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Tag: Health care spending

The Sweet Spot of Health Care Cost Containment

BY BEN WHEATLEY

As health care continues to move in the direction of unaffordability, policy makers are considering a range of options to bring down health care costs. The Health Affairs Committee on Health Care Spending and Value has identified four broad areas for reform, including administrative savings, price regulation and supports for competition, spending growth targets, and value-based payment. These measures appropriately target health care’s supply side and the excesses that exist in the health care system.

In this blog, I would like to highlight another avenue for savings: one that focuses on the demand side of the equation. It is possible to reduce health care expenditures by reducing the demand for care. This is distinct from rationing, which is the denial of needed care. I’m referring to genuine health improvements that make health care less necessary in the first place. This type of health improvement is the sweet spot of health care cost containment, benefiting both patients and purchasers.

In a previous blog, I posed the question: in an ideal world, how much would we spend on health care? I posited that in a perfect world, we would spend zero on health care because no one would be sick. While such a perfect world may be unachievable, having the goal in mind can serve to guide our way in the present moment—like entering a destination into GPS.  

Measures that promote genuine health improvement can alleviate the burden of illness while at the same time reducing the cost of care. They move us in the direction we want to go. In this blog I provide several such examples.

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In an Ideal World, How Much Would We Spend on Health Care?

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BY BEN WHEATLEY

We have heard it said before, and it is no longer shocking to say, that in 2021 the United States spent $4.3 trillion on health care. To put this gaudy number in some perspective, we measure it as a share of our economy and report that health care comprised 18.3% of our gross domestic product. CMS projects that health care will approach 20% of GDP in coming years—one-fifth of everything we buy and sell in this country. 

In a recent report, the Health Affairs Council on Health Care Spending and Value said that “it is unclear what percentage of GDP would represent the ideal level to devote to health care. Nevertheless, the council believes that the current expenditure and rate of growth are higher than they should be….” The council observed that the dollars devoted to health care seem “disproportionate to the health they produce” and noted that the spending places a “significant burden on families, employers, employees, and government.”

We spend approximately $12,900 per person per year on health care. By comparison, the average cost of health care per person in other wealthy countries is only about half as much.

These metrics seem to indicate that the United States is spending too much on health care, but nevertheless we struggle to identify the “right” amount. However, if someone were to ask me: “In an ideal world, how much would we spend on health care?” I would propose a very simple answer: zero. This is because, clearly, in an ideal world, no one would be sick.

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THCB Gang Episode 17, LIVE 7/9 1PM PT/4PM ET

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Episode 17 of “The THCB Gang” was live-streamed on Thursday, July 9th! Watch it below!

Joining me were some of our regulars: patient advocate Grace Cordovano (@GraceCordovano), health economist Jane Sarasohn-Kahn (@healthythinker), WTF Health Host Jessica DaMassa (@jessdamassa), and guests: Tina Park, partner at Diagram (@diagramoffice) & Shannon Brownlee, Senior VP at the Lown Institute (@ShannonBrownlee). The conversation focused on asynchronous care, the gap between patients & technology, and the Supreme Court ruling on employers’ ability to limit women’s access to birth control coverage. It was a great and engaging conversation with some of the top health care experts in the field.

If you’d rather listen, the audio is preserved as a weekly podcast available on our iTunes & Spotify channels — Zoya Khan

Mrs. Verma Goes to Washington

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By ANISH KOKA MD 

Seema Verma, the Trump appointee who runs Medicare, has had an active week. The problem facing much-beloved Medicare is one that faces every other government-funded healthcare extravaganza: it’s always projected to be running out of money. Medicare makes up 15% of the total federal budget. That’s almost $600 billion dollars out of a total federal outlay of $4 Trillion dollars. The only problem here is that revenues are around $3.6 trillion. We are spending money we don’t have, and thus there there is constant pressure to reduce federal outlays.

