The U.S. spends 2–3 times more on healthcare than any other developed nation — but a groundbreaking new study shows some states are finally starting to slow the bleeding. In this episode, we sit down with John N. Mafi, MD, MPH, of UCLA Health, whose research reveals how five pioneering states implemented cost growth benchmark programs to bend the healthcare spending curve.
Jeffrey Snyder, Broadcast Retirement Network
Dr. Mafi, great to see you. Thanks for joining us on the program this morning.
John N. Mafi, MD, MPH, UCLA Health
Thank you so much, Jeff.
Jeffrey Snyder, Broadcast Retirement Network
I’m really, look, we always enjoy talking about health care. Health care is a critical part of the services that many Americans receive each and every day, including from your prestigious UCLA Health. I know you and your colleague Alina did a lot of research into health care spending, but before we get into maybe how to curb that health care spending, I’m wondering if we could kind of pull back a little bit and talk about the expansion of health care spending, because my understanding is, doctor, the costs continue to go up.
That’s right.
John N. Mafi, MD, MPH, UCLA Health
Health care costs are really a huge challenge for Americans and families and our patients. It’s something that is increasingly taking a bite out of the income of American households. It’s putting a strain on everything else.
So it’s a huge, huge problem. And it also gets in the way of patients getting medically necessary care.
Jeffrey Snyder, Broadcast Retirement Network
And just to kind of follow up on that, you know, we had the repeal of the subsidies for the Affordable Care Act. So many, many Americans maybe couldn’t afford these big premium jumps. And also, doctor, we’ve got a lot of other challenges with buying gasoline and food.
So I think all this probably adds up. And I guess what we don’t want is people to feel like they can’t get health care because you want to avoid, it’s so important to avoid the chronic diseases like diabetes, cancer, heart disease, et cetera.
John N. Mafi, MD, MPH, UCLA Health
That’s exactly right. And a lot of the changes you’re talking about in terms of the premium subsidies going away are only going to exacerbate the affordability problem in health care, which is just putting such a strain on Americans. It’s one of the most important problems that Americans face today.
So it’s critically important to find out what are the drivers of increased health care costs and what can we do about it?
Jeffrey Snyder, Broadcast Retirement Network
So let’s talk to that end. You’re the perfect segue in the conversation. What goes into these health care costs in general?
So why do they keep going up, up, up, up, up?
John N. Mafi, MD, MPH, UCLA Health
That’s a great question. It goes back to history. I love history.
Just to tell you a little bit of background, in the United States, we never went the route of most European or industrialized countries never created a single payer or a unified governmental plan that has benefits and trade-offs. So the downside is there’s no price control. So prices in the United States over the last 50 years just kept going up and up and up, and there was nothing anyone could do about it.
It was whatever the market could bear. And then when government got more and partially involved with Medicare, basically, there was no way. Medicare didn’t control the price either, but it was a guaranteed payer.
So the prices kept going up because doctors, hospitals knew they could keep getting paid. So the price is one of the big reasons in the United States. It’s two to three times what the price of care is in other countries, from pharmaceuticals to hospital services.
It’s the price that’s one of the big drivers of why health care is so expensive today. That’s one thing. And then the other reason is why are the prices high?
Part of it is there’s no control or regulation, but the other part of it is we are a wealthy country. We have the cutting-edge technologies. We have all kinds of fancy drugs and all kinds of fancy surgeries, robotic surgeries, transplants.
You name it, we have it. And so these are expensive. So part of it is that we have so much great technology, but it’s very expensive and there’s no control on price.
So great for innovation, not so great for affordability.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, I often feel like, and maybe you can tell me why this is because I don’t know. I have my own insurance. I might go to the doctor.
I had an elbow issue. I went to go see the doctor and I paid whatever the rate was. I was given an invoice, but I had no ability to negotiate on my behalf and say, well, does it really cost this?
It really was between the practitioner and my insurance. I personally, I’m not saying I want to be a doctor, but I’d like to have the ability to have a little bit more control. Would that help if the consumer was a little bit more involved?
Bring costs down?
John N. Mafi, MD, MPH, UCLA Health
It’s a great question. I mean, before most of history, that’s how doctors would practice. They would provide one-on-one care.
You pay out of pocket. If you had less money, you would negotiate with the doctor and pay a lower fee. And that’s how it was handled.
But in the 20th century, what happened, a lot of things changed. Hospitals became these technology centers, surgery, transplants, dialysis, all kinds of fancy things that got really expensive. And the old fashioned way didn’t work anymore.
