If the U.S. health care system is so good why are its customers getting sicker and dying younger?

Jan 17, 2018 | 0 comments

By David H. Freedman

At the heart of America’s vaunted health care system is a frustrating puzzle. The United States pays three times as much per citizen as the average of other wealthy nations — far more than even the second-highest spender, Switzerland, adding up to $3 trillion a year. Yet for all that enormous expenditure, we come in dead last among those nations in lifespan. And as the bills climb, our life expectancy is actually shrinking.

What’s going so wrong?

If our national health care were a corporation, that return on investment would get its CEO immediately fired. Plenty of experts are ready to point fingers at various causes: our lack of universal health care, industrialized food system, suburban lifestyles, and profit-driven tangle of insurers and drug companies and hospitals. Surely those play a role. And yet other countries face each of these, and other challenges as well, and still manage to spend less and enjoy better health overall.

Medical costs in the U.S. are as much as 10 times those in other countries.

Looming over the American conversation about public health is a growing suspicion that there’s a bigger reason for our uniquely poor showing, one that has been staring us in the face for years. It’s an explanation rooted in one simple statistic: While we pay more for health care than any other country in the world, when it comes to spending on social services — education, subsidized housing, food assistance and more — we rank in the bottom 10 among developed countries.

It’s easy to think of “health” as just another category of social-service spending. But a great deal of modern research suggests that it might be more accurate to think of it as the payoff of all the other services put together. Elizabeth Bradley, president of Vassar College and a former Yale researcher widely seen as the world’s foremost expert in the relationship between social services and health, has documented how the ratio of a country’s social-service spending to health care spending is highly correlated with health outcomes around the world. “The right question for our political agenda is, ‘What’s going to give us the most bang for the buck in health outcomes?'” says Bradley. “What our work has shown is that the answer is spending on social services.”

For a cost-conscious government ever wary of spending taxpayer money on public programs, this kind of expansive view of “health” sounds politically forbidding. But if you really care about health — and as a society, we clearly do, to the tune of $672 billion a year in Medicare, $565 billion in Medicaid, $329 billion raked in by the pharma industry and a $1 trillion by hospitals— there is good reason to believe that money pumped into social services would do more for our national health than money invested directly in health care.

In fact, it’s possible to see America’s astronomical health costs as a bill coming due from our reluctance to pay for everything else. “We spend so much on health care because we’re mopping up for our lack of investment in education, housing and other areas,” says Corey Rhyan, an analyst at the Center for Sustainable Health Spending at health care think tank Altarum.

Inadequate social services are one cause of high health care costs.

In public health, there’s a buzzword for all these other factors: the “social determinants of health,” the complex set of home-and-community factors that shapes every American life. A simple way to think of it might be as looking “upstream” from health, toward the influences we encounter long before we need medical care to fix the problems they’ve caused. What if, instead of plowing more money into medicine, we could shift those?

Of course, that’s not how our policy conversation has gone. When we debate housing services, or education spending, we rarely focus on their potentially huge downstream benefits on public health. And when we debate health care spending, we don’t discuss the lack of “upstream” social services that has made much of that care necessary.

Why don’t policymakers start looking further upstream? One problem is that it has been difficult to put hard numbers on the health care payback from social-service spending — and especially hard to get numbers relevant in the what-have-you-done-for-me-lately world of elected officials. But in recent years, economists and public-health experts have started to focus more on answering that question, trying to build an economic case for tackling health through upstream changes, instead of playing an expensive game of catch-up downstream. And the numbers are starting to come in, thanks to a growing range of innovative social-good programs that measure hard health care benefits, as well as a renewed effort on the part of academic researchers to give policymakers the data they need.

Five years ago those sorts of programs and tools were scarce. But more recently, they’ve quietly been arriving on the scene, driven in part by imaginative new approaches to what we should be measuring, and how. If these approaches work, they could start changing not only our policy conversation, but the politics around it, offering hard-headed evidence of savings that Republicans could get behind as easily as Democrats. The stakes couldn’t be higher: Last year health care passed retail as America’s largest industry, and our aging population makes it overwhelmingly likely that we’ll be shifting yet more of our GDP into medical spending for decades to come. If we wanted to start bending that curve right now, what levers should we really push?

