Yahoo Finance Health-care spending can be tackled — 1% at a time: Expert
According to Yale University health economist Zachary Cooper, If U.S. health system were a country, it would have the fifth-largest GDP in the world, at more than $3 trillion. The growth of the U.S. health spend every year outstrips inflation and now accounts for 18% of the US's GDP. What's more, the the cost of a $400 hospital emergency bill would be impossible for at least 40% of Americans to pay.
High prices and booming out-of-pocket costs have been a focus of legislation at the state and federal levels, as have efforts to create more transparency, but any large-scale reform efforts are likely to be ineffective, according to Cooper.
"There's not one thing wrong with the U.S. health-care system. There are all these discreet problems that require incremental, plumbing-like solutions," he told Yahoo Finance in a recent interview.
Problems exist in three major silos of health care: health services, health insurance and pharmaceuticals, he says. And it why Cooper launched the One Percent Steps project to identify and tackle incremental reductions.
"A 1% inefficiency in the health care system is about what we'd be spending to give universal Pre-K to the entire country," Cooper said.
In a recent research paper, Cooper noted, "The average person drives past six cheaper MRI locations between their home and where they ultimately get care."
Such problems are largely driven by physician referrals, and shows the need for patients to take better control of their own health-care spend. If they went somewhere closer and cheaper, health care spending could be reduced by three-quarters of a percent in the country, saving tens of billions of dollars, he added.
Some members of the group of health policy experts and economists working with Cooper previously worked on another similar project which began in 2015 that analyzed health care spending, the Health Care Pricing Project.
In the recent past, there have been a number of ideas to curb health spend, things like payor-provider partnerships, pilot programs, high-deductible health plans, discouraging ER use, drug discount programs, and using an all-claims database, among others. Some worked in some states but never got off the ground in others. The Trump administration saw a flurry of executive orders on price capping and transparency, some of which are being set into motion today. But many of these examples were voluntary or simply tweaks to the existing system rather than addressing the larger issues full on, Cooper said.
Whack-A-Mole health system
Sachin Jain, CEO of SCAN Health, told Yahoo Finance that part of the problem is that scaling the ideas takes time and there is no incentive to do so.
"Usually (pilots are) a fake, nice way to delay implementing some common sense solution," Jain said.
"We have a disease in our industry where we celebrate incrementalism, but we don't try to take the findings and translate into action for all kinds of reasons," Jain added. "The status quo is financially better for all parties."
Atul Gawande, surgeon at Brigham and Women's Hospital, professor at Harvard University's school of public health and former CEO of Haven — the joint venture by Amazon, Berkshire Hathaway and JP Morgan — believes that the key to solving the problem is not just in the hands of the private sector.
"There are fundamental ways in which we need the public sector fixes that the private sector cannot fix. We have way under-committed to our public health resources," Gawande told Yahoo Finance, reflecting on how the broken system has impacted the U.S. response to the pandemic.
"We are not committed as a country, even now, to making sure everyone has coverage, everybody has a doctor, and they are part of a system that can reach you," Gawande added.
Cooper believes if each item that can account for 1% spend is addressed independently, there could be more impact than trying to convince a new administration to tackle the issue with broad-stroke legislation.
The current way to address health-care problems in the U.S. is "more like Whack-A-Mole," than seeing them as "sort of shifting tectonic plates," he said. "Most of the big legislation we can pass actually increases spending," he added.
That's because every dollar being discussed is someone's income — whether that of a pharmacy benefits manager, a hospitalist or physician, or insurer or pharmaceutical company. So rather than ping pong between each side, and follow the endless circle of finger-pointing to find the one lever to bring down health care spend, Cooper wants hopes to identify waste in a more target way, he said.
"Nobody writes country music songs about incrementalism, but it's actually going to be that sort of incrementalism that we need to lower insurance premiums," Cooper said.
More from Anjalee:
Telehealth's future depends on bridging the digital divide: Hospital CEO
What you need to know about at-home, over-the-counter COVID-19 tests
Biden COVID-19 adviser: Vaccine news is great, but we still have a ways to go
Read the latest financial and business news from Yahoo Finance.
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube.
Follow Anjalee on Twitter @AnjKhem.
