How Government, Commercial Insurance and Healthcare Provers Finance Healthcare

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Us Government, Cost Control and Its Impact

As health care costs soar unsustainability, many employers, state Medicaid programs and the Bush administration want to force patients to pay more. That's a cost-control strategy that cannot work, and it is adding to the tens of millions of underinsured Americans going without needed care.

Patients should not have to forgo necessary care. Health spending in the United States is already enough to cover all Americans-if we better use the vast sums now wasted on ineffective care and paperwork. Doctors are key both to cutting unnecessary care and to advancing reform.

Employers are expressing worry about costs. As General Motors CEO Rick Wagoner recently complained, high health spending limits U.S. businesses' ability to price products competitively in global markets.

Unsustainable costs are forcing employers, government and families to cut coverage. The nation cannot rely on still-higher spending to fill gaps for the uninsured and underinsured. Indeed, all Americans are at risk. Prompt action on health costs is vital to prevent a medical meltdown when our fragile economy stumbles.

The latest evidence is that health spending increases have eaten up one-quarter of the nation's economic growth from 2000 to 2005. This limits our ability to pay for education, housing, environmental cleanup-or anything else we care about.

Projected health spending of $1.9 trillion will consume 15.5 percent of gross domestic product this year-nearly double spending on education, and about 3.6 times defense spending.

Health care spending per person in the United States in 2002 was more than twice the average in Canada, France, Germany, Italy, Japan and the United Kingdom. Yet those nations have universal coverage, older populations, superior health outcomes and greater patient satisfaction with care.

We can convert our high spending from a burden to an opportunity-because about half of current spending goes to unnecessary services, needless bureaucracy, excessively high prices and other wasteful expenditures. We must contain costs in ways that squeeze out waste, mobilize the savings to finance high-quality care for us all and pay hospitals, doctors and other needed caregivers adequately.

Patients: The Wrong Target

Many employers' current cost-control strategy consists of requiring higher patient payments-with the goal of spurring patients to use less care and think twice before seeking it. The Bush administration touts "empowering consumers" with high-deductible insurance. Such a strategy is nothing more than emperor's-new-clothes coverage that leaves patients exposed and vulnerable.

A belief in market ideology persuades some employers, physicians and others that patients should bear more of health care costs. They assume that patients will comparison-shop for tests and treatment as if for toaster ovens. But that's impossible in emergencies, and hard when people are sick and fearful. Good information on health care's value and actual cost is often lacking, and the technical choices are often very complex. Isn't that why we send people to medical school?

Forcing patients to pay more cannot durably contain medical costs-especially because the majority ofhighest costs are incurred by physicians' complex decisions in treating a relatively small number of seriously ill people. Patients are the wrong target for cost controls. And it is reckless to force sick people to pay more and second-guess their doctors. The resulting underinsurance is unsafe.

Physicians, not patients, must bear the main responsibility for cost control. That's in part because doctors' decisions control about 87 percent of personal health care spending. About one-fifth of the personal health care dollar goes to physician incomes, with another two-thirds spent on tests, hospitalizations, drugs and other care that physicians order. They increasingly consult clinical guidelines and patients' preferences, but doctors' guidance is generally decisive.

Developing better information on the clinical value and marginal cost of health services is vital, but physicians already know where much money is wasted in providing care. (Doctors often fail to cut wasted care; reasons include financial incentives to over-serve, defensive medicine, and inability to capture and reallocate for better use the money saved by cutting waste.) Improving individual doctors' decisions offers the most effective and careful way to contain costs.

To eliminate unnecessary care, the best tool is not the risky gamble of raising co-payments and dropping benefits, or the meat-axe of HMO regulations, but the scalpel of careful physician decision-making about what care is appropriate for each patient. Obtaining support from physicians for this cost-control strategy is crucial to its success

Why Single-Payer Hasn't Passed

Cutting today's massive administrative waste is also essential. Numerous studies show that paying caregivers from one fund ...