This is a writeup of a shallow investigation, a brief look at an area that we use to decide how to prioritize further research.
In a nutshell
What is the problem?
The United States spends trillions of dollars on health care each year. A significant part of this spending appears to be wasted due to inefficiencies and misaligned incentives. Some policy changes could plausibly reduce these inefficiencies, causing significant fiscal and humanitarian improvements.
What are possible interventions?
Many existing efforts aim to improve the overall cost-effectiveness of the health care system. Using alternatives to fee-for-service payment, bundling payment for common types of care, or more transparent pricing, amongst other approaches, could reduce the amount spent on health care while holding constant or improving quality of care. Some other policy proposals that also might reduce costs, such as relaxing scope-of-practice laws to give nurse practitioners more autonomy or easing restrictions on immigrant doctors, don’t appear to be at the center of the broader discussion of cost and quality. A funder could potentially support a variety of different kinds of research or advocacy to advance these policy changes.
Who else is working on it?
Health care policy and access is an area of interest of a number of large foundations. Major foundations that work in this area include the Robert Wood Johnson Foundation, the Kaiser Family Foundation and the Commonwealth Fund. We’re hoping to investigate some of the subfields listed above more deeply to get a better sense of the overall “crowdedness” of the field.
1. What is the problem?
We find it helpful to break down current issues within US health care into three subcategories:1
- Public health: Well-known issues such as obesity, smoking, alcohol and violence pose significant public health concerns, as do less discussed issues such as accidental drug deaths.
- Increasing access to care: The 2010 Affordable Care Act attempts to expand health insurance coverage to more Americans, but there is lots of uncertainty and room for experimentation around how best to achieve this, as well as room for further potential expansion.
- Improving the trade-off between cost and quality of care: The US spends significantly more on health care than other developed economies, but this excess spending does not appear to increase quality of care.
This investigation was primarily concerned with the third point, improving the trade-off between cost and quality.
The US spends more on health care than any other industrialized nation, both as a percentage of GDP and on a per capita basis. Total health care spending in 2012 was $2.6 trillion according to the OECD,2 which represents 16.9% of GDP (significantly higher than the OECD average, 9.3% of GDP).3 There seems to be consensus among experts that this higher level of spending does not correspond to better care.4
Misaligned incentives for health care providers, payers and consumers appear to be responsible for a large part of this discrepancy between cost and quality. We found broad agreement that the combination of fee-for-service payment arrangements, limited price transparency, and insurance that limits patient incentives to save costs (all of which are widespread in the US) incentivize health care providers to increase the volume of tests and services provided to patients, regardless of whether these tests and services will improve outcomes.5 While these are by no means the only source of inefficiency in American health care, they seem to account for many of the commonly cited problems in the system. However, many different diagnoses of the “root causes” of America’s high health care costs have been offered, and we do not have a strong sense of which are most accurate or most “fundamentally” correct.6
2. What are possible interventions?
Our impression is that health care reform in general is a large and crowded field, with many different players and a high level of funding. Much of this funding appears to be directed towards changing incentive structures so that health care is delivered more cost-effectively. Examples of efforts to shift incentives include:
- The formation of Accountable Care Organizations (ACOs), which was made possible by the Affordable Care Act.7 These are groups of health care providers (typically physicians and hospitals) which pool responsibility for the financial and medical outcomes of their patients. Where they are able to produce good outcomes at lower cost, they share in some of the financial savings.8
- “Bundling” payments for certain types of treatment. The idea behind bundling is that aggregating the expenses for a single episode of care (for example, a joint replacement) or a certain period of time should incentivize providers to reduce the cost of care and standardize practices for similar procedures.9 Bundling by episode has been the subject of a successful pilot by Medicare, and the ACO model is based around bundling a set of patients together across a given time frame.10
- Promoting price transparency. Limited access to prices makes it difficult for decisions to be made based on value, whether the relevant decision-maker is a patient choosing a provider, a doctor prescribing treatments, or a hospital purchasing equipment. Increased price transparency should also incentivize sellers to lower their prices.11 A number of public initiatives already make some pricing information available; further policy proposals and private entrepreneurs aim for greater transparency.12
This list is not exhaustive. Our general understanding is that there are many ongoing efforts to change incentives and to address broad cost/quality issues; although we aren’t confident, we suspect that this area may be well covered by existing organizations. For this reason, we are interested in looking into issues which might not be taken care of by efforts to realign incentives or broadly address the cost/quality problem. Below, we outline several issues which we feel may be promising opportunities, but which are somewhat orthogonal to the approaches described above.
