher in Florida than Minnesota. And, as measured by various quality standards, Florida ranks lower. But the quality standards used reflect health care throughout the community, not just among Medicare patients – indeed mammography screening rates are lower in Florida in both the Medicare age group and among younger women. Such outcomes depend on inputs from all sources, not just Medicare. So how do Minnesota and Florida stack up? Minnesota spends more per capita, not less - 13% more. It’s not a low-cost haven. Minnesota has lower Medicare expenditures but, with fewer uninsured, good benefits plans and generous Medicaid, it spends more overall – and it gets more!

If the President visits Miami and Minneapolis, he’s likely to find out something else – something that he’s had lots of experience with in Chicago. He’ll find poverty in Miami, especially in the Medicare age group. Almost 30% of Miami’s seniors are below the poverty line, triple the rate in Minneapolis. When the distribution of household income is examined, Miami resembles Chicago’s 17^th and 20^th Wards - familiar turf for the President - a preponderance of poor households. And we know that folks in the lowest range of household income use twice the health care resources as those in the top, or even middle (see “Lets Talk About Poverty“). Although the Dartmouth folks grumble that “single working mothers in Nebraska are footing the bill for gold-plated health care provided to high-income Medicare enrollees in Miami,” it’s Miami’s poor who use the most. So, the message is that poverty is expensive to the health care system, including to Medicare , and like Chicago’s south side, south-Florida has lots of it, while Minneapolis has very little. Miami’s poorer outcomes reflect its burden of poverty and Florida’s overall under-investment in health care. Yes, Mr. Obama is right. A straight-talking conversation will ultimately yield significant insight about spending. The title of that conversation may surprise some, but it won’t surprise the President – it’s POVERTY.

A well-known health policy leader asked if wasn’t true that our country has a higher rate of preventable mortality than any other of the OECD countries, as the Commonwealth Fund has demonstrated. My answer was, it depends on which of our countries he is talking about. We have many. The map below shows just two – the Confederacy and the rest. Except for the Confederate states, the United States is rather average among OECD countries, with preventable mortality most similar to Finland. But the Confederate states are the worst in the world, with a preventable mortality rate double that of France.

Much of this can be traced to higher mortality among blacks, who account for 20% of the population in the old Confederacy, but only 10% elsewhere. Across all states, preventable mortality correlates strongly with percent of the population that is black (correlation coefficient = 0.8). But there are sharp north-south differences even among blacks. Black mortality in the Confederacy is 55% higher than in the rest of the country, and white mortality is 15% higher.

So we should not be too quick to malign the US health care system for spending too much and having poor outcomes. We are a nation of nations and must be understood in those terms. And the effects of race and poverty must be understood in each of these “nations.” Real health care reform will have to be built around regional realities and about the realities of wealth and poverty in each.