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Controlling Health Care Costs: How to “Bend the Curve”

Nov 10, 2009• 5

Stephen Shortell

By STEPHEN SHORTELL

As Congress nears passage of the first substantial health care reform in decades, there is an ominous challenge: No reform will be sustainable unless we slow the rapid growth of health care spending.

Health care costs are rising at a staggering pace. Expenditures have been increasing at 2.7% per year faster than the rest of the economy over the past 30 years. In 1980 the US spent about 8% of GDP on health care. We now spend over 17%. We need to rein in growth of health care spending to levels no higher than overall economic growth — or ideally “bend down” the growth curve to an even lower figure.

How do we “bend the curve”? What are the best ways to slow the growth of health care costs, thus making other reforms sustainable?There are three major areas in which reforms will help bring health care spending under control.Prevention: US health care is burdened by diseases that are preventable. If we can improve lifestyle issues – nutrition, exercise, obesity, tobacco use – we will lower the future incidence of diabetes, heart disease, cancer, and other costly maladies. Current health reform proposals that allocate $10 billion for a Prevention and Wellness Fund represent a major step in the right direction. Disease prevention likely provides the greatest return on investment regarding health care costs of anything we do.

Hospital and Physician Behavior: Hospitals have no incentives to prevent unnecessary hospitalization. Physicians, paid mostly by fee-for-service, have every incentive to order more tests and procedures. Neither is rewarded directly for making – or keeping – patients healthy. Key to controlling health care costs in the future will be to realign these incentives.

This will require performance measurement and public reporting for both cost and quality. Provided that predetermined quality criteria are met, hospitals and physicians who can provide better care for less money would share in the savings.

Spotlight on Health 2.0: The Patient Is In, from SF 2009

Nov 9, 2009• 1

Every week we bring you a new video from Health 2.0! This week we’re featuring The Patient is In, a session focusing on how Health 2.0 tools are making a difference for patients.

To see more videos from past Health 2.0 conferences, or to purchase the entire conference DVD sets from ’07 & ’08 click here. 2009 DVD sets will be available shortly, please check back for updates.

Where were you?

Nov 9, 2009• 4

By MICHAEL PAINTER

I distinctly remember the first time I heard the title, “National Coordinator for Health Information Technology”. It was 2004. That’s, of course, the year that RAND released its important national report card highlighting the overall mediocre state of health care quality. You know the one that told us “it’s a flip of a coin.” I was an RWJF Health Policy Fellow working on the Hill with then Majority Leader Bill Frist’s health policy staff.

There was a flurry of staff activity regarding the president’s pending executive order pushing adoption of the electronic health record and creating a new federal health information technology, dare I say, czar. . . . But what to call this new position? To be honest, when I initially heard folks say the words, “national coordinator for health information technology,” my first thought was, “Well, that’s a mouthful.” My second was “It sort of sounds like a character from that TV show, ‘The Love Boat’”. But I kept those smart remarks to myself and quite quickly got on board—and, to be honest, never looked back.Continue reading…

Are We Too Small to Succeed?

Nov 9, 2009

By DON LINDSTROM

The logic behind the government bailouts in the financial and automobile industries goes like this: some institutions are so large and interconnected that their failure could collapse the entire economy. They are considered to be too big to fail. The notion of too big to fail implies its opposite, that some individuals and businesses are too small to succeed. Of course, that includes most Americans.

Author, commentator, and former Republican strategist, Kevin Phillips, uses the near economic collapse to illustrate current reality regarding American values. He calls the government bailouts welfare for the financial sector. Conversely, he points out that whenever topics like universal health care or national pensions arise, they are invariably described as too expensive or socialistic. The same arguments were made about the bailouts, but they did not prevail. Thus, we can afford to bail out large corporate entities in self-made crises, but we cannot afford a basic level of health care for all Americans. This has been true for nearly a century. Prior to the Great Depression, government took a hands-off approach to economic bubbles, allowing the ‘invisible hand’ to work its magic. Since that time, government has taken a hands-on approach to economic crises. In the current case, everybody must pay for the greed of a few, some of whom continue to be rewarded for their behavior. The invisible hand seems to have become the visible finger.

