The ACP Advocate Blog

by Bob Doherty

Monday, September 12, 2011

Health care spending: It’s enough to make a grown man cry!

Liberal and conservative economists disagree on many things, but not on the need to reduce health care spending in the United States. The United States already has higher per capita health care spending than any other industrialized country, and absent major changes, costs will continue to rise, the federal government will pay more and more for Medicare and Medicaid, and there will be little money left for anything else. Before long, relentless spending on health will lead to deep benefit and reimbursement cuts, crippling tax increases, and bigger budget deficits. It’s enough to make a grown man cry. (My apologies to the Rolling Stones, who had a much different topic in mind than health care spending when they penned this rockin’ line!).

This is the stark reality facing the new congressional Super Committee charged with finding at least $1.2 trillion in ten-year budget savings by Thanksgiving. They really can’t get there without cutting health care spending, but any changes they might make will be met with stiff opposition from politically powerful interests—hospitals, doctors, drug and device manufacturers, and seniors’ advocacy groups. I suspect that much of the health care sector secretly wants the Super Committee to fail to reach an agreement, figuring that they would do better under the maximum 2% cut in 2013 Medicare payments (which automatically goes into effect if the Committee deadlocks or Congress turns its recommendations down) than by a deficit reduction package that gores their own oxen. Physicians, though, stand to lose much more than the 2% required under sequestration, since they already are facing a 30% Medicare SGR cut on 1/1/12, and likely, double-digit cuts in 2013.

It is in this context that the American College of Physicians had to decide what it would say to the Super Committee. It could join with everyone else in just saying no: no to cuts in Graduate Medical Education funding; no to changing the way that care is delivered or paid for; no to anything and everything that is on the table. Or it could offer its own ideas for reducing health care spending in a socially and fiscally responsible way.

The latter is the choice made by ACP. In a letter to the Super Committee, ACP offered a menu of options to reduce health care spending by hundreds of billions, potentially enough to pay for permanent SGR repeal and to preserve funding for GME and other critical programs to ensure access to care.

The cornerstone of ACP’s recommendation is to establish a national, multi-stakeholder initiative to increase the use of high value care and to cut the estimated $700 billion that the U.S. spends on marginal and ineffective care. The initiative would develop a plan to provide patients and their clinicians with information on comparative effectiveness, change incentives for clinicians to reward value rather than volume, redesign insurance benefits so that patients have some financial skin in the game if they ask for ineffective care, and base coverage decisions on evidence of effectiveness with considerations of cost.

ACP also advocated a pathway to eliminate the SGR, stabilize physician pay for a five year period during which new value-based models would be tested, followed by a transition to models shown to be most effective by the end of the decade. On GME, ACP proposed broadening the base of funding by requiring all payers to chip in and spending the available dollars more strategically.

ACP also offered for consideration a menu of additional policy changes that the CBO and other experts say could reduce federal health care spending by hundreds of billions. Included in the options, which generally are supported by ACP policies, are strengthening primary care and care coordination ($83 billion in savings), lower defensive medicine costs (saving up to $62 billion), requiring drug manufacturers to pay a rebate to low income patients and/or allowing the federal government to negotiate drug prices under Medicare Part D (saving $110-$300 billion), enrolling Medicare-Medicaid “dual eligibles” in managed care (saving $12 billion), accelerating an excise tax on high cost health plans or phasing down and capping the tax deductibility of employer-sponsored health plans (saving $113 billion to $309 billion), creating a single cost-sharing structure for Medicare Parts A and B combined ($32 billion saving), and adding a public plan to the health exchanges created by the Affordable Care Act (saving $88 billion). Altogether, such options could save between $500 and $886 billion over the next ten years.

Many of ACP’s options are controversial and not likely to be accepted by the Super Committee or Congress. Even the seemingly non-controversial concept of reducing low value care is going to step on the toes of physicians, hospitals, medical device manufacturers, and drug companies that make money from the same services that may be found to offer little or no benefit. Transition to new “value-based” payment systems will be exceedingly difficult, especially for physicians in smaller practices.