In the big picture, it’s become hard to refute the evidence that upstream investment matters to health — and matters a lot. In one analysis, Bradley and her colleagues crunched 74 different studies that had examined the issue, and found a fairly consistent set of health benefits from social spending. In a separate study of U.S states, Bradley calculated that if such a shift in spending in a state were enough to increase the ratio of social spending to health care spending by 20 percent, it would on average equate to reducing the ranks of the obese in that state by 85,000, along with other health improvements. As strange as it sounds, that means the best way to improve health might often be to shift money away from health care.

That’s not an easy political case to make, in part because putting hard dollar values on decisions like that is so tricky. In fact, for a long time researchers didn’t even try. A study published in the British Medical Journal, for instance, found that nearly half the studies that looked at both the costs and health care-savings benefits of social programs simply presented the data without bothering to do a full cost-benefit analysis.

Even when the benefits are clearly visible, policymakers immediately run into the so-called “long pocket” problem: The costs of social spending start piling up immediately, while most of the health benefits pay off years and even decades in the future. That’s politically unappealing to elected officials on two- and four-year cycles, to say nothing of appointees who need to show results while they’re still in office. And politics aside, investing for distant returns is both psychologically and economically hard to justify. “To the extent that investment is diverted somewhere, you give up a stream of benefits that could have been had if you invested somewhere else,” says David Weimer, a policy economist at the University of Wisconsin-Madison. Even in the unlikely chance that researchers managed to run a study for 40 years to fully capture the long-term benefits of a program, Weimer points out, there’s a pretty good chance that the original program would feel irrelevant in a much-changed world.

For those reasons, program sponsors and researchers are now focusing on the shorter term, trying to prove that social spending can pay off quickly in reduced health care costs. One sweet spot is in subsidized housing, where benefits often accrue right away, especially for the most challenging patients.

In Portland, Oregon, in 2011, the city’s housing bureau, in collaboration with county agencies, began placing more than 7,000 residents without homes in a large, new facility. Because most of the residents were covered by Medicaid and received healthcare from local public facilities, it was possible to track the costs of their care from the start. Within a few years, those costs had on average fallen by 55 percent—adding up to an annual drop in health care costs of about $1,100 per person. A similar program in Chicago, led by the city’s housing and health agency and University of Illinois Hospital, reduced health care costs by 42 percent.

A few private-sector organizations are jumping in, too, particularly on the food side. Humana Health, which provides both health insurance and health care, is running programs in Louisville, Kentucky and four other Southern cities, offering healthier food to vulnerable parts of the community, and has already documented an average $15-per-month-per-patient reduction in health care costs. UnitedHealthcare, another insurance and care provider, has announced a comparable program in Mississippi in collaboration with Alcorn State University. [UnitedHealthcare is financial underwriter for POLITICO’s Agenda 2020 series, but was not involved in conceiving or editing this story.]

The savings these programs report may seem relatively small, but they’re at least proof of concept, and are expected to grow over time as the health benefits help slow or even head off expensive long-term conditions like diabetes and heart disease. What’s more, any reduction in health costs stands in sharp and welcome contrast to what has long been a steep, steady upward march. “We’re getting pretty clean evidence now that communities that invest in these programs see lower medical spending,” says Glen Mays, a public health researcher at the University of Kentucky.

One of the most closely watched programs has been that run by Minneapolis-based Hennepin Health, an accountable care organization for patients on Medicaid run by the surrounding county. Minnesota sharply expanded Medicaid eligibility in the state in 2011 and again in 2014, bringing in about 10,000 new enrollees under Hennepin’s care, representing well over $300 million in new health care costs. These enrollees, all of whom were poor and many of whom didn’t have permanent housing, were being admitted to the hospital at three times the rate of other non-elderly adults, and were visiting the emergency department an astonishing 13 times as often, according to Ross Owen, the health strategy director for Hennepin County. Each such admission or visit can easily rack up thousands of dollars in costs, making reducing them good targets for a program. “Those are the low-hanging fruits of these kinds of interventions,” says Owen.

Though Hennepin is a health care organization, it started paying for a range of housing and other social services for its patients—services far outside of medicine—in hopes that they’d pay off by reducing the need for medical care. So far, five years into the program, it has found that emergency department visits have dropped 35 percent, while outpatient doctor visits—a much more cost-effective way to provide care—have risen 21 percent. Overall, health care costs for enrollees have been dropping 11 percent per year. The fast results have kept the county eager to maintain the program and even to expand it, says Owen. “Requiring decades to show savings from an investment doesn’t match the way health care financing works,” he explains.