In contrast, universal health care has been proposed and defeated repeatedly over the past century (in 1915, 1935, 1948, and 1994). With the exception of the old and the infirm (Medicare) and the young, the disabled, and the poor (Medicaid), we as a society have not defined health care as a public good like education or police and fire services. The Social Security Act of 1965 that created Medicare and Medicaid is attributed to the masterful legislative skills of LBJ.

Unlike comedian Jack Benny, our leaders don’t have to think much about the question, “Your money or your life?” With the exception of the SSA of 1965, financial security (money) has always trumped health security (life). In effect, the acute condition (economic crisis) gets action while the chronic condition (health insecurity) does not.

For those with health insurance who have not tested its boundaries, health care is not a crisis. It might be costly. It might be time consuming. It might be infuriating to navigate the insurance and health care labyrinth. But it’s not a crisis. It will probably take a catastrophe like the collapse of the safety net hospitals before universal health care becomes public policy.

Many Americans believe the fix is in, the system is rigged. A friend refers to members of Congress as “the whores in Congress” and suggests they should wear sponsor patches like those worn by NASCAR drivers. To be fair, we the people don’t seem to have a problem with outsourcing political campaigns to the private sector. That’s the game we allow to be played in Washington.

If health care were a product, this would be the current offering. Pay twice as much as other industrialized countries, waste 30% to 40% of that payment due to a highly inefficient system, get lower overall quality (33% less value in terms of outcomes), cover only 80% to 85% of the population, and put 15% to 20% of those with insurance at risk financially if they fully use the product. According to the Business Roundtable, this product puts American business at a competitive disadvantage globally.

One wonders if Yankee ingenuity has died or has simply been co-opted by a collection of balkanized special interests. If we Americans are unable to create a sensible health care system out the current mess, we really are too small to succeed.

Don Lindstrom is a business strategy consultant. His firm recently recommended a redesign of the Florida Medicaid program. He can be reached at do*@**************nc.com.

Modest step in the reform journey shows the idiocy of our political system

Nov 8, 2009• 14

By MATTHEW HOLT

It does seem to take a health care bill to remind us all how incredibly screwed up the political process is in these here United States. The Medicare Modernization Act was railroaded through by Tom Delay and friends using all their charm and finesse. And last night the House passed its version of the health reform bill. It includes employer mandates, exchanges, subsidies, public option and taxes on those earning more than $500,000 to close the cost gap. And CBO in its wisdom says that it doesn’t increase the deficit.But it didn’t pass by much. 40 Democrats opposed it. These were the Blue Doggers who needed some political cover to be able to say in 2010 that they were against the bill before they were for it. Their expected course of action is that a less liberal bill comes back from final conference with the Senate which they can support. Apparently out there in purple state land uninsurance and egregious health plan behavior are not a problem—at least not compared to the desire of the people to protect the incomes of those earning over $500,000 a year.

But in order to stop even more Democrats opposing it at the last moment Pelosi had to let some previously unheard of Congressman called Stupak become the mouthpiece of the Catholic Bishops who decided that they needed to impose their views about reproductive medical care into the debate. Cynics like me may wonder about the validity of views on that issue from a bunch of old men who’ve allegedly never been married or had sex with a woman, and whose main contribution to child welfare over the past few decades has been to ignore and assist in flagrant abuses of it by their colleagues. But no matter, over recent days they started putting pressure on various Democrats to tighten restriction on Federal funding of abortion.Continue reading…

We the Consumers

Nov 7, 2009• 32

By MARGALIT GUR-ARIE

There has been much talk lately about the Consumer movement in health care. The health insurance industry has given us the Consumer Driven Health Care (CDHC), which has gained much traction in the marketplace in the form of high deductible insurance plans, where the Consumer, having “skin in the game” now, is expected to make informed decisions on how to spend his or her money on health care services. The Consumer is empowered and in control of health care expenditures.

And then there are the various Consumer advocacy groups demanding an end to the paternalistic approach to the practice of medicine. Doctors should relinquish control to the Consumer. Consumers should actively manage their care by obtaining and controlling their medical records. Consumers should be informed by the medical establishment of the latest evidence-based best practices, timely research and costs of treatment. The Consumers will then make an informed decision aided by a myriad of peer and professional information available on the internet.

