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Consider the first shot across the bow of serious cost reform, conveyed in an April 29, 2009, report of the Senate Finance Committee. Comparative-effectiveness research, it said, is a fine idea, but whatever "entity" carries it out "should be prohibited from issuing medical practice recommendations or from making reimbursement or coverage decisions or recommendations." Not even recommendations? Just throw the raw data out the window and hope for the best?
Consider also the widespread perception that the three most politically popular nostrums for cost control — prevention, information technology, and the very tactic the Senate Finance Committee would muzzle, comparative-effectiveness research — have been judged wanting. They may work but not well enough to make a great difference.1,2,3
Lest we conclude that only nervous politicians run from tough cost-control measures, almost everyone else is doing so as well. As the health insurance executive Robert Laszewski tartly noted after touring the country as consultant to a PBS Frontline documentary on health care, neither doctors nor hospital executives nor patients showed any willingness to give up anything. His observation echoes a sentiment I've heard expressed repeatedly in discussions of the need for cost control and health care limits — essentially, "Yes, you are right, we do need to set limits, but not if it is my spouse, child, or friend." Although everyone bewails rising costs, the constituency for doing something about them is skimpy.
So what is needed? I think we have to start by reiterating the goals of cost control, developing criteria for judging the various proposed methods of achieving those goals, and looking closely at some of the most promising ones. There is general agreement that the current 6% annual increase in health care costs is disastrous and unsustainable; it is projected to lead to a doubling of costs in a decade or so and insolvency for the Medicare program in 8 years. There seems to be some agreement that the long-term goal should be annual growth paralleling that of the gross domestic product (GDP), about 3% per year.
In one sense, 3% growth seems utopian, but in a deeper sense it is a minimal long-term economic survival goal. Achieving it, however, will require nothing less than changes in medical and professional values, patients' demands and expectations, industry profit seeking, research aims and aspirations, and the culture of American medicine, much of which has been dedicated to unlimited progress and technological innovation, cost be damned. The perversity of medical progress in the United States is that the healthier we get, the more we spend on health care, and the more we spend on medical research — mistakenly thought to reduce costs — the more our health care costs also rise. As the Congressional Budget Office (CBO) noted in 2003, "Examples of new treatments for which long-term savings have been demonstrated are few."4 Death is not conquered, but we spend ever more money to keep it at bay.
As for standards for judging discrete cost-control proposals, here are four possibilities: Is it likely to have a good, bad, or neutral health outcome? Is it technically and managerially feasible and economical? Is it politically acceptable or, with majority muscle, doable? And is it slow-paced or fast-paced?
A December 2008 CBO report offers a rich menu of 115 cost-control options. The CBO does not endorse any of them and notes their painful downside. But when these options are considered along with others advanced by the Senate Finance Committee, a number of fruitful possibilities emerge.
The option of sharply reducing Medicare's physician reimbursements catches the eye. These payments are scheduled to be reduced by 21% on January 1, 2010, and by 6% per year for some years thereafter. Congress has traditionally ignored the legislation that would lower physician reimbursements, but there are some alternative possibilities. The CBO cites two of them: freezing payment rates from 2009 to 2019 and implementing a plan that would raise fees by 2% in the years after 2010 (which clearly would not control costs).
Some more serious possibilities are increasing premiums for Medicare Part B (for physician services) from 25% to 35% of the program's cost per enrollee for 5 years and making similar changes for Medicare drug benefits; increasing the proportion of Medicare beneficiaries who pay an income-related premium for Part B; requiring manufacturers of brand-name drugs to pay the government a 15% rebate of the average manufacturer's price; limiting the growth in per capita Medicare spending to growth in per capita GDP plus 1 percentage point and setting a target of a 1% annual reduction in Medicare outlays for 2012 through 2019; reducing all Medicare payment rates in high-spending regions of the country; canceling annual cost-inflation adjustments in many programs; and increasing copayments and deductibles for many services. In sum, it is a range of possibilities that could step on just about everyone's toes — most notably, patients, physicians, and industry, all of whom will therefore resist such measures. These options are also solid and promising from a cost-control perspective, particularly in combination. In effect, the CBO has notified Congress that costs can be controlled and has thrown down a challenge. Meeting it will be a test of legislators' seriousness about costs.
The general Republican solution for both universal care and cost control is expanded consumer choice and provider competition, not government intervention. But except at the margins, which is not where the highest costs are, consumers' choices will be limited. It is not easy to shop for expensive, complex care for chronic diseases in the last 2 years of life — the situation in which the greatest health care costs are incurred. And there is no good evidence that provider competition is a cost-effective way to manage a health care system. The often-invoked Federal Employees Health Benefits Program, which offers a choice of private plans, has seen the annual costs of those plans rise faster than those of Medicare. But it would be remiss not to note that Medicare's cost increases are also unsustainable; some poor economic outcomes are just better than other poor outcomes.
The creation of a new government health insurance plan to compete with private plans is one of the more ambitious structural schemes for using competition to control costs. But a competitive private sector has never controlled costs for more than a short time in this country, and there is little reason to believe that competition with a public plan could make a significant difference.5 The much-touted "level playing field" could mean that the costs of all plans would continue to increase, albeit a little more slowly. That outcome would not be good enough.
What would be good enough? A way must be found to resolve a basic dilemma: cost controls that are likely to be politically acceptable will not be very effective, and what might be effective will not be acceptable — a point underscored by a recent USA Today–Gallup poll, in which a majority of people said that controlling costs should be legislators' top goal, even though "more than nine in 10 oppose limits on getting whatever tests or treatments they and their doctors think are necessary." A large majority are also "against cutting Medicare costs."
We know from other countries' experiences which techniques hold down costs. Some of them set limits on care that doctors consider necessary, and most require the strong hand of government: for instance, price controls on pharmaceuticals, negotiated physicians' fees, caps on hospitals' annual budgets, and limitations on the introduction of new technologies. Adopting many of the tougher possibilities from the CBO list would make a good start in the right direction. They should be pushed.
No potential conflict of interest relevant to this article was reported.
Source Information
From the Hastings Center, Garrison, NY.
This article (10.1056/NEJMp0905630) was published on July 29, 2009, at NEJM.org.
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