Uncommon Common Sense – June 2014


By Bill Frayer

Medical Costs: Value over Volume


Bill-Frayer-2010In a survey reported in 2013 in The Atlantic that compared medical outcomes in 17 industrialized nations, the US ranked worst in the number of women dying in childbirth and in child mortality before the age of five.  It ranked second worst in death from cardiovascular disease and lung disease. Yet, the US continues to vastly outspend these other nations. Something is clearly wrong. 

The budget implications are very clear.  In 2007, the US medical costs were 15.2% of GDP.  By 2030, they are expected to be 31% of GDP.  This rapid inflation of medical costs is clearly unsustainable.  We hear lots of talk about getting medical costs under control, but little progress has been made.  

 One question I frequently hear when the topic of single-payer health care comes up is “Well, you wouldn’t want socialized medicine like in Canada, would you?!” Well, actually, I would.  Whereas the US ranked 17th in the Atlantic survey, Canada ranked seventh.  (Japan, Switzerland, and Australia ranked 1-3). And all these countries spend far less than the US on health care. 

So why the cost disparity? I am sure there are many factors: the cost of technology, the large profits of pharmaceutical companies and other suppliers, the administrative costs of the insurance industry, to name just a few.  But, to a large degree, I think it is the tendency of US medicine to focus on volume over value.  What do I mean by this?

Physicians, hospitals and other providers are reimbursed for each procedure, test or other service they provide.  Patients, insulated from the cost of medical care by the insurance system, have no incentive to question the value they are getting for their medical dollars.  Doctors make more money if they provide more treatment. We hear stories about patients in other countries having to wait for non-urgent treatments.  In the US system, patients and families demand expensive treatments, and the doctors often comply immediately, even when the chances for a good outcome is poor.  The system focuses on volume over value.By Bill Frayer


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