You needed insurance, because what if you got really sick and you had to go to the hospital, you’d be broke. So you used insurance as a pool, your money as a group to protect yourself from that expensive, catastrophic uncertainty. And so insurance kind of formed that way.
And because it was formed without any coordination or organization, because we never went single payer government route, it became so complicated. And that complexity basically had also the other driver of cost is the complex administrative costs or bureaucracy. And so in some ways, what you’re saying is true that, yeah, if we went back to that old fashioned way, maybe there could be more simplicity and more transparency.
But the downside there is that not everyone can even afford that level of payment to even a single practitioner. And then what do you do if you get catastrophically sick? So there still needs to be some sort of insurance mechanism there.
But right now, I think what we can all say for sure is that the current system is broken and that our health care costs are out of control that I think everyone agrees.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, it certainly doesn’t seem to always serve the interest of the patient in terms of these things. You know, a lot of people think of health care spending as a federal issue, but aren’t don’t most states regulate that states have control over insurance and don’t they have some control over health care spending? I know this was an area of research that you and your colleague Alina looked at.
I mean, didn’t aren’t states having some of the states been successful in capping some of these these spend spending costs?
John N. Mafi, MD, MPH, UCLA Health
Yeah. So, you know, traditionally, yeah, you think about health care spending control as being a federal problem. But you’re right.
You know, I think a lot of the federal reforms to try to reform health care never really seriously took on health care spending from Medicare all the way up to the Affordable Care Act. They touched around it, but they never really directly, you know, so costs kept going up. And so eventually, a few states started getting fed up.
And they say, that’s it, we’re going to take matters into our own hands. So even though Medicare is a federal program, that doesn’t mean that a state can’t collaborate with the Centers for Medicare on some sort of alternative payment plan to pay the doctors and hospitals in their own state. And certainly, they control the commercial and the rules and the Medicaid rules of their own state.
So they do have some influence. And that was really the basis of our study, which was to see are these programs, are they actually bending the cost curve in any way? And that’s really what we tried to figure out.
Jeffrey Snyder, Broadcast Retirement Network
And based on the research, you know, I’m not going to put words in your mouth, because you’re the person that did the study. But the Commonwealth of Massachusetts, Maryland, Vermont, Rhode Island and Delaware seem to have fun. And it may not be an hour talking about 50%, we’re talking small amounts, but they were able to really curb these costs.
And presumably, Doctor, that we’ve got 50 states, and the district, it would seem that, you know, states are the laboratories of democracy, they, each state can learn what these other states have done.
John N. Mafi, MD, MPH, UCLA Health
Yes, that’s well said. That’s one advantage of having this federation of states that you can do these kinds of innovations and experiments, and everyone can learn. So and that’s what happened.
The states were really pioneers, and they, they decided to do what’s called these cost growth benchmark programs. So they’re not designed to lower healthcare costs overall, they’re designed to just lower the growth rate. So it’s still growing, it’s just slowing bending the curve.
So the growth is not as steep. And so, and they did. So what our study found when you looked at the growth rate before and after these states, versus the growth rate in all other states, there was a slight bend in the curve, about 2% reduction, relative reduction in the rate of growth.
So a small, but statistically significant reduction in growth rate, which, you know, if you multiply that across, you know, billions of dollars in a state that that’s not an insignificant amount of money.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, it’s certainly, I think that’s quite a bit of money, I’ll take 2%. I would take 2% off of my spending, if I could.
John N. Mafi, MD, MPH, UCLA Health
Yeah.
Jeffrey Snyder, Broadcast Retirement Network
Yes. And, you know, in terms of the data that you collected, and what do you inform policymakers with it? I mean, obviously, there was a purpose behind doing this study, you wanted to see if the if states were bending the curve, do you promote this study and provide this to, you know, regulators within each state or legislators within each state in order to kind of find best practices?
Is that what the next step is here?
John N. Mafi, MD, MPH, UCLA Health
Yeah, we did have a press release. And then the paper did get some coverage, I think it was picked up by the LA Times and Kaiser Health News. And certainly there are policymakers who are catching wind of it.
And we’re commenting in some of these articles. So it’s good. It’s stimulating conversation.
And I think that it’s important, it’s just as important to know what worked and what didn’t work. And so if you look at the five states, you know, they kind of all did their own different things. And, and four of the five states did either some sort of penalty, or some sort of price control.
And, and so, but one state didn’t do any of those, they did sort of the weakest intervention, which is kind of public reported, they just kind of reported what what the spending was, you know, by different health systems and hospitals, and didn’t have any penalties or anything like that, or price control. And that was the one state, Delaware, which they didn’t actually see a bend in the cost curve. Whereas in the other four states, there was a reduction in not a reduction in spending, but a reduction in the growth of spending, the rate of growth declined in those four states.
