WASHINGTON – A recent report released by a bipartisan working group composed of former governors, health policy experts, insurers and health care providers urges states to make efforts to restrain the growth of health care costs.
[cleeng_content id="397720513" description="Read it now!" price="0.49" t="article"]Each year for decades, spending on health care has consumed a growing proportion of the country’s total income. Health care spending amounted to only 5 percent of total income in 1960, but today it consumes almost 18 percent, according to numbers from the Organization for Economic Co-operation and Development.
According to Brandon Merritt, a health policy analyst with the West Virginia Center on Budget and Policy, health care spending in the Mountain State is an even bigger problem.
“In West Virginia, it is even higher,” he said. “We have calculated that it is about 23 percent of the gross state product.”
The study was released by the State Health Care Cost Containment Commission, which convened to present its findings at the National Press Club in Washington D.C. on Jan. 8.
The study argues that the problem is a stark one: the American health care system has for years been extremely expensive while producing worse outcomes than those in other wealthy countries with much less expensive systems.
“Per capita spending in the U.S. was over twice that of other OECD countries even though residents in the U.S. utilized the system less than individuals in these countries,” the study notes. “In spite of the high level of spending, the U.S. ranked below 17 other OECD countries in terms of life expectancy, [which is] the best measure of health outcomes.”
“One study found that the U.S. had the second highest death rate among 19 OECD countries from conditions that could have been prevented or treated successfully,” it added.
“This is being driven by a glacial force that is going to find a solution somewhere,” said Commission Co-Chair Mike Leavitt, the Republican former governor of Utah and secretary of Health and Human Services under the George W. Bush administration.
Co-chair Bill Ritter, the Democratic former governor of Colorado, said state governments are well-suited to establish goals and implement policies to restrain health care inflation.
“The transformation must be led by states,” he said. “Health care markets and cultures differ from state to state, and so solutions must be tailored to individual states.”
The report places much of the blame for high costs and low quality on the fee-for-service model under which the American health care system operates, and advocates a transition to delivery systems that pay healthcare providers for maintaining their patients’ health.
“Although there are no silver bullets with respect to restraining health care costs, the most important goal is to transform the delivery system [from] one that is fee-for-service into one that is comprehensive and integrated, using payment models that hold organizations accountable for the cost and the quality of care,” Ritter said.
Merritt, a health policy analyst at the West Virginia Center on Budget and Policy, also listed the fee-for-service payment model as a major problem with the American health care system.
“More than a health care system, we have a disease care system,” he said. “There are reasons for this: the fact that hospitals are reimbursed on a fee-for-service basis rather than for prevention measures. It flips the incentive. Not to say that any doctor wants their patients to get sick, but they make their money when their patients are sick not when their patients are healthy.”
The report cites a number of reasons for the much-higher costs of the American health system relative to that in other wealthy nations, including fragmented and uncoordinated care; the higher cost of physicians, procedures and drugs; high administrative costs; unhealthy lifestyles; and the fact that patients do not often weigh costs when making health care decisions.
“All of these factors contribute to the U.S. having the highest health care costs, even though U.S. consumers see their doctors and check into hospitals less frequently than most other OECD countries,” it concludes. “While it is true that many individuals in the U.S. receive exceptional health care, on average, there are significant quality and cost problems.”
The group maintained that states have a variety of powerful “policy levers” at their disposal which they can use to help rein in health care spending while increasing the quality of care.
“Due to the convening power of governors, the current authority of states, and the additional jurisdiction given to the states in the Affordable Care Act, states are the level of government best positioned to transform the United States’ health care system,” the report reads. “States should be able to lead the transformation from a fee-for-service system to one that delivers higher quality care at lower costs.”
The report notes that states either have regulatory powers or direct control over large segments of the health care system. States are in charge of their Medicaid and Children’s Health Insurance Policy programs, which account for a large segment of total health care spending. Changes in the way these programs are run, the report argues, can have big impacts on the broader health care market.
Another significant lever the report points toward are the insurance policies states offer their employees.
“Typically, the state government is the largest employer in the state and hence a significant part of the state market” is funded by state health plans, Leavitt said.
There is one bright spot in the American health care market: while health care spending is still growing in real per capita terms every year, it is growing much more slowly than it used to. Between 2002 and 2008, spending was growing by an average of 7 percent a year, according to reports from the Centers for Medicare and Medicaid Studies. But between 2008 and 2012, the growth rate slowed to around 4 percent.
“The rate of growth of health care spending has slowed down in recent years,” Merritt said. “There is a lot of debate among health policy folks whether this is just a short-term blip, or if we are seeing a bending of the curve downward for future growth.”
Rising health care costs have big impacts on the state budget, increasing the cost of Medicaid, state employee insurance policies, the Children’s Health Insurance Program and other health programs, while reducing workers’ disposable incomes.
Growing heath care costs are also a primary driver of the federal government’s long-term debt. According to the report, the federal government and private households each contribute around 28 percent of total health care spending, which means that rising health care costs will have very similar impacts on the government’s long-term fiscal balance and households’ long-term standard of living.
Merritt argues that finding ways to reduce health care costs should be given more emphasis in state policy.
“As health care costs grow, more of your money is spent on heath care-related expenses, that means there is less money available for other programs, whether that be roads, schools or public libraries,” Merritt said. “I think it is going to continue to tend to grow unless there are some drastic measures that are taken at the local, state and national level.”