Cost, Not Coverage, Drive Health-Care Debate

  • Share
  • Read Later
Ron Watts / CORBIS

Health-care reform is a subject that comes around in Washington as predictably — and at just about the same intervals — as the 17-year cicadas. Just as reliably, you can count on it to make a big stir and then vanish with hardly a trace. If there's any reason to hope that things might be different this time, it comes from looking at what is driving the conversation. In the early 1990s, the argument was all about covering the 37 million or so uninsured. In 2009, after much of the rhetoric on last year's campaign trail focused on the growing ranks of the uninsured, the major thrust of health-care reform centers on something that affects everyone: the staggering cost of a system that threatens to devour the rest of the economy. And as a result, political momentum may finally be on the side of health reform. (See "Five Truths About Health Care in America.")

Among policymakers, one of the phrases you hear most often is "bend the cost curve." The need to do precisely that became even clearer on Tuesday, with the release of the annual report of the Medicare trust fund. The trustees projected that the Medicare Part A (or hospital) trust fund will become insolvent by 2017, which is two years earlier than previously estimated. (Read "The Fire This Time: Is This Health Care's Moment?")

The growing momentum toward bringing down health spending also explains why, despite a notable lack of specifics or any means of enforcement, the White House was so eager to embrace the voluntary pledge of health-industry leaders to curb its costs by $2 trillion over the next 10 years. "This is a historic day, a watershed event in the long and elusive quest for health-care reform," President Obama declared. On Tuesday, Obama followed up that photo op by meeting with business executives who have been at the forefront of holding down the costs of their employees' medical coverage, and in the process making those workers healthier. "Now, if we can do that in individual companies, there's no reason why we can't do that for a country as a whole," the President declared. Hardly mentioned in all of this was the other goal of the reform effort: securing health coverage for the 47 million Americans who lack it. (Read "The Health-Care Talks: Will Obama Get More Involved?")

So how do you actually bring medical spending under control? Health-care experts say it is possible to cut it significantly without reducing quality. Indeed, they say more efficient medicine would be better medicine. By some estimates, as much as $700 billion of the $2.3 trillion that we spend on medical care each year is on unnecessary treatment that is not doing anything to make us healthier — and could even be hurting us. Obama Administration budget director Peter Orszag notes that all sides now are starting to agree that four big changes are needed:

1) Health-information technology: A recent study by researchers from the Harvard School of Public Health, Massachusetts General Hospital and George Washington University found that less than 2% of the 2,952 hospitals they surveyed had comprehensive electronic health-record systems. Without these, it is harder to track what kinds of procedures are being performed and what results they are achieving. But these systems are a big investment — usually costing from $20 million to $200 million — at a time when hospitals are already under severe financial strain.

2) Comparative-effectiveness research to evaluate what works best and what doesn't: "It is stunning how little evaluation we do in the U.S. health-care system," Orszag says. Most of what is done is testing new pharmaceuticals against a placebo, he notes. "It's not done Drug A vs. Drug B vs. some procedure, let alone procedures head to head."

3) New financial incentives: Providers get paid according to how much care they provide, rather than how good it is. If a botched surgery lands you back in the hospital, for instance, that means more profit for the health-care industry. "They are often penalized if they provide more-efficient care, if they reduce readmission rates," Orszag says, adding that changing that kind of perverse incentive will be a major focus of health-care reform.

4) More emphasis on prevention and wellness: Pure common sense tells you that it's much cheaper not to get sick in the first place. But there is little financial incentive for the health-care industry in that regard. Obama says he intends to change that. Here, however, some employers are taking the lead. As Obama noted after his meeting with the business executives: "When you hear what Safeway or Johnson & Johnson or any of these other companies have done, what you've seen is sustained experimentation over many years and a shift in incentive structures so that employees see concrete benefits as a consequence of them stopping smoking or losing weight or getting exercise." (See pictures of the Remote Area Medical Foundation's work in rural Appalachia.)

While these are the obvious steps, it is hard to imagine them happening without the government leading the way with a comprehensive health-reform plan. Medicare and Medicaid programs are such large players in the health-care market that they can often force changes in the way the market works. But in the end, says Orszag, "everyone needs to hold hands and move together."

Watch a video on uninsured Americans.

See TIME's Pictures of the Week.