Sunday, July 19, 2009

Easy Solutions to Health Care Costs Too Easy?

The Kaiser Family Foundation has an excellent primer on health care costs [pdf].

I think this is most important point:

Some approaches for dealing with health care costs may reduce the level of spending but not the rate of growth. Many of the policies under discussion in health policy circles to address costs -- such as increasing the use of electronic medical records and other information technology, promoting evidence-based medicine, provider payment reform such as pay-for-performance, changing the tax treatment of health benefits, consumer-directed health care, disease prevention and chronic disease management, or eliminating fraud and waste –- are aimed at improving the efficiency with which care is delivered. Successfully implementing these policies, which is not an easy task, would likely reduce the amount that we pay on average for care, but they are not likely to be longer-run solutions for addressing the rate of cost growth.

For example, medical errors and other quality lapses very likely increase the amount that we pay for health care, but to influence long-term cost growth, the prevalence or severity of errors and poor quality would need to be an increasing share of expenditures each year, which is probably not likely. Policies that reduce medical errors may well reduce the amount that we pay for care (and are important even if they do not).

But assuming that errors can be reduced to more optimal levels, costs would likely continue to grow, albeit from a lower level, at previously observed rates. Other interventions intended to make the health system more efficient, such as reducing the disparities in health care practices across regions and providers or increasing the use of electronic medical records, are likely to have similar effects. These are important initiatives that could make the health care system cheaper (compared to what we would spend without them) and better. By themselves, however, these types of initiatives are unlikely to address the long-term pattern that we have observed of health care’s growth as a share of economy.

As congressional leaders knit together a health care reform bill, many of the solutions that the Obama administration is proposing are unlikely to have any lasting impact on the long-term growth in health care spending.

If we're going to expand coverage to all Americans, I think we need to consider real, long-term cost control options. But we need to acknowledge that this could mean rationing care.


Ross D. said...

When you say this could mean rationing do you mean it surely will? Or am I misunderstanding what you mean by rationing?

mikhailbakunin said...

I think that any serious attempt to reduce the rate of growth in health care spending will likely come with trade-offs. It's very possible that we'd have to ration care at some level in order to control the rate of growth. It's also possible that we'd have to sacrifice some health care innovation.

These trade-offs may happen at the margins -- and they may be worth it -- but I think they're trade-offs that we need to acknowledge.

Did I answer your question?