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Orszag: Culture's powerful impact on healthcare

Peter Orszag may talk numbers and charts—he was the Office of Management and Budget director—but speaking in Orlando, Fla., last week, he betrayed a fascination with the stubbornly illogical streak that human behavior can bring to the nation's healthcare spending.

Orszag offered his own idiosyncratic choices as proof. He confessed he makes healthier choices if he routinely monitors his weight. But if he must manually enter his weight in a computer, never mind. The minor inconvenience is enough to derail him. (Orszag solved the problem with a wireless scale.)


Now a vice chairman with Citigroup, Orszag spoke last week at the annual meeting of the Healthcare Financial Management Association, an organization of the industry's actuaries, accountants and treasury and finance professionals.

His remarks returned repeatedly to the influence that social norms can have over decision-making. Norms reinforce behavior, he stressed. Consider seatbelt laws: Who has qualms about insisting passengers buckle up? But speed limits get ignored with a shrug, he said. Fines for breaking the laws may be similar, but seatbelt use has become broadly endorsed, Orszag said.

Norms can be a powerful tool to promote changing public policy, Orszag said. In Massachusetts, the state used advertising in Fenway Park to promote the state's health insurance mandate. He credited the ads with helping to establish the Massachusetts law—which requires individuals to be insured, as the 2010 health reform law mandates—as a social standard.

But norms can also be stifling and counterproductive, he argued.

One major culprit behind healthcare costs that have eroded household wealth and undermined U.S. fiscal stability is “just the way we do it here” medicine, said Orszag. Doctors too often adopt the treatment standards of other physicians at a clinic or hospital, he said. Orszag blamed that variation for wasteful health spending early in his remarks.

“The bottom line is, we are practicing medicine in significantly different ways across different parts of the United States,” he said. “And as a result, costs vary significantly across different parts of the United States and as a result value differs significantly across different parts of the United States.”

Local norms vary most when research says little on the safest and most effective care, he said.

Notably, Orszag made his case using research that has won powerful proponents but has attracted critics who have challenged conclusions drawn from the data. He cited research out of Dartmouth College and the Medicare Payment Advisory Commission to bolster his case. I'll have more to say about that data in an upcoming post.

“There is basically no correlation between how much you spend and what kind of outcome you are achieving,” Orszag commented.

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