The reform caldron is heating up. Legislative directions are beginning to appear. And some important government reports, from the Senate Finance Committee and the Congressional Budget Office (CBO), are bringing fresh clarity to the cost control debate.
Some areas of agreement can be discerned. Everyone, well almost everyone, agrees that rising annual costs, now running at 6 percent, pose severe, and now well-publicized threats to present and future health care. The long-term goal of control should be an annual cost increase no greater than that of the annual increase of the GDP, that is, about 3 percent, and the short-term goal is to move effectively in that direction. The main drivers of rising costs are technology, waste and inefficiency, administrative expenses, fee-for-service medicine, irrational regional costs variations…and on and on.
American culture and the commercial ethos of too much of our medicine are not a congenial setting for cost management. As one seasoned observer noted after a nationwide tour to prepare a health care documentary, he met no doctor who felt he was overpaid, no hospital administrator who believed she could get by with less money, and no patient who was prepared to give up anything. There is, as noted, some agreement on cost control, but too much of it is about what others should give up and about our medical neighbor’s wasteful practices.
The politics of cost control is an old, oft-told story: liberals look to government-dominated universal care to manage costs, and conservatives to increased consumer choice and enhanced provider competition. But neither the right nor the left are forthcoming with tough control ideas; and any hint of rationing is taken to be the kiss of death.
But the hard truth is that serious cost control will entail some pain and sacrifice, and of the worst kind: giving up some perceived personal benefits–as patients and as medical professionals–in the name of the overall well-being of American health care. As the Director of the CBO, Douglas W. Elmendorf, delicately put it in spring congressional testimony in March, much health spending “contributes little if anything to the overall health of the nation, but finding ways to reduce such spending without affecting services that improve health will be difficult.” At the least.
As the physician Eric Cassell once put it in an analogous situation, “We doctors often take sick people and then make them even sicker in order to make them well.” In the long run it is perfectly possible to imagine a less expensive health care system and a healthier population, everyone’s win/win dream. But there will be some misery in getting there.
Before touching on some of the specific ideas in the various reports cited above, let me suggest some pertinent questions to help judge their value.
- Is it likely to be effective in controlling cost increases?
- Is it politically feasible?
- Is it technically/managerially feasible?
- Is it a slow-paced or fast-paced plan–years or decades?
- Is it likely to have a good, bad, or neutral health outcome?
While it is impossible to summarize here all the cost control ideas presented in the two reports on policy options by the Senate Finance Committee (April 29 and May 20), many of which are likely to find their way into health reform legislation, an initial point needs mentioning: although the titles of the reports seem to referral to all American health care, the proposals focus almost exclusively on Medicare and Medicaid.
Does the private sector need no reform or is it that the committee has tacitly decided that the government can have no role in private sector reform and that it won’t even try? Or does it expect a spillover effect from the public to the private sector, as if that might be sufficient?
The April 29 report of the Senate Finance Committee focused on payment reform, infrastructure investments (principally health IT and comparative effectiveness research), Medicare Advantage, and options to combat fraud, waste, and abuse. Most notably, some proposals rely heavily on payment incentives for good clinical practices and penalties for poor ones. Those proposals would apply to hospital quality and readmission and bundling rates, health IT, physician practices, and chronic care. Another proposal would set stricter standards for the use of imaging services.
Two features of that report are especially worth noting. One of them is that, under the earlier established congressional legislation of a Sustainable Growth Rate (SGR) for physician fees, a 21 percent reduction in physician fees is scheduled to go into effect on January 1, 2010, and with additional reductions of 6 percent a year for several years thereafter.
The SGR rule has been in effect for some years and, while Congress put the legislation in place, it regularly and almost ritualistically puts it aside. Will that happen again? The Finance Committee offers some softer legislative possibilities, but just what Congress decides to do about the present legislation and its draconian cost reductions will be a severe test of its resolve to control costs in an important high cost area.
The other feature of the Senate Finance Committee report is distressing, that of its proposal for comparative effectiveness research. “The entity conducting the research,” it wrote, “should be prohibited from issuing medical practice recommendations or from making reimbursement or coverage decisions or recommendations.”
