Three Ways to Cut Health Care Spending
The Rand Corporation earlier this month put out a research study on the health care system in Massachusetts and ways the Bay state could cut overall costs. With the American public caught like a deer in the headlights on what way to go with Federal health care reform, it’s nice to take a look at hard evidence in a system that is already operating.
I’m not saying Massachusetts’ health care system is perfect, but it’s at least in place. And since we all have to pay for our health care, it’d be nice to know that someone’s trying to do an efficient job in providing us with services.
So let’s see what Rand said about where, and how, to cut costs. In the report, titled Controlling Health Care Spending in Massachusetts: An Analysis of Options, the authors divide health care saving opportunities into five categories: reform payment systems, redesign the health care delivery system, reduce waste, encourage consumers to make good health choices and change medical liability laws.
One example of a way to lower costs in the payment system category was to bundle payments for tests/procedures around specific conditions, such as diabetes, where the chronic ailment takes a somewhat predictable path for people aged 18-64. In essence, this bundled system replaces an episode-based system where all costs stem from one treatment/procedure that, over time, add up. The thinking behind bundling is that assumed costs would be planned for and any other treatments negotiated at a 50% discount.
Rand projected a savings of $685 million to $39 billion, or 0.1% to 5.9%, from 2010 to 2020 based on where Massachusetts is operating right now. That’s a lot of money and could potentially the altered system could help more people get help for chronic, and common, ailments.
An interesting example of changing the health care delivery system is the rise of the “medical home” where people with chronic conditions who are getting episodic care will instead be introduced to regular, low-cost comprehensive, care. Cost savings would result from fewer visits to emergency rooms, lower hospital spending on patients with chronic conditions, like asthma, and less money spent on drugs since patients would better adhere to prescribed medicines.
All this doesn’t necessarily mean doctors get paid less either. According to the report:
This policy option would increase payments to physician practices that function as a medical home (by managing chronic illness, improving access and coordination of acute care across settings and providers, and using health information technology [HIT]).
There are already several pilot projects like this under way in Massachusetts. Rand projects changes in cumulative spending, for 2010 to 2020, relative to where Massachusetts is now to increase in a range from a $2.8-billion increase to a $5.7-billion decrease (+0.4 to –0.9%). While this is not necessarily a huge cost savings, it would drastically alter how chronic conditions are cared for in this country.
The last option I wanted to look at was eliminating, or lowering, payments to hospitals when they make errors. Think about it: why should they get paid when something goes wrong? It’s their fault. Medicare already holds back funds for “avoidable complications” so any further expansion of the U.S. health care system should follow the same line. Rand suggests costs could be cut as people avoid coming back in after being treated and by eliminating infections after surgery.
For the upper-bound scenario, we assumed that payments are eliminated for potentially preventable readmissions (PPRs) occurring within 15 days of hospitalization and all hospital-acquired infections (HAIs). We estimated that the annual cost of HAIs and PPRs in Massachusetts is $617 million, although—because some PPRs may not actually be preventable—this estimate may be overly optimistic.
Rand estimated savings of $7.6–12.3 billion (–1.1–1.9 percent) total from 2010 through 2020 against current spending.
The point is that there are ways to make a viable health care system here in the United States. We just have to care enough, and have enough patience, to deal with the minutiae.