The truth, though, is that there is no easy way to reduce spending on health care. Physicians could sit back and let the politicians, economists, business executives, and others decide who to cut and how, or they can offer their own ideas for achieving savings in a socially and fiscally responsible way, as ACP has tried to do.

Today’s question: What do you think of ACP’s ideas for reducing health care spending?

4 Comments :

Blogger w said...

How about do something that would truly affect pricing like back the Medicare Patient Empowerment Act - or a proposal along those lines? For that matter if there was a price mechanism for ancillary services in Medicare, prices might fall rather than rise. Without prices that bear any relation to supply and demand it's impossible to speak intelligently about costs.

September 12, 2011 at 5:24 PM  
Blogger Steve Lucas said...

Sadly, as long as we have a fee for service medical model that encourages unnecessary testing, and even treatment, all of the very best ideas will not curb medical spending.

Steve Lucas

September 13, 2011 at 12:52 PM  
Blogger PCP said...

As usual ACPs policies are self sacrificing in an environment where every special interest has a lobbyist looking out for THEIR specific interests. The result has been, is and with such idiocy will be that Physicians will continue to see an erosion in their incomes, their professional autonomy, and their morale. ACP apparently could not care less about that so long as they maintain their leftist ideological purity.
The only type of reform that will work is Primary Care Doctor-Patient centered reform. All other providers of goods and services should be made to serve that relationship. That apparently is too old fashioned for the
ACP. When we get it to the point that Insurers, Drug Companies, PBMs, Home Health, DME suppliers, Hospitals, etc. etc. Truly compete on price, where the doctor with his/her knowledge of service pricing and necessity is guiding the patient, and when his/her fairly apportioned fees are not considered under threat, only then will there truly be any possibility of cost containment. It will mean hard choices then too, but those choices will be made where they belong, and when costs inevitably fall those dollars might actually buy more than currently thought.
Alternately groups of 100 or so physicians should be allowed to organize and take on insurance risk. This should be specific to Doctors groups and no other entity, and they too like insurers could be capped at 15% profit margins, but then there will be some incentive for doctors to cut costs. They could then negotiate with everyone from hospitals to drug companies and other service providers for benefits on behalf of patients, a set of baseline contracts could be drafted for general use. Once Insurers and Hospitals are allowed to run ACOs they will use their financial muscle to capture the system. Purchasing physician groups need to be Primary care physician driven. such models already exist in the UK and on a smaller scale even in the USA.
Finally this consumerism in health care needs to be killed off. In no other market is the consumer so ignorant of the risks/benefit/costs etc of the service they are buying, and nowhere else in the marketplace is someone's negotiating power so less as when they are in the ER desperately needing X or Y. Let's just not follow the insurance industry's hogwash and call doctors Providers and patient as consumers. The prior nomenclature was just fine. Patients to some extent need to be returned to depending and respecting the doctors judgment of their 'needs' rather that the pathetic substitute of an advertisements self serving 'pre-qualified' status. If the public won't voluntarily trust their best and brightest to do so, then having them pay a larger portion of the cost will quickly focus their minds.
None of these sorts of changes will occur. There are far too many special interests in the way. Sadly those who should be advocating for them, are too busy with their left leaning ideology.

September 13, 2011 at 6:33 PM  
Blogger Ashok V. Daftary, MD, FACP. said...

Surprisingly, the comment about unnecessary testing is often made but rarely demonstrated.
Such testing originates with individual physicians and every reader knows several in their communities. Rarely is anything done to rein them in.
Similar practices in other professions would lead to civil and criminal penalties.
Fee for service is not the culprit the abusers of this payment mechanism are.
Is it not time we discipline our own or do our patients and fellow professionals suffer for their excesses?

September 15, 2011 at 9:38 AM  

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About the Author

Bob Doherty is Senior Vice President, American College of Physicians Government Affairs and Public Policy; Author of the ACP Advocate Blog

Email Bob Doherty: TheACPAdvocateblog@acponline.org.

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