Not even recommendations? If nothing else that stance is inconsistent with is quality-improvement tactics, providing for financial incentives to meet government-formulated standards. Why are quality standards acceptable to change clinical and hospital behavior but not to control costs?
No great political sophistication is needed to spot the not-so-hidden hand of the medical industry and some physician groups behind that kind of prohibition. Their long-standing aim, going back to the 1970s, has been to neuter technology assessment efforts. Industry sees a slippery slope to price controls and physicians fear a forced use of probabilistic evidence to treat their patients; that could happen, but not necessarily, and in any event some of both could be valuable.
The public and Congress need to know the cost impact of various treatments and ways of assessing new technologies and treatments. Lacking that knowledge, cost control can only be tepid. “Cost effectiveness,” CBO Director Douglas W. Elmendorf noted in his March testimony in the House of Representatives, “will yield a somewhat larger effect on health care spending” than clinical effectiveness studies.” Just so.
The May 20 Finance Committee report offers a mixed package of cost control measures, mostly promising. Some are aimed, for instance, at reducing physician reimbursement for over-valued services and reducing geographical cost variations; and other are aimed at reducing costs, for example, by means-testing strategies, modifying the exclusion of employer-provided coverage from gross income for taxation purposes, and modification or repeal of the 7.5 percent income level of itemized deduction for medical expenses. All are potent ideas but all will run into political resistance, most notably any efforts to weaken employer-provided health insurance.
In recent months word has gradually leaked out from cost research that the most popular political nostrums–medical IT, comparative effectiveness research, and prevention–are unlikely to make a large difference in cost control, and that to boot it will take years for them to do much good. That knowledge does not leave many likely big winners on the horizon–at least powerful enough to reduce costs from the projected $4.2 trillion in 2019 to, say, $3 trillion, which would bring it close to the optimal parity with the GDP.
Is there any hope that something could make a decisive difference? Yes, if we can bring ourselves to take an open-minded look at the way European countries do it, which will be the focus of some upcoming reports in the Health Care Cost Monitor.
Daniel Callahan is editor of the Health Care Cost Monitor.
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Cost Control: Where Does it Stand?
Neither the political right nor the left are forthcoming with tough cost control ideas. Two Senate Finance Committee Reports attempt to introduce cost savings into future health care legislation, but their proposals fall short in several areas, including the use of comparative effectiveness research to make recommendations for medical practice.
The reform caldron is heating up. Legislative directions are beginning to appear. And some important government reports, from the Senate Finance Committee and the Congressional Budget Office (CBO), are bringing fresh clarity to the cost control debate.
Some areas of agreement can be discerned. Everyone, well almost everyone, agrees that rising annual costs, now running at 6 percent, pose severe, and now well-publicized threats to present and future health care. The long-term goal of control should be an annual cost increase no greater than that of the annual increase of the GDP, that is, about 3 percent, and the short-term goal is to move effectively in that direction. The main drivers of rising costs are technology, waste and inefficiency, administrative expenses, fee-for-service medicine, irrational regional costs variations…and on and on.
American culture and the commercial ethos of too much of our medicine are not a congenial setting for cost management. As one seasoned observer noted after a nationwide tour to prepare a health care documentary, he met no doctor who felt he was overpaid, no hospital administrator who believed she could get by with less money, and no patient who was prepared to give up anything. There is, as noted, some agreement on cost control, but too much of it is about what others should give up and about our medical neighbor’s wasteful practices.
The politics of cost control is an old, oft-told story: liberals look to government-dominated universal care to manage costs, and conservatives to increased consumer choice and enhanced provider competition. But neither the right nor the left are forthcoming with tough control ideas; and any hint of rationing is taken to be the kiss of death.
But the hard truth is that serious cost control will entail some pain and sacrifice, and of the worst kind: giving up some perceived personal benefits–as patients and as medical professionals–in the name of the overall well-being of American health care. As the Director of the CBO, Douglas W. Elmendorf, delicately put it in spring congressional testimony in March, much health spending “contributes little if anything to the overall health of the nation, but finding ways to reduce such spending without affecting services that improve health will be difficult.” At the least.
