March 02, 2012
Martin Gaynor, the E.J. Barone Professor of Economics and Health Policy at the Heinz College, focuses his research on competition in health care markets and on the role of incentive structures within health care.
Gaynor is the chairman of the governing board of the recently launched Health Care Cost Institute, an unprecedented health research initiative that will allow researchers and policymakers access to a comprehensive collection of health plan and government payer data to offer new insights into health care costs, utilization and intensity.
Our major data sources initially come from large private insurance companies. About two-thirds of all Americans are privately insured, and up to this point, there hasn't been really good complete systematic information about them. Up until now most information comes from the Medicare program, and while that is clearly very important that's only part of the picture.
Our goal is to complete that picture and get information to the general public, policymakers and industry participants that will allow for better decisions and better policy to be made.
One is what we're calling scorecards that we will publish on a biannual basis to provide summary information on what's happening with health care costs for the population that we have in our data. We can break those down into how much of cost increases are due to changes in utilization, prices and intensity of service. We also can look at specific kinds of treatments or diseases and at different regions of the country. So there's a lot of things we can do to get a better sense of what some of the drivers of health care costs are and where the changes are coming from.
We also want to put the data behind the scorecards online in a user-friendly interface. So anyone who is interested can get a look at the slices of data that are of particular interest to them.
Initially we want to focus on the scorecards, which will be fairly aggregate kinds of analyses, dedicated to exhibiting patterns in the data.
The other set of activities we will be engaging in is making the data available to researchers. To start we have a small set of projects. These projects will accomplish two goals. First, they will generate new knowledge about health care costs. Second, they will help us understand the data better. They will inevitably find what does or doesn't work, where there are things that are clear or if there are certain problems associated with the data. Our goal is ultimately to have a nice, clean, uniform database that we make publicly available for non-commercial, non-partisan scientific research.
For example, I imagine we could try to identify high performing providers versus those that are not performing at such a high level. Then we could try and understand what it is that's driving the high performers, what are they doing? Is there something special or unique, or are there things they are doing that could be used successfully by other organizations? That's something that could benefit everybody if we could get higher performance in the health system. It could be relevant to government, to the providers themselves, to private payers, to insurance companies.
About half of all the dollars of health care financing are private dollars as opposed to public. So we rely on markets there to a great extent. And if the markets aren't working properly, then we are not going to get the outcomes that we want. What do we want? We want better care; we want lower costs; we want more convenience; better quality of service. That's what everybody wants.
The problem is that, in health care markets, there's been a lot of consolidation. A lot of these markets are not working as well as they should.
The institute can help to shed some light on that, because we all have information on what's happening, again with these privately insured people, who are two-thirds of the markets, and we'll see what's happening for them with regard to where they go, the kinds of quality of care they get, the prices they paid for the services they receive.
The last thing I should mention also is that, it's not just folks with private insurance who are affected by this.
Medicare regulates the prices they pay to hospitals and doctors. But there have been quite a few studies establishing that quality of care, for Medicare beneficiaries, is substantially lower in places where there's not a lot of market competition. That also is true in places like England - patients that go to hospitals facing less competition are at substantially higher risk for worse medical outcomes.
On the private side, again, the concern in general is that while health care spending is valuable and has been increasing in value, it's been increasing so fast that some of the spending is crowding other priorities. We spend money on some things that are fairly low cost and do a lot of good, like aspirin for heart patients. However, we also spend a great deal of money on things that have no proven medical benefit, like proton beam therapy for prostate cancer.
Proton beam therapy involves building a cyclotron and associated equipment the size of a football field at a cost of $120 million. Medicare pays about $1,400 per treatment for this, the typical man needs about 20 treatments ($28,000), and we have no idea whether this treatment works or not. To put this in perspective, if we give a Medicare beneficiary on 3-4 of these treatments, we could have paid for insurance coverage for one person without it.
This is the problem - paying for things that are very costly, but whose benefits are less than their costs.
Health Care Cost Institute To Share Data From 5 Billion Claims
By Ken Walters
Martin Gaynor, the E.J. Barone Professor of Economics and Health Policy at the Heinz College, focuses his research on competition in health care markets and on the role of incentive structures within health care.Gaynor is the chairman of the governing board of the recently launched Health Care Cost Institute, an unprecedented health research initiative that will allow researchers and policymakers access to a comprehensive collection of health plan and government payer data to offer new insights into health care costs, utilization and intensity.
What is the Health Care Cost Institute?
It's a new independent, non-profit, non-partisan entity, dedicated to improving the state of knowledge about health care costs and utilization in the United States.Our major data sources initially come from large private insurance companies. About two-thirds of all Americans are privately insured, and up to this point, there hasn't been really good complete systematic information about them. Up until now most information comes from the Medicare program, and while that is clearly very important that's only part of the picture.