- Changing state scope-of-practice laws to reduce restrictions on nurse practitioners (also known as “advanced practice registered nurses”, or APRNs). Nurse practitioners perform some of the same services as doctors, but are under restrictive regulation in many states.13 Allowing nurse practitioners to contribute more to primary care could be especially beneficial if, as one projection shows, the number of medical students entering internal and family medicine falls while the number of nurse practitioners increases in coming years.14 Our impression is that the evidence to date indicates that nurse practitioners deliver a similar quality of care to more highly trained doctors in the subset of cases that they handle.15
- Making state regulations more compatible with one another, to allow health providers to practice across state lines. This may become a more important issue if tele-medicine (diagnosing and treating patients remotely via video and sound connections) becomes more prevalent.
- Reducing the barriers preventing immigrants to the US with medical backgrounds from practicing, whether by allowing more doctors to immigrate or making it easier for immigrants to use foreign medical certifications in the US.
- Addressing antitrust issues, including hospital monopolies and barriers to entry in the health care industry.16
We have not investigated these policy proposals thoroughly and are not confident in the likely returns to pursuing them, but we are interested in exploring them further for two main reasons:
- We would tentatively guess that the overall field of cost/quality reform efforts is fairly crowded, and we think that issues that don’t straightforwardly fit into that framework could possibly be relatively neglected, and therefore relatively more promising.
- Smaller subfields are typically easier to investigate. If further investigation suggests that these subfields do appear relatively neglected, the broader cost/quality landscape may not be as crowded as we have assumed, and we may want to invest further resources in investigating the whole field.
Further work to advance these proposals would likely take the form of research or political advocacy. A funder could support any of a variety of organizations to advocate for particular policies, develop policy proposals, or research existing health systems.17
3. Who else is working on this?
Health-related causes represent a major target of philanthropic spending; in 2012, US foundations granted more money towards this area than to any other.18 Influencing health policy and increasing access to care makes up a small portion of this total, on the order of several hundred million dollars per year.19
Some of the foundations we have come across which work in this space are:
- Robert Wood Johnson Foundation (RWJF): the largest health foundation in the United States. Policy and access issues account for a sizable minority of their grants.
- Kaiser Family Foundation: an operating foundation focused on health policy analysis.
- Commonwealth Fund: supports research on health care issues as well as making grants aiming to improve health care practice and policy.
- Gordon and Betty Moore Foundation
- California Wellness Foundation
- California Endowment
- Cambia Health Foundation
- John A. Hartford Foundation
- Scan Foundation
- Blue Shield of California Foundation
It is also worth noting that the recent passage of the Patient Protection and Affordable Care Act has made a significant amount of funding available for local pilots to experiment with new models; one source puts the amount of funding available at over $22 billion.20
4. Questions for further investigation
Our research in this area has been relatively limited, and many important questions remain unanswered by our investigation. Amongst other topics, further research on this cause might address:
- How successful have previous efforts by philanthropists to influence health care reform been? As part of our history of philanthropy research project, we hope to learn more about the role of different philanthropic actors in the passage of the Affordable Care Act.
- Which specific strategies are being pursued by the major funders in this field, what do they hope to achieve, and what gaps might remain?
- What kinds of resources are being directed towards the ideas we list above that are not likely to be solved by changing the overall systemic incentives?
5. Our process
We rely heavily on a conversation with David Cutler. For general background, we also read the books The Quality Cure by David Cutler and Where Does it Hurt? by Jonathan Bush, as well as the articles Big Med, The Cost Conundrum and Letting Go, written by Atul Gawande and published in the New Yorker.
|Anderson et al. 2003
|Bipartisan Policy Center 2012
|Cutler and Ghosh 2013
|Emanuel et al. 2012
|FAQ on ACOs, Kaiser Health News
|FC 1000 Grants, Foundation Center
|FC 1000 Health Grants, Foundation Center
|Frequently requested data, OECD Health Statistics 2014
|GiveWell’s non-verbatim summary of a conversation with David Cutler on October 17, 2014
|Grantmakers in Health 2013
|Health Policy and Access Funding: Tips and Tricks, Inside Philanthropy
|Kroch et al. 2012
|Naylor and Kurtzman 2010
|Reinhardt, Hussey and Anderson 2004
|Robert Wood Johnson Foundation 2013
|The Commonwealth Fund Commission on a High Performing Health System 2013
|Total healthcare expenditure, OECD StatExtracts
|White et al. 2014