health care cost containment? E=p*q

Spending on personal health care services in the U.S. has skyrocketed. Whether this is an entirely bad thing is subject to debate. Some of the additional spending has been productive in terms of producing better health. Some of the additional spending probably has not been productive. The difficulty is in knowing wasteful spending when one sees it. For example, if a physician orders a CT scan for you, is this wasteful? Perhaps an accurate diagnosis can be made without the scan. However, perhaps the scan provides reassurance that there is not something dreadfully wrong with you. Establishing uniform rules for when a procedure is to be done may save money (and may be worth doing for this reason), but realistically mistakes will be made. Political candidates and public officials speak of "wasteful" spending as if it were labelled such. If this were true, strong budgetary pressure would have eliminated waste a long time ago.

The equation in the title expresses a simple truth. Expenditures on personal health care services (E) equal the price of such services (p) times the quantity of such services (q). To lower E, one has to lower p and/or q. Health care providers understandably resist reductions in p. Years ago, Congress adopted the Resource Based Relative Value Scale for Medicare Part B. A purpose was to increase relative prices paid to primary care physicians and reduce prices paid under Medicare to specialists. 20 years later, this process is still underway. In the end, some reduction of prices is possible, but we need to be prepared for health care provider bankruptcies and exits. The public does not oppose reductions in p since it perceives it to be at most indirectly affected by such policies, but large reductions in p will have some adverse consequences.

Then there is q. One possibility is to increase deductibles, copays, and coinsurance. This approach works to reduce q, but does it only reduce the q which has low benefit to patients? The answer seems to be it reduces some high benefit q as well. Then alternatively, insurers can refuse to cover new technologies or insist that old technologies be tried first. Or they can "ration" care in other ways.

The bottom line is that health care cost containment is not a pleasant process, especially if appreciable savings are to be generated.

The present public discourse about health care reform (understandably in that some sugar coating helps get bills passed) implies that there will be cost containment if the bills are passed. There is a distinction however between new taxes and cost containment to achieve a budget neutral bill. Real cost containment in the end will not be painfree.

Specialty Courts for Medical Malpractice Legal Disputes

Today's Wall Street Journal publishes letters which comment on Philip K. Howard's proposal for demonstration projects on specialty courts for resolving medical malpractice legal disputes. The comments under the heading "Have the Guts to Reform the Health-Care Tort System" on p. A-16 (Oct. 9, 2009). The letters make various points, but really do not address issues in Mr. Howard's proposal.
Specialty courts or in this context health courts are to be designed to replace general courts with juries. The idea is that technical issues in many medical malpractice cases are beyond the capabilities of most juries and many generalist judges. The proposal would abolish juries and appoint judges who specialize in medical malpractice cases.
The proposal has many merits. First, a point which the letters to the editor do not mention, specialty courts address what is perceived to a be a fundamental problem of the current system. The vast majority of reforms enacted by the states are simply bandaids. Second, specialty courts have existed for other areas of the law, such as for tax, bankruptcy, family issues, drug and alcohol-related issues. These courts provide post-verdict coordination (e.g., with other government agencies) in ways that general courts do not. The track record of these courts is well worth reviewing.
However, abolishing juries for medical malpractice should not be done lightly. Juries bring a general citizen perspective to the courtroom which professionals may not have, given years spent in a professional role. There is empirical evidence on how well juries perform. This evidence is well worth consulting. Also, there is no guarantee that a practitioner will be up to date in the scientific evidence. It might be better to have a central body which reviews scientific evidence and provides balanced summaries of the state of the evidence in various areas for which med mal disputes are common. Finally, there is the issue of who would appoint specialty court judges. Would judges be appointed who were biased in favor of physician defendents or plaintiffs for that matter. Would appointments be subject to medical malpractice litmus tests?
Mr. Howard, as some health reform bills do, only calls for doing demonstrations of specialty courts. It would be hard to argue with demonstrations. But it not clear that the results from a handful of demonstrations would generalize. In the meantime, reviewing evaluations of other specialty court types would be well worth doing.

Sloan-Chepke, Medical Malpractice. MIT Press, 2008 has a chapter on specialty courts. We provide a detailed discussion of the issues and evidence through about 2007.

Defensive Medicine and Healthcare Costs

Defensive medicine is considered an important cost since medical malpractice premiums are such a low percent of personal healthcare spending in the U.S. However, the cost of defensive medicine is questionable. The most cited article on defensive medicine is by Dan Kessler and Mark McClellan, published in 1996. A recent study by John Shadle and myself seeks to replicate their findings not only for heart disease but for stroke, breast cancer, and diabetes as well. While the results for heart disease almost replicate the Kessler and McClellan findings, the results for the other diseases do not. This calls into question the generalizablility of their findings. Other studies have found some effects of tort reform on amount and type of care delivered, but in no case is there hard empirical evidence that medical malpractice is the cost driver the advocates of tort reform would have it be.
Is there Empirical Evidence for “Defensive Medicine”? A Reassessment