Health Care Cost Control

"Unfortunately, few people really understand how much we spend on health care,how much we need to spend to provide quality care, and the difference between the two." The New York Times published three articles by Ezekiel Jonathan Emanuel,MD PhD focusing on how to control the escalating health care costs in the United States. I highly recommend reading the articles published so far and have attached the links to each article below. The following bullet points represent an excerpt of the arguments made in his articles: How much do we spent on health care in the United States? In 2010, the United States spent $2.6 trillion on health care, over $8,000 per American.The United States spends on health care alone what the 65 million people of France spend on everything: education, defense, the environment, scientific research, vacations, food, housing, cars, clothes and health care. In other words, our health care spending is the fifth largest economy in the world. For more than 30 years, health care costs have been growing 2 percent faster than the overall economy. That means every year we spend ever more on health care and therefore have to spend less on other things — or borrow money to pay for the extra health care. If we continue at this rate of growth, health care will be roughly one-third of the entire economy by 2035 — one of every three dollars will go to health care — and nearly half by 2080. This level of spending on health care is high, but is it worth it? Does it make us healthier? The United States spends around 20-30 percent more per person than the next highest-spending countries, Switzerland and Norway BUT the United States is not getting 20 or 30 percent better health care or results than other countries! As a country we are actually doing worse than a number of countries, like France and Germany, that spend considerably less! How do we spent our health care dollars and how can we start saving? In health care, you have to be talking about tens of billions of dollars before you are talking about real money. A useful threshold for savings is 1 percent of costs, which comes to $26 billion a year. Anything less is simply not meaningful. Cutting health insurance companies profits? Last year, health insurance companies did rack up big profits, but it turns out that the combined profits of the country’s five largest for-profit health insurance companies — United, WellPoint, Aetna, Humana and Cigna — were $11.7 billion, only 0.5 percent of total health care spending. Even confiscating every penny of those profits would add up to less than half of the cost-saving threshold. Cutting drug companies profits? Between 2004 and 2009, generic drug use rose from 57 to nearly 75 percent of all prescriptions. Paradoxically, over those same years, the total amount Americans spent on drugs actually increased by 31 percent — the same rate as overall health care expenditures. Even the best estimates suggest that savings from expanding generics’ use even further are, according to the Department of Health and Human Services, “likely to be small relative to total spending on drugs.” Pharmaceutical costs account for roughly 10 percent of total health care spending, some $260 billion in 2010. Importing brand name drugs from abroad would cut about 2 percent from that — $5 billion per year. Another cost control disappointment. Malpractice reform is the solution? In 2009, the Congressional Budget Office did a comprehensive assessment of the potential cost savings from medical malpractice reforms. Its conclusions: A package that included a $250,000 cap on noneconomic damages, a $500,000 cap on punitive damages and a one-year statute of limitations for claims by adults would save about $11 billion a year — 40 percent from reduced malpractice premiums and the rest in the form of fewer defensive procedures like M.R.I.’s. Frankly, $11 billion is not insignificant BUT at less than half the $26 billion threshold, malpractice reform is certainly not a cost savings magic bullet either. Restrict health care spending on exorbitantly expensive patients? An unpublished analysis of nearly 20 million commercially insured patients(provided to the author of the article) showed that there were only 255 patients who consumed over $1 million in 2010. Together they spent 0.5 percent of all costs — a very large number for so few patients, but just half the 1 percent threshold for cost-saving that matters. And not all of those costs could be saved. Are administrative services one of the biggest money wasters in our health care system? Administration accounts for roughly 14 percent of what the United States spends on health care, or about $360 billion per year. About half of all administrative costs — $163 billion in 2009 — are borne by Medicare, Medicaid and insurance companies. The other half pays for the legions employed by doctors and hospitals to fill out billing forms, keep records, apply for credentials and perform the myriad other administrative functions associated with health care. The range of expert opinions on how much of this could be saved goes as high as $180 billion, or half of current expenditures. But a more conservative and reasonable estimate comes from David Cutler, an economist at Harvard, who calculates that for the whole system — for insurers as well as doctors and hospitals — electronic billing and credentialing could save $32 billion a year. And United Health comes to a similar estimate, with 20 percent of savings going to the government, 50 percent to physicians and hospitals and 30 percent to insurers. For health care cuts to matter, they have to be above 1 percent of total costs, or $26 billion a year, and this conservative estimate certainly meets that threshold!!! How do we get to these savings? First, electronic health records would eliminate the need to fill out the same forms over and over. An electronic credentialing system shared by all hospitals, insurance companies, Medicare, Medicaid, state licensing boards and other government agencies, like the Drug Enforcement Administration, could reduce much of the paperwork doctors are responsible for that patients never see. Requiring all parties to use electronic health records and an online system for physician credentialing would reduce frustration and save billions. But the real savings is in billing. There are at least six steps in the process: 1) determining a patient’s eligibility for services; 2) obtaining prior authorization for specialist visits, tests and treatments; 3) submitting claims by doctors and hospitals to insurers; 4) verifying whether a claim was received and where in the process it is; 5) adjudicating denials of claims; and 6) receiving payment. Substantial costs arise from the fact that doctors, hospitals and other care providers must bill multiple insurance companies. Instead of having a unified electronic billing system in which a patient could simply swipe an A.T.M.-like card for automatic verification of eligibility, claims processing and payment, we have a complicated system with lots of expensive manual data entry that produces costly mistakes. The Affordable Care Act requires the Department of Health and Human Services to develop operating standards for electronic eligibility determination and payment — steps one and six — in the next few years, but we need to go further. We need the standard operating rules to encompass authorizing tests and treatments, submitting claims, verifying where in the process a claim is and the real-time adjudication of denials. And we must accelerate the process, covering all steps by 2015. Finally, the government needs to require that all parties — doctors, hospitals, insurers, government agencies — use the electronic systems. This platform of electronic eligibility, claims and payment would — in addition to saving billions of dollars in paperwork — facilitate anti-fraud measures like those used by credit card companies. It would ease the administrative burden on doctors, letting them do the work that really matters — treating patients. Finally, it could improve care through built-in guidelines; if a doctor tried to schedule a stent implantation for a patient with stable heart disease, the system could tell him to try medication first; if he tried to order an M.R.I for a patient with normal back pain, it could tell him to prescribe physical therapy first. We have to realize that there are no " magic bullets" to solve our health care cost crisis.Any solutions offered so far to provide universal health care coverage will fail UNLESS they are being combined with meaningful and sustained cost control measures. This requires a total reform of our reimbursement system transforming it from a quantity to a quality focused service industry utilizing state-of-the-art information technology tools. Unless we are not willing to change, we are going to be forced to further ration medical services. What do we prefer? Yours Bernd Links: Spending More Doesn’t Make Us Healthier, http://opinionator.blogs.nytimes.com/2011/10/27/spending-more-doesnt-make-us-healthier/ Less Than $26 Billion? Don’t Bother., http://opinionator.blogs.nytimes.com/2011/11/03/less-than-26-billion-dont-bother/ Billions Wasted on Billing, http://opinionator.blogs.nytimes.com/2011/11/12/billions-wasted-on-billing/#more-112339