Money Street sign

Money Street sign

Summary: More expensive health care must be better, right? After all, that rule works for cars (a Lamborghini is better than a Kia), for restaurants (Four Seasons beats McDonald’s) and for real estate (Park Avenue beats Staten Island). But in health care, it’s not quite so easy.

People ask us often if more expensive health care is better, and we always say “not necessarily.” Here are some resources.

Here’s one report: Expensive hospitals are not better hospitals. “While more expensive hospitals tend to have higher prestige and brand-name recognition, a new study in the journal Health Affairs finds no clear evidence that these hospitals are actually providing better health care.” Sarah Kliff, Wonkblog, writes about Chapin White’s study in Health Affairs, which is behind a paywall.


Here’s another: “Regional differences in Medicare spending are largely explained by the more inpatient-based and specialist-oriented pattern of practice observed in high-spending regions. Neither quality of care nor access to care appear to be better for Medicare enrollees in higher-spending regions.The Implications of Regional Variations in Medicare Spending. Part 1: The Content, Quality, and Accessibility of Care, Annals of Internal Medicine, February 2013, Elliott S. Fisher, MD, MPH; David E. Wennberg, MD, MPH; Thrse A. Stukel, PhD; Daniel J. Gottlieb, MS; F. L. Lucas, PhD; and Étoile L. Pinder, MS


Here’s another: “First, geographic variations in spending are substantial, pervasive and persistent over time — the variations are not just random noise. Second, adjusting for individuals’ age, sex, income, race, and health status attenuates these variations, but there’s still plenty that remain. Third, there is little or no correlation between spending and health care quality. The report also effectively identifies the puzzling empirical patterns that don’t fit conveniently into the Dartmouth framework, such as a lack of association between spending in commercial insurance and Medicare populations.” An Institutes of Medicine report is described here in a Health Affairs article by Elliott Fisher and Jonathan Skinner. The original report from the IOM is here.


Here’s another: “But while giving providers incentives to do the things they ought to do will very likely increase the use and quality of effective care and save lives, it is unlikely to have a major impact on rising costs; only a relatively small proportion of the health care dollar is influenced by effective care. Most of the spending, at least regarding Medicare, is in other categories — “preference-sensitive care” and “supply-sensitive care” — in which the quality problem is not underuse.” Variation in Use of Medicare Services Among Regions and Selected Academic Medical Centers: Is More Better?, by John E. Wennberg, M.D., M.P.H., A 2005 report from the Commonwealth Fund.


Here’s another: the well-known Atul Gawande piece from The New Yorker, which compared two Texas cities, McAllen and El Paso. “McAllen has another distinction, too: it is one of the most expensive health-care markets in the country. Only Miami—which has much higher labor and living costs—spends more per person on health care. In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average. The income per capita is twelve thousand dollars…. Nor does the care given in McAllen stand out for its quality. Medicare ranks hospitals on twenty-five metrics of care. On all but two of these, McAllen’s five largest hospitals performed worse, on average, than El Paso’s. McAllen costs Medicare seven thousand dollars more per person each year than does the average city in America. But not, so far as one can tell, because it’s delivering better health care.”

Counterarguments here

On the side of “spend more, get more,” it’s harder to find people making strong arguments. Here are a few excerpts from a recent blog post on The Health Care Blog, in which David Dranove and Craig Garthwaite write about a pair of studies — on vacationers in Florida and ambulance calls in New York State — that seem to show more spending is associated with better outcomes.
Whether that’s causation or correlation is not addressed. The studies showcased here were written by Joe Doyle, an MIT economist, Dranove and Garthwaite write. “Vacationers who have medical emergencies in high cost areas in Florida have better outcomes than vacationers who have emergencies in low cost areas. The effect is not subtle. On average, additional spending of $50,000 (in billed charges) is associated with saving one year of life….[The study is here] …
“Emergency patients do better when they are taken to higher cost hospitals, and once again the effects are not subtle. “For every 10 percent increase in spending at the high cost hospitals, there is a 4 percent reduction in the one year mortality rate.Importantly, these differences in outcomes cannot be accounted for with standard measures of hospital quality such as indicators for the use of “appropriate care” after a heart attack. [The study is here]”


Jeanne Pinder

Jeanne Pinder  is the founder and CEO of ClearHealthCosts. She worked at The New York Times for almost 25 years as a reporter, editor and human resources executive, then volunteered for a buyout and founded...