Can We Really Obtain Quality Health Care at a Reasonable Cost?

 Our Costs are Unsustainable

 American health care costs are far higher than health care costs in any other country, and those costs have been rising for more than a decade. In fact, we have already reached the point where health care is becoming unaffordable for many people. Even those who have health insurance through their jobs are finding that their insurance is becoming more and more expensive while it covers less and less.

One of the reasons for the high cost of health care is that our fee-for-service payment system rewards providers for the quantity rather than the quality of the health care that they deliver. Consequently, our system is very wasteful, and we have lots of room to reduce costs without “rationing” care or compromising its quality.

 Fox Valley Healthcare Has Proposed a Solution

 Recently, Fox Valley Healthcare has proposed in a presentation to the League of Women Voters that we can reduce the cost of health care in the Fox Valley by organizing a health care cooperative that would bargain with our local health care providers to obtain care at a lower cost. If we were to adopt their proposal, we would put pressure on our health care providers to become more efficient in order to deliver high quality care at a lower cost. How reasonable is it to assume that they can do that? Can health care providers really provide quality care at a reasonable cost?

Where is the Waste in Our System?

An article published in Health Affairs in 2012 shows the extent of waste in our health care system and categorizes the major types of waste. This blog post summarizes the article’s findings, and they show us that there is plenty of scope for reducing the cost of health care in our community and in our country. The major categories of waste in our current system are:

• ·         Failures of care delivery
• ·         Failures of care coordination
• ·         Overtreatment
• ·         Administrative complexity
• ·         Pricing failures
• ·         Fraud and abuse

Each of these is discussed in more detail below. The paragraphs that follow are quoted directly from the article.

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Failures of care delivery. This category includes poor execution or lack of widespread adoption of best practices, such as effective preventive care practices or patient safety best practices. Delivery failures can result in patient injuries, worse clinical outcomes, and higher costs.
 

A study led by University of Utah researcher David C. Classen and published in the April 2011 issue of Health Affairs found that adverse events occurred in one-third of hospital admissions. This proportion is in line with findings from a 2010 study by the Department of Health and Human Services' Office of Inspector General (OIG), which found that Medicare patients experienced injuries because of their care in 27 percent of hospital admissions.
 

These injuries ranged from "temporary harm events," such as prolonged vomiting and hypoglycemia, to more serious "adverse events," such as kidney failure because of medication error. Projected nationally, these types of injuries--44 percent of which were found to be clearly or likely preventable--led to an estimated $4.4 billion in additional spending by Medicare in 2009, the OIG found. Berwick and Hackbarth estimate that failures of care delivery accounted for $102 billion to $154 billion in wasteful spending in 2011.

Failures of care coordination. These problems occur when patients experience care that is fragmented and disjointed--for example, when the care of patients transitioning from one care setting to another is poorly managed. These problems can include unnecessary hospital readmissions, avoidable complications, and declines in functional status, especially for the chronically ill.
Nearly one-fifth of fee-for-service Medicare beneficiaries discharged from the hospital are readmitted with 30 days; three-quarters of these readmissions--costing an estimated $12 billion annually--are in categories of diagnoses that are potentially avoidable. Failures of care coordination can increase costs by $25 billion to $45 billion annually.

Overtreatment. This category includes care that is rooted in outmoded habits, that is driven by providers' preferences rather than those of informed patients, that ignores scientific findings, or that is motivated by something other than provision of optimal care for a patient. Overall, the category of overtreatment added between $158 billion and $226 billion in wasteful spending in 2011, according to Berwick and Hackbarth.

Administrative complexity. This category of waste consists of excess spending that occurs because private health insurance companies, the government, or accreditation agencies create inefficient or flawed rules and overly bureaucratic procedures. For example, a lack of standardized forms and procedures can result in needlessly complex and time-consuming billing work for physicians and their staff.
In an August 2011 Health Affairs article, University of Toronto researcher Dante Morra and coauthors compared administrative costs incurred by small physician practices in the United States, which interact with numerous insurance plans, to small physician practices in Canada, which interact with a single payer agency. US physicians, on average, incurred nearly four times more administrative costs than did their Canadian counterparts. If US physicians' administrative costs were similar to those of Canadian physicians, the result would be $27.6 billion in savings annually. Overall, administrative complexity added $107 billion to $389 billion in wasteful spending in 2011.

