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The Problem
When researchers and policy-makers discuss the relative merits of health care in the U.S. versus other countries, one fact stands out: U.S. health care is extremely costly. We spend significantly more of our national income on health care than any other country, and this has been going on for a long time. As our “Chart of the Month” below shows, in 2014 the U.S. will spend $4,800 per capita more than the average of nine other countries with advanced economies. If we spent on a per capita basis what these countries spend, our total national health expenditures for 2014 would be $1½ trillion lower. And, this enormous gap is growing. By 2020, according to projections by the Centers for Medicare and Medicaid Services, including the impact of the Affordable Care Act, annual health care spending will be $2 trillion more than other advanced economies.
For a number of reasons, we can’t ignore this problem any longer. Taxpayer-funded government health programs are busting the federal budget, economic growth has slowed, and the baby boom generation is retiring. This cost problem will have to be addressed in the next 5-10 years, one way or another.
Health Policy and Cost
Since Medicare was enacted in 1965, policy-makers have been ambivalent about cost. Many believe that forcing government programs like Medicare and Medicaid to reduce costs will inevitably lead to withholding needed care. As a result, policy-makers have focused on passing legislation and regulations aimed at improving quality of care, efficacy of drugs and devices, and patient safety, rather than reducing costs. For the last few years, however, taxpayers have resisted pouring more and more money into government health programs, which is restricting access to care for government-funded patients. We are headed for a two-tier system, where people with private insurance get first-class care and government-sponsored patients, even if they have insurance coverage, have fewer choices and less access. Unless we get serious about cost, we may not be able to maintain our historical commitment to providing quality health care for those who need it most.
How Will IAHC Help?
Dealing with such a large, pervasive problem requires a unique approach to institutional and social change. No “silver bullet” will fix this problem: we must unwind our excess costs piece by piece over time . This will require a groundswell of innovation by providers, health plans, employers, suppliers, and government agencies. Fortunately, a great deal of innovation is already going on, much of it under the radar screen. For example:
- At Stanford University, Dr. Arnold Milstein has established the Clinical Excellence Research Center (CERC) to develop and test new care delivery models for four high-cost clinical conditions (initially, chronic kidney disease, late stage cancer, colo-rectal cancer, and bariatric surgery). The CERC is also conducting research on innovative methods of care delivery (ambulatory ICUs and Tele-Video Physician Care) and exploratory research on “positive outliers” – PCPs, specialists, and hospitals who provide quality care and spend fewer resources than their peers.
- In Albuquerque, Intel and Presbyterian Healthcare Services have established an employer-sponsored accountable care organization called Connected Care, which employs innovations in benefit design, plan design, and delivery system incentives aimed at creating the healthiest work force on the planet and making their care more efficient and affordable.
- Management Health Solutions, a small Connecticut company, is helping health systems save money on their purchased goods and services by doing a better job managing their inventories. Ensuring health systems get the rebates they are owed, reducing their use of expedited freight charges, and avoiding expired inventory may seem like small improvements, but they add up to multi-million savings for a moderate-sized health system.
These are all examples of the millions of “unwinding strategies” we will need to solve our cost problem.
The Institute for Affordable Health Care (IAHC) is a collaborative established to accelerate this unwinding process by:
- Assembling a national community of experts committed to the goal of making U.S. health care more cost-competitive;
- Helping community members learn from each other and work together to develop innovative approaches to reducing health care costs; and
- Communicating valuable solutions, approaches, and tools to decision-makers and policy-makers.
www.IAHC.com
This web site is the launching pad for IAHC, and we expect to develop other collaboration activities and vehicles in the future – webinars, member forums, conferences, publications, etc. The site is organized in eleven sections. The first section, Root Causes of High Costs, explores the underlying forces and dynamics driving our health care costs. The other sections address ten different “unwinding” strategies we believe will be needed to reduce our high costs over time:
- Realign Incentives to motivate people and institutions to reduce costs
- Redesign Clinical Processes to deliver more cost-effective care
- Invest in Cost-Saving Technologies and process innovation that improves efficiency
- Reposition Clinical Assets, especially hospital beds and other inpatient care assets
- Restructure Health Care Organizations to meet market needs
- Rebuild our Health Care Work Force to meet customer-driven performance requirements
- Strengthen Financial Controls to support improved cost measurement and management
- Build World-Class Business Processes to enable smaller players to realize economies of scale
- Engage Consumers in managing their own health care costs
- Shift Governments’ Role from being payers and providers to being funders and more efficient regulators of health care services.
These categories are intended to elicit a diverse set of “unwinding” ideas. Readers may contribute comments to the general blog or any of these sections. General comments will be moved to relevant sections, and contributions may be moved between sections to stimulate productive dialogue. The sections themselves are not “cast in stone” and will evolve over time. Contributions should be as specific as possible, providing tangible evidence of actual or potential impact on cost, wherever possible. Diatribes without data will generally be screened out…unless they are highly entertaining.
A Word About Quality
Cost reduction ideas discussed on this site should maintain or enhance health care quality. There is no place in 21st century America for ideas that degrade health or the quality of care.
Fellow-Travelers
A number of other organizations are aimed at goals similar to IAHC’s, including the Health Care Cost Institute (healthcostinstitute.org), the Council for Affordable Health Insurance (cahi.org), the Institute for Clinical & Economic Review (icer-review.org), the Bi-Partisan Policy Center (bipartisanpolicy.org), Stanford University’s Clinical Excellence Research Center (cerc.stanford.edu), the HMO Research Network (hmoresearchnetwork.org), and others. We hope to collaborate with many of these organizations as we pursue our common vision. We also welcome new organizations and institutions on this journey. Eliminating $1½-2 trillion per year in excess costs will require an army of fellow-travelers from across the sector (and across the political spectrum). As Arlo Guthrie might say, it will take a movement, and we aim to start this movement.