Managed Healthcare Executive - November 2008 - (Page 4)

NEWS ANALYSIS Reformers seek curbs on healthcare spending Policy makers shift focus from expanding coverage to reducing excess costs JILL WECHSLER | WASHINGTON BURE AU CHIEF PUSH FOR PRODUCTIVITY WASHINGTON, D.C. — The global nancial crisis and huge federal government commitment to stabilize the nation’s banking system has moved healthcare costcutting high up the policy agenda. Talk of expanding coverage for the uninsured and underinsured is taking a back seat to initiatives to curb wasteful and excessive spending on healthcare in the United States. In fact, expanding insurance coverage to more people, while desirable and ethical, will boost spending even more. A new report sponsored by the Robert Wood Johnson Foundation nds that high prices, ine ciencies and the added cost of insurance administration drive outlays for healthcare in the United States much higher than in other developed nations. The U.S. spends more than 15% of gross domestic product (GDP), compared with 11% for France and less than 10% for Germany, Canada, Australia, the United Kingdom and Japan. Another sign of too-high health costs is evidence that increases in insurance premiums outpace earnings, making it increasingly di cult for the middle-class to obtain health coverage, explains Paul Ginsburg, president of the Center for Studying Health System Change (HSC), and lead author of “High and Rising Health Care Costs: Demystifying U.S. Health Care Spending.” This trend also imposes a signi cant burden on employers and forces governments to boost taxes. Behind the healthcare cost rise are new 4 NOVEMBER 2008 The amount the United States spends on healthcare compared with 11% for France and less than 10% for Germany, Australia, the United Kingdom and Japan medical technology and rising obesity rates—not aging or medical liability, Ginsburg says. Medical technology may account for about 40% to 65% of the growth in spending by encouraging additional treatment and by replacing less-expensive technology with new products and services. 15% of GDP At the same time, the healthcare sector has not enjoyed comparable improvements in productivity as seen in other U.S. industries. This is due, according to the analysis, to limited price competition among healthcare providers because of extensive third-party payment, and to payment policies that reward increased service rather than more e cient care. To restrain the spending growth, Ginsburg and his colleagues urge more funding for research on medical technology e ectiveness to better target new technology to those patients most likely to bene t. Of importance to insurers is the call for added e ciencies to reduce administrative costs inherent in the multi-payer U.S. healthcare system. The creation of insurance exchanges could reduce the distribution costs of insurance purchased by individuals or small employers. There are lessons to be learned from how managed care helped moderate spending trends in the 1980s and early 1990s, the report says. Although controls were abandoned by health plans in the wake of the managed care backlash, some cost curbs are being reintroduced in a “more targeted and less-intrusive manner.” These include prior authorization for imaging and limiting imaging networks to those that meet quality standards. Some cost-control methods that have gained popularity include expanded health IT and medical liability reform. These may have less of an impact on healthcare spending, but do have potential to improve quality of care. “The big-ticket play is in productivity,” says consultant Robert Laszewski. In commenting on the report, he cited the need for discriminate use of medical technology, practicing outcomes-based medicine and reducing overhead in the insurance system. “If we only increase access and don’t hit the healthcare productivity issues head-on, we will simply craft a system we will never be able to sustain.” MHE Colin Anderson Colin Anderson/Getty Images

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Managed Healthcare Executive - November 2008 For Your Benefit Editorial Advisors Contents News Analysis State Report Politics &�Policy Letter of the Law Affordable Access Economic Ripple Effect Hospitals &�Providers Technology Managed Care Outlook Desktop Resource Ad/Edit Index

Managed Healthcare Executive - November 2008

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