How Can we Decrease Costs and Improve Quality in Medicine?

Ezekiel Emanuel, oncologist, former White House advisor, and Vice-Provost and Professor of Medical Ethics and Health Policy at the University of Pennsylvania, published an opinion piece last week in the New York Times (Less Than $ 26 Billion ? Don’t Bother. Sunday Review, 6 November, 2011, page 5).  In this piece he went through the plans he attributed to conservatives and liberals, and then asserted that they were “…dead ends.”  Why ? Because they don’t hit the $ 26 billion mark, which is his estimate of the minimum it takes to really say you have cut costs; this approximates 1% of the total cost of health care yearly which about $ 2.6 trillion.

But what are these dead ends, as Doctor Emanuel calls them, and are they really such ? I list these below and give them my “score”.  As you read, make it a point to determine whether you think these are “worth it” or not. Please note that the political labels belong to Doctor Emanuel, I use them for convenience although the issues represented cross political boundaries, at least in rational circles.


1. Insurance company profits – the five largest for profit insurance companies posted profits of $ 11.7 billion last year. As this is only 0.5% of health care spending, Doctor Emanuel claims “…there just isn’t enough money there to make a dent in health care spending.”

2. Drug company profits – the use of generics has already resulted in some cost savings.  The importation of brand name drugs from, say Canada, would result in a 2% decrement of the 10% of total cost ($ 260 billion) that makes up drug spending in the health car budget: about $ 5.2 billion.


1. Medical malpractice reform – physicians do, from my investigations, fear malpractice and, while there is some controversy as to the precise implications of this, there is at least a suggestion that we may do defensive medicine in a way that increases costs.  Emanuel suggests that a reform package that limited non economic damages to $ 250,000, punitive damages to $ 500,000, and imposed a 1 year statute of limitations could save $ 11 billion per year.  Partly (40%) from reduced malpractice premiums and part from less defensive medicine.

2. Restricting health care spending on exorbitantly expensive patients – the example Doctor Emanuel uses is the newborn in the Neonatal ICU.  I think he does this to show – as is entirely appropriate – that this is absurd.  So, he seems to be saying, do you REALLY want to create “Death Panels” ?  He could have used medicare beneficiary data showing that medicare spending in the last 60 days of a patient’s life consumes 13% of medicare dollars (Sarpel U, Ann Surg 2008;247:563).  Of course, as I say to my residents and fellows, if I knew when a person was in their last 60 days, I would not spend those resources.  It is just that is not how it works; one usually doesn’t know.  None-the-less, Doctor Emanuel estimates that limiting this spending – if one could figure out a way to do so – would save about $ 13 billion (0.5% of total expenditures).

So, none of these work by themselves.  But an odd thing happens if you add them together (leaving out the last one restricting health spending, it is way too un-doable), it comes to $ 26.9 billion.  A good start, so why not begin multiple parallel processes?

Additionally, based upon work done by Stephie Woolhandler and her colleagues (Woolhandler, et al, N Engl J Med, 2003;349:768) about 31% of the health insurance premiums of for-profit insurance companies are consumed in administrative costs. These administrative costs include physician and clerical time spent on administration to ensure Billing – Collections, check for payment variance, and appeal rejections.  Further, there are legions of insurance workers whose job is to prevent “Medical Losses”……that is, to make sure physicians and hospitals are not paid.  The amount that this 31% represents is something between $ 290 and $ 320 billion dollars.

But what if it is “only” $ 100 billion; to my eye, it is still worth the effort.  And what is the effort that brings such a large benefit ?

A single payor system, such as Medicare for all.

Let us see if we hear more about this on 13 November when Doctor Emanuel presents his ideas about how to make health reform work.

A single payor system (Medicare for all citizens) is not a panacea.  We will still need to learn to do better primary care, eat healthier, walk not drive, quit smoking.  And to do these things means addressing “food deserts”, unsafe streets, and limited public transportation.

We need to begin to ensure that patients, their families, and health care providers talk to one-another about what the patient wants (and doesn’t want).

We have to begin to discuss and accept that, despite our fondest hopes, we will all die.  One of our tasks is to help our patients do this with some dignity and humanity.

We need to ensure that the care we provide id high quality, reproducible, and with minimal variation.  If this is done, we will begin to “bend” the cost curve.

How can I be so sure ?

Because I work at the place that has done it.

Geisinger Health System, Danville Pennsylvania.

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About AJ Layon

AJ Layon was, for 28 years, at the University of Florida College of Medicine, in the Division of Critical Care Medicine, in Gainesville, FL. For the approximately 10 years until September 2011, he was Professor and Chief of Critical Care Medicine at UF; In September of 2011 he became System Director and Co-Chairman of Critical Care Medicine in PA; this ended in 2017. He served as a Physician in the Surgical Group with Médecins sans Frontières (MSF, Doctors without Borders) through 2018 and is presently an intensivist in Florida, struggling through the SARS-CoV-2 crisis. While his interests are primarily related to health care, health care reform, and ethical issues, as a citizen of our United States and our world, he will occasionally opine on issues of our "time and destiny". Follow on Twitter @ajlayon
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