Arnold Kling shares some shocking views on health policy from Richard Cooper:
Orszag has argued that if Medicare spending could be as low in Newark as it is at Mayo, the nation could save billions. But this theory doesn’t hold up in practice. Consider: One-fourth of the folks in Newark live in poverty, compared with less than 10 percent of those in Rochester. And national surveys show that poor people consume more health-care resources — 50 to 75 percent more than average. They are sicker and they stay sicker, despite the best efforts of physicians and hospitals. Mayo is a fine institution, but it isn’t more cost-effective than other hospitals in its home region, nor are its operations in Jacksonville, Fla., and Phoenix more cost-efficient than other hospitals in those cities. So why would it be more cost-effective in Newark?
Cooper has more to say:
Regional variation is a product of regional differences in wealth, overlaid with differences in poverty. It’s not generally appreciated that health care expenditures for people in the lowest 15% of income are 50% to 100% greater than for people of average income. There’s also a difference at the high end. The wealthiest 15% also consume more, but only about 20% more. So there’s greater utilization at both ends of the income spectrum, but for different reasons and with different outcomes.More spending at the high end improves outcomes, not simply for a specific condition but across the board, because the care consists of a broader spectrum of beneficial services. More yields more. But among the low-income patients, outcomes are poor despite the added spending. In fact, the added spending is because of poor outcomes — more readmissions, more care for disease that’s out of control.
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The Dartmouth folks say that Mayo is more “efficient” in resources used per patient or in number of doctors devoted per unit of patient care than in LA, Philadelphia, Miami, Chicago, and New York City.But the so-called “inefficient” hospitals are all in dense urban centers, while “efficient” hospitals are all in smaller cities, often college towns liked Madison, Wisconsin or Columbia, Missouri, or in places like Rochester, Minnesota, where Mayo is located. Rochester is 90% Caucasian with low poverty. But in fact, Mayo is the most resource intensive center in the upper Midwest. Among peer institutions in similar socio-demographic environments, Mayo actually uses more resources. But you can’t compare Mayo to Los Angeles, where only 30% of the population is non-Hispanic white and where you have tremendous pockets of poverty.