In health care, efficiency means to deliver high-quality, effective care without spending more than necessary to do so. When care is delivered inefficiently, the impact is particularly high in three key areas \u2013 costs, death and quality of life. Inefficient care can mean duplicated tests, unnecessary procedures, misdiagnoses, wrong paths of care and a number of other costly missteps, all of which can undermine the very nature of care itself — to make us better.\u00a0 The founding principle of medicine is to do no harm, and unfortunately our systems are not always structured to do so. And, almost always, when we are failed physically, we are also failed financially.<\/p>\n
While no health system operates at top efficiency, the U.S. market consistently ranks among the most expensive in the developed world, most often seizing the first-place spot. Despite its high cost, outcomes, access and equity in the U.S. remain rather poor, even after the 2010 passage of the Patient Protection and Affordable Care Act (ACA). The ACA aimed to increase access to more affordable health care, particularly for low-income individuals, while imposing several much-needed health insurance reforms. While gains have been made in many ways, inefficiencies still prevail.<\/p>\n
In 2017, U.S. health care spending hit $3.5 trillion, accounting for nearly 18 percent of the U.S. GDP \u2013 a number much higher than U.S. peers, including the United Kingdom, Germany, Mexico and Canada. Yet all four of those countries outperformed the U.S. in efficiency measures, such as patient time spent on paperwork or handling health care-related disputes, prescription access and duplicated tests.<\/p>\n
The structure of the U.S. health care system includes many players, all of which have a stake in the efficiency of health costs. The U.S. does not have a single-payer system, instead relying on a complex system of public, private and quasi-public payers faced with mixed incentives to achieve health goals. There is a singular federal government and 52 separate state and district governments. Some decisions are federal, some are state-based, and many are a combination of the two.<\/p>\n
There are four primary ways care is paid for: Medicaid, Medicare, private insurance and patients paying out-of-pocket costs. It’s also important to note that, sometimes, hospitals themselves act somewhat like a fifth payer through financial assistance programs and community-based subsidized care for low-income patients. But because this is not consistent among all hospitals, we generally don’t consider hospitals to be a payer.<\/p>\n
The U.S. Centers for Medicaid and Medicare Services (CMS) regulates most of health care in the U.S., as any health care provider participating in Medicaid and\/or Medicare is subject to CMS oversight and regulations. Most hospitals, if not all, participate in the program, as do many non-hospital employed providers. CMS spending accounted for nearly a quarter of the federal government\u2019s total budget in 2014, a figure that does not account for state funds supporting Medicaid. Because of this, the federal government has significant skin in the game of establishing stronger efficiencies within healthcare.<\/p>\n
Established in 1965 under the Social Security Act, Medicare is an age-based public insurance mechanism that is funded by taxpayer dollars and divided into four parts. It\u2019s available to those 65 and older, as well as those with certain disabilities or receiving disability benefits. About a third of all Medicare patients also have complementary coverage, commonly called Medicare Advantage, which is private insurance meant to boost standard Medicare offerings.<\/p>\n
Also established through the Social Security Act, Medicaid is a means-tested public insurance program divided into two primary components \u2013 coverage for children (CHIP, or Children\u2019s Health Insurance Program) and coverage for adults (simply referred to as Medicaid). The eligibility standards for these two programs differ, and CHIP generally has more generous parameters \u2013 particularly in states that have opted out of Medicaid expansion. It is important to note it is not uncommon for a person to be deemed dually eligible, meaning the patient is enrolled in both Medicaid and Medicare. In all, those covered through public insurance represent roughly 32 percent of the U.S. population.<\/p>\n
These vulnerable populations present significant challenges for both those delivering care and those funding that care. These populations tend to be the sickest and generally require more care coordination than the typical population. They also face unique issues in accessing ambulatory care, which can be due to socioeconomic barriers and\/or lack of access to a provider. Prescriptions can be costly, as can the durable medical equipment oftentimes necessary to maintain good health. For some, financing health means forgoing meals, transportation or stable housing.<\/p>\n
Some private providers opt out of providing care to this population, a trend that has, in some communities, increased with the partial expansion of Medicaid eligibility within the U.S. Reasons for this include below-cost reimbursement rates for many services, a heavy administrative burden for participation and slow reimbursement times. This limited access can lead to additional complications in care, which undermines efforts to maintain adequate levels of efficiency among this vulnerable population. If a patient is unable to see an ambulatory care provider in a timely manner to\u00a0 manage a chronic condition or address a pressing need, there are two common patterns that tend to emerge.<\/p>\n
In the first scenario, the patient will delay care, eventually requiring more advanced and costly services in a more expensive setting (the hospital, either presenting at the emergency department much sicker and\/or being admitted as an in-patient for a condition that could have been treated earlier in a lower cost setting with potentially better patient outcomes.). The second common scenario transforms the emergency department into a primary care office in which it sees more patients. This serves as a destination for low-acuity conditions that should have been treated more efficiently and affordably elsewhere.<\/p>\n
Additionally, within a given state, there may be county or district funding mechanisms, particularly in larger urban settings and for care rendered by \u201csafety net\u201d hospitals. Either by design or by chance, these facilities have a high level of uninsured, low-income patients and would not be able to shoulder the cost of that care without additional funding from local sources. That said, inefficiencies can be created locally through the funding of a pet project of a particular local elected official, or the support of one safety net over another, despite overall cost and quality of the care each institution provides. While the allocation of funds may prompt local reviews of a hospital\u2019s ability to provide care in an efficient manner, generally federal regulations are the standard bearer.<\/p>\n