Pricing failures. This type of waste occurs when the price of a service exceeds that found in a properly functioning market, which would be equal to the actual cost of production plus a reasonable profit. For example, Berwick and Hackbarth note that magnetic resonance imaging and computed tomography scans are several times more expensive in the United States than they are in other countries, attributing this to an absence of transparency and lack of competitive markets. In total, they estimate that these kinds of pricing failures added $84 billion to $178 billion in wasteful spending in 2011.

Fraud and abuse. In addition to fake medical bills and scams, this category includes the cost of additional inspections and regulations to catch wrongdoing. Berwick and Hackbarth estimate that fraud and abuse added $82 billion to $272 billion to US health care spending in 2011.

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There is Plenty of Scope for Improvement

Clearly, our health care providers have plenty of scope for reducing costs, and it makes sense for us to put pressure on them to do so. Fox Valley Healthcare’s proposal for a health care cooperative makes good sense. Let’s learn more about it. Maybe, it is the answer.

Let’s Be Sure that We Are Solving the Right Problem

The Republicans are Solving the Wrong Problem

Health care costs continue to rise, and as they do, the problem of providing health care for every American becomes more and more difficult. Most Americans believe that health care is a right and that every American should be able to receive adequate care, but if we do not control its cost, we will soon be unable to afford to do what we know that we should do.

The Republicans in Congress mistakenly focus on controlling federal health care spending instead of focusing on the problem of controlling the cost of health care as a whole. They propose to solve the federal spending problem by shifting the cost of health care from the government to the people.  They propose to achieve that by turning Medicare into a voucher program.  The idea is that each Medicare recipient will receive a voucher to use to purchase health insurance in the private market. Thus, the federal obligation will be fixed at the cost of the vouchers.

Focusing only on Federal Spending Will Make Health Insurance Unaffordable for Everyone

This solution to the federal spending problem will work only if the dollar amount of the vouchers does not rise with the cost of healthcare, but of course, the cost of healthcare will rise, and as it does, most of us will become unable to afford health insurance. That is happening already to people who buy individual insurance through the exchanges, and it is only a matter of time before it happens to those who get their health insurance through their jobs.

We Can Reduce the Cost of Health Care

In order provide health care to every American, we have to address the problem of controlling the cost of health care itself. We have to understand the causes of the high cost of American health care, and we have to address those causes directly.  In an earlier post on this blog, I wrote about the causes of the high cost of health care in detail, and I will not repeat that discussion here. To deal with those causes, there are several things that we can do:

1. We can change the way we compensate health care providers to encourage them to reduce costs. The current fee-for-service system encourages them to maximize costs by providing expensive and unnecessary services. This is key. We cannot reduce the cost of health care unless we change the incentives of the health care providers.
2. We can bargain with the drug companies to reduce the cost of medications.
3. We can insist that each service and product have a standard price, and we can make information on prices available to doctors and patients to use in deciding what diagnostic tools or treatments to choose.
4. We can increase our support for primary care to encourage patients and health care providers to maximize its use.  Primary care is cheap, and if people care for themselves when they are not yet so sick that they need to be hospitalized, we will save money because emergency care and hospital care are much more expensive than primary care.
5. We can increase our support for health education and provide incentives for people to choose healthy lifestyles because that will reduce the need for expensive management of chronic conditions like diabetes, obesity and coronary disease. 

These are not complicated ideas, and there are several ways that they can be implemented. All of them have been tried in other countries and in some places in the United States.

If we reduce the cost of health care, we will also reduce its drain on the federal budget, and we will do so without making health insurance unaffordable for most Americans. So, let’s make sure that we solve the right problem – the cost of health care – rather than focusing narrowly on federal spending. If we do so, we will be able to afford health care for every American.