Rising healthcare costs are the key fiscal problem the United States faces said former White House budget director Peter Orszag during a press conference Thursday, and the best solution to the problem is a provider-value approach.
Orszag, now the vice chair of global banking at Citigroup, spells out how the country can rein in rising healthcare costs in a detailed article, “How Health Care Can Save or Sink America,” published in the July/August issue of Foreign Affairs magazine. His press conference, hosted by the Center on Budget and Policy Priorities and the magazine, addressed the issues he raises in the article.
“Medicare and Medicaid healthcare costs overall are the key long-term fiscal problem that the nation faces, so all of the discussions over the debt limit that are occurring, while important in that context, you need to remember that this is the key issue,” he told reporters at the press conference.
He pointed to new projections from the Congressional Budget Office, of which he was formerly the director, to back his point. The CBO predicts that Medicare, Medicaid and other federal health expenditures will rise from 5.5 percent to 12 percent of gross domestic product between now and 2050, signaling a potentially severe fiscal crisis for the country without intervention.
After outlining the various approaches the country can take to contain costs – including a close look at the most popular option being proposed, consumer-directed healthcare, which he said will not offer as much “traction” as proponents expect it will – Orszag concludes that the most promising option is provider-value-based.
A provider-value approach assumes that patients with high-cost, chronic cases usually agree with whatever treatment their doctor recommends, so to reduce costs, doctors must be encouraged to change their recommendations through the advancement of evidence-based medicine.
“When you sit someone down, the so-called active decision-making, sit someone down and say, ‘Look, we have two paths we can follow here. We can do lots of stuff, you’re going to spend a lot more time in the hospital and it might not have that much effect or there’s another approach that’s less intense, less costly. Which do you prefer?’ A significant share of the beneficiaries wind up choosing the less intense approach,” Orszag said.
He said there are institutions in the country already using provider-value approaches and demonstrating such an approach works – organizations that have health information technology systems in place; that are aggressive users of feedback loops into the clinical decision support software; that coordinate care; and often have doctors on salary so that the financial incentives are not as distorted as they may be elsewhere in the healthcare system.
Orszag recognizes that the reform measures currently being put in place may not be enough to contain healthcare costs and admits more may need to done.
However, he said, “Going forward, we have much more potential to do this well than we did 20 years ago, mostly because of growing recognition among the medical community itself of its (healthcare reform’s) necessity combined with the advance of health information technology. And secondly, even though (the Affordable Care Act is) imperfect, it has to be compared to the alternatives. So the question becomes if not this, than what?”