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What Does Value for Money Mean?
April 4, 2011 at 3:45 pm
Daniel Callahan with an interesting essay searching for a practical meaning of the phrase ‘value for money’ in health care, and wondering whether we can use it to control health care costs.
Three different deployments of the concept can be discerned: in contexts where circumscribed comparisons of like with like can be made, where it is a stand-alone principle, and where it is meant to trump short-term cost control in the name of future benefits.
He focuses on the third use of the term, trading off short-term cost control in light of future benefits, which he views as the essence of our current health care situation.
No doubt, there are many other areas of health care spending where the upfront costs are high but the long-term gains are worth it. Unfortunately, we have a cost problem here and now, one that will only worsen if we listen to the siren song of eventual payoffs for more spending now….
The sad consequence of our cost escalation is that the upfront costs for later benefits must be cut now, and threats of harm to patients have to be put aside. That is what serious cost control entails if we swear off all evasions and rationalizations. If we fail to do so, our future health care system will have fewer and fewer of any kind of benefits to offer.
There are probably areas in which the costs are high and the benefits are small, non-existent or even negative. I am not sure how much of this type of care there may be, but we need to find out. To do so we need to systematically ask the questions: does it improve quality of life? and does it extend life? If no, then we shouldn’t be doing it (there is of course uncertainty, and a distribution of effect that must be taken into account). These questions need to become cultural ones, that each of us ask when thinking about health care choices, and not just technical health policy questions. If we get to the point that the answer is yes that all care is beneficial and we still need savings, then we are stuck where Callahan leaves us, trading off the need to slow costs to sacrifice some benefits. This would be hard. Of course we could then also decide to increase the Medicare payroll tax….The first step in figuring this out is learning to ask these questions; then we can move on to answering them.
There is a methodology which has been used for many years in public health which is “disability adjusted life years” (DALY). This measures the lifetime morbidity and mortality impact of a disease. For example, if you had the “flu” for a week and were 20% disabled you would have a DALY of 0.027 years.
One can calculate the cost to prevent and treat disease in terms of the $ per DALY saved. Interventions such as immunization typically cost about $5 per DALY whereas something like coronary artery bypass surgery is more in the neighborhood of $50,000 per DALY. (Some would even dispute that there is any benefit at all to CAB.)
Using this methodology, one an calculate the benefit of an intervention and the cost. When you do this for the US, you discover that we spend large amounts of money on very expensive and sometimes ineffective interventions.
Every other developed country has been able to control spending at about half of what we spend on health care and at the same time provide better access and better health. There is no secret mystery on how to do this… you can just look at any of the other 20 or so developed countries for examples.
The problem in the US is that the health industry has captured the legislative and regulatory process to ensure their profits. There are great potential savings in reducing ineffective, overpriced and wasteful medical care but that would require going against the powerful interests who control the system. So instead of attacking wasteful spending, we talk about shifting the burden to patients to make them pay more. The whole discussion of private vs public insurance is a smoke screen. In the absence of strong evidence based cost control, both systems are ineffective. Private insurance has less bargaining power than the larger public systems so is less effective.
You can look at Switzerland for an example of private insurance which works well because of strong regulation of prices and services. You can look at Germany, Canada or France for examples of public insurance which works well because of strong regulation of prices and services. The key is strong government regulation.
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