Recommended readings from the Journal of Economic Perspectives

September 11, 2008

Tim Taylor has always struck me as wise. And not just because of this section from his most recent "Recommendations for Further Reading" in The Journal of Economic Perspectives: CBO and the Health Care System Our national debate over reform of the nations health care system would be vastly improved if all participants familiarized themselves with recent Congressional Budget Office reports on the subject. Here are some examples: The Long-Term Outlook for Health Care Spending describes factors that will drive health care costs over the next 75 years. [I ]n the absence of changes in federal law: Total spending on health care would rise from 16 percent of gross domestic product (GDP) in 2007 to 25 percent in 2025, 37 percent in 2050, and 49 percent in 2082. Federal spending on Medicare (net of beneficiaries premiums) and Medicaid would rise from 4 percent of GDP in 2007 to 7 percent in 2025, 12 percent in 2050, and 19 percent in 2082. November 2007. The Long-Term Outlook for Health Care Spending A February 2008 report discusses Geographic Variation in Health Care Spending. Per capita health care spending varies widely across the United States. In 2004, as an example, per capita spending ranged from roughly $4,000 in Utah to $6,700 in Massachusetts. The variation is even greater among smaller geographic units and among individual medical providers. Among large hospitals in California from 1999 to 2003, Medicare spending per patient in the last two years of life ranged more than fourfold, from less than $20,000 to almost $90,000. Researchers affiliated with the Dartmouth Atlas of Health Care estimate that among groups of Medicare beneficiaries who are otherwise similar, individuals who live in highspending areas receive approximately 60 percent more in services than do those who live in low-spending areas. Geographic Variation in Health Care Spending A January 2008 report explores the connections between Technological Change and the Growth of Health Care Spending. Technological innovation can theoretically reduce costs and, for many types of goods and services, often does. Historically, however, the nature of technological advances in medicine and the changes in clinical practice that followed them have tended to raise spending . . . .Breaking down the long-term growth in spending into its various components leaves much of the increase unaccounted for by measurable factors such as the aging of the population or rising personal income. Table 2 shows estimates from three studies of the contributions of selected factors to the long-term growth of health care spending in the United States. Overall, those factors [aging of the population, changes in third-party payment, personal income growth, prices in the health care sector, administrative costs, defensive medicine and supplier-induced demand] appear to account for no more than half of that growth. Analysts generally attribute the rest of the growth to increases in the technology-related changes in medical practice. Technological Change and the Growth of Health Care Spending Research on the Comparative Effectiveness of Medical Treatments: Issues and Options for an Expanded Federal Role explains: More recently, the Agency for Health Care Research and Quality (AHRQ) has been the most prominent federal agency supporting various types of research on the comparative effectiveness of medical treatments. Established in 1989, . . . [i]t currently has a staff of about 300 and an annual budget of over $300 million, which primarily funds research grants to and contracts with universities and other research organizations covering a wide range of topics in health services. December 2007. Research on the Comparative Effectiveness of Medical Treatments: Issues and Options for an Expanded Federal Role Evidence on the Costs and Benefits of Health Information Technology arrived in May 2008. Many analysts and policymakers believe that health IT [information technology] is a necessary ingredient for improving the efficiency and quality of health care in the United States. Despite the potential of health IT to increase efficiency and improve quality, though, very few providersas of 2006, about 12 percent of physicians and 11 percent of hospitalshave adopted it. Evidence on the Costs and Benefits of Health Information Technology