Why Does U.S. Medical Care Cost So Much? Lessons From McAllen, TX

I finally got around to reading the “hot” article in the June 1,2009 New Yorker magazine written by Atul Gawande.  The article which is entitled “The Cost Conundrum” with subtitle, “What a Texas town can teach us about health care,” has been making the rounds in Washington,D.C. since it addresses the cost issues in U.S. health care.  It has been said that President Obama has made the article must reading for all of the White House staff that are working on health care issues.

A summary of the article

Dr. Gawande has written yet another excellent article in a long series of article he has written about U.S. health care.  Here he explores the reasons that per capita Medicare spending in McAllen, Texas is about twice the national average- about $15,000 per enrollee vs. about $8000 per enrollee nationally (2006 data).  I don’t want to ruin a good story for you but basically, the reason for the cost differential is pretty simple- the physicians in McAllen, Texas order many more tests and procedures on average than do physicians in other places.  Furthermore, Dr. Gawande’s conclusion based on pretty good research, was that the reasons for the high costs in McAllen, Texas were partly a “culture” within the medical community of ordering lots of tests but also simple greed.  Dr. Gawande described the situation well but as in many of his other articles, he was short on solutions (not a criticism, just disappointment on my part).  He mentioned what some other communities were doing to keep costs down but seemed to end with the notion that we will need to “experiment” with different approaches if we are to find an effective way of controlling costs.

Do we really need to carry out extensive studies to figure out how to save costs?

Dr. Gawande has done an admirable job in describing one major reason for the astonishingly high U.S. health-care costs.  I disagree with him with respect to how difficult it will be to improve things.  It is true, the solution might be difficult politically, but in my opinion, not otherwise.  In earlier entries I discussed the issue of high costs and offered some solutions.  Let me try again.  Let’s focus on Medicare.

First, we should require that all Medicare enrollees have a “medical home.”  This could  be a clinic or a hospital or a group of hospitals and clinics.  The medical home is responsible for maintaining the enrollees’ medical records, presumably in an electronic form that is at least available to all caregivers within the medical home system.  Every enrollee has to have a primary care giver or at least a group of primary care givers within the same medical home.  The primary caregiver decides when the enrollee should see a specialist, get an MRI, etc.  The referral for the test, specialist appointment or whatever must be well documented in the medical record, particularly the justification.  What I am describing may seem quite a bit like the “managed care” of 10-20 years ago that went over like a brick balloon.  The difference here is that in the medical home, healthcare professionals make the care decisions not a clerk who decides yes or no on treatment requests by looking up the request on a big list (with managed care the answer was usually “no” regardless of the situation).

To summarize: each Medicare enrollee will have a medical home that is responsible for orchestrating all of the enrollee’s medical care.  The medical home’s performance will be monitored regularly and unusual patterns of referrals, test ordering, etc. will be investigated.

So, what’s in it for the medical home?  Clearly, the medical home will need some incentives for signing up Medicare enrollees.  I would recommend first that the reimbursements to primary caregivers be comparable to that paid by private insurers.  Second, I would eliminate the “facilities fees” that Medicare currently pays to hospitals and some clinics for seeing Medicare patients (these “fees” can be more than the caregiver charges for the clinic visit) and set up some system for providing a modest  annual fee to the medical home for each Medicare enrollee in their system.

How will the medical home plan save money?

The problem in McAllen, Texas is inappropriate referrals to specialists and the ordering of inappropriate tests and procedures.  This over-utilization of the health-care systemclearly makes medical care for Medicare enrollees in McAllen, Texas very expensive.  Sadly,the over-utilization doesn’t even result in better medical care and/or better health-care outcomes for the patients; it just puts more money in the pockets of the health-care givers.  If each Medicare enrollee has a medical home that is responsible to the government for every referral and for every test that is ordered with financial penalties for inappropriate use of the health-care system, I guarantee that serious efforts will be made to change medical practice behaviors.  Of course, it’s not about getting health-care givers to order as few tests as possible; obviously, many patients do need referrals to specialists and for various laboratory tests and procedures.  Rather, it’s about appropriate ordering.  There shouldn’t be a prize to the doc whose Medicare enrollees account for the lowest cost per capita.  Maybe those patients are not getting referrals and tests that they truly need?

One last thing.  In Dr. Gawande’s article there is a section about the cooperative approach physicians in Grand Junction, Colorado are taking to minimize costs.  Likewise, there is a section about the way physicians practice medicine at the Mayo Clinic in Rochester, Minnesota.  Even I as a jaded old physician, was excited to learn how well we really can do if we set our sights first on providing excellent care to our patients and make financial gain a lower priority.  Three cheers for physicians and other health care workers in Grand Junction and at the Mayo Clinic.

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