Expenditures on healthcare in the United States, which currently outpace the economy and workers' earnings, will continue to rise rapidly over the next decade unless there are major healthcare policy changes, a new study contends.
The nation's healthcare system has the potential to achieve improvements in quality, access and cost performance, all detailed in recent findings by the Institute of Medicine. But the nation must be committed to making that investment, say the authors of the Commonwealth Fund study, entitled, "Slowing the Growth of U.S. Health Care Expenditures: What Are the Options?"
"It is clear there are opportunities to improve the yield we reap given the resources we invest in healthcare," the report said. "There is currently ample evidence that we can achieve savings and efficient payment, insurance and care delivery systems, and still improve health outcomes, quality of care, and access to care."
Rather than shifting costs from one payer source to another, healthcare policies should aim to reduce total national expenditures, the authors suggest.
The report listed several short-term factors that currently contribute to high expenditures, inefficiency and waste. Such factors include overuse, inappropriate or ineffective use of care; payment incentives that reward productivity over quality and value; and the market power of business entities, such as insurers and pharmaceutical companies, to set prices above competitive levels.
The widespread existence of payment incentives that reward productivity over quality is "by far the most important factor" affecting future healthcare expenditures, said Jeffrey Goldsmith, healthcare futurist and president of Health Futures Inc.
"Part B is essentially being hurt by continued double-digit growth in procedure volume," he said. "Under the (Sustainable Growth Rate) formula, you have to cut back fees across the board to pick up these costs."
As a possible solution, Goldsmith suggests that Medicare do away with having separate Part A and Part B plans and pay for complex services on a bundled case rate based on severity. Under this approach, providers would get a specific amount for a patient's procedure, based on the severity of the case and complexity of the treatment.
"If (providers) can figure out how to provide the care for less than the given payment, they keep the difference," he said. Goldsmith said this could create new incentives and be a more effective way of shifting economic risk to providers than a global capitation methodology, which failed in the 1990s.
The Commonwealth Fund report detailed various drivers of long-term expenditures, including the introduction of new technology without comparative information of cost-effectiveness and clinical outcomes; inflated wages and prices for hospital goods and services; limited consumer choice and price competition as a result of the market power of entities such as insurers and pharmaceutical firms; and the increasing prevalence of chronic diseases.
Jeffrey Bauer, PhD, a Chicago-based partner in management consulting for ACS Healthcare Solutions, said healthcare expenditures involve both cost and quantity. Bauer said most efforts to restrain expenditures focus too heavily on quantity; however, to restrain healthcare spending, it's more important to determine the appropriate levels of expenditure for the right care procedures.
"We provide an enormous amount of unproductive care," Bauer said. "It's not just cutting expenditures; it's finding the appropriate level of healthcare expenditures. I am not at all ashamed that we spend 16 percent of our GDP on healthcare."