Oregon Learns How to Spend Less and Give Better Care

In the health reform battle, the Obama administration could learn much from Oregon and a handful of other states that consistently spend less but achieve comparable or better health results than those that spend more. One wonders how that is possible.

The spending differences are surprisingly big. Research from the Dartmouth Institute for Health Policy and Clinical Practice cited, for example, Miami, where Medicare spent $16,351 per enrollee in 2006 and costs rose at an annual rate of 5 percent. That was twice as fast as in Salem, where Medicare spent $5,877 per enrollee in 2006 and the growth rate was 2.3 percent. Across much of Oregon, annual inflation was less than 3 percent.

"To slow spending growth, we need policies that encourage high-growth (or high-cost) regions to behave more like low-growth, low-cost regions," said Dr. Elliot Fisher and colleagues at the Dartmouth Institute. Their analysis appeared last week in The New England Journal of Medicine. They are certain patient needs have little to do with regional differences in spending and more to do with the availability of hospitals and specialists in a given city, and pay incentives that reward greater use of services.

In the Northwest, a thrifty style of medical care dates to at least World War II, said Mark Hornbrook, a health economist with the Kaiser Permanente Center for Health Research in Portland. The population exploded as wartime production drew workers to the region. "We couldn't build hospitals fast enough," Hornbrook said. "Western physicians had to figure out how to live with fewer hospital beds -- and they did."

Differences in spending today reflect drastically greater use of hospitals and specialists in high-cost regions. During the last two years of life, for instance, a Portland resident dying of cancer, diabetes or heart disease is likely to be hospitalized 16 times and spend two to three days in intensive care. In Los Angeles, the same patient could expect to be hospitalized 77 times and receive more than 11 days of intensive care. But as far as researchers can tell, the extra care doesn't improve survival rates, and it may worsen quality of life.

A study last year found evidence that less hospital care gives patients more satisfying experiences. In regions with the highest intensity of hospital care, patients rated hospitals worse on each of the 10 measures of satisfaction.

In the new report, Fisher and colleagues showed how even a small difference in spending growth can make a huge budget difference over time. They compared spending growth in San Francisco and the eastern half of Long Island. Both regions spent nearly the same per Medicare enrollee in 1992. But San Francisco held annual spending growth to 2.4 percent annually for 14 years while Long Island's climbed by 4 percent. By 2006, Long Island spent $2,300 more per enrollee, or about $1 billion in added Medicare costs.

The researchers conclude that reform efforts should focus first on eliminating overspending: overuse of hospitals, unnecessary doctor visits, consultations, tests and minor procedures. If Medicare reduced its annual spending growth from the national rate of 3.5 percent to 2.4 percent (the rate in San Francisco), the program could save about $1.4 trillion during the next 14 years and avoid the projected deficit of $660 billion.

Hornbrook said the analysis is convincing, but putting it into action won't be easy. While the data from Portland and Seattle show that people in Boston or Miami could fare just as well with a lot less medical care, "People will fight you tooth and nail if you propose something that sounds like you're taking away their access to specialists or hospitals," Hornbrook said. "It will take a major cultural reform."

Filed under: General-Medicare

Tags: General-Medicare, Hospital Expenses, Low Cost Better Health