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Next year's big debate: the politics of cost containment

From the November ACP Observer, copyright 2004 by the American College of Physicians.

By Robert B. Doherty

No matter who wins this month's presidential and congressional elections, 2005 is likely to be remembered as the year that health care cost containment came roaring back as a major public policy issue. (This column was written two weeks before the election.)

In an article in the Oct. 14 New England Journal of Medicine, Paul Ginsburg, PhD, director of the Center for Studying Health System Change, argued that neither presidential candidate had said anything of real substance about health care costs because neither wanted to risk alienating voters. (The article is online.)

Despite the candidates' silence, the numbers are available and they're sobering. Between 1999 and 2003, per capita spending for medical services covered by private insurance increased by 39% while hourly earnings for U.S. workers increased by only 14%. With health care costs increasing at a faster pace than incomes, many people, especially those with low incomes, can no longer afford health insurance.

Wages, jobs and the federal budget

Rising insurance costs not only lead to growing numbers of uninsured Americans. Higher costs also keep wages down and stunt job growth. Every dollar employers have to spend on health care premiums is money not available to boost wages, fund other benefits or expand facilities to create new jobs.

The problem is not limited to the private sector. According to the Congressional Budget Office (CBO), the federal budget in fiscal year 2004 reached a record $415 billion deficit, with Medicare and Medicaid outlays a major factor in that shortfall. The Medicaid program paid out 9.7% more in medical costs in 2004 than in the previous year, while Medicare spending increased 8.4% over 2003. The CBO also made it clear that the rate of spending increases is on the rise: Medicare spending between 2002 and 2003 rose only 6.7%.

In the next few years, the federal government will post even higher rates of health care spending to cover expenses from the Medicare prescription drug program, the increased enrollment in Medicaid and the State Children's Health Insurance Program, and growing numbers of patients with chronic diseases in all three programs. And cost hikes will only get steeper as the first wave of baby boomers become eligible for Medicare in 2012.

The more money the government spends on health care means fewer funds for all its other programs. How will Congress and the next president meet the public's demand for increased spending on national parks, education and homeland security—to name just a few—when federal health care entitlement programs consume an ever-bigger share of the federal budget?

What can be done?

None of this is meant to suggest that increased health care spending is necessarily bad. Higher expenditures can benefit the nation when they lead to better quality of life, longer life span, lower infant mortality, greater employee productivity and fewer days lost from work.

But we don't know if increased health care spending is really buying better care or just driving up costs and demand for services that don't yield major benefits. According to Dr. Ginsburg, changes in spending for medical technology account for one-half to two-thirds of spending increases in excess of general inflation. Much of that increase, he wrote, is due to the accelerated use of established technologies, such as magnetic resonance imaging, and not to the cost of new technologies being integrated into medical care for the first time.

What can be done to control health care costs? Dr. Ginsburg outlined four basic options: increase the efficiency of health care delivery; shift more costs to patients to encourage them to limit their use of medical services; increase administrative controls on the use of services; or limit the resources available in the health care system. Let's take a closer look at each:

  • Increasing efficiency. Among the four options, increasing efficiency enjoys the most support from politicians. In fact, much of the push for broader adoption of electronic health records comes from the belief that such systems could save the government, as well as private payers, hundreds of billions of dollars a year.

    Despite that widespread belief, it is unclear how much information technology would ultimately save and when those savings would occur. In the meantime, the initial impact of adopting information technology would be to spend more money on developing viable systems.

    Evidence-based medicine has also been touted as a way to improve health care efficiency. But as Dr. Ginsburg suggested, adherence to evidence-based guidelines could have the opposite effect if it leads to accelerated use of services. Drug and technology companies, physicians and health care facilities that profit from greater use of new and existing technologies or drugs will also resist evidence-based standards that would curtail such use.

  • Shifting costs. Shifting costs to consumers through higher cost-sharing has been shown to reduce the use of services. But such measures may lead some individuals—especially if they're poor—to forgo needed preventive and other essential services.

    One promising approach may be to link consumer cost-sharing to evidence of the effectiveness of different technologies. That would force patients to pay more for discretionary medical services than for essential ones. Dr. Ginsburg pointed out, however, that evidentiary tools would have to be refined before substantial cost containment could be achieved.

  • Administrative controls. Health plans may want to bring back greater use of administrative controls, such as prior authorization for services, restricted provider networks, post-payment audits and limits on specialist referrals. But many plans abandoned those controls just a few years ago due to a public backlash against managed care.

  • Limiting resources. Canada and other Western nations have imposed considerable limits on the use of resources, but such measures have been strongly resisted in the United States. In the 1970s, many states tried using certificates of need to limit growth of new technologies, but then had to abandon them. And in 1994, Congress soundly rejected the Clinton administration's proposal to impose a "global budget" on overall health care expenditures.

The challenge for the College

ACP will be called on to weigh in on the cost containment debate. Internists will need to share their unique perspectives on how to achieve administrative efficiency, create incentives to save costs, boost adherence to evidence-based medicine, and help patients distinguish between necessary and discretionary services.

In making its case, the College can build upon its admirable record of support for reforming the physician payment system, increasing the use of beneficial health information technology and advocating for evidence-based clinical decision-support tools. ACP will also have to take the lead in recommending ways to improve chronic disease care and the use of clinical performance measures.

But engaging in this debate will require a willingness on our part to directly confront the problem of health care costs and exert the kind of leadership that, sadly, most politicians lack. The alternative, as Dr. Ginsburg wrote, "is a downward spiral as more and more resources are used to pay for the health care of fewer and fewer Americans."

Robert B. Doherty is ACP's Senior Vice President for Governmental Affairs and Public Policy.

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