Cost Control: Setting the Bar

How high should the bar be set for cost control measures in health care form legislation? Three considerations — priorities, time frame, and political feasibility — point to the answer.

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With the fashioning of congressional legislation the health reform effort now moves into its (maybe) last phase. While the focus on cost was prominent at the beginning of the reform debate, it has gradually receded, displaced by an ideologically driven emphasis on the likely cost of extending access to the uninsured. It is imperative that cost control be brought back into prominence.

An important issue at this point is this: how high should the bar be set in pushing for a strong place for cost control measures in the final legislation? I put aside the prudent judgment about whether too strong an emphasis on cost control will harm the drive for expanded access. Possibly so. Instead, I suggest that three questions are pertinent, all turning on the proposals now extant on reducing annual cost escalation.

Priorities: which of the many proposals is most promising economically – that is, tough – and should be given priority (e.g., reduction of physician reimbursements)?

Time frame: how soon would the proposal have an impact (e.g., immediate price controls vs. a decade’s gestation)?

Political feasibility: How politically realistic are the proposals – impossible, easy, worth a fight (e.g., Medicare benefit reductions vs. information technology vs. comparative effectiveness research with mandated compliance)?

My too-brief response to those three questions is this: give priority to the tough proposals likely to have the most immediate impact and be prepared to fight hard before compromising. It has become obvious that the most politically acceptable proposals are those that are on the now ubiquitous and ambling 10-year plan – slow to make a difference, uncertain in their economic impact, but unthreatening to patient, physician, and industry interests (information technology, prevention, and toothless comparative effectiveness studies).

I raise those three questions because they are either not raised or are scanted in some otherwise recent valuable articles and reports. The articles are in the September-October issue of Health Affairs under the general title “Bending the Cost Curve,” and the reports are from The Urban Institute and the Engleberg Center of The Brookings Institution.

While many of the Health Affairs articles and the Brookings report are illuminating, the Urban Institute study, written by Robert A. Berenson and colleagues, stands out for the specificity of its proposal both for controlling costs and raising revenue. Best of all, they present some plausibly projected figures to go with their proposals (though some, such as a public plan choice, may never make it through Congress). They also usefully distinguish between tough proposals – though they present only four – certain to lower costs (reducing payment rates to hospitals) and eight proposals that they call delivery systems reform, with a less certain outcome (investing in chronic care management and coordination programs).

Taken together, their proposed measures, Berenson and colleagues say, could save the government close to $1.3 trillion over a 10-year period, surely a tremendous benefit. Or would it?

The most common cost projection without reform is for a near-doubling of national costs from the present $2.4 trillion to $4.2 trillion over the next 10 years. Their $1.3 trillion savings would give us a final figure of $2.9 trillion, a 22 percent gain – significant increase over the present baseline. The present $2.4 trillion is already wreaking havoc and the fact that we could say in the future that “it could have been worse” would not be much of a consolation.

The Engleberg Center study, also called “Bending the Curve,” sets forth nearly 50 cost reducing proposals, only a handful of which would have any immediate impact (e.g., increased payments for primary care). They also seem to be on the 10-year plan.

In the lead article in the Health Affairs collection, Michael. E. Chernew, Richard A. Hirth, and David M. Cutler write that “reforms that would dramatically slow the growth of health spending growth are necessary.” With two exceptions, no strikingly dramatic reforms are proposed in the articles that follow. Most would be slow and have no assured results, and many would encounter political and industry opposition, perhaps surmountable, perhaps not. Their fine power of diagnosis is not matched by strong, much less fast-track, ideas. A sense of urgency is almost altogether missing.

An exception is an article by Jonathan Oberlander and Joseph White. They argue for a solution to the problem of notoriously high prices in American health care. “There is evidence,” they say, “that price regulation can constrain spending and that the public will support that cost control approach.” Their evidence of public support is probably a bit weaker than they present, but they are surely correct in noting the political obstacles. Even so, Oberlander and White think that policymakers may well be drawn to price controls if the health care industry’s promise to cut health care spending does not materialize.

The other exception is an article by Bruce Vladeck and Thomas Rice, which, while more theoretical, indirectly supports Oberlander and White. We must do what other countries have successfully done, which is to “consolidate the bargaining power of purchasers [which] gives the upper hand to stronger government involvement.” Just so.

But don’t these exceptions run afoul of the three considerations for judging cost control proposals that I suggested above? Yes, true enough. They are hardly on anyone’s priority list, would take a long time to bring about, and would provoke a paroxysm of political and industry hostility.

Even so, since so many of the more conventional system-wide proposals run into the same kind of difficulties, some wishful thinking about price controls and stronger government involvement in cost control may eventually be tolerated. It would only require the sense of urgency now absent, and that may soon come, as health care disintegrates.

Daniel Callahan, president emeritus and cofounder of The Hastings Center, is editor of the Health Care Cost Monitor and author of the new book, Taming the Beloved Beast: How Medical Technology Costs are Destroying Our Health Care System (Princeton University Press).

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One Comment

  1. J Maguire
    Posted October 6, 2009 at 11:51 pm | Permalink

    The health care system in whole is very disjointed and needs to be reigned in in order to begin the first steps toward better health care. We are at a point in history where our treatment based approach is no longer working and there is too much statistical support of a preventative system to deny.
    According to Dr. Kardos ” ‘The focus for the past 50 years has been to zero in on the 20 percent of people who account for 80 percent of health expenses’ “…” ‘This has been a very costly strategic failure because the best you can do by ‘managing’ sick people is to squeeze out some nominal payment for procedure or avoid the procedures completely.’ “
    http://​www​.ourblook​.com/​c​o​m​p​o​n​e​n​t​/​o​p​t​i​o​n​,​c​o​m​_​s​e​c​t​i​o​n​e​x​/​I​t​e​m​i​d​,​2​0​0​0​7​6​/​i​d​,​8​/​v​i​e​w​,​c​a​t​e​g​o​r​y​/​#​c​a​t​i​d​107

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