Experts Describe Steps Needed to Begin Controlling Health Costs

Health costs have been growing much faster than the rate of inflation, and most observers agree that while health reform addresses the issue of access to insurance, it inadequately addresses the underlying problem: the cost of care itself.

Unanswered questions surround reversing the unsustainable cost of health services. For example, would replacing the fee-for-service system with one that rewards care coordination and quality outcomes curb cost growth? Is health reform the spur needed to prompt plans and providers into together adopting value-based strategies? What will be needed to persuade consumers to consume health services more economically?

Experts from the insurance and employer-plans communities shared their ideas about reducing amounts spent on care by rewarding quality and paying for excellent care coordination, at a July 17 summit sponsored by Health Affairs.

Cut Costs, Don’t Just Shift Them

If the country is unable to get to the root of the problem, cost-shifting will remain the name of the game. Patients have not been looking for ways to streamline care or lower billed amounts; instead they try to shift increased costs to insurers and employers, said Mark Smith, president and CEO of the California HealthCare Foundation.

But there will be no way to reduce cost if the nation does not consume fewer health services, said Helen Darling, president and CEO of the National Business Group on Health. The insurance reforms passed in 2010 without payment system and care delivery reform will not reduce health costs, she said.

The key, Darling said: “We have to tie evidence to coverage and coverage to evidence.” Bonuses should go to physicians for quality performance and outcomes, and for treating patients who are newly insured under reform, she suggested.

Allowing states to determine what an essential health benefit is, was a mistake that doesn’t help contain costs. For states may decide the latest most popular malady must be covered by all plans that state. That could be a cost disaster for plans.

Money’s Running Out

When it becomes clear time is running out, people work harder. Likewise when it becomes clear money’s running out, health care might get the incentive it needs to figure out how to better manage care, phase out unnecessary services and target high-cost conditions efficiently.

Managed Care-only Strategy Failed

A managed care-only strategy — reducing coverage, tightening enrollment and cutting reimbursement — has not yielded sufficient results, said Bill Kramer, executive director for health policy at the Pacific Business Group on Health. Nor is it really clear that high-deductible health plans persuaded consumers to manage their health costs better, he said.

However, insurers, employers and plans should use the following to seek out less costly, more effective care:

·         Price comparison data, for example, of replacement joints, or colonoscopy services, are available in some areas. But price transparency must be ramped up in scale or it will have little effect, Kramer said.

·         Better management of chronic conditions, identifying the proper quality improvement measures, and tracking clinical outcomes — not just processes — will help control costs as well, he predicted.

·         Value-based design can give consumers an economic incentive to do the right things whether they are healthy or have a chronic condition. Making the right decision will be rewarded, said Mike Cropp, CEO of Independent Health in Buffalo, N.Y.

·         Networks of high-performing providers and incentives for patients to go to them. Under such a regime, plan members who use providers from the high-performing network will get lower out of pocket costs.

·         Patient centered dashboards, where patients and health providers can view a patient’s x-rays, lab work, and medical notes electronically, even if the patient is seeing a new provider or having an emergency. The regional system of health records would be a community owned asset, Cropp said.

Insurance Reforms

Karen Ignagni, president of America’s Health Insurance Plans, a group representing large insurers, said cost drivers in health reform include an essential benefits “buy-up” and a new health insurance premium tax. Part of the problem is the sudden nature of the changes.

·         Sales taxes on health insurance, imposed by the reform law on insured plans and individual policies. They are passed on to individuals, small businesses, privately administered Medicaid plans; and Medicare Advantage (thereby canceling out added value and driving people away from those plans), she said.

·         Rating bands — the ratio expressing the premium variation between the youngest members and the oldest members — will change under reform from 5-1 to 3-1 overnight, Ignagni said. The abrupt way this will be done will force insurers to increase premiums, she said, and although it will be a welcome development for elderly individuals, it will drive up premiums for younger members.

·         Essential health benefits: Consumers who have been making do with limited coverage and catastrophic only coverage will abruptly have to buy much more comprehensive coverage with a far less affordable premium, she said.

She went on to say: (1) more system conformity would contribute to cost control; (2) public and private measures to reform health delivery need to be coordinated; (3) transparency must support consumer driven health efforts and value-based benefits; and (4) health care no longer can be considered an economic growth industry.