Our goal is to complete that picture and get information to the general public, policymakers and industry participants that will allow for better decisions and better policy to be made.
How will you accomplish this?
We see ourselves as engaging, roughly speaking, in two major activities.One is what we're calling scorecards that we will publish on a biannual basis to provide summary information on what's happening with health care costs for the population that we have in our data. We can break those down into how much of cost increases are due to changes in utilization, prices and intensity of service. We also can look at specific kinds of treatments or diseases and at different regions of the country. So there's a lot of things we can do to get a better sense of what some of the drivers of health care costs are and where the changes are coming from.
We also want to put the data behind the scorecards online in a user-friendly interface. So anyone who is interested can get a look at the slices of data that are of particular interest to them.
I understand you're working with more than five billion medical claims. How do you make sense of the enormous amount of information?
It's a very large undertaking. There are some challenges. One is that the datasets are so large. But with advances in computing, there are methods to handle large databases. A little more forbidding is that the data are complex, and there definitely will be a lot we'll have to learn.Initially we want to focus on the scorecards, which will be fairly aggregate kinds of analyses, dedicated to exhibiting patterns in the data.
The other set of activities we will be engaging in is making the data available to researchers. To start we have a small set of projects. These projects will accomplish two goals. First, they will generate new knowledge about health care costs. Second, they will help us understand the data better. They will inevitably find what does or doesn't work, where there are things that are clear or if there are certain problems associated with the data. Our goal is ultimately to have a nice, clean, uniform database that we make publicly available for non-commercial, non-partisan scientific research.
What impact will this information have?
There will be findings from work done on these data that will be of benefit to policymakers, insurers and providers. Generating information on the drivers of costs will help us hone in on key elements to address in trying to improve the functioning of the health care system.For example, I imagine we could try to identify high performing providers versus those that are not performing at such a high level. Then we could try and understand what it is that's driving the high performers, what are they doing? Is there something special or unique, or are there things they are doing that could be used successfully by other organizations? That's something that could benefit everybody if we could get higher performance in the health system. It could be relevant to government, to the providers themselves, to private payers, to insurance companies.
That brings us right to health care competition. How important is it for an area to have a competitive health care base?
I think it's quite important. It's an area of health policy that hasn't received as much attention as some other areas like expanding insurance coverage, or improving the quality of care, or malpractice. Those are all vital areas. But folks in health policy haven't paid too much attention to competition. In my view, that's a mistake. We have a system in which we rely on markets to produce and deliver health care. That's true not only in the U.S., but increasingly in other countries, as they reform their health systems. England, the Netherlands, and many other countries are decentralizing their health systems and trying to encourage choice and competition.About half of all the dollars of health care financing are private dollars as opposed to public. So we rely on markets there to a great extent. And if the markets aren't working properly, then we are not going to get the outcomes that we want. What do we want? We want better care; we want lower costs; we want more convenience; better quality of service. That's what everybody wants.
The problem is that, in health care markets, there's been a lot of consolidation. A lot of these markets are not working as well as they should.
The institute can help to shed some light on that, because we all have information on what's happening, again with these privately insured people, who are two-thirds of the markets, and we'll see what's happening for them with regard to where they go, the kinds of quality of care they get, the prices they paid for the services they receive.
The last thing I should mention also is that, it's not just folks with private insurance who are affected by this.
Medicare regulates the prices they pay to hospitals and doctors. But there have been quite a few studies establishing that quality of care, for Medicare beneficiaries, is substantially lower in places where there's not a lot of market competition. That also is true in places like England - patients that go to hospitals facing less competition are at substantially higher risk for worse medical outcomes.
When you look at the nation's health care system, where do you think it's going?
We are not heading in a good direction, which folks have been saying for quite some time. On the public side, we are on an unsustainable path. Public spending on medical benefits over the past 20, 30 years has grown about 2.3 times faster than national income. So we are spending money on health care faster than is our ability to pay for it.On the private side, again, the concern in general is that while health care spending is valuable and has been increasing in value, it's been increasing so fast that some of the spending is crowding other priorities. We spend money on some things that are fairly low cost and do a lot of good, like aspirin for heart patients. However, we also spend a great deal of money on things that have no proven medical benefit, like proton beam therapy for prostate cancer.
Proton beam therapy involves building a cyclotron and associated equipment the size of a football field at a cost of $120 million. Medicare pays about $1,400 per treatment for this, the typical man needs about 20 treatments ($28,000), and we have no idea whether this treatment works or not. To put this in perspective, if we give a Medicare beneficiary on 3-4 of these treatments, we could have paid for insurance coverage for one person without it.
This is the problem - paying for things that are very costly, but whose benefits are less than their costs.