In the first installment of this two-part series, I noted that U.S. healthcare spending has reached the point where it is affecting every aspect of our economy, from the federal budget deficit to family finances. Medical debt is the leading cause of personal bankruptcy in the U.S.
It doesn’t have to be this way.
A Path Forward
Many groups, including the National Academy of Medicine, the Health Affairs Council on Health Care Spending and Value, RAND Corporation, the Bipartisan Policy Center and others have offered blueprints to tackle this challenge. Among the hundreds of recommendations that have been offered, five stand out:
1. Pay For Value, Not Volume
Doctors drive most health spending in the U.S. through the decisions they make and the treatments they provide. How doctors practice is strongly influenced by how they are paid. “Fee-for-service” reimbursement incentivizes doctors to do more, whether or not their patients needs it.
“Value-based” payments take a different approach. They are designed to encourage doctors to reduce inappropriate care, treat based on best clinical evidence, focus on safety and do only what’s needed to improve each patient’s health.
The most dramatic version of this concept makes doctors and the healthcare organizations they work for fully accountable for the outcomes of their patients. Each year, they are paid a pre-set fee—typically weighted to reflect the complexity of the patient’s health problems. After that, the organization must cover all costs of care, whether it’s an ER visit, major surgery or a lengthy stay in a rehabilitation unit. Organizations that accept all of the risk have a powerful incentive to keep their patients healthy and out of the hospital.
2. Strengthen Primary Care
Primary care is the only medical discipline in which expanding physician supply improves population health, life expectancy and health equity, according to a 2021 report from the National Academies of Sciences, Engineering, and Medicine. Access to primary care allows health problems to be diagnosed early, when they are easier to treat. This decreases costly ER visits and hospitalizations. It’s no coincidence that the few healthcare organizations to date that have embraced full-risk, value-based payment are built around strong primary care networks. Examples include Oak Street Health in Chicago and ChenMed, which started in Florida but is growing nationwide.
To improve access to primary care, we should follow the example of other high-income countries and eliminate co-payments for primary care visits. We should also boost provider pay, expand training programs (particularly in underserved rural communities) and enable primary care physicians to delegate a wider range of tasks to members of their health care team.
3. Improve Efficiency
Across our country, Americans are enrolled in thousands of health insurance plans with bewildering eligibility rules, different covered services and shifting networks of “preferred providers.” Every plan should be required to cover a minimum set of essential health benefits and use a standard claims form. Electronic medical records should be reengineered to make them easier to use, more patient-centered and accessible by different health systems. That way, patients could share their health information with any healthcare provider they see, anywhere in the country. This would make healthcare simpler, safer and less expensive.
4. Support Technologies That Reduce Costs
In most sectors of the U.S. economy, including manufacturing, transportation, retail and IT, advances in technology tend to boost efficiency and lower costs. In healthcare, the opposite is true. A 2008 report from the Congressional Budget Office, noted that in recent decades, technology has accounted for half of healthcare spending growth. Although some advances make a difference, many new drugs and devices boost profits while doing little to improve health.
If Congress altered incentives to reward developers who create high-value, cost-lowering drugs, biologics and devices, American ingenuity would take care of the rest. The White House could help by directing the National Institutes of Health, the Food and Drug Administration, the Centers for Disease Control and Prevention and the Centers for Medicare and Medicaid Services to work together to promote development of high-value healthcare technology.
5. Protect Americans’ Health
Americans’ average life expectancy increased by 30 years In the 20th century. Twenty-five years of that gain were due to public health. Unfortunately, once many deadly diseases were conquered, a lot of us became complacent. Even worse, medical disinformation is leading a growing number of Americans to reject immunizations and other tools of public health. As a result, once-conquered diseases like measles are making a comeback.
In 2021, the Peterson Center on Healthcare and the Kaiser Family Foundation observed that 5% of the U.S. population accounts for half of total health spending, mainly due to the severity or complexity of their medical conditions. In contrast, the healthiest half of the U.S. population accounts for only 3% of health spending. If we focused on expanding the size of the “healthy half” through injury and disease prevention, better management of high blood pressure, lowering rates of obesity and drug abuse and other measures that reduce development of chronic disease, we could save tens of thousands of lives and billions of dollars each year.
The Urgency To Act
The healthcare cost burden in the U.S. has become unsustainable. Just this month, retirees learned that their social security benefits will increase 3.2% in 2024, but their Medicare Part B premiums will grow by 6%. Employer-sponsored health insurance premiums jumped 7% in 2023, according to the Kaiser Family Foundation.
The Congressional Budget Office 15 years ago declared, “For the federal government, rising health care costs constitute the principal challenge of fiscal policy—no other single factor will exert more influence over the long-term balance of the federal budget.” [Emphasis added]
“It is no exaggeration to say that the United States’ standing in the world depends on its success in constraining this health-care cost explosion,” Peter Orzag, a former director of the White House Office of Management and Budget wrote 12 years ago. Since then, annual spending on U.S. healthcare has grown relentlessly, from $2.7 trillion in 2011 to more than $4.6 trillion today.
Congress narrowly avoided a catastrophic default on our national debt in June—but only by postponing action until January 1, 2025. That deadline is rapidly approaching. We can’t afford to ignore relentless growth of healthcare spending. Fixing our broken healthcare system is the surest and safest path to restoring our nation’s fiscal health and improving Americans’ health as well.
Read the full article here