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New project looks to identify problems in the U.S. health system

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Yahoo Finance’s Kristin Myers and Anjalee Khemlani, along with Zack Cooper, Associate Professor of Public Health and Economics at Yale University, discuss the 1% Steps Project’s objective to make health care spending more efficient.

Video Transcript

KRISTIN MYERS: Welcome back to "Yahoo Finance Live." Now, our next guest says that small, incremental changes can have huge impacts on the health care system. And an organization called 1% Steps aims to look at how. Let's bring in Zack Cooper, associate professor of public health and economics at Yale University, as well as Yahoo Finance's Anjalee Khemlani for this conversation. So Zack, what is the low hanging fruit in the health care system that can be fixed?

ZACK COOPER: Well, I think, take a step back. If the US health system was a country, it would be the fourth largest country in the world. And I think that offers some guidance about how we should be thinking about health care spending and how we reduce it.

There's not one thing wrong in the US health care system. There are all of these discrete problems that require sort of incremental plumbing-like solutions. So we see a lot of hospital mergers that are making markets less competitive. We need to fix that.

There are some quirks in how Medicare pays for certain types of drugs. That's 1% of health spending right there. There are just all these little problems that add up. But when we think about it, a 1% inefficiency in the health care system is about what we'd be spending to give universal pre-K to the entire country.

ANJALEE KHEMLANI: Zack, I know that recently, you also had a publication focused on MRI scans. And that's something to look at when we talk about some of the easy or sort of low hanging fruit on how to direct and control health spending. Can you walk us through that a little bit and tell us what the finding was on why more spending happens or why spending is inefficient?

ZACK COOPER: Yeah. So I think it's a really good example of the sort of potential. So the average person out there actually drives past six cheaper MRI locations between their home and where they ultimately get care. And if they didn't, if they just literally went to the place closest to their house, on average in the country, we'd [GARBLED AUDIO] lower health care spending by about 3/4 of a percent, so tens of billions of dollars.

And then the question is sort of how do you get people to make better choices? And it turns out exposing people to high out-of-pocket costs doesn't do it. What you really want to do sort of help their doctor help their patients make better choices. So you sort of tell the doctor the prices of different locations around where the doctor practices.

It's sort of these small steps that each sort of aren't super-remarkable in their own right, but that collectively add up to big reductions in health spending. And our sort of point is nobody writes country music songs about incrementalism. But it's actually going to be that sort of incrementalism that we need to lower our insurance premiums.

KRISTIN MYERS: OK, if we were to add up all of these incremental steps. And Anjalee's partially laughing because I was stunned when I heard that 1% could fund universal pre-K, I believe you said. So if we were to add up all of those small, incremental changes, how much of a savings are we going to get, or essentially, how many other programs could we fund here in the US if we just made health care spending more efficient?

ZACK COOPER: $400 billion. It's the size of a small country. It's just it's enormous, the scale of the inefficiency that we see.

KRISTIN MYERS: Wow, I'm speechless. Anjalee, take it away.

ANJALEE KHEMLANI: I know there's a lot-- Zack is really big on this. But let's talk about what you're trying to do with the 1%. Obviously, pushing a lot of this in front of the policymakers is a big deal. Why can't we do sort of a bigger overhaul, kind of in the way that Obamacare came through? Why can't we do that with health spending and control? Especially in recent past, we've seen things like price transparency come to light. Why isn't that effective?

ZACK COOPER: So I think the heart is most of the big legislation that we can pass actually increases health care spending, and that's because it's, in a sense, easier to give people things than it is to take away. And I think one of the big challenges in the US health care system is, each dollar is actually somebody's income. And we're all pretty good at sort of making sure our income doesn't come down.

And so I think the sort of key message here is identifying waste and then taking it out. And so the idea was to sort of find the 15 or 20 best economists I could think of. And there are couple of Nobel laureates in the mix. And saying, what are some really big inefficiencies that you've identified in your work? And what are concrete steps that would fix it? And then putting those on paper, and then taking it to the Hill and taking it to legislators.

And I think one of the real upsides of doing it that way is you sort of say, look, here are tangible steps. I think a lot of us are really good at dunking what doesn't work. And the idea here is to actually say what you can do. And it just turns out, when you say what you can do, it's a little less dramatic than [GARBLED AUDIO] to be.

ANJALEE KHEMLANI: And then finally, I know that you said you have a mix of people. Why get that mix instead of just health care experts or top experts in health care?

ZACK COOPER: Time. I tried to find as many people as we could. And we want more coming forward. So if folks have good ideas, they should reach out. And the idea is finding all of these discrete problems and then offering a tangible roadmap to fix them. And the more we find, the bigger the savings we'll make.

I think the analogy for how we address health care spending in the US is more like Whack-A-Mole than sort of shifting tectonic plates. We want to find all these leaky pipes, fix them, and actually make the system run a little more efficiently.

KRISTIN MYERS: I'm still stuck back on $400 billion worth of savings, which should be a nice point of bipartisan support and a bit of common ground for everyone. Thank you so much, Zack Cooper, associate professor of public health and economics at Yale University, of course, Yahoo Finance's Anjalee Khemlani for an absolutely fascinating and really important conversation.