One big obstacle to using these insights is that the broader American health system really isn’t set up to benefit from long-term preventive investments. Right now, the incentive to spend on upstream services is largely limited to agencies and organizations that, like Hennepin Health, are in “closed systems”—that is, where the payer also provides the care, so the organization spending money will be the same one reaping the benefits. Other such closed systems include Kaiser Permanente and Veterans Affairs, which notably have also have been providing housing benefits to their neediest enrollees. But most of American healthcare doesn’t work this way: Payers and providers operate in separate and competing realms. Insurers have an incentive to keep costs down, but most don’t hang onto individual customers long enough for distant payoffs to matter. Hospitals and doctors, meanwhile, make more money by providing more care, so they have no obvious financial incentive to invest in social services that will leave patients needing less of it.

Of course, government and other agencies can fund those services, but if those savings do materialize, they may never come back to the taxpayers who funded them. Even local governments can get cut out, because the federal government would be the biggest beneficiaries of any savings in Medicaid or Medicare treatment. It’s called the “wrong pocket” problem: The money comes out of one party’s pocket, but the benefits go into someone else’s.

And justifying the investments with the biggest benefits may be an even steeper challenge. Many researchers have come to believe that the most important long-term health payoffs are likely to come from investments in education, environmental cleanup and urban design—areas even further removed from health care, and where the payoffs that are even more diffuse and distant. But now researchers may be closing in on ways to convincingly document those more elusive gains, as well.

The first problem they’re encountering is just how little information is available to work with. A study published in the BMJ surveyed the research on the question and found the longest follow-up period of health outcomes ended less than four years after the social-service intervention. For many kinds of investments, like better education, and for many types of health payoffs, like diabetes or Alzheimer’s, that would barely even be the starting point for observing returns. “Expectations that health impacts will be observed in this short timescale may be naive,” the authors drily noted.

And “health” itself is a frustratingly hard thing to put a clear economic value on. In health care economics writ large, benefits and their values can be very subjective, and can veer into difficult moral issues. One crude but effective way to measure at least the relative value of upstream interventions is simply to determine which ones leave people less likely to die sooner. For example, one study calculated that every $1,000 invested in the education of a low-income child can add more than a month to the child’s life–which adds up to a much higher return on investment than, say, colorectal cancer screening, and exceeds by a factor of three the widely accepted threshold for the level of risk reduction required to justify a public-health intervention.

Researchers at the University of Michigan found that the sorts of conditions addressed by social-service spending figure heavily in mortality and health. They concluded that about one out of five deaths can be attributed to conditions in the immediate environment; that low-income individuals are 29 percent more likely to die in any given time period than those of middle income; and that social circumstances account for 40 percent of what influences health. A United Kingdom study found that a jump in the mortality rate coincided with a drop in social-service spending there in 2010, leading to 120,000 more deaths from 2010 to 2017 than there would have been if the pre-2010 rate had held steady. It’s no different in the U.S., says Alex Sutherland, research leader at Rand Europe. “The impact of tiny investments can be dramatic,” he says. “A 1 percentage point increase in social spending would add up to 16 million additional years of life across the whole U.S. population.”

While these sorts of findings bring home the impact of social services on health, they don’t really give policymakers the hard-dollar numbers that would help politicians make a more clear-eyed case to the public. One way to do that, says Weimer, is to come up with so-called “shadow prices” for things like an extra year of life, or a percentage drop in the risk of a disease. “Economists come up with rules of thumb that allowing valuing savings in commuter time as, for example, half the wage rate,” he says. “We need to develop the same sort of thing for health improvements.” These shadow prices could then be discounted in a straightforward way if they kick in over time, and then added up like any other return on investment.

BUT THERE MAY be an even better way to make the accounting case for the long-term health benefits of social spending—one that borrows a tactic from pharmaceutical studies. Those studies frequently use surrogate endpoints like lower cholesterol as a way to forecast longer-term heart benefits. Several researchers are now working on approaches that look for short-term health markers that strongly correlate with long-term outcomes. One of them is Andrew Fenelon, a public-health scientist at the University of Maryland’s Population Research Center, who’s planning to integrate federal data on 40,000 households with biomarkers like blood pressure to come up with projections of how spending on housing is likely to affect long-term health and to do it within a few years rather than a few decades. “We usually rely on self-reported health,” he says. “But biomarkers give us a way of validating the data with objective clinical measures.”

