Healthcare Spending

HEALTHCARE SPENDING....Does higher healthcare spending actually provide better healthcare? Maybe not. Phil Longman provides one side of the argument:
Dr. Elliot S. Fisher, a Dartmouth Medical School researcher, estimates that 30 percent of all Medicare spending goes for unnecessary operations and procedures. For instance, under Medicare, the per capita cost of treating terminally ill patients in Miami is $50,000 more than the per capita cost of treating equally old terminal patients in Minneapolis, yet the patients in Miami don't live any longer. The explanation is simply that Miami's high concentration of specialists and hospitals is overtreating the city's patients.
But maybe there's a difference between the elderly populations of Miami and Minneapolis that accounts for this. Perhaps Miami has a reputation for providing great healthcare and tends to attract sicker patients. That might explain the higher average cost.

So how do you eliminate this possible geographical bias and study only the effect of spending itself? Tyler Cowen points to a new paper that tries to do this by comparing outcomes only for people who get sick away from home and therefore receive care at a random location:
Visitors who become ill in high-spending areas have significantly lower mortality rates compared to similar visitors in lower-spending areas. The results are robust across different types of patients and within groups of destinations that appear to be close demand substitutes.
Interesting! It's not conclusive, of course, since this study looks at a wide range of illnesses while Longman focuses solely on terminal care for elderly patients. It's entirely possible that higher spending is largely wasted in terminal care but highly effective elsewhere. More study is needed!

On a (marginally) related note, though, one thing that always bugs me about these discussion is their focus on mortality. In the great scheme of things that might be worth focusing on since a large portion of our healthcare dollars are spent in the last year or two of life. But extending life is hardly the only — or even the primary — purpose of healthcare. I tore a meniscus in my knee a few years ago and ended up getting $10,000 worth of arthroscopic surgery on it. It didn't extend my life by a single minute, but it sure did improve my life. Ditto for things like dental care, antidepressives, athsma inhalers, cortisone shots, and all those infamous hip replacements. They cost a lot of money, but they don't really have much of an effect on mortality at all. Still pretty nice to have around, though.

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