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If Congress guarantees health coverage for all, the nation, at last, will be forced to focus on reining in costs. That's the hope of reformers, anyway.
According to virtually all health-policy analysts, health-care price inflation has significantly outstripped the growth of the rest of the economy and could soon put health care out of the reach of many more Americans.
“Health-insurance premiums have more than doubled in a decade, rising four times faster than wages,” said Princeton University Professor of Bioethics Peter Singer. “Health care now absorbs about one dollar in every six the nation spends, a figure that far exceeds the share spent by any other nation” and is on track to double in cost by 2035.
So far, “every innovation that's been promised to hold down costs has failed,” says Jacob Hacker, a Yale University professor of political science. In the 1970s, “health planning” — limiting the number of hospitals in an area to discourage them from providing excessive or redundant services, for example — was the dominant mode, while in the 1990s policy makers pinned their hopes on managed care. Neither succeeded, for various reasons, including strong pushback from providers who didn't want anyone interfering with their practice patterns or business decisions. Although previous efforts have stalled, some methods for controlling cost growth have been shown to work, economists say.
At the top of most cost-cutting lists is the current “fee-for-service” payment scheme, says Stuart Altman, a professor of national health policy at Brandeis University. Paying doctors and hospitals for every service performed encourages them to offer unnecessary services to boost income, especially if fees are cut to control costs, he says.
On the other hand, having physicians work in coordinated groups, then reimbursing the group with a “bundled” prepayment would encourage coordinated, effective and cost-efficient care, Altman says. Payments could cover a six-month period for a healthy patient or an entire episode of acute illness or injury, with penalties if an ill patient relapses or has to be readmitted to the hospital.
However, implementing ideas like bundling payments can be politically unpopular, so Sen. Jay Rockefeller, D-W. Va., introduced legislation earlier this year to create an independent executive agency to recommend such changes for public programs like Medicare. “It's a wonderful idea,” says Stan Dorn, a senior research associate at the nonpartisan Urban Institute think tank. “It's like the military base closings. Everybody [in Congress] knew they had to take the medicine,” but nobody was willing to recommend closing a base in their own district. Instead of Congress having to recommend specific cost-cutting measures, “Let the expert agency make proposals to Congress for an up or down vote.”
Because no U.S. insurers cover the same patients for life, they have no incentive to prevent long-term, costly illness, says Katherine Baicker, a professor of health economics at the Harvard School of Public Health. A private insurer, for example, ultimately hands off its enrollees to Medicare, and businesses change insurers frequently, she says.
Insurance regulations could be devised to “make sure everybody has a long-term horizon,” Baicker says. For example, insurers could be penalized for handing over sicker patients to Medicare when they retire.
But all potential cost-control measures are “painful and politically difficult,” and “win-win solutions don't really exist,” says Michael Chernew, a professor of health-care policy at Harvard Medical School. Implementing a “medical home” model, which gives every patient a source of preventive care and a gatekeeper for specialist interventions, sounds more benign than other potential cost-savers, for example, and “there are people who are optimistic that this could be a win-win approach,” says Chernew. But “we simply don't know to what extent, if any, that would control spending growth.”
The backlash in the 1990s against health maintenance organizations, or HMOs — which bundled payments — partly explains why some Washington lawmakers are loath to propose similar solutions today, says Altman. “You have some key legislators in the House … the old guard, who killed managed care, and they are still philosophically opposed” to anything that smacks of it.
Some providers say that basing their pay partly on patient outcomes sounds like an incentive to provide good, efficient care. But it overlooks the fact that patients often fail to take their medication or follow the doctor's orders to get more exercise. “Providers say, ‘Oh, my gosh, I can't control this because I can't control my patients!’” says Crystal Haynes, chief executive at St. Louis University Hospital.
Another often-heard suggestion — smoothing out huge geographical variations in how much health care people use — is also more problematic than it seems, says Haynes. In many parts of Florida, for example, Medicare costs are high because the elderly visit doctors more frequently than people in other states. But those doctors' visits play an important role because most of Florida's elderly have retired there, far from families and old friends.
“A lot of times those visits are their social life,” and are valuable to health and well-being, she says. “The elephant in the room is always that these are cultural and societal issues,” not just matters of cost-efficiency.
Squeezing out excess cost growth would inevitably mean some pain for the many people with a financial stake in the current system, says Pamela Farley Short, a professor of health policy and administration at Yale University. Some cities, such as Pittsburgh, for example, have partly replaced a sagging manufacturing economy with health-care services, “and many of us hold pharmaceutical stocks in our retirement accounts.”
Behind closed doors this summer President Barack Obama controversially conceded some cost savings to win drugmakers' support for reform. In return for pledges to cut some prices and refrain from opposing reform, Obama vowed not to allow the government to negotiate lower drug prices.
“When an industry gets secret concessions out of the White House in return for a promise to … support … legislation … that's called extortion,” said former Labor Secretary Robert Reich, a professor of public policy at the University of California, Berkeley.
But the government often sweetens the pill for financial stakeholders when making big changes, says Yale's Hacker. When Aneurin Bevan, the Welsh politician who oversaw the United Kingdom's transition to its National Health Service (NHS), was asked how he quelled doctors' objections, he famously replied that he had “stuffed their mouths with gold,” Hacker notes.
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