Yale-led project offers proposals to fix U.S. health system one problem at a time

Soaring health care costs in the United States burden families with expensive premiums and account for nearly a third of the federal budget. A new project based at Yale University is providing policymakers with evidence-based proposals to eliminate inefficiencies in the health system and reduce costs by hundreds of billions of dollars annually.

The recently launched 1% Steps for Health Care Reform Project synthesizes research by leading economists and health care experts from top institutions nationwide into easily digestible policy proposals for incrementally reforming the U.S. health system, thereby bringing academics and their specialized expertise closer to the policy process. The project, directed by Yale economists Zack Cooper and Fiona Scott Morton, is aimed at identifying and addressing discrete problems that individually raise health spending by 1 to 2% — so-called 1% problems — but collectively represent massive costs that make the United States an international outlier in health care spending.

From 2000 to 2019, health spending in the United States increased 87% while median household income increased by only 10%. Today, average annual health insurance premium for a family of four is $21,342 — the equivalent dollar amount of buying a new Toyota Corolla each year. If the $3.8 trillion U.S. health system were a country, it would be the world’s fourth-largest economy, larger than the economies of Germany, India, and the United Kingdom.

“There is no silver-bullet policy solution to wholly reforming a health system of this scale,” said Cooper, an associate professor of public health and of economics, and associate faculty director of Yale’s Tobin Center for Economic Policy. “By reframing health care spending as a series of distinct problems, we can create a policy roadmap to help policymakers and industry reduce costs, increase efficiency, and ease the financial burden on families.”

The project’s academic contributors have produced 16 policy briefs based on their research that each highlight a 1% problem in the U.S. health system and offer tangible steps for reform that would eliminate inefficiencies harming the quality of health services or access to care. The briefs address a range of topics, from reforming the inefficient coding the Centers for Medicare and Medicaid Services use for physician-administered drugs, to helping individuals more effectively choose insurance plans, to reducing fraud in the home-health sector, to improving auto-assignment of beneficiaries in Medicaid managed-care plans. Collectively, the proposals offer a pathway to reducing health care costs by more than $300 billion annually, or about 9% of overall health spending, Cooper explained.

“Each proposal we’re sharing, and there are more to come, is based on data and supported by rigorous empirical research,” he said. “We hope to engage with policymakers at the state and federal levels to tackle the problems we’ve identified.”

For example, a pair of briefs proposing strategies to increase kidney donations illustrate that policy changes can reduce spending while also improving health outcomes. Currently, about 90,000 people in the United States have end-stage renal disease and need a kidney transplant, and studies have shown that death rates are considerably higher for patients if they must rely on dialysis instead of receiving a new kidney. Researchers show that each kidney transplant saves the Medicare program about $146,000 in aggregate by eliminating the need for dialysis. The briefs offer recommendations for increasing the supply of donor kidneys, such as removing financial disincentives for living kidney donations. If implemented, the measures would improve patients’ quality of life and generate substantial savings for taxpayers, the researchers explained. 

The list of proposals is expected to grow as more researchers join the project, noted the project’s directors.

Cooper and Scott Morton have firsthand experience in using economic research to tackle a 1% problem. Their research informed and inspired a new federal law to eliminate surprise medical billing — a discrete problem that raised health care costs by approximately $60 billion annually. 

“We understand why people hope for a panacea to fix the country’s health system, but economists owe it to the public to provide tangible, evidence-based, and achievable steps to reducing health care costs, even if expected gains are not dramatic,” said Scott Morton, the Theodore Nierenberg Professor of Economics at the Yale School of Management. “Incremental and continuous progress is how we will transform the U.S. health system over the long run.”

The project is supported by Arnold Ventures and the Tobin Center for Economic Policy. The policy briefs and a list of contributors is available on the project’s website.