HCI3 Update from the Field: Bold Action Reduces Price Gouging

Submitted by francois.debrantes@hci3.org on Friday, May 24, 2013 - 01:56

Newtown, CT – May 24, 2013

"Continuation of a 1.7% gap [health care cost increase – GDP increase] until 2040 would result in health care's absorbing 26% of the GDP, a level that would still pose problems for the economy and especially the federal budget."

Victor R. Fuchs, Ph.D. NEJM Perspective, May 22 2013

That's one way to put it. Another way is to say that premiums that would correspond to that level of health care costs would lead most American families to depend on Medicaid for their insurance. That's why in a recent report issued by Brookings we argue so strongly that the target of health care cost growth has to be GDP + 0% … at most. And it's doable when you look at and understand the causes for the massive amount of variability that exists in costs of care today. The sources of variation are threefold – the mix of services used for any medical episode; the volume of services deployed for each; and the price of each service. To help dissect some of this, we've posted a few graphs and data that might be helpful. As many of you know, our work has pretty clearly shown the prevalence and cost of Potentially Avoidable Complications. And these aren't the "apologists' " complications (i.e. the complications that are defined as a progression of the disease, as if nothing could prevent a diabetic to have an amputation or retinal damage!!). They're bad things that happen to patients and could be avoided with better care. The variability of PACs is significant and drives much of the variation of mix and use of services. And we also know that chronic care patients with lots of risk factors incur more PACs. That's consistent with the Camden Health Coalition's work on super-utilizers, and they've shown that pro-active patient management significantly reduces those PACs. And then there's price.

What this means to you – We've worked hard to isolate these three components of variability and it's pretty clear that each can be addressed and reduced. And if we were to take out most of the unwarranted variability, health care costs per capita could stay at their current level for several years and patients would still get all the care they need. PACs, caused by overuse, underuse and misuse, can be reduced by transforming payment and delivery systems. Price gouging, caused by market opacity, can be reduced by taking bold action. This week the state of Rhode Island did as much and we encourage state leaders everywhere to take note and act similarly. And Joe Fifer, in a column, reminds us how some courageous hospitals have also taken bold action, and we encourage many more to follow suit. As Dr. Fuchs says euphemistically, health care costs growing at GDP + 1.7% for the next decades (as it has during the past decades) would be a "problem". And the truth is that there's absolutely no reason for us to tolerate anything greater than GDP + 0%. We've outlined the causes and the solutions. The agents of the status quo will dispute the former and reject the latter, but what else is new! I say: Bring it on. I'm ready for a good fight, and you should be as well.


Francois de Brantes
Executive Director
Health Care Incentives Improvement Institute, Inc.
w: www.hci3.org