The $640 Billion Question — Why Does Cost-Effective Care Diffuse So Slowly?

NEJM | May 18, 2011

Victor R. Fuchs, Ph.D., and Arnold Milstein, M.D., M.P.H.

Health Care Expenditures and Life Expectancy in the United States and Ten Other Developed Countries, 2005.

To avoid financial crises in federal and state governments and turmoil for health care stakeholders, U.S. health care must become more cost-effective.¹ The United States spends much more per capita on health care than do other developed countries, with broad outcomes no better than those of its peers (see graph). There are, however, individual U.S. physicians and health care organizations that deliver high-quality care at a cost roughly 20% lower than the average.² If the rest of the U.S. health care industry followed their example, health care spending would drop from 17% of the gross domestic product to 13%. Though that would still be well above the spending level in other high-income countries, $640 billion would become available for addressing other important public- and private-sector needs. Why don’t cost-effective models diffuse rapidly in health care, as they do in other industries? The answers to this $640 billion question lie in the perceptions and behaviors of the major participants in health care./.../