The Overuse, Underuse, and Misuse of Health Care

Source: Peter R. Orszag, CBO Testimony before the Committee on Finance United States Senate, July 17, 2008

I appreciate the opportunity to appear before you to discuss the importance of getting the right health care to the right patient at the right time–and the existing evidence about how frequently that objective goes unrealized. The breadth and scope of those topics are such that they are not amenable to comprehensive analysis in a single testimony, so I would like to focus today’s remarks on several key points:

■ Rising health care costs represent the central fiscal challenge facing the country, exerting a larger influence on the long-term fiscal balance than other commonly cited concerns such as the aging of the population.
■ Spending for health care varies substantially across the United States, mostly because of variation in the intensity of services provided, but Medicare enrollees in areas with higher spending do not appear to have better health outcomes on average than those in areas with lower spending. Those observations suggest that substantial opportunities exist to reduce costs without harming health overall, but capturing those opportunities will be technically challenging to bring about through changes in policy and may also prove to be controversial.
■ Expanded use of health information technology (IT) has the potential to improve the quality and efficiency of the care that patients receive, but realizing that potential would require broader changes in the health care system (including, especially, changes in the financial incentives for doctors).
■ One reason that the most appropriate care is not always provided is that, for many conditions, the evidence is limited about which treatments work best for which patients and whether the benefits of more expensive therapies warrant their additional costs. More information about the comparative effectiveness of medical treatments would help to address that problem, especially if the findings were linked to Medicare’s payment rates or cost-sharing requirements.
■ A growing body of research on behavioral economics suggests that, in addition to financial incentives, norms and default options can exert a strong influence on individuals’ choices. Such findings could inform efforts to improve efficiency in the health sector.
■ Given the importance of health care issues, the Congressional Budget Office (CBO) is devoting increasing resources to that topic. As part of its effort, CBO is in the process of analyzing a number of options that could improve the efficiency of health care delivery and possibly reduce geographic variation in Medicare spending–including greater bundling of payments and stronger incentives to provide effective care–and plans to release the results of its analysis by the end of the year.
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