Spending on Medical Care: Title and subTitle BreakMore Is Better?

According to conventional economic theory, “more is better.” The most obvious example from economics is the assumption that more money leads to more happiness. Economists also believe in the law of diminishing returns—each additional unit provides a smaller increment in happiness than the previous unit. Behavioral economists recognize that individuals frequently compare their level of goods and services with that of their neighbors and are often happier when they have more than their neighbors.¹

Many studies have examined if these same principles apply to medical care. For example, are patients healthier and happier when they receive more medical care? Do the last few dollars spent on medical care provide as much benefit and satisfaction as the first few dollars? Does an individual's level of satisfaction with medical care depend on what his or her neighbors receive? Studies examining these issues have been conducted at different levels of aggregation, with some studies comparing health spending, health outcomes, and satisfaction at the international level, across different regions of the United States, or at the institutional or clinician level, and some comparing these issues at the individual patient or person level. In this issue of JAMA, Fowler and colleagues² compare the level of health expenditures with the level of satisfaction with health care at the regional level and in doing so provide information that contributes to the “is more better’’ debate in health care.

Studies that have compared the level of health spending across various countries using a variety of health outcomes such as life expectancy and infant mortality generally have found that level of health spending is a relatively poor predictor of health outcomes. Factors such as education among women, average per capita income, and degree of income inequality explain more of the cross-national variation in overall health status than the level of health spending.³ These studies also seem to show that the law of diminishing returns applies. Above a certain level of health care spending, roughly $2000 per capita, additional spending on health care seems to result in minimal improvements in health outcomes.^{4 - 5} Surveys of satisfaction conducted by the World Health Organization⁶ and by the Gallup Organization⁷ across a wide range of countries have found only minimal correlation between higher levels of health spending and levels of satisfaction with care or between health spending and the broader notion of system “responsiveness,” a measure of how well individuals believe the health care system responds to their own needs.⁸

Other studies have focused on industrialized countries. The Organization for Economic Co-operation and Development (OECD), a membership organization of the 30 industrialized countries, recently had its members collect data on 21 different health outcome indicators.⁹ The study showed that no country scored consistently high or low on all 21 indicators, that most countries scored well on certain indicators, and that some areas needed improvement in all countries. Overall, the correlation between level of health spending and scores on most indicators was relatively low. The United States, by far the biggest spender on health care, scored high on some indicators, such as breast cancer survival, and average or low on others, such as in-hospital mortality rates following myocardial infarction or mortality from asthma. The OECD study builds on a previous study that reached similar conclusions comparing the health outcomes in the United States, Canada, Australia, New Zealand, and the United Kingdom.¹⁰

The Commonwealth Fund has conducted a series of surveys with Harris International comparing the levels of satisfaction with care among industrialized countries. These surveys have compared a cross-section of the population,¹¹ individuals with health problems and those with recent experience in using the health care system,¹² physicians,¹³ and hospital executives.¹⁴ These studies show little correlation between the level of health care spending and satisfaction with care. Despite significantly higher levels of spending, US patients, physicians, hospital executives, and the general population are often less satisfied with the performance of their health care system as compared with those in other industrialized countries.

Within the United States, Fisher and colleagues¹⁵ have been studying the regional variation in health spending across different parts of the country. They have consistently found minimal correlation between the level of health spending and clinical outcomes in each region. The article by Fowler et al² in this issue of JAMA expands their previous work and shows that Medicare beneficiaries' level of satisfaction with their own health care is not necessarily greater in areas with higher health care expenditures.

Most analyses at the institutional level have reached similar conclusions. One study found that while expenditures varied by up to 60% across academic medical centers,¹⁶ higher spending did not necessarily lead to improved health outcomes. Analyses at the individual physician level often reach the same conclusion. For example, increased spending by individual intensivists caring for critically ill patients does not correlate with better mortality rates or shorter stays in the intensive care unit.¹⁷

Hospital executives or clinicians may claim that, in the competitive marketplace, patient demand drives additional use of medical services. The evidence here is less conclusive. However, because most patients do not have medical expertise, they are likely to rely on physicians and the media for their information. Patients often depend on their physicians acting as their “agents” to decide the appropriate levels of care they should receive. Whether physicians truly act as agents for their patients and whether doing so serves to increase satisfaction with care has been heavily debated, with no definitive conclusions.¹⁸ Another driver of demand from individual patients is direct-to-consumer advertising. An extensive literature exists demonstrating the influence of such advertising on patients' preferences, satisfaction, and overall consumption of medical goods and services.¹⁹

An increasing body of literature also shows that, when provided with independent, unbiased information on the risks and benefits of interventions, patients do not always seek or accept the newest, most expensive, or most aggressive mode of treatment. For example, once the findings of a clinical trial on lung reduction surgery in emphysema were published, physicians and their patients became much less keen to opt for the procedure instead of conservative treatment.²⁰

The article by Fowler et al² adds to the discussion concerning whether the economic principles of “more is better,” diminishing returns, and comparison with others apply in health care. When patients are able to access good-quality objective information on the risks and benefits of the various treatment alternatives, they do not necessarily choose more aggressive or more costly interventions. Currently, the United States spends more than twice as much as most other industrialized countries on health care services, some regions of the United States spend twice as much as other regions of the country, and some institutions or clinicians are twice as expensive as others. In terms of outcomes and satisfaction, the United States may have reached the position of diminishing returns for spending on medical care.