June 21, 2016

Rising health care costs demand action to protect common resources


Dr. Eric Larson issues a challenge to politicians and health care professionals: Talk about health care costs and take action to slow their growth.

by Eric B. Larson, MD, MPH, executive director, Group Health Research Institute, and vice president for research, Group Health 

Next Monday, Dr. Leana Wen will visit Group Health for our annual Birnbaum Lecture. Dr. Wen, the Baltimore City Health Commissioner, will talk about social determinants of health such as education, employment, and income. Her visit comes at a perfect time. New analyses show the effects of the Affordable Care Act (ACA), or Obamacare, on health care and health equity. In last month’s newsletter, I celebrated how the ACA has increased access to care. This month, I’m addressing a concern: the inability of current reform efforts to truly control costs.

Remembrance of Birnbaums past: No change in cost concerns

In preparation for this year’s Birnbaum lecture, my colleague Dr. Michael Von Korff and I were recalling the 2005 event. The speaker, Dr. Karen Davis, president of the Commonwealth Fund, participated in a roundtable discussion with GHRI and Group Health leaders. Michael and I looked at background material for the conversation, which was on health care costs. Little has changed. Points that are still true today include:

  • The stagnating effect of high care costs on wages, especially for low-income workers;
  • The tax burden of financing health care; and
  • Lost opportunities, when overspending on health care means neglecting other national priorities.

The 2012 Birnbaum speaker, Dr. Don Berwick, who had been Acting Director of the Centers for Medicare & Medicaid Services, also made a point about opportunity costs. Don stated convincingly that reducing health care costs is an ethical imperative, because excessive health care spending prevents us from investing in schools, roads, and bridges. We’ve grown jobs in health care but possibly at the expense of needs in other sectors such as infrastructure. And the cost problem is getting worse.

A new estimate from the Congressional Budget Office of the costs of increased enrollment in Medicaid and health insurance marketplaces is $136 billion higher than the previous estimate. Insurance companies are warning of double-digit percentage increases in premiums. Clearly, Obamacare has not solved the cost problem—yet.

High care costs have complex causes—and solutions

Here are my thoughts about what we need to do to rein in health care spending. We have to move more quickly away from fee-for-service care. Paying for health care by the service encourages unnecessary and sometimes harmful tests and procedures. Although the fee-for-service model is deeply engrained in our culture, health care systems like Group Health and Kaiser Permanente have a proven model that combats this culture. Because these systems provide both insurance and care, they are motivated to keep members healthy. They apply evidence-based care. They do not measure success based on fee-for-service revenues. Health systems with this model keep costs lower for everyone because, through market competition, they force fee-for-service systems to compete with them on costs. We need more health care leaders to embrace this model. The ACA recognizes that rewarding high-quality care instead of more care is one of the best ways to control costs. That’s why, under Obamacare, we’re seeing accountable care organizations springing up around the country. This is a trend we should encourage.

Other solutions to high spending will come from individual states, supported by the ACA, that are creating their own solutions to rising health care costs. An example is the Washington State Community Checkup from the Washington Health Alliance, of which Group Health is a member. Stay tuned to see how these initiatives affect costs, and let’s hope the successful ones can be translated nationwide.

Finally, let’s talk about our own responsibility in reducing costs. Can we cut back on what we consume as a health care industry? Can we apply the argument of the tragedy of the commons? This concept, associated with ecologist Garrett Hardin and applied to health care decades ago by Dr. Howard Hiatt, has come to mean that when individuals overuse common resources based on their own self-interest, they hurt everyone, including themselves. For example, wasting money on expensive medical equipment that does not have proven benefits diminishes care quality for all. How can we use common resources wisely to promote the general good of improved health?

Reducing waste and overutilization is one obvious solution. Another point came up in the 2005 Birnbaum discussions and still stands out today: In the U.S., we pay higher prices than other countries for medications, treatments, and salaries. We must challenge our politicians and ourselves to reduce these costs, even though doing so will work against the self-interests of companies that produce drugs and medical devices and health care professionals and executives who earn high wages.

I’m sure Dr. Wen would agree that our community and country’s health would be a lot better if instead of spending so much on health care, we invested in education, infrastructure, jobs, and better wages in general. Please join me at the Birnbaum Lecture if you can. I want to hear your ideas about how we can ensure affordable health care that is available to everyone.


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