(Working Stories is a recurring series of pieces in which we collect stories of how and why people work. This has been lightly edited for clarity.)
Louise Sheiner, economist, Brookings Institution and Hutchins Center on Fiscal and Monetary Policy:
I used to work at the Federal Reserve. One day, Alan Greenspan got a present from John Wennberg at Dartmouth: the first Dartmouth Atlas of Healthcare. He sent it up to me and I thought, “This is fabulous. It looks like fun.”
As soon as I see data that looks interesting, I start playing. That’s the word I use because thinking about healthcare and economics is fun.
I’ve spent a lot of time researching health spending and the labor market. The problem was: it’s really hard to get data on health spending and the labor market. So, I found Medicare data was a useful proxy for differences in costs across areas.
My latest study, published yesterday by the Brookings Institution, shows why geographic spending patterns don’t tell us much about the quality and efficiency of our health-care system.
It bucks conventional wisdom.
The conventional wisdom is: We’d save a lot of money if we would just adopt the practices of the low-cost states. If we could, for example, turn Mississippi into Minnesota, we’d save a lot of money.
When I look at the data, I think that idea is probably…not right.
First of all, the health of people in Mississippi is tremendously worse than the health of people in Minnesota, by any metric of health. I use the diabetes rate; the general rate of the population in Mississippi is practically double what it is in Minnesota.
These two states are very, very different in terms of health. It makes sense that health will explain a lot of the spending — and that Medicare spending is a lot higher in Mississippi.
So, it would be very hard to turn Mississippi into Minnesota. There’s a long history of social problems and less social capital. That has health consequences.
Differences between states affect the need for healthcare, how well things work, how hospitals are managed — those won’t be easy things to change.
So, we shouldn’t think it should be so easy to save money by adopting practices of low-costs states. One of the main public policy implications of my work is: You shouldn’t just assume it will be easy to improve efficiency in health-care and save a lot of money.
I think we’re making great efforts — and that’s wonderful — but I don’t think looking at cross-state comparisons tells us how much money we can possibly save.
Instead, we might want to have different policies in places where Medicare is cheap and where Medicare is expensive.
In Mississippi, you might want to have a health-care system that’s much more hands-on, with people who help make sure patients are getting to appointments, eating right, following the doctors’ orders…
That might be a very different model from what would be appropriate in other places. With health-care reform, we have ACOs – which are basically a bunch of physicians who get together in different areas and decide a way of producing health-care.
I think that’s the way to go. We can see what is working in different states.
Health-care is taking up a huge area of our economy – nearly 18-percent of our economy now. That number is going to get larger. Trying to find out how to solve the problem is something that’s going to affect everybody.
As researchers, we’re all in this together to figure out what’s going on. We do our best, we put it out there — and, hopefully, move the conversation along.