Can we really save $700 billion in health care costs?

Larry Summers repeats the $700 billion stat:

Appearing on “Meet the Press” on Sunday, Lawrence H. Summers, President Obama’s chief economic adviser, stated, “Whether it’s tonsillectomies or hysterectomies … procedures are done three times as frequently [in some parts of the country than others] and there’s no benefit in terms of the health of the population. And by doing the right kind of cost-effectiveness, by making the right kinds of investments and protection, some experts … estimate that we could take as much as $700 billion a year out of our health care system.”

So you’re probably wondering where that $700 billion number came from. Well, it kind of came from Peter Orszag’s prepared statement to the Senate:

Researchers have estimated that nearly 30 percent of Medicare’s costs could be saved without negatively affecting health outcomes if spending in high- and medium-cost areas could be reduced to the level in low-cost areas—and those estimates could probably be extrapolated to the health care system as a whole. With health care spending currently representing 16 percent of GDP, that estimate would suggest that nearly 5 percent of GDP—or roughly $700 billion each year—goes to health care spending that cannot be shown to improve health outcomes.

Hotay, so who are these “researchers” and where did they come up with this estimate?

Turns out there’s a little group at Dartmouth who’s been researching this for years – it’s become a lifetime pursuit for them. Unfortunately lifetime pursuits are usually bad for science. Anyway, here’s what they had to say:

We have used benchmarks for Medicare spending from low-cost regions to estimate how much money would be “saved” if regions with higher spending were brought down to the level of the benchmark. If, on an age-, sex-, and race-adjusted basis, spending levels in the lowest decile were realized in all higher regions, total spending would have been just $98.2 billion, or a savings of $40 billion (28.9 percent).

So what’s the problem? Well, for one thing, these conclusions are drawn largely upon elderly people in their last 6 months of life:

Exhibit 2 shows the close correlation between per capita Medicare spending for the entire Medicare population and the average number of specialist visits for those in their last six months of life. Thus we view the incremental Medicare dollar as flowing not simply toward more specialist visits in the general elderly population but, more specifically, toward specialist visits concentrated among the population with chronic and ultimately life threatening diseases.

The Dartmouth folk, at least in the few papers that I read, never explained how the health care of people in their last 6 months of life could be extrapolated to the population as a whole.

But that’s not all. They said that the cost savings would come from reducing spending in all regions down to the lowest 10%. That sounds good, but earlier in their report they noted that none of the regions were actually completely meeting their minimum criteria for health care:

Compliance with evidence-based practice guidelines exceeds 80 percent of patients in only eight regions; in ten regions, compliance was less than 20 percent.

I don’t think it’s likely that lowering costs will increase compliance. But how about the amount of spending vs. health? Does more spending give longer lives or a higher quality of life? Here’s their answer (in 2 parts):

Studies at the population level indicate no net advantage in terms of life expectancy for Medicare enrollees living in regions with more hospital resources (and hospitalizations) and greater care intensity as measured by more aggressive treatment patterns during the last six months of life.

I hope that doesn’t really mean what it seems to say, which is: “if you’re treated more aggressively in your last 6 months of life, it’s still the last 6 months of your life.” Here’s the quality of life part:

The major limitation of these studies is the possibility that beneficiaries in high-spending regions could achieve gains in their quality of life. Several lines of research provide at least suggestive evidence that quality of life in high-intensity regions may not be better than in low-intensity regions.

So based on the “suggestion” that quality of life “may not be better,” these researchers have decided that the additional treatment is a waste.

I think it’s fair to be a little concerned that major revisions to health care choices are being planned based on lessons learned from the terminally ill. And I think it’s ridiculous to base cost savings projections on those lessons.

Even if I believed the lessons themselves.