How to Cut Health-Care Costs: Less Care, More Data

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Outside the Mayo Clinic's Gonda building in Rochester, Minn.

Raoul Benavides for TIME

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Alas, there's no proven link between more spending and better care. The good news is that parts of the country provide care at a low cost, so there's potential for gigantic savings if the rest of the U.S. could imitate them. One Dartmouth study found that if nationwide spending had mirrored the modest rate of that in Rochester, Minn. — where care is dominated by the renowned Mayo Clinic — Medicare would have reduced its costs for chronically ill patients by $50 billion from 2001 to 2005. As the old inflation-adjusted saying goes, pretty soon you're talking about real money.

But one man's unnecessary costs are another man's profits; lobbyists for drug- and devicemakers, hospitals, doctors and insurers are already fighting to make sure their slices of the more than $2 trillion health-care pie aren't nibbled by reform. Senate Republicans just introduced "antirationing" legislation to bar the government from using comparative-effectiveness research — "a common tool used by socialized health-care systems" — for cost control. They paused in their usual attacks on Obama's profligacy just long enough to attack his stinginess, warning that he will use evidence as an excuse to micromanage the art of medicine, stifle innovation and deny Americans their right to choose whatever treatments they want — or at least their right to taxpayer reimbursements. (Read "The Year in Medicine 2008: From A to Z.")

Some of this is transparent posturing, but there are legitimate concerns about politicians' deciding when treatments are effective enough — or, more controversially, cost-effective enough — to be reimbursable. Medical knowledge is constantly evolving, and treatments that seem to lack solid evidence today might seem indispensable tomorrow. Wasteful tests and procedures don't come with labels marked "wasteful," and most patients and providers genuinely believe the care they're getting and giving is necessary. Comprehensive studies of what works can be slow, expensive and inconclusive. Even Orszag admits the savings from cutting out unneeded care would take a decade to materialize.

Still, those savings could mean the difference between national solvency and fiscal catastrophe, so Obama is targeting two major barriers to data-driven medicine. The first is the perverse "fee-for-service" incentives that now plague our health-care system: hospitals get paid more if you stay longer and come back often; doctors get paid more if they do more tests and procedures — and you come back often. More services, more fees. "You've got to follow the money," says former Senator Tom Daschle, Obama's initial choice for health czar. "We reward volume, so that's what we get." Obama wants to reward quality instead.

The other big barrier is information: evidence-based medicine is hard to practice without evidence. There are studies showing that generic and over-the-counter drugs for hypertension, heartburn and psychosis are often just as effective as costlier brand-name alternatives; that stents can work miracles when inserted quickly after heart attacks but don't seem to help much as preventive measures; that the areas with the most hospital beds, imaging machines and specialists spend the most on excess hospital stays, MRIs and specialty care. But the big money in medical research goes to testing new drugs and cutting-edge technologies, not to comparing existing treatments. Drug companies often just have to prove that their products are better than placebos to get FDA approval; new devices merely have to be similar to existing products. Nobody has to show that their drug or device works better than rival drugs or devices, or treatments that don't require drugs or devices. So the things we know are dwarfed by the things we don't know.

Then again, we do know what high-quality, low-cost medicine looks like. It's already available in Rochester, Minn.

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