Don Berwick on cutting health-care costs

Donald Berwick, right, is the former Medicare administrator. (Ed Andrieski - AP)

Readers of Wonkblog are pretty familiar with the fact that American health care is very expensive, more so than most other developed nations, with costs increasing year by year. At the rate we’re going, one researcher estimates that health insurance premiums will cost more than an average family’s income by 2037. By another estimate, they’ve already eaten up the past decade of families’ income gains.

The million-dollar question — or, perhaps, $1.7 trillion question — is how do we fix it? In this week’s Journal of the American Medical Association, former Medicare administrator Don Berwick broke down where, exactly, he sees space to bring down what we spend on health care. You can see that summarized in the graph below.

One of Berwick’s big points in this article is that there’s no silver bullet on health-care cost reduction. Reducing hospital readmissions or cutting out administrative costs won’t do the trick on its own. Instead, he advocates for a multi-faceted approach, one that looks at what path we’re on in health-care spending right now, and then breaks down where cuts would need to happen in order to get health care to grow at the same pace as the rest of the economy.

Berwick sees six areas of waste in the health-care system, previously identified in health economics literature, and a place for addressing each of them in order to bring down costs.

“Addressing the wedge designated ‘overtreatment,’ for example, would require identifying specific clinical procedures, tests, medications, and other services that do not benefit patients and using a range of levers in policy, payment, training, and management to reduce their use in appropriate cases,” Berwick writes in this month’s Journal of the American Medical Association. “The next needed step would be for stakeholders to adopt the waste-reduction goals for that wedge and combine efforts to change practice accordingly.”

Berwick and I spoke earlier this week for a longer piece I’m working on, looking at recent reforms to our health-care delivery system. I asked him about how much change he thinks we can expect in how much we pay for health care, within the next five to 10 years. Most of his thoughts had to do with moving toward a more patient-centric system.

“I’d like to see a delivery system that reliably harnesses the knowledge we have to help patients,” he said. “We have to be weaned from this volume-driven system, and no longer asking, ‘How much did we do today?’ but ‘How much did we help today?’ ”

Berwick doesn’t expect this change to sweep through the health-care system at large. Rather, he hopes that on a short-term timeline, we’ll see more and more examples of how this can be successful. “There are places where we can go, to a Grand Junction, Colorado, or to Birmingham, Alabama, and there’s so much optimism,” Berwick told me of some of his recent travels. “I’d hope to see more of those, where there’s optimism about where we’re headed, and not this whole depression and beleagueredness of the health-care system you see right now. It really will be joyous.”