Effective Cost Containment Requires Targeting Drivers On Multiple Levels

So, what can we do to continue to expand health care coverage through health reform without breaking the U.S. bank?  In an article titled “A Systemic Approach to Containing Health Care Spending” published in the August 2 New England Journal of Medicine, 23 health policy experts convened by the Center for American Progress set out nine major strategies to effectively contain health care costs both for public and private payers.

These experts insist that to effectively contain health care costs, strategies must target drivers of both the level and growth of costs and the role of medical prices and quantity of services; and eliminate administrative costs that do not improve health status and outcomes. The United States spends nearly $360 billion a year on administrative costs, accounting for 14 percent of excessive health spending.

“Although these solutions are not intended to be exhaustive, they have the greatest probability of both being implemented and successfully controlling health costs,” the report noted, emphasizing that it would be most effective to implement as a package the following recommended solutions.

• Negotiate uniform payment rates to apply to all payers and providers in a state; install an independent council to enforce a global spending target with growth per person limited to the average growth in wages. States will publicly report measured of quality, access, and costs with bonuses to be paid to high performing providers and payment rates adjusted for quality.

• Use payment alternatives to fee-for-service with fixed bundled payments for all the services and care a patient needs, including related rehabilitation and follow-up care for 90 days after discharge. Begin implementation as soon as possible using the bundles for 37 cardiac (heart) and orthopedic procedures used in the Medicare Acute Care Episode program.

• Implement competitive bidding for all medical equipment and devices, laboratory tests, radiological diagnostic services, beginning with Medicare and health insurance exchanges negotiating for private payers and state employee plans.

• Health insurance exchanges should offer tiered products based on high quality and low cost providers tied to reduced cost-share for insureds who use the high quality providers.

• Simplify administrative systems by electronic exchange of eligibility and claims information; use a single standard physician credentialing system; electronically provide monthly explanation of benefits statements; implement electronic health records integrating clinical (test orders, for example) and administrative tasks (billing, prior authorization, and payments).

• Require full transparency in medical provider pricing, including out-of-pocket costs, quality of care, and patient volume; prohibit “gag clauses” (which forbid contracted providers from disclosing to patients the discounts negotiated with insurers) on price information. Have state insurance department and health insurance exchanges collect, audit, and publicly report pricing and claims data.

• Expand use of non-physician providers such as advance practice nurses or nurse practitioners.

• Expand to private sector payers the Medicare ban on physician self-referral to facilities in which they or their families have a financial interest.

• Reduce costs of defensive medicine by providing a “safe harbor” for providers who use qualified health information technology and evidence-based clinical practice guidelines.

In conclusion, the NEJM article states, “These are the types of large-scale solutions that are necessary to contain health costs. Although many in the health industry perceive that it is not in their interest to contain national health spending, it is a fact that what cannot continue will not continue….Americans therefore face a choice. Payers could simply shift costs to individuals. As those costs become more and more unaffordable, people would severely restrict their consumption of health care and might forgo necessary care.

“We present alternative strategies to contain national health spending that allow Americans to access necessary care. Our approach addresses the system as a whole, not just Medicare and Medicaid. It is the path to rising wages, a sustainable federal budget, and the health system that all Americans deserve.”