Cutting Health Care Spending with Occam's Razor

If we want to lower health care costs (or, more honestly, health care spending), we need to look at where the spending takes place. It's a classic case of Occam's razor.

This article published with permission from The Burrill Report.

Why did Willy Sutton rob banks? According to urban legend he pointed out, “That’s where the money is.” This apocryphal aphorism led to what is called “Sutton's Law,” the notion that when diagnosing, one should first consider the obvious.

President Obama and Medicare directors nationwide should pay heed. If we want to lower health care costs (or, more honestly, health care spending), we need to look at where the spending takes place. It’s a classic case of Occam’s razor.

According to the Agency for Healthcare Research and Quality, the top 1% of health care spenders is responsible for more than 20% of all health care spending. And the bottom 50% represents only 2.9% of the nation's health care bill.

While this is not news, it seldom seems fit to print. After all, it just doesn’t justify a lot of political agendas and editorial opinions that prefer a simplistic, one-size-fits-all single payer national healthcare “solution.”

According to a story in the National Journal, “The data suggest that healthcare policies designed to reduce spending of healthy populations may be of limited value in reducing overall costs. The big savings can be achieved by reducing the costs of the biggest healthcare users.”

This raises important questions. Why didn’t Florida maintain its “Healthy State” program where high-cost Medicaid recipient care was being managed and overall costs were going down? And why aren’t more states aggressively pursuing solutions like the Hoosier State’s “Healthy Indiana” program, where Governor Daniels shifted authority and made personal responsibility central?

Instead, public and private payers continue to rely on population-based approaches when science, data, and best practices suggest that what we require are more personalized and preventative approaches.

And, to address the 800-pound gorilla in the room, it also demands a thoughtful national dialogue on end-of-life care. (Some 77% of Medicare decedents’ expenditures occur in the last year of life — 52% in the last two months of life and 40% in the last month).

What better time to raise this issue than during a presidential election cycle.

Peter J. Pitts, a former FDA Associate Commissioner, is President of the Center for Medicine in the Public Interest.

Copyright 2012 Burrill & Company. For more life sciences news and information, visit http://www.burrillreport.com.