What about health care costs? by David Torchiana, MD

The cost of healthcare is a major problem and getting worse, as demand for healthcare services grows relentlessly. Some believe that direct to consumer advertising of costly drugs and tests is the problem. Others think that containing demand by forcing people to pay more out of pocket for their health care expenses is the way to reduce costs. But to me, the real crux of the cost problem isn’t pharmaceutical advertising or recreational MRIs. The highest costs by far are generated by people with chronic illnesses who need lots of medical care. Kenneth Thorpe, a professor at Emory University, has created a great chart to illustrate this problem. Using data from the Medical Expenditure Panel Survey (MEPS), he has shown that 20 percent of the population account for 78 percent of health spending and 30 percent generate almost no costs at all.

That the sickest people consume a disproportionate share of our country’s health care resources leads to two important conclusions.

First of all, it makes sense to concentrate on this group and try to do a better job of managing their care to avoid costly hospitalization. Many providers and insurers across the country are working on this approach. At MGH, we are part of a national demonstration project in which 2,500 chronically ill Medicare patients are receiving practice-based care management and other special efforts – education, family support, mental health services, and end-of-life services – to help better coordinate care and avoid hospitalization. Our early results are promising, but it is too soon to say we have found the answer. I am convinced, though, that care to the chronically ill is the right place to focus attention to make a sustainable difference on cost, for the simple reason that it is where we spend, by far, the most money.

The second conclusion is that for health insurance to work there needs to be universal participation. Having insurance coverage is essential for patients with chronic illness so that they get access to the resources, preventive services, and medications they need. The basic idea of insurance is that it distributes the burden of cost across a population so that coverage is available for all (even though it may not be used by all) in a given interval. This means that healthy people should pay for medical insurance too. That isn’t an infringement on personal liberty; it’s the way insurance works. Individuals and employers who don’t pay for insurance aren’t just avoiding cost for themselves, they’re increasing the cost for everyone else. Illness or accident can strike any one of us, at any time. It is our collective responsibility to share the expense.

David F. Torchiana, MD
Chairman and CEO
Massachusetts General Physicians Organization