HCI3 Update from the Field: Concrete Steps to Cut Health Care Costs Now

Submitted by francois.debrantes@hci3.org on Thursday, August 2, 2012 - 01:20

Newtown, CT – Aug 3, 2012

18% — that's the portion of the GDP that's collected in taxes, and it's also the portion of the GDP that's consumed by national health expenditures. No wonder we have a problem. Now, of course, the government pays only about half of healthcare expenses, but that's still a chunk of change and has been growing. The result: budget deficits. If half the government's spending is on entitlement programs, that doesn't leave much for everything else. And that's why increases in government health spending that exceeds the rate of growth of GDP will simply increase deficits and the national debt unless taxes go up or all other programs are slashed. As a result, the only reasonable answer is to limit healthcare spending to the increase in GDP, or better yet, to something less. If health spending were flat for the next decade, the percentage of GDP consumed by health care would decrease, as would the rate of increase of premiums for businesses. That's what we really need and economists and serious policy makers on all sides of the political spectrum agree. In two NEJM Sounding Board papers (1) (2), several of them propose a series of concrete actions that can be taken today by CMS and states to curb the increase in health care costs. And importantly, there is broad consensus on the actions to take, which mainly focus on moving rapidly away from fee-for-service. While the CMMI has certainly done its part to-date to focus the delivery system on value-based payments, more can be done and faster. And it should. It has to.

What this means to you – Do we really need a bunch of new pilots and demonstrations to show that better coordinated care will result in fewer emergency visits and hospitalizations? No. Do we need more pilots to tell us that providers taking on financial risk for episodes will reduce costs of care? No. Do we need more pilots to learn that competitively bidding durable medical equipment and implantable devices will lead to lower prices? No. Do we need more tests and demonstrations to show that disclosing the cost and quality of physicians and hospitals will lead to performance improvement? No. Do we need more carefully controlled studies to show that consumers, armed with pricing information and the right incentives will make value-based purchasing decisions? No. And yet here we are, futzing around with pilots and demonstrations up the wazoo while we actually do know what works. We need to simply get to full implementations, evaluate, recalibrate if needed, and keep going. Many have, in fact, made that decision, but too many are arguing for caution, for continued incrementalism. Why? Because, generally, they benefit from that incrementalism at our collective expense. And as a result costs continue to rise faster than GDP, the debt continues to accumulate, and the US is all the poorer for it. Raise taxes or flatline health spending. We've chosen the latter. Which do you want?


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