Insight, analysis & opinion from Joe Paduda

< Back to Home


The CBO health policy study misses the mark

The release of a long-awaited study by the Congressional Budget Office today “Key Issues in Analyzing Major Health Insurance Proposals” has stirred up a lot of comment and observation, most of it noting that the current proposals aren’t going to solve the coverage/cost problem.
There’s a lot in the study that’s very good, but much of the discussion has missed a central point. There is enough money in the system today to pay for excellent care for every American – probably more than enough. While we can save $110 billion over ten years by negotiating a 15% rebate on drugs covered by Medicare Part D and another $34 billion from efficiencies resulting from improved health care IT, these totals are chump change next to the amount of money we waste by delivering too much care to people who don’t need it.
As an excellent companion piece, I give you Dartmouth’s latest work, Expanding Coverage without Increasing Health Care Spending. As the Hanoverians put it:
“Most analyses of coverage reform predict that we will spend more as a nation on health care once the uninsured gain coverage and begin consuming more care,” write lead authors John E. Wennberg and Shannon Brownlee. “But we predict that covering everyone will have a much smaller impact on the trend in health care costs, provided that capacity is not increased.”… Not increasing capacity while improving quality and increasing coverage, say the authors, can be achieved in a number of ways, including reducing oversupply of health care services in high spending regions of the country. As documented repeatedly over 20 years of research by the Dartmouth Atlas Project, more spending on health care, more procedures and more hospitalizations, do not result in better health outcomes for patients.” [emphasis added]
The CBO report suffers from a troubling omission – an explicit acknowledgment of the impact of over-utilization on US health care costs. While the authors provide an excellent analysis of a hundred-plus health reform initiatives, they do not address the elephant in the room – too many doctors prescribing too many treatments that have no basis in science, no demonstrated efficacy, deliver no benefit to the patient.
That’s where the money is. Yet the CBO study claims that savings from comparative effectiveness research would be tiny – and most of the benefit would take place more than ten years in the future. Where the study misses the mark is in assuming that the health care funding, regulatory, and delivery systems remain static. Without fundamental change, their numbers are likely correct, and may well be optimistic. That, I would suggest, is the point.
There must be fundamental change – as described by Wennberg and Brownlee – in the health care system. Health care has to move from a cottage industry, overseen by a guild of white-coated demigods, to one blending diagnosticians with care delivery systems. Vertically integrated health systems could, and should, be able to survive and flourish in this new world, while insurers and big health plans will only make it if they buy up delivery systems and utilize their analytical capabilities to drive better outcomes on a population basis.
What does this mean for you?
Buyers – be they employers, governments, or individuals – must start evaluating health care offerings not on the basis of premium cost and size of the network directory but using the metric of functionality – how effectively does the health plan maintain and improve the health of its members.

7 thoughts on “The CBO health policy study misses the mark”

  1. Great blog Joe, white-coated demigods…I love it. I work for a Utilization Review company and the finger is often pointed at us as if we are the bad guys out to keep injured workers from getting the care that will make them better. More care is definitely NOT better care and I can attest that everyone here is a patient advocate from the Medical director down. How about a little blurb on Iatrogenic disease next to drive this point home???

  2. Huh?
    CBO report targets high cost areas with outlier spending patterns (read: waste and overuse), uses bundled payments, penalizes readmission

  3. Let’s remember that all of those physicians out there are overutilizing the health care resources for a reason. Patients expect their MRIs and CT scans. To not have a right to the latest medication is considered rationing. If there is the appearance of everything not being done and a bad outcome results, lawyers have a field day.
    Let’s put this in a little context. It’s as much if not more about expectations of Americans over-using the health care system than it is about physicians overutilizing it.

  4. How come you only hear comments about how patients drive utilization on blogs? I’ve never once seen a PSA or any advertisement sponsored by the AMA or any other provider or hospital community about how that MRI you want is unnecessary. Funny that.

  5. Telling someone “Sorry you’re going to have to live with your pain, an MRI is unnecessary” is going to be a hoot to sit back and watch being implemented. That’s going to go over like a terd in a punchbowl at a birthday party. The physicians will always be just the messenger as well, when patients decide to go after the government, HMO or policy wonk that’s telling them no. Physicians will be more than happy to point out where exactly to vent. How do you think “I can fix you if **** would approve your MRI, contact **** to give them an earfull.” is going to go over.

  6. there is a very easy solution that worked for decades. Eliminate first dollar coverage. People order far fewer test and waste considerably less when they are paying for it. High deductibles and 20-30% co-insurance and suddenly people act like the smart consumer they should.

  7. Joe,
    Please respond to the inevitable assertion that following evidenced based and standard of care guidlines is no defense in a Tort case. It seems unrealistic to expect providers to practice in an environment which restricts their latitude to decide on treatments but forces the entire burden of risk on their shoulders. It is not the actual malpractice risk that drives this phenomenom but the perception of financial and emotional risk. The repeated airings of John Edwards channelling a fetus (whose physician followe established care guidlines)probably has increased healthcare costs 1% in and of itself.
    I agree with Nate, doing away with outpatient first dollar coverage and third party billing will go far in decreasing utilization. Simple economics, more self pay at the point of service, even if eventually reimbursed, will result in more price transparency, lower provider overhead through decreased billing staff, ARs and lower patient demands. More physicians and their employers should require their patients to sign “arbitration first” agreements prior to care to address the liability drivers to our system

Comments are closed.

Joe Paduda is the principal of Health Strategy Associates




A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



© Joe Paduda 2018. We encourage links to any material on this page. Fair use excerpts of material written by Joe Paduda may be used with attribution to Joe Paduda, Managed Care Matters.

Note: Some material on this page may be excerpted from other sources. In such cases, copyright is retained by the respective authors of those sources.