Managing Editor’s Memo

Buy Me Some Peanuts and Cracker Jack But Please Watch Your Utilization Rates


Frank Diamond

Baseball is life, T-shirts inform us. Not because the game is something to be cherished and celebrated — though true fans are enthralled — but because every time you think you have it figured out, you learn that you don’t. (Maybe the shirts should say, “Baseball is love.”)

For years, I’ve felt that all health services could be fully covered, with much to spare, if our technological growth had stopped in the 1970s. Of course, many of us would be dead for lack of the advances in treatment that have come our way in recent decades. Then I looked at other industries. For instance, technological advances seem to cut the cost of computers and phones.

Or do they? If you manufacture something that costs a dollar a unit to create, what would you have to charge if 10,000 people wanted it? If it costs $5 to make, what could you charge 10 million people and still make a handsome profit?

Our cover story looks at lab costs. Contributing editor Joseph Burns reports that utilization spurs an increase in spending as much as the cost of the tests. Economics has as much to do with psychology as with statistics. One health plan says that the cost per test has stayed about the same, but that test utilization is driving spending up by 8% to 10% annually, twice that of overall medical costs, which have been rising 4% to 5% annually.

In Medicare, clinical lab tests rose by an average of 5.6% annually from 2003 through 2012, including a sharp increase in spending of 9.1% in 2012.

No matter what happens in a baseball game, even if that event is something longtime fans have never seen before, as the crowd files out of the stadium, what really matters is what’s on the scoreboard.

Maybe managed care is life, too.