As the physician Eric Cassell once put it in an analogous situation, “We doctors often take sick people and then make them even sicker in order to make them well.” In the long run it is perfectly possible to imagine a less expensive health care system and a healthier population, everyone’s win/win dream. But there will be some misery in getting there.
Before touching on some of the specific ideas in the various reports cited above, let me suggest some pertinent questions to help judge their value.
While it is impossible to summarize here all the cost control ideas presented in the two reports on policy options by the Senate Finance Committee (April 29 and May 20), many of which are likely to find their way into health reform legislation, an initial point needs mentioning: although the titles of the reports seem to referral to all American health care, the proposals focus almost exclusively on Medicare and Medicaid.
Does the private sector need no reform or is it that the committee has tacitly decided that the government can have no role in private sector reform and that it won’t even try? Or does it expect a spillover effect from the public to the private sector, as if that might be sufficient?
The April 29 report of the Senate Finance Committee focused on payment reform, infrastructure investments (principally health IT and comparative effectiveness research), Medicare Advantage, and options to combat fraud, waste, and abuse. Most notably, some proposals rely heavily on payment incentives for good clinical practices and penalties for poor ones. Those proposals would apply to hospital quality and readmission and bundling rates, health IT, physician practices, and chronic care. Another proposal would set stricter standards for the use of imaging services.
Two features of that report are especially worth noting. One of them is that, under the earlier established congressional legislation of a Sustainable Growth Rate (SGR) for physician fees, a 21 percent reduction in physician fees is scheduled to go into effect on January 1, 2010, and with additional reductions of 6 percent a year for several years thereafter.
The SGR rule has been in effect for some years and, while Congress put the legislation in place, it regularly and almost ritualistically puts it aside. Will that happen again? The Finance Committee offers some softer legislative possibilities, but just what Congress decides to do about the present legislation and its draconian cost reductions will be a severe test of its resolve to control costs in an important high cost area.
The other feature of the Senate Finance Committee report is distressing, that of its proposal for comparative effectiveness research. “The entity conducting the research,” it wrote, “should be prohibited from issuing medical practice recommendations or from making reimbursement or coverage decisions or recommendations.”
Not even recommendations? If nothing else that stance is inconsistent with is quality-improvement tactics, providing for financial incentives to meet government-formulated standards. Why are quality standards acceptable to change clinical and hospital behavior but not to control costs?
No great political sophistication is needed to spot the not-so-hidden hand of the medical industry and some physician groups behind that kind of prohibition. Their long-standing aim, going back to the 1970s, has been to neuter technology assessment efforts. Industry sees a slippery slope to price controls and physicians fear a forced use of probabilistic evidence to treat their patients; that could happen, but not necessarily, and in any event some of both could be valuable.
The public and Congress need to know the cost impact of various treatments and ways of assessing new technologies and treatments. Lacking that knowledge, cost control can only be tepid. “Cost effectiveness,” CBO Director Douglas W. Elmendorf noted in his March testimony in the House of Representatives, “will yield a somewhat larger effect on health care spending” than clinical effectiveness studies.” Just so.
The May 20 Finance Committee report offers a mixed package of cost control measures, mostly promising. Some are aimed, for instance, at reducing physician reimbursement for over-valued services and reducing geographical cost variations; and other are aimed at reducing costs, for example, by means-testing strategies, modifying the exclusion of employer-provided coverage from gross income for taxation purposes, and modification or repeal of the 7.5 percent income level of itemized deduction for medical expenses. All are potent ideas but all will run into political resistance, most notably any efforts to weaken employer-provided health insurance.
In recent months word has gradually leaked out from cost research that the most popular political nostrums–medical IT, comparative effectiveness research, and prevention–are unlikely to make a large difference in cost control, and that to boot it will take years for them to do much good. That knowledge does not leave many likely big winners on the horizon–at least powerful enough to reduce costs from the projected $4.2 trillion in 2019 to, say, $3 trillion, which would bring it close to the optimal parity with the GDP.
Is there any hope that something could make a decisive difference? Yes, if we can bring ourselves to take an open-minded look at the way European countries do it, which will be the focus of some upcoming reports in the Health Care Cost Monitor.
Daniel Callahan is editor of the Health Care Cost Monitor.