Our
health care system is in crisis. Without
swift action, that crisis could threaten every American family’s health and
finances.
Unless the new Congress and
Administration act to reduce health care costs, the yearly cost of the average
employer-paid family health policy in America is projected to more than
double from $11,381 in 2006 to $24,291 by 2016 even after adjusting for
inflation. If recent trends continue, wages and household incomes will simply
not keep up with these high costs. Nor will the business sector be immune to
this crisis. Unchecked, this cost
epidemic could also severely impact the small businesses that drive job
creation in the American economy.
Unfortunately, too much of these
astronomic costs are going to enrich special interests, not buy the best health
care. The Congressional Budget Office
estimates that nationally as much as one third of health care spending is
wasted and does not improve outcomes. That means that, in 2007, one out of
every three dollars that Americans spent on health care, or $730 billion, went
to the insurance bureaucracies, drug companies, medical device manufacturers,
and providers without improving a single person’s health.
This report examines three
important sources of this unproductive spending. We conclude with a package of urgently needed
reforms which target those causes, improve quality of care, and rein in this
unnecessary spending. As part of comprehensive
health reform, these policies will enable America to emerge from this crisis
with a health system that consumers and businesses can afford and families can
depend on.
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Unnecessary Medical
Care Undermines Patient Health and Increases Costs
Research has shown that patients
who live in regions with above-average health care spending are not any
healthier than people in lower-cost regions. In parts of the country where more
specialists and hospital beds are available, doctors send patients to
specialists or to the hospital more frequently, yet the patient outcomes are no
better.
Medicare
and private insurance payment policies compensate doctors on the basis of
how many tests and procedures are ordered, not on the basis of whether
effective treatment is delivered.
Payment
for care does not adequately support effective strategies that improve
patient health and reduce the amount of unnecessary care prescribed such
as primary care, coordinated care, patient involvement in care decisions,
and the use of evidence-based care.
High-performing
health systems that seek to reduce unnecessary care, like the Mayo Clinic
and Utah’s
Intermountain Health System, can reduce costs per patient by as much as
43%, while providing quality care. If America’s
hospitals achieved Intermountain’s level of quality and efficiency, we
would spend $299 billion less a year for hospital care.
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Excessive Administrative Expenses Inflate Insurance
and Medical Prices
Many administrative costs within America’s
health care system are the result of efforts to shift costs from one payer to
another—from the insurance company to a hospital, or from a physician to a
patient. This paperwork increases total costs without improving outcomes for
patients.
Unnecessarily
duplicative and complex billing and insurance certification requirements
add billions in additional administrative costs.
The
credentialing process by which physicians are certified as providers is
unnecessarily burdensome and wasteful
Insurers
and providers spend tens of billions a year nationally on
insurance-related paperwork that does not contribute to the quality of
care.
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Unchecked Pharmaceutical Marketing Drives Up Costs
Americans spend billions of
dollars annually on prescription drugs that are no better than cheaper
alternatives or that may have dangerous or unrecognized side-effects. Worse,
drug companies’ marketing campaigns in support of their most expensive drugs
cost $11.5 billion in 2005.
Drug
advertising generally encourages the use of newer, more expensive
medications, even if they are no more effective than existing ones
Pharmaceutical
companies increased prescription drug advertising by 250 percent from 1997
to 2007. In response, physicians prescribe and consumers purchase billions
of dollars of unnecessary and even risky medicine each year.
Direct
marketing to physicians, which has been shown to rely on misleading
information, boosts the total number of prescriptions and increases the
number of prescriptions for newer and more expensive drugs that are no
better than old ones.
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Solutions
Fortunately, the high cost of
care can be reduced and wasted spending is preventable. America can fix this problem now. In
light of the 2008 election, health care reform will be on Congress’ agenda in
2009. If these reforms are to be economically sustainable, they must tackle
unproductive spending that doesn’t improve health. This report recommends the
adoption of the following policy initiatives:
Reduce Ineffective
Medical Care While Improving Quality
Fund comparative effectiveness research that studies
which medical procedures, regimens and drugs work and which do not.
Broadly implement and incentivize coordinated
care systems such as medical homes. Compensate primary care providers
adequately.
Expand information provided to patients and encourage
them to share in decision making about their care.
Reform public and private payment systems to
provide the right incentives for high-quality care and reduce unnecessary but
costly tests and procedures.
Reduce Expensive Administrative Bureaucracy
Standardize systems for enrollment, credentialing,
billing and insurance payment.
Limit insurers’ administrative expenditures to a
certain percentage of premium dollars.
Reduce
Prescription Drug Costs
Strengthen FDA monitoring of false statements in
direct-to-consumer advertising and marketing materials
Undertake a publicly funded effort to publicize
the benefits and prices of drugs to counter the unreliable information provided
by pharmaceutical companies.
Limit industry’s gifts to physicians and require
drug companies to disclose more information about their marketing practices
Some of these reforms could
happen fairly quickly; others will take years. But it is critical that we start
now by addressing overspending that does not deliver results. Americans simply
can not afford any more years of spiraling health care costs.
