The Agenda

On the Dartmouth Atlas Project and Low-Hanging Fruit

Yesterday, I wrote a post on a New York Times report by Reed Abelson and Gardiner Harris that argued that the findings of the Dartmouth Atlas Project have been misused to suggest that it would be easy to find cost savings in the U.S. health system that could help fund coverage expansion under PPACA. Elliot Fisher and Jonathan Skinner, the directors of the project, have responded to the article, claiming that it makes a number of factual errors and conceptual confusions. Fisher and Skinner make a number of decent points, and I recommend taking a look (it’s a PDF).

But I think it’s safe to say that Abelson and Harris were right to raise the obvious point that the Dartmouth Atlas Project does not offer a clear roadmap for generating cost savings. And indeed, their reply didn’t address a number of serious points raised in the article, among them that one has to be sensitive to the needs of different populations. My friend and colleague Arpit Gupta has pointed me to the very different conclusions drawn by MIT economist Joe Doyle.

Joe Doyle, an economist at MIT, has a study that gets much closer to this ideal by looking at the treatment of vacationers in Florida. He finds that tourists who went to high-cost hospitals received better care than those who went to low-cost hospitals. Doyle’s results suggest that higher costs do lead to better outcomes, at least in certain cases, but that the interact with local demographics in ways that Dartmouth’s study is unable to pick up. Again, this points to the idea that there are no easy cuts in health spending.

Fisher and Skinner would have filled me with more confidence had they acknowledged this potential difficulty.

Ezra Klein doesn’t think this debate has any bearing on the debate over PPACA, and he’s very well-informed about how the debate played out within the White House.

 

For the record, the Dartmouth Atlas findings have very little to do with what’s actually in the health-care law. The Congressional Budget Office never bought the argument that more research and more electronic records (both of which were funded in the stimulus) would lead to less wasteful care and thus much bigger savings. This annoyed the White House, which was very taken with this data, but there was nothing they could do about it. The bill thus had to use old-fashioned tax increases and spending reductions to get the CBO’s seal of approval.

So if the Dartmouth guys are totally wrong, that’s a bummer in that it means there’s less low-hanging fruit to pick, but it won’t change the numbers on the bill. The Times might be strafing the Dartmouth Atlas guys, and they might be strafing the rhetoric of politicians who want to believe we can balance the books by getting rid of things no one needs in the first place, but they’re not saying much about the health-care bill.

I find this a bit perplexing. Of course new findings won’t change the numbers on the bill. In a similar vein, the fact that medical providers revolted in response to the sustainable growth rate formula did not change the numbers on the Balanced Budget Act of 1997. Yet when medical providers found that they could not or would not offer care at the rates envisioned in BBA, political reality changed. This is what Medicare chief actuary Robert Foster was suggesting in his report on PPACA.

Much depends on whether there is low-hanging fruit to pick. If there isn’t, there will be political resistance to the envisioned Medicare cost savings, which means that the assumptions embedded in the bill will prove false. Many of us believed that the assumptions regarding cost savings in the health bill were overoptimistic because the mechanisms for generating costs savings weren’t very well-designed. They rested on an assumption of low-hanging fruit. And it seems increasingly clear that this low-hanging fruit will not materialize. 

Ezra writes about the political appeal of “loser-free health-care reform.” The political case for PPACA rested on this notion of loser-free reform, and when conservatives and social democrats and others who rejected the model suggested that there would in fact be losers, they encountered stiff resistance from advocates of the bill. It’s important to note, however, that the losers did not include medical providers or the pharmaceutical industry or most large private insurers. Rather, the potential losers included Medicare recipients, particularly those enrolled in Medicare Advantage plans, and taxpayers.

Had we acknowledged that it was inevitable that there would be losers in any serious effort at comprehensive health reform, my guess is that alternative approaches would have looked far more attractive.

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