Study Supports Obama Health Savings Plan

President Barack Obama’s budget plans announced Thursday to reduce health care costs by $634 billion through savings to expand medical insurance coverage seems partially supported in a report being published in the New England Journal of Medicine.

The study found that the government is paying twice as much for treating a patient in Miami as in San Francisco. The dramatic cost differences paid by Medicare does not reflect seniors living in the more expensive areas receiving better treatment.

Advanced medical technology is only a fraction of the cost differences. Mostly it is decisions made by doctors and, to a lesser extent, patients, according to the report.

“Technology doesn’t drive the growth in health care spending, people do,” said Dr. Elliott Fisher, the lead study author and a medicine professor at the Dartmouth Institute for Health Policy and Clinical Practice. Fisher said physicians are not the only issue, but also questions whether there’s a local medical health race among local hospitals or whether a community has a single hospital that is more focused on primary care.

The Dartmouth findings say there is plenty of room for reform if practices in the regions of the country that are less expensive could become the national norm.

In his budget, Obama proposes setting aside $635 billion in savings over the next decade to pay for health care reform, about half the total estimated cost to extend insurance coverage for all Americans. Some of the funding will come from higher tax rates on people earning more than $250,000 annually.

Medicare reforms won’t come easy since the country’s medical system frequently rewards expensive practices, the Dartmouth study notes.

For example, hospitals lose money if they improve care in a way that reduces admissions. Doctors don’t have a financial incentive to spend time carefully listening to a patient rather than quickly referring them to a specialist. “There are no financial rewards for collaboration, coordination or conservative practice,” the study said.

(I can vouch for that on personal experience. My primary care physician once referred me to the hospital emergency room for a bloody scratch on my ear lobe.)

The study found that among the 25 largest hospital-referral regions, Manhattan was the costliest, at $12,114 per patient in 2006. Minneapolis was the least expensive, at $6,705 per patient.

Among states, New York spent the most per Medicare enrollee: $9,564 per patient. Hawaii spent the least: $5,311. Medicare spent $16,351 on each Medicare enrollee in Miami in 2006 compared with $8,331 in San Francisco.

Combined health care costs paid by the governments, private insurance companies and citizens is $2.4 trillion, according to the U.S. Health and Human Services Department.

Cross posted on The Remmers Report

Author: JERRY K. REMMERS, TMV Columnist

Jerry Remmers worked 26 years in the newspaper business. His last 23 years was with the Evening Tribune in San Diego where assignments included reporter, assistant city editor, county and politics editor.

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2 Comments

  1. Hopefully the original article will be more complete, but while hospitals lose money by avoiding admissions they also lose money on lengthy wasteful admissions. There already is a incentive for hospitals to keep admissions as inexpensive as possible – DRGs (diagnosis-related groups). These are already used by Medicare. What happens is Medicare pays the hospital a flat fee per admission based on diagnosis (pneumonia, chest pain, whatever). If the hospital spends less than the DRG amount they keep the money, if not they take the loss.

    What this article is implying is that the spending differences are based on doctors ordering less tests and consulting less specialists. The most common reasons to over-utilize testing and specialists are 1. fear of being sued and 2. meeting patients expectations. The most likely reason a patient would be referred to an ER for a scratched earlobe would be that the doc was afraid of being sued if there was something really bad going on.

    So this article doesn't appear to go far enough. It's not a matter of just changing the physician behavior, it's also changing patient expectations and the legal environment, something politicians don't have much stomach for.

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