Cost Control: Moving Forward, Backwards, or Sideways?

On the day before an historic vote on health care reform, it is only fitting to assess the Senate bill’s viability in managing costs.

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As the debate on the Senate health reform bill winds down, some assessment of its viability in managing costs is in order. The best that can be said is that the prospect is uncertain, what the weather bureau might call “mixed precipitation” if it was in the Congressional prediction business.

The most notable and disturbing trend can be seen in what Peter Orszag said in late November as he tried to put the Senate and House bills in a good light. We need, he said, “to move toward the high-quality, lower cost health system of the future, and the reform reforms underway in the House and Senate will put us firmly on that path”

In short, as his language – “of the future” and “on that path” – and much of the two bills make clear, the most common time frame is 10 years, which seems to me a dangerously slow stroll into the future. Even if the present rate of 6% annual cost inflation slowly abates, the baseline costs of the system will be much higher a decade from now.

In a December 10 report the Office of the Actuary of the CMS noted that Medicare costs per beneficiary usually increase over time as a result of price growth, more utilization of services, and greater intensity or complexity of those services. The report then discussed how difficult it will be for the proposed Independent Medicare Advisory Board to manage those costs. Since then the prospect that such a Board will make it through the Congressional debate has faded. The CMS did not say how hard much harder it would be without such a Board.

Atul Gawande received his usual attention in his most recent NewYorker article, claiming that the lack of a grand strategy for cost control may be just fine and that a variety of experimental approaches might well do the job just as they once did (and continue to do) in agriculture. That is not a fast-track method of bringing about change, and of course some of the experiments may not work or may be hard to implement on a national scale, as has happened before with Medicare pilot projects.

There is nothing per se wrong, and much good, to be said about such efforts. But they represent one more capitulation to the mañana approach that seems to have caught on, and exemplified as well in deferred starting dates for many important reforms, 2014 and 2015 in many cases. Better late than never, one might say, but it is like walking with deliberate slowness to call 911 to report a fire.

Hardly less striking has been the way in which one potentially fast moving and strong idea after another has been abandoned, watered down, or is on a death track: the public option plan, the Medicare Advisory Board, the excise tax on the costliest insurance plans, and the scheduled 2l.2% cut in Medicare payments to physicians (likely to give way to small increase).

While I have painted a bleak picture there are some good cost control features in the Senate and House bills: restructuring Medicare Advantage plans to reduce federal subsidies; reducing annual market basket updates for inpatient hospital, home health, skilled nursing facilities, and hospice; and a requirement for the Secretary of the Department of Health and Human Services to negotiate drug prices for Medicare part D plans.

My worry is that a reform plan that works well to improve access will be achieved at the price of still more compromises on costs. That has been the trend so far. If that happens we are likely to be faced with a health policy doomed to a short life.

Medical care in general and Medicare in particular will not suddenly collapse. It will just rot away. A lower cost, affordable, and sustainable policy will require that everyone – doctors, patients, hospitals, and the assorted medical industries – understand that nothing less than a system guaranteeing decent care for all combined with a far more modest model for that care will suffice to get us into a tolerable future.

It comes to this: universal health care and universal self-sacrifice. That is the only way a decent society can give its citizens what they need in the long run. But the short run is the place to start, and that does not appear likely.

Daniel Callahan, editor of the Health Care Cost Monitor, is the author most recently of Taming The Beloved Beast: How Medical Technology Costs are Destroying Our Health Care System.

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