This is a feat that appears to be legislatively impossible.  The country barely is able to defund bridges to nowhere let alone try to reduce health care spending because, as everyone knows, any reduction in health care spending will spawn a death toll that would shame the black plague. The prior administration’s health policy wonk certified approach was to change the equation in health care from paying for volume to paying for value. This, we were assured, would allow us to get better healthcare for cheaper! And so we got MACRA, The Medicare Access and CHIP Reauthorization Act, that introduced penalties for doctors unable to provide ‘good’ care. Never mind that in some years good care means you treat everyone with a statin, and in others it means treat no one with a statin. When in Rome, live like the Romans. In 2018 parlance, that roughly translates to “check every box you can and everything will be all right.”Continue reading…

The Democratization of Health Care: The IPAB

By Gary Puckrein

You probably missed this one, but this bit of legislation will have profound implications not only for your health, but the health of our economy. A provision of the Patient Protection and Affordable Care Act (PPACA) created a 15-member Independent Payment Advisory Board (IPAB), delegating to it the responsibility to develop specific proposals to contain the growth rate of Medicare spending if it is projected to exceed targets also established by the law. These proposals are transmitted to Congress in the form of legislative proposals that must be enacted or substituted on a legislatively mandated basis.

Once it is in place, IPAB can be discontinued only by a joint resolution that must be introduced in January 2017. Since IPAB is not a government agency, and is not promulgating regulations, it is subject neither to open meetings or public comment requirements. There are no options for appealing the IPAB recommendations. The provisions for judicial review appear to be limited to the recommendations issued by IPAB based upon deliberations that are not open to the public. Judicial or administrative review of the Secretary’s implementation of those recommendations is prohibited. The clear intent of the law is to insulate the board and its decision from the full range of traditional democratic processes.

The IPAB approach to problem solving in a democracy is unwarranted under all but the most dire of circumstances. Moreover, if enabled, an approach such as IPAB should have a reasonable chance of solving the stated problem. It does not. The dire circumstance of “unsustainable” health care expenditures that IPAB is built to help resolve is truly a manufactured crisis. That statement may resonate as heresy to established dogma to many readers, but the facts support the statement.

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The FY15 Budget: There’s More to it Than the Numbers

By PAUL KECKLEY

Paul KeckleySaturday, the U.S. Senate passed the House-sponsored Omnibus Appropriation Bill that funds the federal government through September 2015. In all likelihood, all eyes weren’t glued to these proceedings, perhaps otherwise attentive to holiday shopping or the events around nationwide protests about policing in our cities.

Healthcare is a huge part of the federal budget: combining spending for Medicare, Medicaid, Children Health Insurance Program (CHIP), military and veterans’ health, Indian Health Services and federal employee health benefits, it represents 35% of the total $3.9 trillion budget. For the decade prior to the economic downturn, total health spending increased 7.2% annually. During the downturn, it slowed to less than 4% but is expected to increase to 6% annually for the decade ahead. That means healthcare spending will be an even bigger part of federal budgets going forward.

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How Business Can Save America From Health Care

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Brian-KlepperBy BRIAN KLEPPER
One of America’s most enduring mysteries is why the organizations that pay for most health care don’t work together to force better value from the health careindustry.We pay double for health care what our competitors in other developed nations do, but studies show that more than half of our annual health care spend – equal to 9% of GDP or our 2012 budget deficit – provides zero value. Every health care sector has devised mechanisms that allow it to extract much more money than it is legitimately entitled to. Health plans contract for and pass through the costs of products and services at high multiples of what any volume-based purchaser can buy them for in the market. Medical societies campaign for excessive medical service values that Medicare and commercial payers base their payments on. Hospitals routinely over-treat and have egregious unit pricing. There are scores of examples.Decades of these behaviors have made health care cost growth the most serious threat to America’s national economic security. Medicare and Medicaid cost growth remains the primary driver of federal budget deficits. Over the past decade, 79% of the growth in household income has been absorbed by health care. Health care’s relentless demand for an ever-increasing percentage of total resources compromises other critical economic needs, like education and infrastructure replenishment.Health care costs have been particularly corrosive to business competitiveness. Three-fourths of CFOs now report that health care cost is their most serious business concern. Commercial health plan premiums have grown almost five times overall inflation over the past 14 years. Businesses in international markets must overcome a 9+ percent health care cost disadvantage, just to be on a level playing field with their competitors in Australia, Korea or Germany.The health care industry’s efforts to maximize revenues have been strengthened by its lobby, which spins health policy to favor its interests. In 2009, as the Affordable Care Act was formulated, health care organizations fielded eight lobbyists for every Congressional representative, providing an unprecedented $1.2 billion in campaign contributions to Congress in exchange for influence over the shape of the law. These activities go on continuously behind the scenes and ensure that nearly every health care law and rule is structured to the industry’s advantage and at the expense of the common interest.Health care is now America’s largest and most influential industry, consuming almost one dollar in five. Only one group is more powerful, and that’s everyone else. Only if America’s non-health care business community mobilizes on this problem, becoming a counterweight to the health care industry’s influence over markets and policy, can we bring health care back to rights.

