Health for life

The levers that control health care costs

Ask an average voter how health insurers reduce costs and, thanks to years of hostile anti-insurer rhetoric, he or she will tell you that they "deny."  Think of it as "deny^2" for both the person (who is no longer insured) as well as the procedure (which is "not covered"). 

Sophisticated Disease Management Care Blog readers know better. "Deny" stories are mostly anecdotal and that kind of misbehavior is largely prohibited. 

If insurers want to save money, there are far smarter ways to do it.  The same is true for government sponsored insurance.

After reading this Health Affairs article, the DMCB discovered that Canada, France Germany and England are using those smarter ways.

And so is the United States government.

Hows that you ask?

While health care costs in other developed countries are lower than the United States, the contrarian DMCB has pointed out that todays costs are not all that important. A far more ominous trend is the rate of growth, a.k.a. "trend."  Year-after-year increases in health costs that outstrip GDP are far more threatening to governments fiscal health, especially when budgets are being strained by other priorities, like combating terrorism, keeping tax-dodging French movie stars from moving to Belgium and helping Mr. Bieber retrieve his pet monkey from Germany.

So what are Canada, France, Germany and England doing to control health care costs?  According to the DMCBs read of Mark Stabile and colleagues article, they are using three strategies:

1. Budget shifting: This involves individual beneficiary cost-sharing, as well as cost-shifting to private insurers and/or local governments. Ottawa, Paris, Berlin and London are also eliminating coverage of "low-value" services, devices or drugs. Yet, since backing away from universal coverage is out of the question, the central governments are also providing funding that protects low income individuals from otherwise unaffordable out-of-pocket costs.  While theyre at it, coverage for "high value" services such as hospice, immunizations, dementia care (Germany) and hypertension care (France) is being expanded.

2. Budget setting: While England and France use national caps (that are flexible and subject to adjustments), all four countries have a growing reliance on regional or local price fixing as well as capitated payment arrangements. Pay-for-performance is being substituted for otherwise routine budget increases and consumers are being given their their own fixed personal spending accounts.  This helps limit the likelihood of future budget increases. 

3. Direct controls of health care supply: examples of this include cutting the number of hospital beds, eliminating coverage of certain drugs, increasing the number of primary care providers, using health technology assessment and relying on practice guidelines.

If this sounds familiar, it should.  As the DMCB noted here, the Feds are reducing Medicares risk exposure by asking individual beneficiaries, providers and State governments to take on a greater share of health care costs.  Theyre also imposing budget controls by capitating providers with bundled payment and risk contracting arrangements. Last, but not least, theyre controlling the supply of health care services by, for example, increasing payments to incent the adoption of electronic records and increase the pool of primary care providers.

It turns out rising health care costs are a global problem with the same set of policy options.