Don’t waste healthcare’s $8 trillion opportunity

Waste throughout the American healthcare system is bankrupting our nation. According to the Institute of Medicine, unnecessary health spending in the United States makes up about 30 percent of all health spending, or more than $750 billion.  That’s more than the federal government spends on defense and education combined.  

Of that total, $200 billion is for unnecessary services like duplicate blood tests or MRIs, and $105 billion is for prices that are out of line with the market.

{mosads}While this problem has many solutions, one is relatively simple — encourage doctors, hospitals, insurers, and drug companies share their data with each other. Big data has already revolutionized industries like advertising and finance. Health care could be next — if Congress frees the trove of healthcare data the feds control and reforms several antitrust laws that date back to the 19th century. 

Americans will spend roughly $40 trillion on health care over the coming decade. Up to $8 trillion of that sum will pay for services that are unnecessary or don’t improve health. 

Sharing medical data across industries would slash that wasteful spending by allowing physicians and researchers to identify what procedures work best for different patients, and which ones do not.

That would revolutionize health care. Doctors would be able to prescribe the most effective course of treatment for each patient, based on data from millions of other patients with the same condition and circumstances. 

Insurers, meanwhile, could avoid paying for duplicate tests or procedures with low success rates. And as medical spending drops, ordinary consumers would enjoy lower insurance premiums, out of pocket costs, and tax bills.

Some healthcare organizations are already capitalizing on data to deliver better care at lower cost. Consider Intermountain Healthcare, a large health system based in Salt Lake City, Utah, which has been able to deliver services 40 percent less expensively than average, without sacrificing safety or quality.

Rolling out Intermountain-style efficiencies nationwide would yield $1.2 trillion in savings this year alone.

Doctors and patients currently have little way of determining whether care that’s more affordable is better — or worse. That’s why the rate at which doctors employ certain treatments can vary by up to 250 percent — even within highly ranked medical centers. 

Fixing the problem requires linking insurance “claims” data — information about which patients received which treatments under which circumstances — to data about how those patients actually fared. The aggregate data wouldn’t include patients’ identities. Researchers only need the ability to examine big-picture trends.

But private healthcare organizations don’t have enough data at present. A typical health plan may have access to just 5 percent of a physicians’ records. That’s simply not enough information to draw reliable conclusions about the efficiency and quality of different treatments.

That’s where the government can step in — by providing health plans, benefits consultancies, and researchers access to data from Medicare, Medicaid, and other federal health programs. Together, these programs cover about half of all procedures performed nationwide.

Today, that information is only shared with a select group of largely academic institutions. But it was originally financed by taxpayers and consumers. Disseminating it more widely could allow the private sector to develop tools that would empower patients to make more informed healthcare decisions. 

Likewise, Congress should allow insurers access to each other’s data. That’s currently illegal, thanks to outdated antitrust laws. These rules presume that prices are the chief determinant of our nation’s runaway health costs. But the evidence points to waste as a significant culprit. 

Allowing insurers to identify and reward efficient healthcare delivery would improve quality and foster competition, not hinder it. 

Consumers also need more robust information about their insurance policies. At a minimum, all plans sold through the Affordable Care Act’s exchanges should provide information on which drugs are covered and whether a doctor or hospital is in the plan’s network.

Health spending accounts for more than 17 percent of our nation’s economy — more than any other sector. But much of that money is wasted. To reduce that waste, Congress needs to enable and encourage the sharing of data among all healthcare actors. Doing so will preserve America’s health and wealth. 

White is president of Clear Choices, a consumer-industry coalition dedicated to making health markets more transparent, accountable and consumer-friendly.