Addressing health care costs -- the right way

The AMA has put forward four broad strategies to reduce health care spending and improve value.

Editorial. Oct. 15, 2007.

Tired of seeing headlines like the one on the front page of the Oct. 1 AMNews: "Health insurance premiums up 6.1%, fast outpacing inflation and wages"?

More important, are you weary of experiencing what that statistic and others that document rising health care costs mean to you and your patients in real life terms -- a higher number of people without health insurance, more paperwork for your practice, soaring administrative costs?

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Topic: The uninsured

Well, it's possible to change the status quo. A fundamental first step is to properly address the issues of cost, value and efficiency in the U.S. health care system.

The latest rise in health insurance premiums -- only a part of the nation's roughly $2 trillion annual health bill -- is a timely example of why attention turns so quickly to rising health care costs. The figures, compiled by the Kaiser Family Foundation, represent the smallest rate of premium increase since 1999. But that's a dubious distinction given that the rise is more than twice the overall inflation rate of 2.6% and far ahead of the 3.7% increase in wages.

And if insurance costs go up at that rate, expect also a rise in the number of uninsured Americans. Another of our page one headlines, only two weeks before the premium news, announced a dramatic increase in the latest U.S. Census Bureau tally of the uninsured -- to 47 million.

When insurance rates rise, according to researchers, fewer workers can afford to pay premiums and medium- and small-size firms give up offering coverage. One striking figure: In 2001, 68% of firms smaller than 200 workers offered health benefits; at last count it was 59%.

It's essential to note that much of the increase in what's spent on health care in America is for necessary care. By one count, from a 2004 study in Health Affairs, treated prevalence of disease -- basically, the underlying prevalence of illness and often evolving treatment resources used to address it -- alone accounts for an estimated two-thirds of the recent growth in health costs. But there are a number of studies indicating inefficiencies due to overuse and underuse of services. On top of that is non-clinical waste, including bureaucratic burdens and excessive third-party profits.

The answer is not willy-nilly hacking away at costs, but defining and moving forward with a focus on better value in our health care spending. Focusing on value would likely lead to a slower growth of costs.

This positive approach to addressing rising health care costs was the subject of an in-depth report presented by the AMA's Council on Medical Service to the Association's House of Delegates in June. It framed the essential issue of value as follows: "Value can be thought of as the best balance between benefits and costs (i.e., efficiency, in economic terms), and better value as improved clinical outcomes, quality, and/or patient satisfaction per dollar spent." Delegates adopted four broad strategies, presented in the report, to contain health care spending and improve value:

Reduce the burden of preventable diseases. This includes preventing the onset of chronic illnesses such as diabetes and improving patient compliance with medications.
Make health care delivery more efficient. Better coordination of care and reducing unnecessary services fall into this category.
Reduce non-clinical health system costs that do not contribute to patient care. For example, reducing excessive spending on administration, profits and marketing.
Promote "value-based decision-making" at all levels. This involves improving the process used to make decisions so that cost and benefit -- particularly clinical outcomes -- are taken into account.

Patients and stakeholders inside and outside of the health care arena will be needed to bring about the transformation to a more value-driven system. And physicians have an opportunity to be a key component in the change. Physicians -- you -- influence what lab tests are ordered and what medications are prescribed. You also have the most contact with members of the public every year, putting you in a unique position to help patients help themselves, such as by adopting healthier lifestyles.

With some effort on everyone's part, headlines on future stories could proclaim health care costs under control and improved health care for all Americans.

The doctors are in the house
The AMA's House of Delegates is holding its Interim Meeting Nov. 7-10 in Houston, addressing issues such as health system reform and physician payment.
AMA House - Slideshow - Updates