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10 Ways Innovation Could Help Cure the U.S. Health Spending Problem

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By Steven Garber

flying cadeuciiThe United States spends more than $2 trillion per year on health care, surpassing all other countries in per capita terms and as a percentage of gross domestic product.

New, expensive medical technologies are a leading driver of ballooning U.S. health care spending. While many new drugs and devices are worthwhile because they substantially extend lives and reduce suffering, many others provide little or no health benefit.

Many studies grapple with how to control spending by considering changing how existing technologies are used. But what if the problem could be attacked at its root by changing which drugs and devices are invented in the first place?

Recently, my colleagues and I explored how medical product innovation could be redirected to reduce spending with little, if any, sacrifice to health and to ensure that any spending increases are justified by sufficient health benefits.

The basic approach is to use “carrots and sticks” to alter financial incentives for drug and device companies, their investors, health care payers and providers, and patients.

The ten policy options below could change which technologies are invented and how they’re used. In turn, this could cut spending or increase the value (health benefits per dollar spent) derived from new products that do increase spending.

We urge policymakers—both public and private—to consider these options soon and to implement those that are most promising. Policymakers should also consider how to reduce spending and get more value from health services that don’t involve drugs or devices.

The longer the delay, the more money will be badly spent.

1. Encourage Creativity in Funding Basic Science

The National Institutes of Health (NIH), the leading funder of basic biomedical research, typically favors low-risk projects. Funded researchers who fail to achieve their goals are much less likely to secure additional NIH funding. Encouraging more creativity and risk-taking could increase major breakthroughs.

2. Reward Inventors with Prizes

Public entities, private health care systems, the philanthropic sector, or public-private partnerships could award prizes to the first to invent drugs or devices that satisfy certain performance criteria, including a potential to decrease spending. Winners could receive a share of future savings that their product brings the Medicare program, which spends more than $500 billion annually.

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The Data Are Wrong. Our Patients Are Sicker!!!

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By Paul Levy

People in health care don’t like it when numbers emerge that are uncomfortable.  Take these, issued today by the Massachusetts Health Policy Commission in its latest report on the drivers of the high cost of care in our state.

Variation, particularly when not correlated to quality of outcome, is particularly troublesome for some incumbents.  Academic medical centers often have their answer, but as the HPC explains, it doesn’t hold water:

One oft-cited theory for the cause of this variation is that certain types of hospitals, such as those that teach physician residents and fellows, must incur additional expenses to support their mission. However, the difference in median expenses per discharge between teaching hospitals and all hospitals ($1,030) was less than the difference between individual teaching hospitals ($3,107 between the 75th percentile and 25th percentile teaching hospitals). Moreover, there were a number of teaching hospitals that incurred fewer expenses per discharge than the statewide all-hospital median of approximately $9,000 per discharge.

So perhaps the high cost ones will now revert to the usual squawking: “This isn’t fair. The data are wrong.  Our patients are sicker.”

Except here, the data are the best that could be available–all the claims for all the hospitals and all the payers in the state–even adjusted for wages.  And the acuity of patients across the spectrum of academic medical centers does not vary widely–but, just in case, the numbers are case-mix adjusted.

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Is Obamacare Responsible For the Recent Slowdown in Health Care Costs?

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By ROBERT LASZEWSKI

That is what we have been told the Obama administration will claim today as they begin the job of reselling Obamacare.

Is Obamacare even partly responsible for the slowdown in health care costs?

That is silly.

First, Obamacare is not a health care reform law; it is a health insurance reform law. No one on either side of the debate has ever argued anything different.

Does the law have some limited cost containment features in it?

Yes. But these are either pilot projects or are years from being fully implemented.

I have heard the argument that the Medicare cuts that were made to help pay for the program are examples of cost containment efforts that are having a short-term impact on controlling costs. The Democrats need to be careful with this one. I recall their countering Republican “Mediscare” claims by saying the Medicare cuts were not significant.

In a letter last year accompanying the Medicare Trustee’s report, the Medicare actuary said, “The [Obamacare Medicare cuts] will affect Medicare price levels more gradually, but a strong likelihood exists that, without very substantial transformational changes in health care practices, payment rates would become inadequate in the long range.”

Translated: The Obama Medicare provider cuts are not having a big impact in the short-run but will be unsustainable over the longer-term.

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