That’s a lot of new responsibilities for most of us who have no idea how much a visit to the doctor costs and even less of an idea whether or not we need that stent, assuming that we even know what a stent really is. Well, since we are Consumers now, not just passive patients, let’s see how we stack up to our brand new responsibilities.Continue reading…

“The possible” vs “what we want,” resumed

Nov 5, 2009• 2

By MATTHEW HOLT

Not so long ago (actually less than 2 weeks), there was quite the spat on THCB between the Four Horseman (Klepper, Kibbe, Lazewski & Enthoven) and Maggie Mahar. Essentially it came down to this question:

Is there enough in the current House & Senate bills to restrain spending and remake the health care system? Or is the whole effort so bought off by the health industry as to be a waste of time?

I put myself in the camp of agreeing with both the Four Horsemen (that the bills were pretty much emasculated) and with Maggie (in that at least we’ll get some significant improvements in coverage for the uninsured).

And don’t they need it. In fact I wonder how many of the 50–odd million uninsured and the 50–odd million Americans who don’t have enough to eat are the same people.

But today the chorus of “fiscal responsibility through health reform” being orchestrated by the Administration got a little louder. It started about a week ago with Peter Orzsag banging the drum for health care reform being deficit neutral. He pointed to a letter from a group of moderate to liberal economists supporting HR 3962.

Today many of that same group (although not all and without the non-economists) were joined by some heavy hitters on the health economics side supporting many of the tenets of the Senate bill. This new group includes many of the same liberals but also some sensible Republicans (well Mark McClellan) and some real big guns including Uwe Reinhardt, Victor Fuchs, Joe Newhouse, Laura Tyson, Henry Aaron, Alan Garber and Kenneth Arrow. Alain Enthoven (one of the Four Horsemen) is notable by his absence.

However, the economists probably wouldn’t disagree with the Four Horsemen about how limited the changes in the Senate and House bills actually are, and they appeal for an independent Medicare Commission and serious delivery system reform—all of which will be emasculated in Congress. But nonetheless they are providing valuable intellectual cover for the Administration—no one on the other side will be able to put a crew like this together! Meanwhile over on the Health Affairs blog Jack Wennberg (with Shannon Brownlee) is giving an assist by stepping up his counter-attack against the Academic Medical Centers who are complaining that their patients are sicker.

So the “realists” are coming out in support—all believing that once we get the legislation out of Congress and into sensible hands within the Administration there’s a chance that we might be able to do some good in terms of delivery system change.

Stay tuned. This is a good reason to keep reading THCB for the next decade.

Why “free market competition” fails in health care

Nov 3, 2009• 32

By JOE FLOWER

In trying to think about the future of health care, thoughtful, intelligent people often ask, “Why can’t we just let the free market operate in health care? That would drive down costs and drive up quality.” They point to the successes of competition in other industries. But their faith is misplaced, for economic reasons that are peculiar to health care.

More “free market” competition could definitely improve the future of health care in certain areas. But the problems of the sector as a whole will not yield to “free market” ideas – never will, never can – for reasons that are ineluctable, that derive from the core nature of the market. We might parse them out into three:

True medical demand is wildly variable, random, and absolute. Some people get cancer, others don’t. Some keel over from a heart attack, get shot, or fall off a cliff, others are in and out of hospitals for years before they die. Aggregate risk varies by socioeconomic class and age – the older you are, the more likely you are to need medical attention; poor and uneducated people are more likely to get diabetes. Individual risk varies somewhat by lifestyle – people who eat better and exercise have lower risk of some diseases; people who sky dive, ski, or hang out in certain bars have higher risk of trauma. But crucially, risk has no relation to ability to pay. A poor person does not suddenly discover an absolute need to buy a new Jaguar, but may well suddenly discover an absolute need for the services of a neurosurgeon, an oncologist, a cancer center, and everything that goes with it. And the need is truly absolute. The demand is literally, “You obtain this or you die.” Continue reading…