And what was interesting was, the two states that kind of were focused more on price control, there, that that’s where the spending growth was the greatest in the commercial plans, because in commercial, you can negotiate the price, whereas Medicare, it’s set by the government. So, you know, versus the other states, Massachusetts, Vermont, they were more focused on Medicare spending. And and that’s where they saw the greatest, especially Vermont, they saw the greatest reduction in Medicare spending.
And the way all the states did it, one of the biggest ways they did it was, when you’re in a hospital, and, you know, if you’re, if you’re an elderly patient, and you have to go to a nursing home, that’s very expensive for Medicare to get rehab. And so what, what the what they were trying to do was incentivize health systems to get their patients to home health, because home is less expensive. And so that was one of the ways that they were able to so we actually saw was home health spending went up in some of these states, in many of these states.
And, you know, whereas nursing home and hospital spending went down. If you’re a patient, the way you might feel it is, you know, you might, you might have, you know, you might need to go home, whether even if you might want to go to a nursing home. So there’s, you know, there’s no free lunch.
And so you have to realize that these are high level decisions, but they affect people’s lives. And there’s always going to be pros and cons and trade offs with every approach. That’s what good economic analysis should teach in any way.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, it sounds like these states in particular were creative. And I’m sure that that, you know, other states can be creative as well. I mean, they can control costs, they can try to bend that curve.
It sounds like obviously, there’s more work to do, maybe things will change. And then we’re kind of coming up on election, we don’t talk politics on the program. But this is certainly, along with affordability, a very big issue.
I guess my last question is, you know, there’s very few things as consumers that we can’t control, we can’t control, as you as you stated, you know, these are negotiations that usually happen between systems and insurance companies and, and the regulatory bodies. But we can control how we treat ourselves and the food we consume, we can control a lot of these, I guess, in the short run, we can control some of these chronic diseases, if we if we have the right behaviors, and we could, I guess, in a way, bend the cost curve for us.
John N. Mafi, MD, MPH, UCLA Health
That there’s definitely truth to that there’s there’s certainly some behavioral components to good health and preventing diabetes, high blood pressure, I will say I’m a primary care physician, I practice primary care, general internal medicine. And when I talk to my patients about lifestyle changes, sometimes it resonates. But other times, I get feedback from my patients saying, Doc, you know, I love to go on walks.
The problem is, the other night, somebody was shot going on a walk in my neighborhood. And I don’t, I don’t feel safe, you know, and so you have to, not everybody’s circumstances always going to be the same. And so you have to be cognizant of that as a physician.
I will say that, you know, I think that it’s, it’s a small win for these states. And it’s great. I think one of the other pieces, and I agree with you that affordability is probably one of the number one issues health care cost affordability for our country.
And so it is a small win, it’s important to learn. I think more work needs to be done, though, more work needs to be done to understand what else can work here in bending the curve for Americans. And then the other pieces, I think we also need to measure what’s happening to the quality of care, because that’s the big concern.
If you start to tamp down on costs, one of the concerns is if you’re not if you’re too clumsy about it, you could actually impede or impair the quality of care. And God forbid, you know, patients get hurt. And that’s a concern from the patient perspective.
And from physician perspective. So that’s so we need, we need to make sure that we are monitoring these programs very carefully.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, I agree with you, you don’t want to be in a situation where you drive physicians out of the marketplace, they don’t want to be serve a certain type of client, well, I guess I can’t do that. But you know, they don’t want to do a certain discipline, because it’s not, it’s there’s nothing, quote, unquote, in it for them, right. So I think that’s, you can’t work with a blunt instrument.
And you also don’t want to, you know, like during the affordability crisis, we’ve seen like shrink inflation, where you buy a package of Fritos, and it’s still price the same, but there’s less Fritos in the in the container, right? It’s just packaged differently. We don’t want that either, which I think is your point is we don’t want to drive down quality and get have people get less.
You want people to be to receive quality care, regardless of their circumstance. Well, doctors, it’s a great study. Look, I think it’s thought provoking.
Clearly, there’s work to be done. Maybe we’ll never have a perfect system. But you know, we’re striving to get towards perfection.
Great to see you. Thanks for doing for joining us. Please give our best to your colleague Alina for helping out with the study.
And we look forward to having you back on the program again very soon, sir.
John N. Mafi, MD, MPH, UCLA Health
Thank you very much, Jeff. It was a pleasure.
