PharmExec Blog

Eliminate Waste (Whatever That Is)

There’s a fascinating editorial in this week’s New England Journal of Medicine by Henry J. Aaron,Henry J. Aaron a healthcare economist at the Brookings Institution. Aaron argues that on average healtchare spending is not wasteful, since its benefits exceed its costs. But that doesn’t mean there isn’t waste. The trick, though, is to identify it, and as Aaron points out, it’s hard even to define it:

Waste could be defined as care that costs more than some threshold per unit of health care improvement. But what threshold? The cost of extending life by 1 year or improving its quality ranges from a few dollars to millions of dollars; and studies of the same intervention sometimes produce quite different results. Judgments will vary as to where along this continuum waste begins. Furthermore, such estimates incorporate analysts’ weightings of various outcomes and risks, which may differ from the values that patients would place on them. Most of the care that analysts label as waste is not uniformly useless but produces average benefits that are judged to be small relative to cost — and typically that cost is widely diffused among payers other than the patient.

Aaron, like almost everyone else, recommends research into what treatments are cost effective, but he also argues that cost control efforts will fail unless virtually everyone is insured. The reason? Without universal insurance, the burden of cost cutting will fall disproportionately on those who lack insurance. “If In a world with effective spending limits,” he says, “being uninsured would take on a whole new and terrifying meaning. Societal revulsion toward the resulting inequalities and deprivation would threaten the entire cost-control effort.”

Read the entire article here.

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