In recent years, there have been moves to standardize reporting around efficiency measures and to increase those levels, particularly within the hospital setting. Efforts around quality include incentives and penalties for reducing readmissions, creating Medicare-based accountable care organizations, and value-based purchasing programs, among many others. To date, many of these programs have shown some gain towards CMS\u2019s goal. CMS has driven many of these initiatives and, in some cases, private insurers have aligned some of their payment structures with the population health components of CMS reforms.<\/p>\n
Two-thirds of U.S. citizens had some form of private insurance in 2018,\u00a0and within private coverage exists many factors that contribute to inefficiency. One such example is the pricing of plans, even those within the federal or state health insurance exchanges. For lower-income families and individuals, available plans come with high deductibles and limited benefits, which can lead to higher out-of-pocket expenses. Should the family or individual face a significant injury or major illness, they will walk away with a high hospital bill.<\/p>\n
These plans \u2013 called high health deductible plans \u2013 are sometimes coupled with a tax-free medical savings account. The goal of this structure, referred to as consumer-directed health plans, is to reduce health care utilization and cost among participants due to adverse moral hazard. Both the employee and the employer are contributing the cost of care for the insurance product and the savings account, though cost burdens are heavily shifted to the employee. While this shows promise in the short term, the longer-term effect is still not known.<\/p>\n
Administrative complexity related to insurance is the excessive waste due to confusing or conflicting rules, rescission and overwrought underwriting processes. In a 2011 study looking primarily at public and private insurance, researchers found that small U.S. physician practices incurred administrative costs equal to approximately ten times that of their counterparts in Canada, who work within a single payor system.<\/p>\n
But the paperwork issue isn\u2019t limited to those with insurance. Those without insurance are often subjected to intense financial scrutiny in order to gain access to assistance within a health system. Providers \u2013 particularly hospitals \u2013 have incentives to provide some care to low- and no-income patients due to regulatory requirements. There are two primary areas in which this applies: nonprofit hospital designation and Certificate of Need (CON) requirements. The former refers to the need for nonprofit hospitals to demonstrate charitable activities, such as the provision of unreimbursed financial assistance to low-income patients to maintain state and federal tax-exempt status. The latter refers to state-level Certificate of Need programs that hospitals, service lines, providers and health systems must undergo to undertake major renovations, purchase pricey equipment or expand into new territory. Once granted, the CON is maintained through a variety of standards, including that of a minimal amount of free care provided to indigent patients, often demonstrated as a percentage of operating expenses or net income.<\/p>\n
While no one would want to undermine the provision of care for those least able to afford it, the requirements can unfortunately lead to some inefficiencies in delivery of care \u2013 particularly around the application for financial assistance and the variety of hoops a patient must go through to gain that assistance. Added to that are long-held allegations that the process for patients to access financial assistance is often wrought with barriers and subjective standards that push many out of the system once the minimum is reached.\u00a0The door to access care is only open for so long and should a patient need care beyond that, they are often on their own. The Internal Revenue Service has attempted to address this in some accountability and transparency measures set forth in 2014; however, the issue of true access for uninsured patients, regardless of their ability to pay, remains a critical question.<\/p>\n
For all patients, regardless of payor, asymmetrical information also remains a significant barrier to efficiency. Asymmetry occurs when one individual or party has better or more information than the other. The doctor knows more than the patient in two critical ways: academically, due to the intensity of training and the knowledge of complex terms and potential tracts of treatment; and, empirically, from hands-on and observed experience from varying consequences of choices. The doctor is in a more removed state than the patient, who is likely sick and will be significantly and intensely personally impacted by the choices that are made.<\/p>\n
With the advent of the Internet came access to a broad base of health conditions and a heightened ability of the patient to better understand both diagnoses and available options. Websites such as WebMD.com allow for the general public to simply type in their symptoms and evaluate potential diagnoses and treatment options. Social networks have also allowed for the sharing and discussion of care, which in turn creates a culture allowing the patient more participation in treatment decisions. Added to this is the increasing prevalence of electronic medical records (EMRs), which are often accessible to patients through web-based portals. This allows the patient to review their own charts and view physician notes, something almost entirely nonexistent even just a decade ago (though still not widespread).<\/p>\n
Even so, due to the unique nature of care, patients still often rely on their physician for guidance. The stress of making a decision on care, surely exacerbated by the potential of making a wrong one, still places the patient as beholden to physician advice.\u00a0This creates a potentially tricky relationship, which one in which the patient \u2013 who is the person with limited information \u2013 delegates their health problem to the doctor, who is the person that is informed. That patient is limited in knowing how good that care was and if there was a cheaper and more effective way to get better. This is especially true in emergency situations, which tend to be the costliest.<\/p>\n
While the introduction of EMRs has come at a high cost to providers, the payoff in a more efficient system is already proving true, especially for hospitals or others with large patient volume. Streamlined provider handoffs, detailed patient history and built-in evidenced-based recommendations are key selling points of EMRs, though these are being realized within the U.S.<\/p>\n
It\u2019s important to note that none of the above address issues of fraud and defensive medicine, which are considered by many to be huge contributors to health care inefficiency. Also not discussed are issues with mergers and acquisitions, which create monopolies that, in turn, have been proven to increase prices for both insurers and patients.<\/p>\n
However, even aside from those issues it is clear that there are a multitude of factors that lead to inefficiencies within the health care market, and there is no silver bullet to fix them. As with all aspects of health care, the stakes can quickly prove to be quite high \u2013 as the core of it concerns human life. Policymakers, insurers and providers must prioritize mechanisms aimed at achieving efficient care, as the health of us all depends on those efforts.<\/p>\n