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Uninsured, Waste and Uneven Quality Linked: Solutions to One Must Address All in U.S. Health Care System

News Releases
March 10, 2003

Alwyn Cassil: (202) 264-3484

ASHINGTON, D.C.— If Congress wants to make headway on reducing the number of Americans without health insurance, it also will have to tackle the problems of waste and uneven quality of care in the current health system, economist Len Nichols, Ph.D., vice president of the Center for Studying Health System Change (HSC), told Congress today.

"The U.S. health care system is undergoing a period of growing stress. Rising health care costs and health insurance premiums, combined with the recent economic slowdown, have forced many employers and workers to make tough choices about who will bear the brunt of cost increases and who will risk going without health insurance," Nichols testified at a hearing of the U.S. Senate Special Committee on Aging.

"These problems are deeply connected to each other, and attempts to solve them in isolation are likely to prove disappointing," Nichols said. A copy of Nichols’ testimony is available online at HSC is a nonpartisan policy research organization funded exclusively by The Robert Wood Johnson Foundation.

"Whether the health care system is in crisis depends on where you sit," Nichols said. "To some policy makers, the system looks like it is in crisis when tens of millions of Americans go without health insurance for a year or more. To other policy makers, the system looks like it is in a crisis when they discover we now spend more than 14 percent of gross domestic product (GDP) on health care."

Nichols outlined the three major problems facing the health care system:

The uninsured. Health insurance coverage rates vary substantially by income level, race and ethnicity. For example, Latinos are about three times as likely to be uninsured as whites, while African Americans are roughly twice as likely as whites to be uninsured.

Access to care is higher among the insured than the uninsured. Partly due to coverage disparities then, Latinos and African Americans, when compared with non-Latino whites, are less likely to have a regular health care provider, to have had a doctor visit in the last 12 months, to have seen a specialist, and more likely to visit an emergency room. These gaps have persisted for years, and would likely be reduced—but not eliminated—if coverage were expanded to all groups equally.

Waste. In 2001, the United States spent 14.1 percent of GDP on health care, substantially more than any other nation—Germany and Switzerland both spend a little over 10 percent. Yet, the United States ranks 28th in infant mortality and 29th in life expectancy at birth.

Nichols also pointed to the tremendous variation in medical practice across the country as a key indicator of waste in the health care system. Citing work by John Wennberg, M.D., Nichols described three categories of health care. One is effective care, whose use is supported by well-documented medical evidence. Another is preference-sensitive care, where at least two valid alternative treatments are available, and the choice of treatment involves trade-offs between risks and benefits that patients and providers should explore before choosing one. The final category is supply-sensitive care, which lacks a well-developed evidence base, especially around certain kinds of hospitalizations and the frequency of follow-up visits to specialists. Reducing supply-sensitive care that is costly but has no strong clinical justification could be done without harming patients.

"There is a growing body of research that strongly suggests that areas of the country with higher rates of supply-sensitive care do not have better health outcomes but do have higher costs," Nichols said.

Quality gaps. Quality gaps range from not doing things that should be done, such as providing eye exams to people with diabetes and giving beta-blockers to post-heart attack patients, to doing things that should not be done, such as unnecessary follow-up visits to specialists. Most reimbursement systems don’t provide incentives to encourage provision of high quality care and in some cases actually discourage quality.

"Each of these three major problems with our health care system—the uninsured, waste and uneven quality—is daunting enough to discourage many who seek solutions. Incremental efforts to solve one are often frustrated by spillover effects flowing back from the other two," Nichols said. "Waste and poor quality exacerbate our cost problem, which in turn creates more uninsured, especially among low-income people, who are disproportionately racial and ethnic minorities."

A system that pays for quality care and good health outcomes, and does not pay for failure to provide quality care, is the kind of system most likely to have sustainable incentives, Nichols said. Building this system will require public investment in an information infrastructure so that providers and patients will find it easier to jointly produce good quality health care and the best health outcomes possible. This kind of system also will require organized group purchasing, with leadership from public insurance programs, to create an environment where widespread provider participation in quality improvement efforts is not an option dependent on the balance of local market power but a reality. Finally, this system will also require federal subsidies for coverage expansions or too may people will continue to be left behind.

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The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely insights on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded exclusively by The Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.


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The Center for Studying Health System Change Ceased operation on Dec. 31, 2013.