Health Care Cost Containment – Reality versus Rhetoric

Cost Containment
Controlling Healthcare Costs
Reducing Health care Spending
Eliminating Waste, Fraud and Abuse
Creating More Value from Healthcare Spending
Increasing Cost Effectiveness for the Healthcare Dollar

These are the types of headlines and catch phrases that we are going to see over the next 6 months as the healthcare focus in the 2008 elections zeros in on spending and costs.

A couple of weeks ago I wrote about how the economy has become the #1 issues of concern for the 2008 elections. Because of this, costs and spending will be the major focus for the political debate about healthcare reform. The two main traction points within these political messages and speeches will be about how healthcare spending is:

  • Draining resources from the rest of the economy
  • Increasing the public’s concern about becoming unemployed because it could mean losing their health insurance

As CNN recently pointed out, how to actually reduce spending – or at least lower the growth rate for spending – is the $2 Trillion puzzle. One of the harsh realities is that there is often very little connection between a candidate’s proposals for solving a problem and their ability to actually use those proposals to address the problem – because either the solutions won’t do much, or the politics won’t let them implement their proposals. As H.L. Menken said, “For every complex problem there is an answer that is clear, simple, and wrong.”

While each of the three remaining major candidates’ healthcare proposals has been widely discussed, it will be informative to see how they reposition themselves around reducing costs and spending. The Democratic candidates in particular have focused on increasing coverage, so how they add to or modify their positions will be particularly interesting to see.

It will also be worth watching how different advocacy groups position themselves along the continuum from increasing access to controlling spending ­– and what their proposals actually say.

For example, I noted an ad from the American Medical Association (AMA) that ran in the National Journal a couple of weeks ago, (and I presume in other policy oriented publications), that laid out 4 things they support for “controlling rising healthcare costs”:

  1. Disease prevention and wellness programs
  2. Comparative effectiveness research
  3. Eliminating excessive administrative costs
  4. Value-based decision making

These all sound good, but how effective would they be to actual control rising healthcare costs? This obviously would depend upon what time frame you’re using to measure costs, and whose costs you’re measuring. Nevertheless, Professor Stuart Altman – one of the very best health policy people I know – last fall laid out in ranked order ways to limit the growth in health spending. (See page 41 of his presentation) According to his assessment, the effectiveness of the AMA’s proposals range from “Very Limited Impact” for #1, to the better end of “Limited Impact” for #2 and #3, and possibly “Greater Impact” for #4, but I’m not really certain what the AMA means by “Value-based decision making,” because value to whom is always an important question.

Before I leave this issue (for now), I also want to point out that one of the easiest political message points in this area is to propose “reducing waste, fraud and abuse.” Since nobody is for “waste, fraud and abuse” this has great traction with voters, but it is important to remember that eliminating any part of the up to 50% of healthcare spending that is estimated to be wasted, is a lot harder than it sounds for two fundamental reasons. First, these waste calculations often don’t account for the healthcare delivery system’s need for “surge capacity.” For example, rarely do hospital emergency rooms run at truly full capacity, but they need to be staffed most of the time to do so, since emergencies aren’t planned and their treatment can’t be rescheduled for a slower time. Second, what may be considered waste in one analysis is generally someone’s salary, and is represented by an advocacy organization that will resist efforts to reduce the size of their piece of the pie.

I have a friend who thinks that the situation has gotten so bad that the political barriers to a single-payer healthcare system will be breached – since that’s the “best” way to control costs – and that’s what we’ll have in a few years. I don’t agree with his perspectives, and think we’ll have continued rationale migration towards a more efficient and coordinated system – particularly once the economy picks up again.

What are your favorite proposals for reducing healthcare spending?

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