Monday, November 12, 2007

Costs - In the Abstract Not The Concrete

A husband and wife watch their children play in the newly laid sidewalk.. The husband fumes, his neck veins distend, his eyes bulge, his mouth froths. His wife confronts him, “But Dear, I thought you loved children.” He replies,” In the abstract, not in the concrete!”

Lowering health care costs is like that. In the abstract, given current trends, we must lower costs. Peter Orszag, director of the Congressional Budget Office, and Philip Ellis, his senior analyst (NEJM, Nov. 8, 357:1885-2007), put is this way,

“The long-term fiscal balance of the United States will be determined primarily by the future growth of health costs. If cost per enrollee in Medicare and Medicaid continued to grow at the same rate as they have over the past four decades, federal spending on the two programs alone would increase from about 5% of the gross domestic product to about 20% by 2050- roughly the share of the economy now accounted for by entire federal budget.”

So, constrain costs we must.

But how?

One, in the abstract, generate more information about treatment effectiveness and align incentives. In the concrete, this is behind P4P programs, yet to be broadly tried (or proven).

Two, in the abstract, expand federal disease management programs and coordinate care to reduce costs. In the concrete, Medicare disease management demonstration programs have been found to improve care but not reduce costs.

Three, in the abstract, “target” specific diseases, e.g...diabetes and heart failure, which cost the most and pay more to those who reduce costs. In the concrete, end fee-for-service reimbursement to remove incentives, and then reward salaried groups of physicians.

Four, in the abstract, have consumers themselves ration care by requiring them to pay more and by giving them tax incentives to seek less care. In the concrete, given deep roots and expectations engendered by the entitlement mind set, this is politically difficult.

In the abstract, it boils down to finding what works, targeting high-cost patients on whom it works, and paying physicians more who make it work. If all else fails, there’s always the “R” word – rationing. Maybe, in America, land of abundance, voluntarism, and innovation, we won’t step in that concrete.

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