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HEALTH SPENDING: Paul Ginsburg Continues The Discussion

January 22nd, 2008

Editor’s Note: In the Jan/Feb issue of Health Affairs, Paul Ginsburg, president of the Center for Studying Health System Change, offered a Perspective on the report on national health spending for 2006 by the Centers for Medicare and Medicaid Services Office of the Actuary. Ginsburg’s article, which warned, “Don’t Break Out The Champagne” in celebration of slower health spending growth, prompted a response on the Health Affairs Blog by Jeff Goldsmith, the president of Health Futures Inc. Below is Ginsburg’s reply to Goldsmith’s blog post.

My Perspective’s focus on factors that make significant further declines in the spending trend unlikely emphasized potential drivers of increasing spending. I was not predicting a substantial increase. But recent rates of spending growth, while not at peaks, are still above trends in earnings, adding cumulatively to the issue of affordability. The stability of the percentage of gross domestic product (GDP) spent on health care has been welcome, although a portion of that is from somewhat higher-than-average GDP growth. Now we are facing a year of very low GDP growth (if it is even positive), which will lead to percentage of GDP rising again. A recession will have some impact on spending, but the research on cycles in health care spending suggests that much of the impact of recessions is spread over many years. We may still have a portion of the impact of the recent boom to get through before getting to the point where the economy is suppressing spending trends. 

Much of Jeff’s discussion of areas where health care use is slowing is a valuable complement to my discussion of areas of likely further growth. The overall cost picture is the netting out of numerous factors that have positive and negative signs. Some of the most interesting areas that he raises are those where policy changes that lowered payment rates have had an impact on spending beyond the direct effects of lower unit prices. Perhaps these examples will be more effective in getting policymakers interested in devoting more political and staff resources to refining Medicare payment mechanisms than warnings of how overpaying for services generates more volume. The examples would have an even greater impact if they convinced budget scorekeepers to depart from assumptions of offsets of rate reductions. But the examples also will likely lead to more lobbying resources on the part of interests whose businesses are at stake to protect existing distortions. 

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2 Responses to “HEALTH SPENDING: Paul Ginsburg Continues The Discussion”

  1. DavidMoskowitz Says:

    I haven’t seen anybody get the right diagnosis for the American healthcare crisis yet. As an insider, it has taken me my whole life to figure it out, so I thought I would share my experience.

    Any effort to lower costs will have to start with quality. Instead of positing that American healthcare is the best in the world, we need to examine that claim. A little personal experience is helpful here.

    In 1993, I realized that a well-known enzyme, called ACE (for “angiotensin I-converting enzyme”–it converts angiotensin I into angiotensin II by clipping off two amino acids, leaving only eight instead of ten) caused kidney failure. ACE inhibitors have been widely used since 1978, and are known to be extremely safe.

    I couldn’t get any research funding for nine months. (This has a lot to do with the NIH’s getting out of clinical research in the 1960s, and the massive consolidation going on in the pharmaceutical industry, even 15 years ago). Finally, in desperation, I just started treating my own 200 renal failure patients differently. The very first patient got unexpectedly better. It’s important to realize that kidney patients NEVER get better: I was taught that they never could, that their kidneys were full of scar tissue.

    The following month, I took over another physician’s job, and his 800 patients. The outcomes were published in a peer-reviewed medical journal a few years later:

    Moskowitz DW. From pharmacogenomics to improved patient outcomes: angiotensin I-converting enzyme as an example. Diabetes Technol Ther. 2002;4(4):519-32. PMID: 12396747. (For PDF file, click on paper #1 at:

    The data showed clearly that people who had lost less than half of their kidney function could actually recover kidney function. This meant 90% of kidney failure in the US could be prevented.

    This is no mean feat. There are currently 400,000 people on the dialysis machine. A small number, about 25,000 a year, get kidney transplants. Altogether, kidney failure costs Medicare about $25 billion a year. It’s only a stop-gap measure, anyway. Dialysis and transplantation patients only live around 5 years. Being able to prevent kidney failure means that patients with high blood pressure and diabetes could live an extra decade.

    Lawrence Agodoa MD, the former Director of the US Renal Data System, which tracks how well dialysis patients do, called my paper “beautiful” when he reviewed it for Randall Maxey MD, himself a nephrologist and then-President of the National Medical Association, the black AMA.

    But when I presented the data to Medicare in 2004, the Medical Director (Sean Tunis MD) and his assistants (including Sandra Foote) had absolutely no interest. They referred me to “[their] man at the NIDDK,” a PhD, who promptly let the issue die.

    So this is what I’ve concluded from my personal 15 year odyssey: America’s healthcare crisis of inexorably rising costs is the result of the healthcare system itself. Rising costs (and revenues) is exactly what the system wants. It is a perfect monopoly. Both the public and the private sectors want to keep their jobs and increase their revenues. The lives lost and the money spent are not their own–but the jobs supported by the system certainly are!

    Quality, not access, is the central problem.

    The only solution is to mandate reporting of patient outcomes by the public sector. The private sector will follow suit, if only to retain patients. Right now neither sector even mentions patient outcomes, so it’s hard to imagine them ever improving. There’s certainly no incentive to improve them, as my experience with kidney failure amply showed.

    Secondly, there must be a conscious effort to improve outcomes. Given the lack of interest by foreign National Health Services in preventing dialysis, presumably for the same reason as Medicare, I don’t think a single payer could ever improve outcomes. In the US, vigorous competition between a robust private and public sector would be much more in keeping with our national tradition, and much more likely to get the job done.


    David W. Moskowitz, MD, MA(Oxon.), FACP
    Chairman, CEO & Chief Medical Officer
    GenoMed, Inc.
    “Our business is public health(TM)”

    9666 Olive Blvd., Suite 310
    St. Louis, MO 63132
    Ticker symbol: GMED.PK (on the OTC Pink Sheets)

    Cell phone 314-378-7864
    Office phone 314-983-9938
    FAX 314-754-9772

  2. Brad Kirkman-Liff Says:

    “But the examples also will likely lead to more lobbying resources on the part of interests whose businesses are at stake to protect existing distortions.”

    Health economists should lobby Congress for an earmark in the HHS budget to examine that issue.

    It is doubtful that anyone in COngress has read this research: “Academic Earmarks and the Returns to Lobbying” by John M. de Figueiredo and Brian S. Silverman, The Journal of Law and Economics, vol. 49 (October 2006)]

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