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A former Obama advisor: sometimes less health care is better health care

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David Cutler is a professor of economics and health policy at Harvard University and a former senior health care advisor to President Barack Obama. His new book The Quality Cure examines a problematic truth: despite being the highest-spending nation in health care, the United States doesn't deliver better health outcomes.

Cutler believes that reform efforts fundamentally need to be about improving quality, and that lower spending will follow. I asked Cutler to share his thoughts on the problems that plague the American health care system — and the efforts undertaken to cure them. What follows is a transcript of our conversation, edited for length and clarity.

Adrianna McIntyre: We talk a lot about waste in the health care system, how up to a third of spending in the health care system is "wasteful". It's a word that gets tossed around a lot, but people don't frequently define what it means in the context of health care. Can you expand on that?

David Cutler: Nobody denies that there's a lot of waste. Estimates range from 15 to 20 percent on the low end to 50 percent at the high end. There are a few different categories of waste.

One is clinical waste, things that are done that don't need to be done. A very classic example of that is people who are in and out of the hospital because you can't monitor them in between visits. It's not that the hospitalization itself is unnecessary — because the person is having a crisis — it's that the system is not good at preventing people from needing hospitalization when it's clearly possible to do that.

Another kind of waste is something we call "pricing failures." This is the idea that we pay much more for medical services than is necessary. In the Boston area, the cost of an abdominal CT scan ranges from $300 to $1,300. It's not that the hospital with the $1,300 scan is better — it's often the same machine, similar doctors — it's that the place with the more expensive service has more power in the market.

The third kind of waste is administrative cost. What we spend on administrative expenses in the U.S. is twice what we spend on heart disease and three times what we spend on cancer. That's just absurd. Health care seems to be much less efficient than any other industry in getting rid of those administrative costs. 

The fourth broad area is fraud and abuse. It's hard to know exactly how much, but it's a system where it's easy to imagine there is some fraudulent billing.

Between all that, you get to enormous amounts of money.

AM: Do you think this is very different from other nations? Are other nations better at getting better health care outcomes for their health care dollars? Are there particular kinds of waste that the U.S. is especially bad at?

DC: Yes. Other countries deliver less care, because they have constraints on the total amount of technology available. For example, in all of Ontario there are 11 hospitals set up to do open-heart surgery; the government puts a limit on it. In Pennsylvania, which has roughly the same population and is much smaller geographically, there are 60 hospitals that can do open-heart surgery.

That additional care doesn't seem to be doing much good. Survival after a heart attack is similar in the U.S. and Canada; most studies suggest that quality of life is similar, too. A lot of care seems to be provided in discretionary situations where it's not always necessary, nor is it doing very much.

Other countries also don't pay the high prices that the U.S. does. And administrative costs are much lower in other countries.

That's not to say that other countries are perfect. When I'm asked which country is best, I say, "Well, we have 25 examples of what not to emulate, and no examples of things to exactly emulate. Saying other countries are more efficient doesn't mean we should strive to be them, it just goes to show that it is possible to do better.

AM: I went back and read Roger Lowenstein's New York Times article that you borrow your book title from. One line that stood out to me was "instead of worrying about the cost of health care, [we] should worry about the benefits." I think that we tend to focus on costs — we want to put everything in dollar terms. But I think you're onto something here; that might not be the right lens. Can you talk a little about that?

DC: The whole title, The Quality Cure, is about the fact that quality has to be front and center.

If you ask people, "Do you want to save money in health care?" they'll say yes. If you ask, "Do you want to save money in health care by giving up valuable services?" they'll say no. And they're correct to say that! It's easy to save money. It's hard to save it in a way that's right and in a way that works for people.

What the book is about — and what I think is the single hardest challenge in American health care — is to figure out how to make the system work better so that our goal is not cutting costs; our goal is improving value. Eventually this will come with lower costs, but that will be a byproduct of actually doing better.

AM: One of the challenges here is that we need to be able to define and measure quality before we can pay for "value." Where are we at with that now, and how much research still needs to be done before we can really push forward on that front?

DC: I think we get hung up on saying that we don't understand value perfectly, and therefore we need to be careful about doing anything.

There's enormous variation across doctors in the care they provide. Not just across the country, but doctors in the same office; one might order CT scans for head trauma ten or twenty times more frequently than the next. There's very little confronting providers and asking, "Why do you practice this way instead of another way?"

One of the very big steps that health systems can take is to look at that distribution and show the doctors that spread. Then you say, "Let's talk about it. What are you doing that's different?" Almost invariably, those at the high end will agree that they're probably doing too much.

That's just getting rid of the obvious, but the lowest-hanging fruit is a lot of money.

If you look at the poster children for bad care, like preventable readmissions, infections, and other hospital errors, there are very effective protocols that can be put in place. Hospitals have had enormous success with these.

Well before we get into the question of "Do I know exactly which treatment should be done exactly when for exactly whom?" there's enough low-hanging fruit that we can make huge progress.

AM: One of the other lines that stood out to me in your book is where you say "Society cannot force change." So, how do we motivate this change — change we've been talking about for decades, but that we've never actually realized?

DC: People yell at me about that a lot. I remember when I advised Senator Obama when he was running for president the first time; people kept asking, "What makes you think you'll be any more successful than the 25 people who came before you?"

Part of the answer is that it helps to be optimistic.

One of the things that's different between the failed Clinton health reform and what happened in the Obama administration is that, in the interim, the Institute of Medicine published volumes saying that costs were much higher than they need to be and outcomes were much poorer than they could be. It then became impossible to deny that.

The argument on which many health reforms have faltered over time — that we're not sure what the right thing is because we're not sure how we compare to some optimal system — that argument got totally undercut. You can no longer argue that we can't do better.

AM: You say in your book that you anticipate a lot of change in health care over the next few years. What's that going to look like?

DC: All markets have two sides: they have the demand side and the supply side. The health care market is screwed up on both of them.

So, on the demand side, we tell people to go out and be smart consumers of health care, only it's actually impossible to find out how much providers will charge you. Literally, if you call them, they can't tell you. We have to fix that.

On the supply side, we have fee-for-service payment. We've told providers that we'll pay them more for doing more stuff — then we're surprised when they do more stuff!

Fixing the supply-side problem is really about payment reform. As I see it, there's a substantial amount of agreement — including among people who don't like many features of the Affordable Care Act — that one of the worst features of health care is the way it goes about paying for things.

Medicare has taken a halfway-step on payment reform with the ACO program and bundled payment initiatives. Most hospital CEOs saying they expect to be on bundled payments in a few years. That's why hospitals are reducing their readmission rates; at present, a readmission is profitable, but hospitals suspect they won't be profitable in a few years.

Right now we have one foot on the dock and one foot in the boat. The dock is the old fee-for-service system and the boat is a new, alternative payment system that is much more quality-based. It's untenable to try to do both.

The dock wasn't working; we were basically destroying ourselves. We've got to jump in the boat — let's just do it.