Follow the Money: Harvard Professor & MedPAC Chair, Michael Chernew, Illuminates the Causes & Consequences of Healthcare Spending

Understanding healthcare spending growth in America is a critical
component of any initiative attempting to improve care quality
and affordability. This holds true for every person or
organization focused on improving healthcare – from policy
makers, to traditional healthcare incumbents, new entrants, and
the entrepreneurs driving digital health innovation.

There are few people who understand healthcare economics in the
U.S. as well as Michael Chernew, PhD, who has dedicated his
career to studying healthcare spending and how it affects the
quality of care and outcomes. Dr. Chernew is the Leonard D.
Schaeffer Professor of Health Care Policy, and director of the
Healthcare Markets and Regulation Lab in the Department of Health
Care Policy at Harvard Medical School. Among many other roles, he
is also currently serving as the Chair of the Medicare Payment
Advisory Commission (MedPAC), an independent agency that advises
Congress on costs, payments and other issues affecting the
Medicare program.

Dr. Chernew’s research examines several areas related to
improving the health care system including studies of novel
benefit designs, Medicare Advantage, alternative payment models,
low value care and the causes and consequences of rising health
care spending.

In this episode of Healthcare is Hard, Dr. Chernew shares his
knowledge with Keith Figlioli in a discussion that touches a
broad range of topics around healthcare economics and innovation,
including:



The false choice between free markets and government
intervention. While some people argue for a stronger
government role in healthcare, others believe there needs to be
better mechanisms to make markets work better. Dr. Chernew says
we need to use the power of the markets where we can and sees a
lot of potential for innovation to play a role. But he is also
skeptical about how much markets can accomplish on their own.
He says the most important thing is to recognize that both the
government and the markets are flawed, and he talks about the
need to understand where flaws exist in order to navigate them.


The appetite for disruptive innovation. There are a lot
of organizations now that believe they can deliver good
population health for less and capture the gains associated
with that efficiency. While the effectiveness of these new
approaches generally remains to be seen, Dr. Chernew talks
about how there are now many mechanisms in place that will
allow organizations to accept risk, along with an appetite for
innovation that has grown exponentially over the last decade –
especially if it can lower spending.


Skepticism on the impact of better primary care. There’s
a common belief that more and better primary care will
ultimately save money because everyone would be healthier. This
might be true in some places or situations, but Dr. Chernew
says he’s very skeptical of the assertion that it could scale
in the current system. He explains how saving money is
typically achieved by eliminating low value care and providing
high value care more efficiently, and talks about potential
alternatives for expanding primary care as it exists today.


The high cost of drugs. There’s a lot of disfunction in
the drug market in terms of pricing and value, and the way Dr.
Chernew explains it, high costs are really financing future
innovation. He says there are core debates about how much
innovation should be financed, and how much innovation will
occur as a result. He talks about options for designing
potential structural changes and incentives to address these
issues.



To hear Keith and Dr. Chernew talk about these topics and more,
listen to this episode of Healthcare is Hard: A Podcast for
Insiders.