Health Care & Prescription Drugs News

With Californians increasingly concerned about rising health care costs, CALPIRG Education Fund today released a report identifying billions of dollars of unnecessary, wasteful spending in the state’s health care system. The report, Diagnosing the High Cost of Health Care: How Spending on Unnecessary Treatments, Administrative Waste, and Overpriced Drugs Inflates the Cost of Health Care in California, identifies three strategies to reduce costs without affecting patient health. Reducing unnecessary treatments and over-hospitalization, cutting administrative waste, and restricting drug company marketing provide a consumer-friendly approach to simultaneously lightening the burden of health care costs on working Californians and promoting high-quality care.

“More health care spending doesn’t always equal better health,” said Michael Russo, Health Care Advocate with CALPIRG. “Our research found that there’s a smart, consumer-friendly way to rein in rising premiums – target unproductive spending that drives up costs but doesn’t provide any improvement in patient health.” 

In 2004, California spent $167 billion on health care, and spending rose 56 percent between 2000 and 2006. These runaway costs have made it harder for consumers, businesses, and the state to afford health care, but more dollars have not bought better health. The report examines three areas where billions of dollars are spent without providing any benefit to patients: the overuse of invasive treatments, intensive services, and hospitalization; excessive administrative costs; and the marketing of prescription drugs that encourages the use of unnecessary, more expensive drugs.

“We took a broad look at all the ways health care dollars get spent, and found these three areas where, as far as patients are concerned, the money might as well be thrown into a dumpster,” Russo continued. “And in fact, some of this spending can actively harm a patient’s health, for example when an unnecessary hospital stay exposes a patient to an antibiotic-resistant infection, or when a misleading drug commercial causes a patient to ask for a prescription that isn’t right for them.”  

Among the report’s findings:

=> In some parts of the state, patients are hospitalized far more often and for longer stays without resulting in better health. Hospitals in Sacramento are more likely to provide proper care for patients suffering from heart disease, congestive heart failure, and pneumonia than hospitals in the Los Angeles region. But care in Los Angeles is much more intensive, and therefore expensive: compared to Sacramento patients had three times more visits to specialists, spent twice as many days in intensive care, and were hospitalized 1.6 times longer, ultimately leading to a 67% cost increase, all for no health benefit. Reducing this excess through initiatives like ensuring that chronically ill patients get low-cost, high-benefit treatments, and reforming our payment systems so they reward effective rather than high-volume care would save at least $700 million annually.

=> While some administrative spending – such as maintaining high-quality patient records – can improve patient health, billions of dollars are spent on administrative tasks that do not help patients. California’s costs for billing and insurance related activities come to more than $9 billion annually – over $350 per insured Californian. Policy solutions include moving towards a standardized billing and payment system that would be shared by the state’s insurers and providers.

=> Pharmaceutical company advertising is often misleading, and encourages physicians to prescribe and consumers to purchase billions of dollars of potentially unnecessary medicine every year. And because drug advertising encourages the use of newer, more expensive medications, even if they are no more effective than existing ones, consumers can end up paying much more than they should. The industry spends an estimated $2.5 billion on advertising in California each year – and with the costs of unnecessary drugs added in, the true price of this advertising is higher still. To cut these wasteful costs, we recommend requiring better disclosure of and limits on drug company gifts to doctors.

“Cutting costs doesn’t have to mean cutting care.  With gas prices at record highs and problems in the housing market, Californians need commonsense solutions like these to protect their health, and their pocketbooks,” Russo concluded. “Getting costs under control is a necessary part of the comprehensive health care reform California needs.”

The full report is available on U.S. PIRG's web site.