In a similar vein, researchers are looking at cholesterol levels in a Pittsburgh low-income neighborhood that recently got a supermarket after years as a food desert. So far, new cases of high cholesterol have dropped 10 percent in a year. And Mays is involved in a study with Eskenazi Health in Indianapolis that’s integrating electronic medical records with community social-service resources. That’s an approach that could pay off on both the cause and effect sides: first, by making it easier for health care providers to flag patients who would most benefit from a social intervention and funnel them directly into services; and then by ensuring that downstream health results are tabulated directly alongside records of past interventions for clear cost/benefit calculations.

Some researchers think that the best biomarkers for linking social service investment to long-term health will involve those that indicate inflammation, strongly correlated with stress, and now seen by many in medicine as important factors in everything from heart disease to cancer to Alzheimer’s. Inflammation markers can shift quickly with changes in the environment, notes Apostolos Davillas, senior research officer at the Institute for Social and Economic Research at the University of Essex in the U.K. “When you see elevated inflammation biomarkers it’s a clear indicator that something’s happening in the body’s stress pathway,” he says. “It can show us how socioeconomic status can literally get under someone’s skin.” Davillis is already working with blood samples that provide inflammation data that can be pulled together with other health care markers, like BMI, along with detailed social and economic data. “It’s the only good way to evaluate the effects of social policies on the health of the population,” he says. Future efforts could add in measurements of diet, exercise levels, alcohol and tobacco consumption, and other lifestyle indicators that are all correlated with long-term health outcomes.

One of the most ambitious new efforts is being funded by the Gates Foundation. The project brings together researchers from Harvard and Stanford to sift through and analyze a wealth of data from 1999 to 2014 covering neighborhood conditions, socioeconomic status, biomarkers and health outcomes all across the U.S. population. The goal is to nail down how long-term health outcomes vary with income and neighborhood factors, and to use those findings to identify the social policies that are likely to provide the biggest returns in long-term health. The scope of the project, as well as of the caliber and weight of its sponsor and participants, are good indicators of both the scale of the challenge and the enthusiasm about its potential.

IT’S ONE THING if this and many other projects together succeed in building a clear-cut, hard-dollars case for the big health payback of social-service spending. Having those results matter is another thing. There’s no guarantee that, even in the face of strong proof to the contrary, politicians won’t keep on with business as usual, continuing to throw the bigger bucks at health care—which has big, well-funded lobbies and enjoys broad public support—rather than the social conditions that make the care necessary. After all, they’ve done a pretty good job of shrugging off the evidence so far. “It’s been making less and less sense to look at medical diagnoses when you want make health-related spending decisions, and more and more sense to look at demographics,” says Hennepin’s Owen. “The way we distribute resources in this country ignores that reality.”

But the more scientifically and economically hard-nosed these measurements get, the broader a constituency they could attract. Bradley, who advocated for more social-service spending in her 2013 book “The American Health Care Paradox,” suggests that a more powerful, long-term economic case for health-related savings wouldn’t just change the policy conversation—it could change the politics around the issue.

When conservative cost-cutters take aim at America’s unsustainable medical spending, they tend to sharpen their knives for safety-net programs like Medicare and Medicaid. What if the smartest economic move to rein in those costs were actually to spend money, but direct it judiciously elsewhere? That could make this kind of public-health reform more than a progressive fantasy. “Bobby Jindal and other Republican governors said they liked the idea as a way to spend less on Medicaid and to make the best investments possible,” Bradley says. Some in Congress want to get private investment involved in providing support for social-service programs that pay off in clear, measurable savings in healthcare, among other benefits. That approach, called “social impact bonds,” has been winning some bipartisan support, including from no less a Republican stalwart than Orrin Hatch.

The quest to demonstrate powerful, broad, long-term health benefits to a range of social-service investment offers the chance to reshape the politics around American social spending. That means looking at improvements that tend to play out over one or more decades. Such long-pocket payoffs may not normally play well in politics, but if the case were strong enough and the returns big enough, legislators might not be able to say no.

David H. Freedman is co-founder and Executive Editor of Global HealthCare Insights Magazine, and a contributing editor at The Atlantic. His most recent book is “Wrong: Why Experts Keep Failing Us.”


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