Can we really save $2 trillion on health care?

Move over, The Money You Could Be Saving With GEICO. Obama trumped the poor little fellow with googly eyes when he announced earlier this week that bigwigs in the medical, hospital and insurance industries had pledged to him that they could shave some $2 trillion off our nation's health care costs over the next ten years.

Naturally, any time a government official says he can produce $2 trillion out of nowhere, it's hard not to be a little suspicious.

Indeed, Republican Senator Chuck Grassley quickly issued a statement essentially saying: We'll believe it when we see the details. On the National Review Online, meanwhile, conservative economist Larry Kudlow declared that Obama's plan would "bankrupt the nation." (Rush Limbaugh, meanwhile, compared Obama to Don Corleone.)

At the other end of the political spectrum, a blogger for the Leigh Valley Pennsylvania Express-Times wondered how it was that the health care industry could suddenly find $2 trillion in savings. If all that free money is just sitting there, he wondered, doesn't that suggest that "they've been stealing from us for all these years[?]"

It's not quite as simple as that, of course, and the health care industry isn't quite as villainous as the blogger makes it out to be. But he's right about one thing: the trillions in savings may actually be more than a pipe dream.

The confidence that Obama and other in his administration have that big savings in health care are possible stems from their reading of some very interesting research conducted over the last couple of decades at Dartmouth. Led by researchers Jack Wennberg and Elliott Fisher, the folks at what's called the Dartmouth Atlas of Health Care found out two very interesting things when they began examining regional patterns of health care spending.

First, they discovered that spending varied tremendously from city to city, region to region, and that much of this variation had nothing to do with demographics or any other factor that might logically explain the differences.

Second, they discovered that those regions that spent the most on health care didn't actually get better results than the regions where spending was much lower. Patients in the high-spending regions got more MRI scans, and spent more time in the hospital, but all that extra attention didn't make them any healthier. More money, in other words, didn't mean better health care.

That's the glass-half-empty way of looking at it, anyway.

The glass-half-full way suggests something rather extraordinary: if we can figure out what the more effective hospitals are doing right, we could save a lot of the money we now waste on ineffective care. We could get the same or even somewhat better results than we get now, while spending a great deal less — by some estimates, as much as a third.

Of course, getting to this rather utopian state of affairs will require a lot more than mere pledges like the ones Obama got this week.

For more of the gory details of the research and the reforms that may come out of it, check out this story in Dartmouth Medicine by health journalist Maggie Mahar.

Researcher Fisher points out a few options in this New York Times roundtable; if this merely whets your appetite for more, check out the white paper titled "An Agenda For Change" on the Dartmouth Atlas' own web page.

In any case, you can rest assured that you'll be hearing a lot more about this research in the months and years to come.

–David Futrelle